Automotive Properties REIT Reports Financial Results for First Quarter of 2017

TORONTO, May 11, 2017 /CNW/ - Automotive Properties Real Estate Investment Trust (TSX: APR.UN) ("Automotive Properties REIT" or the "REIT") today announced its financial results for the three-month period ended March 31, 2017 ("Q1 2017"). References to "same property" correspond to properties that the REIT owned for the equivalent period in 2016, thus removing the impact of acquisitions. The REIT's unaudited condensed consolidated financial statements and the related Management's Discussion & Analysis ("MD&A") for Q1 2017 are available on the REIT's website at www.automotivepropertiesreit.ca and on SEDAR at www.sedar.com.

Q1 2017 Highlights

  • Total and same property rental revenue were $9.9 million and $8.3 million, respectively, up 18.9% and 3.0%, respectively, from the first quarter of 2016 ("Q1 2016"), reflecting the impact of acquisitions and 1.5% rent increases across a significant portion of the portfolio;
  • Net Operating Income1 ("NOI") was $8.3 million, up 14.2% from Q1 2016;
  • Total and same property Cash NOI1 were $7.6 million and $6.45 million, respectively, up 15.8% and 1.45%, respectively, from Q1 2016;   
  • Funds from Operations1 ("FFO") increased by 18.2% to $5.9 million, or $0.244 per unit of the REIT ("Unit"), from $5.0 million, or $0.279 per Unit, in Q1 2016. The per Unit decline was attributable to the period of time between (i) the issuance by the REIT of 4,255,000 Units through a $46.2 million equity offering completed on February 7, 2017 (the "Equity Issuance") and (ii) the partial deployment of the funds from the Equity Issuance late in Q1 2017 to complete two accretive automotive dealership acquisitions (the "Timing Difference");
  • Adjusted Funds from Operations1 ("AFFO") increased by 24.0% to $5.4 million, or $0.219 per Unit, from $4.3 million, or $0.239 per Unit, in Q1 2016, with the Timing Difference noted above also impacting the per Unit figures;
  • Adjusted Cash from Operations1 ("ACFO") was equivalent to AFFO in Q1 2017, at $5.4 million, an increase of 24.0% from $4.3 million in Q1 2016;
  • On March 22, 2017, the REIT acquired the Go Mazda automotive dealership property located in Edmonton, Alberta from Go Auto, one of Canada's largest owner/operators of automotive dealership properties, for $8.0 million. The operating tenant, owned by Go Auto, entered into a 17-year, triple-net lease with the REIT;
  • On March 31, 2017, the REIT acquired the Barrie Volkswagen automotive dealership property located in Barrie, Ontario for $8.9 million. The operating tenant, owned by 893353 Alberta Inc. and its affiliates (the "Dilawri Group"), has entered into a 17-year, triple-net lease with the REIT;  
  • The REIT declared monthly cash distributions of $0.067 per Unit, resulting in total distributions declared of approximately $5.0 million and total distributions paid of approximately $4.7 million during Q1 2017, representing an AFFO payout ratio1 of approximately 91.8%. The REIT's payout ratio for the quarter also reflects the Timing Difference noted above; 
  • As at March 31, 2017, the fair value of the REIT's investment properties was $480.13 million compared to $461.81 million as at December 31, 2016; and
  • As at March 31, 2017 Debt to GBV1 was 43.9% compared to 51.5% as at December 31, 2016.

1

NOI, Cash NOI, FFO, AFFO, ACFO, AFFO Payout Ratio, and Debt to GBV are non-IFRS financial measures. See "Non-IFRS Financial Measures" in this news release.

 

Subsequent Event

  • On April 7, 2017, the REIT acquired the Heritage Honda automotive dealership property located in Calgary, Alberta for $23.6 million. The operating tenant, owned by the Dilawri Group, entered into an 18-year, triple-net lease with the REIT.   

"Our portfolio generated solid increases in revenue, NOI and AFFO in the quarter driven by acquisitions and contractual annual rent increases," said Milton Lamb, CEO of Automotive Properties REIT. "We continue to demonstrate strong progress in advancing our growth by acquisition strategy, completing two accretive transactions during the quarter, and another one just subsequent to quarter end for a cumulative purchase price of $40.5 million. Through these acquisitions, we have further enhanced our geographic, brand and tenant diversification and strengthened our cash flows in support of unitholder distributions. In Q1 2017, we also continued to enhance unitholder liquidity by increasing the float of REIT units outstanding by 35.6%."

