Automotive Properties REIT Reports Financial Results for Third Quarter of 2024

TORONTO, Nov. 13, 2024 /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 2024") and nine-month ("YTD 2024") periods ended September 30, 2024.

"We generated continued growth in rental revenue, Cash NOI and AFFO per Unit in the quarter, supported by the fixed and CPI-linked annual rent increases built into our leases," said Milton Lamb, CEO of Automotive Properties REIT. "Subsequent to quarter end, we entered into agreements to acquire three properties, including our first automotive property in the United States and two heavy construction equipment dealerships properties in the Greater Montreal Area. The purchase prices for the acquisitions will be funded primarily from draws on our revolving credit facilities, which were repaid in full with the proceeds from our sale of the Kennedy Lands in Markham, a transaction that unlocked significant value from this property."

Q3 2024 Highlights

• The REIT generated AFFO per Unit[1] of $0.233 (diluted) and paid total cash distributions of $0.201 per Unit (as defined below) in Q3 2024, representing an AFFO payout ratio1 of approximately 86.3%. For the comparable three-month period ended September 30, 2023 ("Q3 2023"), the REIT generated AFFO per Unit of $0.230 (diluted) and paid cash distributions of $0.201 per Unit, representing an AFFO payout ratio of approximately 87.4%.
• On July 26, 2024, the REIT entered into an agreement (the "Sale Agreement") to sell its automotive dealership properties located at 8210 and 8220 Kennedy Road and 7 and 13/15 Main Street in Markham, Ontario (collectively, the "Kennedy Lands") to a member of the Dilawri Group for initial gross proceeds of $54.0 million (the "Sale Transaction"). The Sale Transaction was completed on October 1, 2024 and the net proceeds were used primarily to repay indebtedness under the REIT's revolving credit facilities in full.
• The REIT had a Debt to Gross Book Value ("Debt to GBV")[2] ratio of 43.7% as at September 30, 2024, and $55.1 million of undrawn capacity under its revolving credit facilities, $0.2 million of cash on hand, and two unencumbered properties with an aggregate value of approximately $72.3 million. The REIT's Debt to GBV ratio declined to 41.8% as at October 1, 2024 due to the debt repayment noted above. As at the date of this news release, the REIT has approximately $90.0 million of undrawn capacity under its revolving credit facilities and cash on hand of $18.0 million.

Subsequent Events

• On October 15, 2024, the REIT funded the dealership facility expansion at its McNaught Cadillac Buick GMC dealership property located in Winnipeg, Manitoba (the "McNaught Expansion"). The McNaught Expansion added a new Cadillac building having 13,681 square feet of gross leasable area ("GLA") at a cost of approximately $7.1 million, resulting in an annual rent increase. The REIT funded the McNaught Expansion with cash on hand.
• On October 31, 2024, the REIT announced that it entered into two separate agreements to acquire a total of three properties (the "Property Acquisitions"). The first agreement is to acquire a Rivian-tenanted automotive property in Tampa, Florida for a purchase price of approximately US$13.5 million (approximately C$18,800). The second agreement is to acquire two heavy construction equipment dealership properties in the Greater Montreal Area for a purchase price of approximately $25.4 million. The addition of these three properties are expected to be accretive to the REIT's AFFO per Unit. The REIT expects to fund the Property Acquisitions with cash on hand and draws on its revolving credit facilities and are expected to close in Q1 2025 and Q4 2024, respectively.

Financial Results Summary

Rental revenue in Q3 2024 increased by 0.7% to $23.5 million, compared to $23.4 million in Q3 2023. The increase in rental revenue reflects growth from the property acquired during Q2 2023 and contractual annual rent increases.

The REIT generated total Cash NOI of $19.7 million in Q3 2024, representing an increase of 2.4% compared to Q3 2023. The increase was primarily attributable to the property acquired during Q2 2023 and contractual rent increases. Same Property Cash NOI was $19.6 million in Q3 2024, representing an increase of 2.2% compared to Q3 2023. The increase was primarily attributable to contractual rent increases.

