On Friday, Raymond James initiated coverage on First Capital REIT (FCR-U:CN) shares, assigning an Outperform rating and setting a price target of Cdn$20.50. The firm highlighted the real estate investment trust's robust portfolio, which includes 138 grocery-anchored retail assets totaling approximately 19.4 million square feet of gross leasable area (GLA).
The properties are predominantly located in Canada's VECTOM markets, with the Greater Toronto Area (GTA) accounting for about 40% of the average monthly rent (AMR), marking it as First Capital's most significant market.
The analyst from Raymond James noted that as of June 30, First Capital REIT's weighted average lease term (WALT) was approximately 5.2 years. This figure is below the average of around 7.0 years seen among its Canadian retail REIT peers. Despite this, the REIT has demonstrated strong performance in its largest markets, buoyed by favorable leasing demand and supply trends in Canadian urban retail.
First Capital has reported above-average retail renewal rent spreads, reaching +12% in both 2023 and 2024 year-to-date. This performance is notably higher than the +8-10% range that is typical among its Canadian retail peers. The positive figures reflect the company's ability to increase rents during lease renewals, which is a bullish indicator of its market position and the demand for its retail spaces.
The Outperform rating suggests that Raymond James expects First Capital REIT's stock to perform better than the average total return of the stocks that the firm covers. This initiation of coverage provides investors with a new analysis of the REIT's potential, taking into account its portfolio strength and recent performance in lease renewals.
The Cdn$20.50 stock price target represents the firm's expectation for the stock's value, which investors may use as a reference point for their investment decisions.
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