TORONTO, May 11, 2023
/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, 2023 ("Q1 2023").
"Our positive momentum continued in the first quarter as
acquisitions and contractual rent increases drove year-over-year
growth in revenue, Cash NOI, and AFFO per unit," said Milton Lamb, CEO of Automotive Properties REIT.
"We've made strong progress with our acquisition program to date
this year with the purchase of six properties in Quebec during the first quarter, and our
agreement announced today to purchase the Groupe Park Avenue Volvo
and Jaguar Land Rover dealership property in Greater Montreal. Looking ahead, we are well
positioned to generate continued solid performance with our
expanded property portfolio and embedded fixed and CPI-adjusted
rental growth. We are also well insulated from potential interest
rate increases due to the measures we have taken to secure 94% of
our debt at fixed rates at quarter end."
Q1 2023 Highlights
- The REIT generated AFFO per Unit1 of $0.229 (diluted) and paid total cash
distributions of $0.201 per Unit (as
defined below) in Q1 2023, representing an AFFO payout
ratio1 of approximately 87.8%. For the comparable
three-month period ended March 31,
2022 ("Q1 2022"), the REIT generated AFFO per Unit of
$0.228 (diluted) and paid cash
distributions of $0.201 per Unit,
representing an AFFO payout ratio of approximately 88.2%. The AFFO
payout ratio was lower in Q1 2023 primarily due to the impact of
the properties acquired during and subsequent to Q1 2022 and
contractual rent increases.
- The REIT had a Debt to Gross Book Value ("Debt to
GBV")2 ratio of 45.2% as at March
31, 2023, and $52.4 million of
undrawn capacity under its revolving credit facilities,
$0.1 million of cash on hand, and
four unencumbered properties with an aggregate value of
approximately $61.5 million. As of
the date of this news release, the REIT has approximately
$82.0 million of undrawn capacity
under its revolving credit facilities and four unencumbered
properties with an aggregate value of approximately $61.5 million.
- The REIT's valuation of its investment properties declined
nominally in Q1 2023 compared to the prior quarter to reflect
current market conditions, resulting in a fair value loss of
$3.0 million. The capitalization rate
applicable to the REIT's entire portfolio increased to 6.48% as at
March 31, 2023, compared to 6.42% as
at December 31, 2022, and 6.25% as at
March 31, 2022.
- On January 3, 2023, the REIT
acquired the real estate underlying six automotive dealership
properties in Quebec (the "Quebec
Properties") from separate third parties for an aggregate purchase
price of approximately $98.5 million.
Four of the Quebec Properties are located in Laval and St.
Eustache in the Greater Montreal
Area (Hamel Honda, Honda Ste-Rose, Chomedey Toyota and
Mazda de Laval) and two of the
Quebec Properties are located in Sorel-Tracy, northeast of Montreal (Hyundai Sorel and Kia Sorel). On closing of the REIT's acquisition
of the Quebec Properties, the operating tenants entered into
long-term, triple-net leases with the REIT that include a
contractual annual rent increase based on the Quebec Consumer Price
Index, subject to a minimum of 1.5%, after year one of the lease
term.
- In February 2023, the REIT
entered into a new mortgage in the amount of $9.0 million for a term of five years at an
interest rate of 5.05%.
___________
|
1 AFFO per
Unit and AFFO payout ratio are non-IFRS measures and non-IFRS
ratios, respectively. See "Non-IFRS Financial Measures" at the end
of this news release.
|
2 Debt to
GBV is a supplementary financial measure. See "Non-IFRS Financial
Measures" at the end of this news release.
|
Subsequent Events
- In May 2023, $25 million of the outstanding revolving portion
of Credit Facility 1 was converted to a non-revolving balance,
which is currently at floating rates.
- On May 3, 2023, the REIT waived
conditions for the purchase of the real estate underlying an
automotive dealership property located in Brossard, Quebec (the "Brossard Property")
from a third-party vendor. The Brossard Property is under lease
with Groupe Park Avenue Volvo and Jaguar Land Rover. Such lease is
subject to annual adjustments linked to the consumer price index
("CPI") in Quebec. The REIT
expects that the total expenditure, including the purchase price,
will be approximately $16.1 million.