The REIT recorded net income of $1.8 million in Q3 2024, compared to $28.3 million in Q3 2023. The decrease was primarily due to changes in non-cash fair value adjustments for interest rate swaps and Class B LP Units, DUs, IDUs, PDUs and RDUs (collectively "Unit-based compensation"), partially offset by changes in fair value adjustments for investment properties and investment properties held for sale (including the $23.8 million fair value gain as a result of entering into the Sale Agreement). The impact of the movement in the traded value of the REIT Units resulted in a decrease in fair value adjustment for Class B LP Units and Unit-based compensation of $2.8 million in Q3 2024, compared to an increase of $10.6 million in Q3 2023.

FFO in Q3 2024 decreased by 0.4% to $11.9 million, or $0.237 per Unit (diluted), compared to $12.0 million, or $0.239 per Unit (diluted), in Q3 2023. The slight decrease in FFO was primarily attributable to higher interest expense and a reduction in straight-line rent adjustment, partially offset by higher rental revenue. Straight-line rent adjustment decreased by $0.2 million due to the addition of leases to the investment property portfolio containing CPI-linked rent adjustments.

AFFO in Q3 2024 increased 1.7% to $11.7 million, or $0.233 per Unit (diluted), compared to $11.5 million, or $0.230 per Unit (diluted), in Q3 2023. The increase in AFFO reflected the impact of the property acquired during Q2 2023 and contractual rent increases, partially offset by higher interest costs. Straight-line rent adjustment is excluded from the calculation of AFFO.

Adjusted Cash Flow from Operations ("ACFO")3 for Q3 2024 was $11.7 million, an increase of 1.5% compared to $11.5 million in Q3 2023. The increase was primarily attributable to the difference in timing of non-cash working capital payments.

Cash Distributions

The REIT is currently paying monthly cash distributions of $0.067 per Unit, representing $0.804 per Unit on an annualized basis. For Q3 2024, the REIT declared and paid total distributions of $9.87 million, or $0.201 per Unit, representing an AFFO payout ratio of 86.3%. The AFFO payout ratio was lower in Q3 2024 compared to the 87.4% AFFO payout ratio in Q3 2023, primarily due to the positive impact of the property acquired and contractual rent increases, partially offset by higher interest expense.

Liquidity and Capital Resources

As at September 30, 2024, the REIT had a Debt to GBV ratio of 43.7%, $55.1 million of undrawn capacity under its revolving credit facilities, $0.2 million of cash on hand, and two unencumbered properties with an aggregate value of approximately $72.3 million (including the Kennedy Lands, which had an IFRS fair value of $54.0 million as at September 30, 2024). The completion of the Sale Transaction occurred on October 1, 2024, with the net proceeds from the sale used primarily to repay indebtedness under the REIT's revolving credit facilities in full, which lowered the REIT's Debt to GBV ratio to 41.8% as at October 1, 2024. As at the date of this news release, the REIT has approximately $90.0 million of undrawn capacity under its revolving credit facilities, cash on hand of $18.0 million, and one unencumbered property valued at approximately $18.3 million.

As at September 30, 2024, 94% of the REIT's debt was fixed with a weighted average interest rate of 4.31%, a weighted average interest rate swap term and mortgages remaining of 4.1 years, and a weighted average term to maturity of debt of 2.6 years.

Units Outstanding

As at September 30, 2024, there were 49,090,142 REIT Units and nil Class B LP Units outstanding.

Outlook

The REIT is subject to risks associated with inflation, interest rates and availability of capital. Fluctuations in the interest rate environment, inflation and credit environment impacts rental growth and capitalization rates overall in the real estate industry which, in turn, could provide attractive buying opportunities for the REIT.

The REIT used a portion of the net proceeds from the Sale Transaction to pay down in full its indebtedness under its revolving credit facilities, which lowered the REIT's Debt to GBV ratio to 41.8% as at October 1, 2024 (43.7% as at September 30, 2024), providing the REIT with additional acquisition capacity. The REIT expects to use a portion of the net proceeds from the Sale Transaction and draws on its revolving credit facilities to fund the respective purchase prices of the Property Acquisitions. Assuming closing occurs, the Property Acquisitions will enhance the tenant and geographic diversification within the REIT's portfolio and are expected to be accretive to the REIT's AFFO per Unit.

