Automotive Properties REIT Reports Financial Results for Third Quarter of 2016

TORONTO, Nov. 7, 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 ("Q3 2016") and nine-month ("YTD 2016") periods ended September 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. As a result, the three-month and nine-month periods in 2015 reflect the REIT's operating results only for the 71-day period from July 22, 2015 to September 30, 2015 (the "71-day Period"). As a result, the 2015 financial results, for both the three and nine month periods, cover different time frames and, as such, are not directly comparable.

The REIT's unaudited condensed consolidated interim financial statements and the related MD&A for the three and nine-month periods ended September 30, 2016 are available on the REIT's website at www.automotivepropertiesreit.ca and on SEDAR at www.SEDAR.com.

Q3 2016 Highlights

  • The REIT's financial performance was in line with management's expectations in the third quarter of 2016;
  • Property Revenue for Q3 2016 was $8.5 million, compared with $5.8 million in the 71-day period in 2015;
  • Net Operating Income1 ("NOI") was $7.3 million in Q3 2016 compared with $5.0 million in the 71-day period last year; 
  • Funds from Operations1 ("FFO") of $5.0 million, or $0.269 per Unit, in Q3 2016 versus $3.6 million, or $0.199 per Unit, in the 71-day period last year;
  • Adjusted Funds from Operations1 ("AFFO") of $4.4 million, or $0.236 per Unit, compared with $3.1 million, or $0.171 per Unit, in the 71-day period in 2015;
  • On September 19, 2016, the REIT closed a bought deal public offering of 3,841,000 units at a price of $10.50 per unit for gross proceeds of approximately $40 million. Net proceeds were used primarily to acquire the Pfaff Audi dealership property and to reduce indebtedness owing under the REIT's credit facilities;
  • On September 20, 2016, the REIT completed the $17.2 million acquisition of the Pfaff Audi dealership property, approximately 69,000 square foot, full-service Audi dealership located on three acres in Vaughan, Ontario, part of the Greater Toronto Area. The acquisition is immediately accretive to the REIT's AFFO per unit; and
  • The REIT declared monthly distributions of $0.067 per Unit, resulting in total cash distributions declared of approximately $3.9 million, representing an AFFO payout ratio of 85.2%.

"The third quarter of 2016 was highlighted by our acquisition of the Pfaff Audi dealership property and the $40 million equity offering that both satisfied the purchase price of the Pfaff Audi property and improved the REIT's balance sheet," said Milton Lamb, CEO of Automotive Properties REIT. "With this equity infusion, we are well positioned to continue advancing our acquisition program, focusing on prime automotive dealership properties with cash flow stability in strategic markets across Canada that can enhance the REIT's brand, tenant and geographic diversification. Since the completion of the IPO, we have acquired four properties comprising five dealerships, each of which is accretive to the REIT's AFFO per Unit. Two-thirds of the capital we have deployed has been for properties leased to third-party tenants. Further, through these acquisitions, we added two new brands to our portfolio with Jaguar and Land Rover, expanded our Audi and Toyota representation, and entered new markets in Montreal and Edmonton, while growing our presence in the Greater Toronto Area."

Financial Results Summary









For the three months ended
September 30



For the nine months ended
September 30



2016



2015(1)



2016



2015(1)













Revenue from investment properties

$

8,538


$

5,801


$

25,147


$

5,801













Cash NOI


6,649



4,544



19,728



4,544













FFO


4,990



3,600



14,879



3,600













AFFO


4,376



3,086



12,997



3,086













Fair value adjustment to investment properties


2,890



1,155



5,217



1,155













Distributions per Unit

$

0.201


$

0.156


$

0.603


$

0.156

FFO per Unit - basic (2)


0.269



0.199



0.817



0.199

FFO per Unit - diluted (3)


0.269



0.199



0.817



0.199

AFFO per Unit - basic (2)


0.236



0.171



0.713



0.171

AFFO per Unit - diluted (3)   


0.236



0.171



0.713



0.171

Payout ratio (%)












FFO


74.7%



78.4%



73.8%



78.4%

AFFO


85.2%



91.2%



84.6%



91.2%

(1)

Based on operations beginning July 22, 2015. 71-day Period.



(2)

The FFO 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 REIT Units and Class B LP Units. Q3 2016 18,554,253 Units, YTD 2016 18,221,472 Units and 18,053,253 Units for the 71-day Period. 