Q1 2017 Financial Results Summary









For the three months ended
March 31,


($000s, except per Unit amounts)



2017



2016

 

Change

Property rental revenue¹


$

9,881


$

8,308

18.9%

Same property rental revenue¹



8,331



8,089

3.0%

NOI



8,259



7,235

14.2%

Cash NOI



7,559



6,526

15.8%

Same Property Cash NOI



6,449



6,357

1.45%

FFO



5,945



5,028

18.2%

AFFO



5,354



4,319

24.0%

ACFO



5,354



4,319

24.0%

Distributions per Unit


$

0.201


$

0.201

--

FFO per Unit - basic 2



0.244



0.279

- 0.035

FFO per Unit - diluted 3



0.244



0.279

- 0.035









AFFO per Unit - basic 2



0.219



0.239

- 0.020

AFFO per Unit - diluted 3   



0.219



0.239

- 0.020

Payout ratio (%)








FFO



82.4%



72.0%

10.4%

AFFO



91.8%



84.1%

7.7%



(1)

Property rental revenue is based on rents from leases entered into with tenants on closing of the applicable acquisitions, all of which are triple-net leases and, as such, include recoverable realty taxes. Same property rental revenue is based on property rental revenue for the same asset base having consistent gross leasable area in both periods.

(2)

FFO per Unit and AFFO per Unit – basic is calculated by dividing the total FFO and AFFO by the amount of the total weighted average number of outstanding Units and Class B limited partnership of Automotive Properties Limited Partnership units ("Class B LP Units"). For Q1 2017, the basic total number of REIT Units outstanding (including Class B LP Units) was 24,399,775. 

(3)

FFO per Unit and AFFO per Unit – diluted is calculated by dividing the total FFO and AFFO by the amount of the total weighted average number of outstanding Units, Class B LP Units, deferred units and income deferred units granted to certain independent trustees and management of the REIT. For Q1 2017, the total weighted average number of Units outstanding (including Class B LP Units, deferred units and income deferred units) on a fully diluted basis was 24,407,903.

 

Total and same property rental revenue in Q1 2017 were $9.9 million and $8.3 million, respectively, representing increases of 18.9% and 3.0%, respectively, compared to Q1 2016. The increase in total and same property revenue is attributable to growth from acquisitions completed during and subsequent to Q1 2016 and contractual annual rent increases of 1.5%.

Total and same property costs for Q1 2017 were $1.6 million and $1.3 million, respectively, compared to $1.1 million (total and same property) in Q1 2016. The increase is attributable to the five properties acquired subsequent to Q1 2016. Property costs as a percentage of revenue increased from approximately 13% in Q1 2016 to approximately 16% in Q1 2017, primarily due to an increase in realty tax payments for the properties acquired during and subsequent to Q1 2016. These costs are recoverable from the tenants pursuant to the term of the triple-net leases.

Total and same property Cash NOI generated during Q1 2017 totaled $7.6 million and $6.45 million, respectively, compared to $6.5 million and $6.36 million, respectively, in Q1 2016, representing increases of 15.8% and 1.45%, respectively. The year-over-year increases were attributable to the contributions from acquisitions and the annual contractual rent increases of 1.5% across a significant portion of the portfolio.

FFO in Q1 2017 was $5.9 million, an increase of 18.2% from $5.0 million in Q1 2016. On a per Unit basis, Q1 2017 FFO was $0.244 compared to $0.279 in Q1 2016. The per Unit decline was attributable to the Timing Difference noted above.

AFFO in Q1 2017 was $5.4 million, an increase of 24.0% from $4.3 million in Q1 2016. On a per Unit basis, Q1 2017 AFFO was $0.219 compared to $0.239 in Q1 2016, reflecting the Timing Difference noted above. 

ACFO was equivalent to AFFO in Q1 2017, at $5.4 million, an increase of 24.0% from $4.3million in Q1 2016.

Cash Distributions

The REIT is currently paying monthly cash distributions of $0.067 per Unit, representing $0.80 per Unit on an annualized basis. The REIT declared total distributions of $5.0 million to unitholders in Q1 2017, or $0.201 per Unit, representing an AFFO payout ratio of approximately 91.8%. The payout ratio was also affected by the Timing Difference noted above.

Investment Properties

The REIT valued the investment properties using a discounted cash flow approach whereby a current discount rate was applied to the projected NOI which a property can reasonably be expected to produce in the future.  The REIT's valuation inputs are supported by quarterly market reports from an independent appraiser which indicate no change in capitalization rates from December 31, 2016. The overall implied capitalization rate applicable to the entire portfolio remained at 6.5%, which is equivalent to the REIT's overall assessment as at March 31, 2017. The fair value of the REIT's investment properties was $480.13 million as at March 31, 2017.

Liquidity and Capital Structure

As at March 31, 2017, the REIT had cash and cash equivalents of $0.3 million and access to $28.3 million in undrawn credit facilities. The REIT had $211.8 million outstanding on its credit facilities with an effective weighted average fixed interest rate on its debt of 3.15%. Interest rates on $182.9 million have been effectively fixed for a term of 4.7 years by way of interest rate swaps. The REIT's debt to gross book value as at March 31, 2017 was 43.9%.

Units Outstanding

As at March 31, 2017, there were 16,216,000 Units and 9,933,253 Class B LP Units outstanding.

Outlook

The Canadian automotive retail industry is a large and stable business with a track record of long-term growth. According to Statistics Canada, the automotive retail industry represented the largest component of total retail sales and merchandise in Canada, equating to approximately 6.7% of Canadian gross domestic product in 2016. Over the last 20 years, Canadian automobile retail sales grew at a compound annual rate of 4.5%. Sales of new automobiles in 2016 were up 2.3% from 2015, which was itself a record year.