The property comprises 50,415 square feet of gross leasable area on
approximately 3.4 acres of land. The REIT expects to fund the
acquisition of the Brossard Property through draws on its
non-revolving and revolving credit facilities, and cash on hand.
The acquisition of the Brossard Property is expected to close by
the end of June 2023.
Financial Results Summary
|
Three
months ended
March 31,
|
($000s, except per
Unit amounts)
|
2023
|
2022
|
Change
|
|
|
|
|
Rental revenue
(1)
|
$22,876
|
$20,434
|
12.0 %
|
NOI(2)
|
19,457
|
17,543
|
10.9 %
|
Cash
NOI(2)
|
18,846
|
16,941
|
11.2 %
|
Same Property Cash
NOI(2)
|
16,136
|
15,761
|
2.4 %
|
Net Income
(3)
|
16,967
|
29,706
|
-42.9 %
|
FFO(2)
|
12,029
|
11,949
|
0.7 %
|
AFFO(2)
|
11,409
|
11,362
|
0.4 %
|
Distributions per
Unit
|
$0.201
|
$0.201
|
-
|
|
|
|
|
FFO per Unit - basic
(4)
|
0.245
|
0.244
|
0.001
|
FFO per Unit -
diluted (5)
|
0.241
|
0.240
|
0.001
|
|
|
|
|
AFFO per Unit - basic
(4)
|
0.233
|
0.232
|
0.001
|
AFFO per Unit -
diluted (5)
|
0.229
|
0.228
|
0.001
|
|
|
|
|
Ratios
(%)
|
|
|
|
FFO payout
ratio(2)
|
83.4 %
|
83.8 %
|
-0.4 %
|
AFFO payout
ratio(2)
|
87.8 %
|
88.2 %
|
-0.4 %
|
(1)
|
Rental revenue is based
on rents from leases entered into with tenants, all of which are
triple-net leases and include recoverable realty taxes and
straight-line adjustments. Same Property Cash NOI is based on
rental revenue for the same asset base having consistent gross
leasable area in both periods.
|
(2)
|
NOI, Cash NOI, Same
Property Cash NOI (excluding bad debt (recovery)), FFO, AFFO, FFO
per Unit, AFFO per Unit, FFO payout ratio and AFFO payout ratio are
non-IFRS measures or non-IFRS ratios, as applicable. See "Non-IFRS
Financial Measures" at the end of this news release. References to
"Same Property" correspond to properties that the REIT owned in Q1
2022, thus removing the impact of acquisitions.
|
(3)
|
Net income for Q1 2023
includes changes in fair value adjustments of $14.5 million for
Class B Limited Partnership Units of Automotive Properties Limited
Partnership ("Class B LP Units"), Deferred Units ("DUs"), Income
Deferred Units ("IDUs"), Performance Deferred Units ("PDUs") and
Restricted Deferred Units ("RDUs"), $4.8 million for interest rate
swaps and $3.0 million for investment properties. Please refer to
the consolidated financial statements of the REIT and notes
thereto.
|
(4)
|
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
trust units of the REIT ("REIT Units" and together with the Class B
LP Units, "Units") and Class B LP Units. The total weighted average
number of Units outstanding – basic for Q1 2023 was
49,054,833.
|
(5)
|
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, DUs, IDUs, PDUs and RDUs granted to certain independent
trustees and management of the REIT. The total weighted average
number of Units outstanding (including Class B LP Units, DUs, IDUs,
PDUs and RDUs) on a fully diluted basis for Q1 2023 was
49,889,062.
|
(6)
|
Debt to GBV is a
supplementary financial measure. See "Non-IFRS Financial Measures"
at the end of this news release.
|
Rental revenue in Q1 2023 increased by 12.0% to $22.9 million, compared to $20.4 million in Q1 2022. The increase in rental
revenue reflects growth from properties acquired during and
subsequent to Q1 2022 and contractual annual rent increases.
The REIT generated total Cash NOI of $18.8 million in Q1 2023, representing an
increase of 11.2% compared to Q1 2022. The increase was primarily
attributable to the properties acquired during and subsequent to Q1
2022 and contractual rent increases. Same Property Cash NOI was
$16.1 million in Q1 2023,
representing an increase of 2.4% compared to Q1 2022. The increase
was primarily attributable to contractual rent increases.