(3)

The FFO 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 REIT Units, Class B LP Units and DUs granted as at September 30, 2016 to independent board members. Q3 2016 18,554,293 Units, YTD 2016 18,221,485 Units and 18,053,253 Units for the 71-day Period

 

The REIT performed in line with management's expectations for Q3 2016. Property Revenue of $8.5 million was $2.7 million higher than the 71-day Period, primarily due to the time frame variance, which contributed approximately $1.8 million. The four properties acquired since the IPO (Toyota Woodland property, Porsche Centre and Jaguar Land Rover Edmonton property, Audi Barrie property and Pfaff Audi property) had a cumulative positive impact on revenue during Q3 2016 of approximately $0.9 million. Rental revenue for YTD 2016 was $25.1 million.

Property costs for Q3 2016 of $1.2 million were $0.5 million higher than those incurred during the 71-day Period, with $0.4 million attributable to the time frame variance, and the balance attributable to the four properties acquired subsequent to the IPO. The property costs for YTD 2016 were $3.3 million. General and administrative ("G&A") expenses for Q3 2016 were $0.5 million, compared with $0.3 million in the 71-day period.

NOI and Cash NOI generated during Q3 2016 totaled $7.3 million and $6.6 million respectively, compared with $5.0 million and $4.5 million respectively in the 71-day period, with the variances attributable to the time frame variance and acquisitions.    

FFO and AFFO in Q3 2016 were $5.0 million and $4.4 million, equal to $0.269 and $0.236 per Unit, respectively. This compared with $3.6 million and $3.1 million, or $0.199 per Unit and $0.171 per Unit respectively, in the 71-day Period, with the increases attributable to the time frame variance and acquisitions.

For the YTD 2016 period, Property Revenue was $25.1 million, with NOI and Cash NOI totaling $21.8 million and $19.7 million, respectively. FFO and AFFO in the YTD 2016 period were $14.9 million and $13.0 million, equal to $0.817 per Unit and $0.713 per Unit, respectively. The AFFO payout ratio for the nine months was 84.6%. The REIT's results in the first half of the year were measured against an adjusted forecast related to its IPO. During that period, Property Revenue, NOI, FFO and AFFO all exceeded the forecast. Excluding the impact of the acquisitions completed subsequent to the REIT's IPO, each of these metrics was in line with the forecast. Combined with the results in Q3 2016, the REIT's YTD 2016 results were consistent with management's expectations.

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 $3.9 million to unitholders in Q3 2016, or $0.201 per Unit, representing an AFFO payout ratio of 85.2%. For YTD 2016, the REIT declared total distributions of $11.1 million to unitholders, or $0.603 per Unit, representing an AFFO payout ratio of 84.6%.

Investment Properties
The REIT assessed the valuation of the investment properties using a discounted cash flow approach whereby a current discount rate was applied to the projected net operating income which a property can reasonably be expected to produce in the future. A $5,217 fair value gain was recognized for the nine-month period ended September 30, 2016.

The REIT's valuation inputs are supported by quarterly market reports from a third party appraiser  which indicate a decrease in capitalization rates in the Vancouver and Toronto markets which were offset by a capitalization rate increase for the Regina market. The overall implied capitalization rate, applicable to the entire portfolio remained at 6.5%, which is unchanged for December 31, 2015.

Liquidity and Capital Structure
As at September 30, 2016, the REIT had cash and cash equivalents of $2.1 million and access to $22.5 million in undrawn credit facilities. The REIT had $206.7 million outstanding on its credit facilities with an effective weighted average interest rate on its debt of 3.15%. Of this amount, $187 million has been effectively fixed for a term of 5.2 years by a way of swaps. The REIT's debt to gross book value2 as at September 30, 2016 was 48.2%.

Subsequent to quarter end, on October 13, 2016, the REIT entered into a new $14.6 million revolving acquisition credit facility with a Schedule I Canadian chartered bank bearing interest at the Bankers' Acceptance Rate plus 150 basis points. This facility remains undrawn. As a result, the REIT now has access to $37.1 million in undrawn credit facilities and total liquidity of $39.2 million.

Units Outstanding
As at September 30, 2016, there were 11,961,000 Units and 9,933,253 Class B limited partnership units of Automotive Properties Limited Partnership outstanding.

Outlook
Given the large size of the retail automotive industry, there are ample opportunities for the REIT to acquire additional properties on an accretive basis in support of stable and growing cash flow available for Unitholder distributions. Management of the REIT continues to target 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.

Conference Call
Management of the REIT will host a conference call for analysts and investors on Tuesday, November 8, 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: 4668823. The replay will be available until November 15, 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 30 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 Q3 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 A. Kalra, CFO & Corporate Secretary, Automotive Properties REIT, Tel: (647) 789-2446

RELATED LINKS
www.automotivepropertiesreit.ca

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