Given the large size of the industry, there are ample opportunities for the REIT to acquire additional properties on an accretive basis in support of stable and growing cash available for unitholder distributions. The Canadian automotive dealership industry is highly fragmented, with the top 10 dealership groups in aggregate comprising less than 10% of the overall market. Industry consolidation is gaining momentum and, to this end, the REIT has been actively expanding its automotive dealer and industry relationships to build its acquisition pipeline. In addition, the REIT has a right of first offer to acquire any REIT-suitable properties that the Dilawri Group acquires or develops.

Nomination of Louis Forbes to the Board

"We are delighted that Louis Forbes, Senior Vice President and Chief Financial Officer of CT Real Estate Investment Trust, will stand for election as a Trustee and Chair of our Audit Committee at our upcoming annual meeting," said Kap Dilawri, Chair of Automotive Properties REIT. "On behalf of the Board and senior management, we extend our gratitude to Janet Graham, who will not be standing for re-election as a Trustee at our annual general meeting on June 20, 2017. Janet's strategic guidance and leadership since the REIT's formation in 2015 have been vital in positioning the REIT for success". 

Mr. Forbes has over 30 years of real estate and finance experience. Prior to his appointment as Senior Vice President and Chief Financial Officer of CT Real Estate Investment Trust, Mr. Forbes was the Executive Vice President and Chief Financial Officer of Primaris Retail Real Estate Investment Trust from 2003 to 2013. Prior to serving in that role, Mr. Forbes was Vice President, Director and Senior Canadian Real Estate Equities Analyst of Merrill Lynch Canada, where he was responsible for covering North American real estate securities. Mr. Forbes also served as Vice President Finance and Chief Financial Officer of Revenue Properties Company Limited. Mr. Forbes is a CPA (CA) and holds a Bachelor of Science degree from McMaster University and a Master of Business Administration degree from Queen's University. Mr. Forbes completed the Chartered Director Program at the Directors College, McMaster University.

Conference Call
Management of the REIT will host a conference call for analysts and investors on Friday, May 12, 2017 at 9:00 a.m. (ET). The dial-in numbers for the conference call are (647) 427-7450 or (888) 231-8191. A live and archived webcast of the call will be accessible via the REIT's website.

To access a replay of the conference call dial (416) 849-0833 or (855) 859-2056, passcode: 15195933. The replay will be available until May 19, 2017.

About Automotive Properties REIT

Automotive Properties REIT is an unincorporated, open-ended real estate investment trust focused on owning and acquiring primarily income-producing automotive dealership properties located in Canada. Currently, the REIT's portfolio consists of 35 income producing commercial properties represents approximately 1.4 million square feet of gross leasable area in Ontario, Saskatchewan, Alberta, British Columbia and Québec. Automotive Properties REIT is the only public vehicle in Canada focused on consolidating automotive dealership real estate properties. For more information, please visit: www.automotivepropertiesreit.ca.

Forward-Looking Information

This news release contains forward-looking information within the meaning of applicable securities legislation, which reflects the REIT's current expectations regarding future events and in some cases can be identified by such terms as "will" and "expected". Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT's control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to, the factors discussed under "Risks and Uncertainties" in the REIT's MD&A for the year ended December 31, 2016 and in the REIT's current annual information form, both of which are available on SEDAR (www.sedar.com). The REIT does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law. This forward-looking information speaks as of the date of this news release.

Non-IFRS Financial Measures

This news release contains certain financial measures which are not defined under IFRS and may not be comparable to similar measures presented by other real estate investment trusts or enterprises. FFO, AFFO, ACFO, FFO payout ratio, AFFO payout ratio, NOI, same property NOI, Cash NOI, and same property Cash NOI are key measures of performance used by real estate businesses. Debt to gross book value is a measure of financial position defined by the REIT's declaration of trust.  These measures, as well as any associated "per Unit" amounts, are not defined by IFRS and do not have standardized meanings prescribed by IFRS, and therefore should not be construed as alternatives to net income or cash flow from operating activities calculated in accordance with IFRS. The REIT believes that AFFO and ACFO are important measures of economic performance and is indicative of the REIT's ability to pay distributions, while FFO, NOI and Cash NOI are important measures of operating performance of real estate businesses and properties. The IFRS measurement most directly comparable to FFO, AFFO, NOI and Cash NOI is net income and the IFRS measurement most directly comparable to ACFO is cash flow from operating activities. See the REIT's Q1 2017 MD&A for further discussion of these non-IFRS financial measures and for a reconciliation of NOI, FFO, AFFO and Cash NOI to net income and comprehensive income and of AFFO and ACFO to cash flow from operating activities.

SOURCE Automotive Properties Real Estate Investment Trust

For further information: Bruce Wigle, Investor Relations, Bay Street Communications, Tel: 647-496-7856; Milton Lamb, President & CEO, Automotive Properties REIT, Tel: (647) 789-2445; Andrew Kalra, CFO & Corporate Secretary, Automotive Properties REIT, Tel: (647) 789-2446

RELATED LINKS
www.automotivepropertiesreit.ca

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