The REIT recorded net income of $17.0
million in Q1 2023, compared to $29.7
million in Q1 2022. The decrease was primarily due to
non-cash fair value adjustments for interest rate swaps and
investment properties, partially offset by higher NOI and fair
value adjustments for Class B LP Units and DUs, IDUs, PDUs and RDUs
(collectively "Unit-based compensation"). The impact of the
movement in the traded value of the REIT Units resulted in an
increase in fair value adjustment for Class B LP Units and
Unit-based compensation in Q1 2023 of $14.5
million, compared to an increase of $3.9 million in Q1 2022.
FFO in Q1 2023 increased 0.7% to $12.0
million, or $0.241 per unit
(diluted), compared to $11.9 million,
or $0.240 per unit (diluted) in Q1
2022. The increase was primarily attributable to the properties
acquired during and subsequent to Q1 2022, and contractual rent
increases.
AFFO in Q1 2023 increased 0.4% to $11.4
million, or $0.229 per unit
(diluted), compared to $11.4 million,
or $0.228 per unit (diluted), in Q1
2022. The increase reflects the impact of the properties acquired
during and subsequent to Q1 2022, and contractual rent
increases.
Adjusted Cash Flow from Operations ("ACFO")3 for Q1
2023 was $12.1 million, compared to
$12.2 million in Q1 2022. The nominal
decrease was primarily attributable to higher interest costs due to
additional debt incurred by the REIT to acquire properties during
and subsequent to Q1 2022, and higher interest rates.
__________
|
3 ACFO is a
non-IFRS measure. See "Non-IFRS Financial Measures" at the end of
this news release.
|
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 Q1 2023, the REIT declared and paid total distributions
of $9.86 million, or $0.201 per Unit, representing an AFFO payout
ratio of 87.8%. The AFFO payout ratio was lower in Q1 2023 compared
to the 88.2% AFFO payout ratio in Q1 2022 primarily due to the
impact of the properties acquired during and subsequent to Q1 2022,
and contractual rent increases.
Liquidity and Capital Resources
As at March 31, 2023, the REIT had
a Debt to GBV ratio of 45.2%, $52.4
million of undrawn capacity under its revolving credit
facilities, $0.1 million of cash on
hand, and four unencumbered properties with an aggregate value
of approximately $61.5 million. As of
the date of this news release, the REIT has approximately
$82.0 million of undrawn capacity
under its revolving credit facilities and four unencumbered
properties with an aggregate value of approximately $61.5 million.
As at March 31, 2023, 94% of the
REIT's debt was fixed with a weighted average interest rate of
4.18%, with a weighted average interest swap term and mortgages
remaining of 5.5 years, and a weighted average term to maturity of
debt of 3.6 years.
Units Outstanding
As at March 31, 2023, there were
39,727,346 REIT Units and 9,327,487 Class B LP Units
outstanding.
Outlook
The REIT is subject to risks associated with rising inflation,
interest rates and availability of capital. The REIT anticipates
that inflation and interest rates will remain elevated in the near
term, which may have an adverse effect on consumer demand and the
overall economy. The REIT will continue to monitor these factors
and strategically move its floating and short-term debt into fixed
and/or long-term debt in an effort to minimize the impact of any
potential future interest rate increases. The fluctuation in the
interest rate environment, inflation and credit environment impacts
rental growth and capitalization rates overall in the real estate
industry and may also provide attractive buying opportunities for
the REIT.
The COVID-19 pandemic and other factors have impacted the
vehicle supply chain, resulting in constraints of specific parts,
models and brands. Management believes these supply chain
constraints will continue into the foreseeable future but will not
have a significant impact on the REIT's tenants' ability to pay
rent.
Overall, the REIT believes that the fundamentals of the
automotive dealership business remain solid, and that the industry
is resilient and essential.
The Canadian automotive dealership industry remains 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.
Financial Statements
The REIT's unaudited consolidated financial statements and
related Management's Discussion & Analysis ("MD&A") for Q1
2023 are available on the REIT's website at
www.automotivepropertiesreit.ca and on SEDAR at
www.sedar.com.
