Automotive Properties REIT Reports Financial Results for Second Quarter of 2016

TORONTO, Aug. 8, 2016 /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 ("Q2 2016") and six-month ("YTD 2016") periods ended June 30, 2016. 

The REIT completed its initial public offering ("IPO") and commenced trading on the Toronto Stock Exchange on July 22, 2015. The REIT had no operations prior to July 22, 2015. Accordingly, the following summary of the REIT's financial results is presented in comparison to the Adjusted Financial Forecast (as defined below) included in the REIT's Management's Discussion and Analysis ("MD&A") for Q2 2016. The REIT's financial forecast that was included in its IPO prospectus (the "Financial Forecast") has been adjusted (the "Adjusted Financial Forecast") to reflect the issuance of 620,000 Units pursuant to the partial exercise of the over-allotment option granted by the REIT to the underwriters in the IPO. The REIT's unaudited condensed consolidated interim financial statements and the related MD&A for the three and six-month periods ended June 30, 2016 are available on the REIT's website at www.automotivepropertiesreit.ca and on SEDAR at www.SEDAR.com.

Q2 2016 Highlights

  • Property Revenue, Net Operating Income ("NOI"), Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") all exceeded the Adjusted Financial Forecast1. Excluding the impact of the three acquisitions completed subsequent to the REIT's IPO, each of these metrics was in line with the Adjusted Financial Forecast.
  • Declared monthly distributions of $0.067 per Unit resulting in total cash distributions declared of approximately $3.6 million, representing an AFFO payout ratio of 84.1%.

"As we enter our second full year of operations, we are pleased with our accomplishments thus far. We've generated predictable cash flows and demonstrated reliable cash distributions for our unitholders, while successfully advancing our acquisition program. The three accretive transactions we have completed to date effectively demonstrate our ability to execute on the key elements of our acquisition strategy," said Milton Lamb, CEO of Automotive Properties REIT. "Looking ahead, we will continue to focus on building unitholder value by expanding our property portfolio and growing cash available for distribution. Our acquisition program is targeting prime automotive dealership properties with cash flow stability in strategic markets across Canada that can enhance the REIT's brand, tenant and geographic diversification. Further, the contractual annual rent increases that are built into the property leases for the 26 initial properties acquired through our IPO will commence in the third quarter."

 

Financial Results Summary






($000s, except Unit, per Unit and AFFO payout ratio amounts)

Three months
ended June 30,
2016 (Actual)

Three months
ended June 30,
2016 (Adjusted
Financial Forecast)

Six months ended
June 30, 2016
(Actual)

Six months ended
June 30, 2016
(Adjusted
Financial Forecast)

Property revenue1

$8,302

$7,475

$16,609

$14,950

NOI2

7,266

6,479

14,501

12,958

FFO2

4,861

4,555

9,889

9,099

AFFO2

4,319

3,891

8,621

7,771

Cash NOI2

6,553

5,844

13,080

11,688

Number of Units outstanding (including Class B LP Units)

18,053,253

18,053,253

18,053,253

18,053,253

FFO per Unit

$0.269

$0.252

0.548

0.504

AFFO per Unit

$0.239

$0.216

0.477

0.430

Distributions per Unit

$0.201

$0.201

0.402

0.402

AFFO payout ratio2

84.1%

93.1%

84.3%

93.5%



1.

Property revenue of $7,475 for Q2 2016 and $14,950 for YTD 2016 is attributable to the 26 properties in the initial portfolio (the "Initial Properties"). The incremental revenue of $827 for Q2 2016 and $1,659 for YTD 2016, respectively, are attributable to the three properties acquired subsequent to the IPO (Toyota Woodland, Porsche JLR Edmonton and Audi Barrie).

2.

NOI, FFO, AFFO, Cash NOI and AFFO payout ratio are non-IFRS financial measures.  See "Non-IFRS Financial Measures" in this news release.

  

The REIT performed in line management's expectations for Q2 2016 and YTD 2016. The Initial Properties performed in line with the Adjusted Financial Forecast for both periods, while the three property acquisitions (Toyota Woodland; Porsche Centre and Jaguar Land Rover Edmonton; and Audi Barrie) completed subsequent to the IPO (the "Acquisitions") accounted for the incremental revenue, NOI, FFO, AFFO and Cash NOI as well as the lower AFFO payout ratio for both periods.

For Q2 2016, property revenue of $8.3 million was $0.8 million higher than the Adjusted Financial Forecast. For YTD 2016, property revenue of $16.6 million was $1.7 million higher than the Adjusted Financial Forecast. The increases were primarily attributable to the Acquisitions.

