Automotive Properties REIT Reports Financial Results for Three Months and Operating Year Ended December 31, 2015

TORONTO, March 21, 2016 /CNW/ - Automotive Properties Real Estate Investment Trust (TSX: APR.UN) ("Automotive Properties REIT" or the "REIT") today announced its financial results for the fourth quarter and the 163-day period from July 22, 2015 to December 31, 2015 (the "Operating Year"). The fourth quarter is the first full quarter of operations for the REIT, as it 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.

The following summary of the REIT's financial results for the fourth quarter of 2015 is presented in comparison to the Financial Forecast ("Financial Forecast") included in the REIT's IPO prospectus dated July 10, 2015 (the "IPO Prospectus"). The following summary of the REIT's financial results for the Operating Year is presented in comparison to the Adjusted Forecast (as defined below) included in the REIT's Management's Discussion and Analysis ("MD&A") for the Operating Year.  The Financial Forecast in the IPO Prospectus assumed a full six months of operations for the period ended December 31, 2015 and has therefore been adjusted to reflect the 163-day period (the "Adjusted Forecast") in order to facilitate comparison with actual results. The REIT's audited consolidated financial statements and related MD&A for the Operating Year are available on the REIT's website at www.automotivepropertiesreit.ca and on SEDAR at www.SEDAR.com.

Fourth Quarter Highlights

  • Property Revenue, Net Operating Income ("NOI"), Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") were in-line with the Financial Forecast1;
  • On December 23, 2015, the REIT completed the acquisition of the Toyota Woodland property ("Toyota Woodland"), a 49,737 square foot automotive dealership property located in Montréal, Québec, for a purchase price of approximately $7.2 million. Pursuant to the strategic alliance agreement, the property was offered for purchase to the REIT by the Dilawri Group
  • On December 30, 2015, the REIT completed the acquisition of the Porsche Centre Edmonton and Jaguar Land Rover Edmonton property ("Porsche JLR"), a 44,800 square foot automotive dealership property occupied by two dealerships located in Edmonton, Alberta, for a purchase price of approximately $23.0 million.

Operating Year Highlights

  • Completed an IPO of 7.5 million REIT units for gross proceeds of $75 million;
  • In conjunction with the IPO, completed the acquisition of a portfolio of 26 retail automotive dealership properties encompassing approximately 958,000 square feet of gross leasable area ("GLA") located in the Greater Vancouver Area, Calgary, Regina and the Greater Toronto Area (the "Initial Properties") for a purchase price of approximately $357.7 million (including transaction costs);
  • Issued an additional 620,000 REIT units for gross proceeds of $6.2 million, pursuant to the partial exercise of the over-allotment option granted to the underwriters in the IPO;
  • Property Revenue, NOI, FFO and AFFO for the Operating Year were in-line with the Adjusted Forecast;2 and
  • Declared monthly distributions of $0.067 per REIT unit resulting in total cash distributions declared for the Operating Year of approximately $6.4 million.  

"Our fourth quarter and Operating Year financial results were in-line with our IPO forecast. The consistency of our actual results with our forecast underlines the high visibility of the REIT's cash flows," said Milton Lamb, CEO of Automotive Properties REIT.  "In addition to meeting our forecast for the Operating Year, we have successfully started to execute on our mandate to expand and diversify our property portfolio through accretive acquisitions. During the fourth quarter, we completed our first two automotive dealership property acquisitions. The acquisition of the Toyota Woodland property in Montreal and Go Auto's Porsche JLR property in Edmonton further enhances our geographic and manufacturer diversification. The acquisition of Go Auto's Porsche JLR property demonstrates our ability to be a real estate partner with large, third-party dealership owners."

Subsequent Event

On January 14, 2016, the REIT completed the acquisition of the Audi Barrie property, a newly constructed 25,000 square foot automotive dealership located on 3.1 acres at 2484 Doral Drive in Innisfil, near Barrie, Ontario, for a purchase price of approximately $11.1 million. Audi Barrie was one of three development properties owned by the Dilawri Group at the time of the IPO. Pursuant to the strategic alliance agreement, the property was offered for purchase to the REIT by the Dilawri Group.

Outlook for 2016

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 and re-invest the proceeds in their core businesses. This business model provides the REIT's unitholders with reliable cash distributions, funded by cash flows generated from the REIT's long-term, triple-net tenant leases. The three acquisitions completed to date are expected to increase AFFO per unit, thereby further supporting unitholder distributions. Management will continue to focus on building the REIT's acquisition pipeline, which includes the two remaining development properties outlined in the REIT's IPO Prospectus. The REIT is targeting prime automotive dealership properties with cash flow stability in strategic markets across Canada that can enhance its brand, dealer owner and geographic diversification.