The Canadian automotive and original equipment manufacturer ("OEM") dealership and service industry is highly fragmented, and the REIT expects continued consolidation over the mid to long term due to increased industry sophistication and growing capital requirements for owner operators, which encourages them to pursue increased economies of scale. The REIT plans to continue to grow its portfolio of properties leased to OEMs, OEM dealers and other automotive related uses.

Financial Statements

The REIT's unaudited consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for Q3 2024 are available on the REIT's website at www.automotivepropertiesreit.ca and on SEDAR+ at www.sedarplus.ca.

Conference Call

Management of the REIT will host a conference call for analysts and investors on Thursday, November 14, 2024 at 9:00 a.m. (ET). To join the conference call without operator assistance, participants can register and enter their phone number at https://emportal.ink/3XTRbuC to receive an instant automated call back. Alternatively, they can dial (416) 945-7677 or (888) 699-1199 to reach a live operator who will join them into the call. A live and archived webcast of the call will be accessible via the REIT's website www.automotivepropertiesreit.ca.

To access a replay of the conference call, dial (289) 819-1450 or (888) 660-6345, passcode: 92690 #. The replay will be available until November 21, 2024.

About Automotive Properties REIT

Automotive Properties REIT is an internally managed, unincorporated, open-ended real estate investment trust focused on owning and acquiring primarily income-producing automotive properties, including retail dealership and original equipment manufacturer properties, located in Canada and the United States. The REIT's portfolio currently consists of 76 income-producing commercial properties, representing approximately 2.8 million square feet of gross leasable area, in metropolitan markets across British Columbia, Alberta, Saskatchewan, Manitoba, Ontario 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 includes the REIT's expectations with respect to inflation and interest rates, including the impact of each of the foregoing on the REIT and its tenants, the completion of the Property Acquisitions, the timing and the anticipated financial benefits there from and additional acquisition capacity. 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 & Uncertainties, Critical Judgments & Estimates" in the REIT's MD&A for the year ended December 31, 2023 and in the REIT's MD&A for the interim period ended September 30, 2024, and under "Risk Factors" in the REIT's annual information form dated March 7, 2024, which are available on SEDAR+ (www.sedarplus.ca) and the REIT's website (www.automotivepropertiesreit.ca). The forward-looking information relating to theProperty Acquisitions is subject to the further risk that the customaryclosing conditions may not be satisfied or waived such that one or more of the Property Acquisitions do not close oncurrent terms or at all.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 only as of the date of this news release.

Non-IFRS Financial Measures

This news release contains certain financial measures and ratios which are not defined under International Financial Reporting Standards ("IFRS") and may not be comparable to similar measures presented by other real estate investment trusts or enterprises. FFO, AFFO, FFO payout ratio, AFFO payout ratio, NOI, Cash NOI, Same Property Cash NOI and ACFO are key measures of performance used by the REIT's management and real estate businesses. Debt to GBV, a supplementary financial measures, are measures of financial position defined by agreements to which the REIT is a party. 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 earnings performance and is indicative of the REIT's ability to pay distributions from earnings, while FFO, NOI, Cash NOI and Same Property Cash NOI are important measures of operating performance of real estate businesses and properties. The IFRS measurement most directly comparable to FFO, AFFO, NOI, Cash NOI and Same Property Cash NOI is net income. ACFO is a supplementary measure used by management to improve the understanding of the operating cash flow of the REIT. The IFRS measurement most directly comparable to ACFO is cash flow from operating activities. For reconciliations of NOI, FFO, AFFO and Cash NOI to net income and comprehensive income, and ACFO to cash flow from operating activities, please see the tables below. For further information regarding these non-IFRS measures and supplementary financial measures, please refer to Section 1 "General Information and Cautionary Statements – Non-IFRS Financial Measures" and Section 6 "Non-IFRS Financial Measures" in the REIT's Q3 2024 MD&A which is incorporated by reference herein and is available on the REIT's website at www.automotivepropertiesreit.ca and on SEDAR+ at www.sedarplus.ca.

Reconciliation of NOI, Cash NOI, FFO and AFFO to Net Income and Comprehensive Income

Same Property Cash Net Operating Income

Reconciliation of Cash Flow from Operating Activities to ACFO

SOURCE Automotive Properties Real Estate Investment Trust

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