Property costs (which included costs associated with the Acquisitions) of $1.0 million for Q2 2016 were in line with the Adjusted Financial Forecast. Property costs of $2.1 million for YTD 2016 were $0.1 million higher than the Adjusted Financial Forecast due to costs associated with the Acquisitions.

General and administrative ("G&A") expenses for Q2 2016 and YTD 2016 were $0.6 million and $1.0 million, respectively, compared to forecasted G&A expenses for Q2 2016 and YTD 2016 of $0.4 million and $0.7 million, respectively. G&A expenses were higher than the Adjusted Financial Forecast for both periods as a result of a non-cash accrual of $0.2 million for the REIT's short term incentive plan, as well as additional tax filings required for the Acquisitions and additional legal and regulatory filing costs for the REIT.

NOI and Cash NOI generated during Q2 2016 of $7.3 million and $6.6 million, respectively, were both higher than the Adjusted Financial Forecast.  NOI and Cash NOI generated during YTD 2016 of $14.5 million and $13.1 million, respectively, were both higher than the Adjusted Financial Forecast. The positive variances for both periods were attributable to the Acquisitions.  

FFO and AFFO in Q2 2016 of $4.9 million and $4.3 million, respectively, or $0.269 and $0.239 per Unit, respectively, were higher than the Adjusted Financial Forecast. FFO and AFFO for YTD 2016 of $9.9 million and $8.6 million, respectively, or $0.548 and $0.477 per Unit, respectively, were higher than the Adjusted Financial Forecast. The positive variances for both periods was attributable to the Acquisitions. 

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 $3.6 million to unitholders in Q2 2016, or $0.201 per Unit, representing an AFFO payout ratio of 84.1%. For YTD 2016, the REIT declared total distributions of $7.3 million to unitholders, or $0.402 per Unit, representing an AFFO payout ratio of 84.3%

Investment Properties

The REIT assessed the valuation of the investment properties by reviewing the overall capitalization rate. In determining the fair value, the REIT considers various market evidence, including market information, and reviewing the results with a nationally recognized independent appraiser on a quarterly basis. The overall implied capitalization rate applicable to the entire portfolio remained at 6.5% which is consistent with December 31, 2015. This resulted in a total value for the investment properties of $404.8 million as at June 30, 2016, an increase of $15.2 million from December 31, 2015. The positive variance reflects a fair value gain due to contractual rent increases over the next 12 months, a decrease in capitalization rates for the Vancouver market and the REIT's acquisition of Audi Barrie in January 2016. 

Liquidity and Capital Structure

As at June 30, 2016, the REIT had cash and cash equivalents of $0.2 million and access to $5.5 million in undrawn credit facilities. The REIT had $226.5 million outstanding on its credit facilities with an effective weighted average interest rate of 3.16% and an effective interest term of 5.4 years. The REIT's debt to gross book value2 as at June 30, 2016 was 55.6%.

Units Outstanding

As at June 30, 2016, there were 8,120,000 Units and 9,933,253 Class B limited partnership units of Automotive Properties Limited Partnership outstanding. 

Outlook

Management of the REIT continues to actively focus on identifying opportunities to expand its property portfolio, targeting prime automotive dealership properties with cash flow stability in strategic markets across Canada that can enhance the REIT's brand, dealer owner and geographic diversification. As Canada's only publicly traded vehicle focused on consolidating automotive dealership properties, the REIT is uniquely positioned to provide owners of automotive dealership businesses with the opportunity to monetize their real estate for succession planning, directly investing in upgrading their dealerships or facilitating acquisitions in this period of industry consolidation. This dealer proposition has been well received and is expected to result in consistent asset expansion for the REIT as the capital markets environment continues to improve.

Conference Call

Management of the REIT will host a conference call for analysts and investors on Tuesday, August 9, 2016 at 11:00 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: 55436424. The replay will be available until August 16, 2016.

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. The REIT's portfolio of 29 income producing commercial properties represents approximately 1.1 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 management's discussion and analysis for the year ended December 31, 2015 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. Funds from operations ("FFO"), adjusted funds from operations ("AFFO"), AFFO payout ratio, net operating income ("NOI") and cash net operating income ("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 is an important measure 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. See the REIT's Q2 2016 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 to cash flow from operating activities.

_______________
1 NOI, FFO and AFFO are non-IFRS financial measures.  See "Non-IFRS Financial Measures" in this press release.
2 Debt to gross book value is a non-IFRS financial measure.  See "Non-IFRS Financial Measures" in this news release.

 

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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