Financial Highlights






($000s, except per Unit amounts)

Three months ended
December 31, 2015

(Actual)

Three months ended
December 31, 2015

(Financial Forecast)

Operating Year ended
December 31, 2015

(Actual)

Operating Year ended
December 31, 2015

(Adjusted Forecast) 

Property revenue (1)

$7,498

$7,458

$13,300

$13,241

NOI2 (including straight‑line adjustments)

6,518

6,479

11,566

11,507

FFO2

4,454

4,532

8,054

8,049

AFFO2

3,788

3,868

6,875

6,871

Cash NOI2

5,865

5,844

10,410

10,381

Number of Units outstanding (including Class B LP

18,053,253

18,053,253

18,053,253

18,053,253


 Units)

FFO per Unit

$0.247

$0.251

$0.446

$0.446

AFFO per Unit

$0.210

$0.214

$0.381

$0.381

Distributions per Unit

$0.201

$0.201

$0.357

$0.357

AFFO payout ratio2

95.7%

93.9%

93.7%

93.7%



1.

Property revenue in the Adjusted Forecast was calculated as follows: total rent revenue of $23,951 for the twelve-month period divided by
365 days and multiplied by 10 days in July, and including August through December monthly rental revenue. Also included is the prorated
amounts for realty tax and straight-line rent adjustment.

2.

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

Fourth Quarter Financial Results

The REIT performed in line with the Financial Forecast and management's expectations for the period.

Property revenue totaled $7.5 million and property costs of $1.0 million, were in-line with the Financial Forecast.

General and administrative ("G&A") expenses were $0.5 million compared to $0.4 million in the Financial Forecast. G&A expenses were above the Financial Forecast level due to year-end audit, accounting, and legal fees that were expensed during the quarter instead of being amortized on a straight-line basis over the 12 months of operations in the Financial Forecast.

NOI and Cash NOI generated during the fourth quarter of $6.5 million and $5.9 million, respectively, were both in-line with the Financial Forecast. 

FFO and AFFO of $4.5 million and $3.8 million, respectively, or $0.247 and $0.210 per Unit, respectively, were both consistent with the Financial Forecast, with a nominal variance that was primarily attributable to the higher fourth quarter G&A expenses as noted above.

Operating Year Financial Results

The REIT performed in line with the Adjusted Forecast and management's expectations for the Operating Year.

Property revenue totaled $13.3 million and property costs were $1.7 million, both in-line with the Adjusted Forecast.

G&A expenses were $0.8 million compared to $0.7 million in the Adjusted Forecast. The variance is primarily attributable to the higher fourth quarter G&A expenses, as noted above.

NOI and Cash NOI generated during the Operating Year was $11.6 million and $10.4 million, in-line with the Adjusted Forecast.  

FFO of $8.1 million, or $0.446 per Unit, and AFFO of $6.9 million, or $0.381 per Unit, for the Operating Year, were also both in-line with the Adjusted Forecast.

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 $6.4 million to unitholders during the Operating Year, or $0.357 per Unit, representing an AFFO payout ratio of 93.7%. Management expects that 96% of the REIT's total declared distributions for 2015 will be a return of capital to unitholders.

Fair Value of Investment Properties

As part of the IPO, the Initial Properties were externally valued by an independent, nationally-recognized appraiser. At that time, the overall implied capitalization rate was 6.6%. As at September 30, 2015, the same independent appraiser undertook a valuation of the Initial Properties using an income approach whereby a current capitalization rate was applied to the net operating income which a property can reasonably be expected to produce over its remaining economic life. As at September 30, 2015, the overall implied capitalization rate was 6.5%, reflecting an increase of 20 basis points in the capitalization rates for Calgary (17% of Cash NOI) and a 10 basis point decrease in Toronto and Vancouver (69% of Cash NOI).  As at December 31, 2015, the overall implied capitalization rate remained at 6.5%.   

Liquidity and Capital Structure

As at December 31, 2015, the REIT had cash and cash equivalents of $1.8 million and access to $12.3 million in undrawn credit facilities. The REIT had $215.9 million outstanding on its credit facilities with an effective weighted average interest rate of 3.15% and an effective interest term of 6.3 years. The REIT's debt to gross book value3 as at December 31, 2015 was 55.0%.

Units Outstanding

As at March 21, 2016, there were 8,120,000 REIT units and 9,933,253 Class B limited partnership units outstanding. 

Conference Call

Management of the REIT will host a conference call for analysts and investors on Tuesday, March 22, 2016 at 10:00 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: 52820431. The replay will be available until March 29, 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 most recently filed 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 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 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 NOI, FFO and AFFO are non-IFRS financial measures. See "Non-IFRS Financial Measures" in this press release.
3 Debt to gross book value is a non-IFRS financial measure. See "Non-IFRS Financial Measures" in this press 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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