Conference Call
Management of the REIT will host a conference call for analysts
and investors on Friday, May 12, 2023
at 9:00 a.m. (ET). To join the
conference call without operator assistance, you may register and
enter your phone number at https://emportal.ink/3UaEoBM to
receive an instant automated call back. Alternatively, you can dial
(416) 764-8688 or (888) 390-0546 to reach a live operator who will
join you 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 (416) 764-8677
or (888) 390-0541, passcode: 681401 #. The replay will be available
until May 19, 2023.
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
dealership properties located in Canada. 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; and the expected
timing of the closing of the Brossard Property acquisition.
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, 2022 and in the REIT's
annual information form dated March 16,
2023, which are available on SEDAR (www.sedar.com) and the
REIT's website (www.automotivepropertiesreit.ca). 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 measure, 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 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
Q1 2023 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.sedar.com.
Reconciliation of NOI, Cash NOI, FFO and AFFO to Net Income
and Comprehensive Income
Three months ended
March 31,
|
|
|
|
($000s, except per Unit
amounts)
|
2023
|
2022
|
Variance
|
Calculation of
NOI
|
|
|
|
Property
revenue
|
$22,876
|
$20,434
|
$2,442
|
Property
costs
|
(3,419)
|
(2,891)
|
(528)
|
NOI (including
straight–line adjustments)
|
$19,457
|
$17,543
|
$1,914
|
Adjustments:
|
|
|
|
Land lease
payments
|
(86)
|
(99)
|
13
|
Straight–line
adjustment
|
(525)
|
(503)
|
(22)
|
Cash
NOI
|
18,846
|
16,941
|
1,905
|
Reconciliation of
net income to FFO and AFFO
|
|
|
|
Net income and
comprehensive income
|
$16,967
|
$29,706
|
$(12,739)
|
Adjustments:
|
|
|
|
Change in fair value –
Interest rate swaps
|
4,762
|
(13,985)
|
18,747
|
Distributions on
Class B LP Units
|
1,875
|
1,997
|
(122)
|
Change in fair value –
Class B LP Units and Unit-based compensation
|
(14,492)
|
(3,923)
|
(10,569)
|
Change in fair value –
investment properties
|
2,957
|
(1,642)
|
4,599
|
ROU asset net balance
of depreciation/interest and lease
payments(1)
|
(40)
|
(204)
|
164
|
FFO
|
$12,029
|
$11,949
|
$80
|
Adjustments:
|
|
|
|
Straight–line
adjustment
|
$(525)
|
$(503)
|
$(22)
|
Capital expenditure
reserve
|
(95)
|
(84)
|
(11)
|
AFFO
|
$11,409
|
$11,362
|
$47
|
Number of Units
outstanding (including Class B LP Units)
|
49,054,833
|
49,031,407
|
23,426
|
Weighted average Units
Outstanding — basic
|
49,054,833
|
49,013,807
|
41,026
|
Weighted average Units
Outstanding — diluted
|
49,889,062
|
49,748,964
|
140,098
|
FFO per Unit –
basic(2)
|
$0.245
|
$0.244
|
$0.001
|
FFO per Unit –
diluted(3)
|
$0.241
|
$0.240
|
$0.001
|
AFFO per Unit –
basic(2)
|
$0.233
|
$0.232
|
$0.001
|
AFFO per Unit –
diluted(3)
|
$0.229
|
$0.228
|
$0.001
|
Distributions per
Unit
|
$0.201
|
$0.201
|
—
|
FFO payout
ratio
|
83.4 %
|
83.8 %
|
—
|
AFFO payout
ratio
|
87.8 %
|
88.2 %
|
—
|
Same Property Cash Net Operating Income
Three months ended
March 31,
|
2023
|
2022
|
Variance ($)
|
Same property base
rental revenue
|
$16,222
|
$15,847
|
$375
|
Land lease
payments
|
(86)
|
(86)
|
—
|
Same Property Cash
NOI
|
$16,136
|
$15,761
|
$375
|
Reconciliation of Cash Flow from Operating Activities to
ACFO
Three months ended
March 31,
|
|
|
|
($000s)
|
2023
|
2022
|
Variance
|
Cash flow from
operating activities
|
$17,099
|
$15,824
|
$1,275
|
Change in non-cash
working capital
|
1,080
|
608
|
472
|
Interest
paid
|
(5,736)
|
(3,726)
|
(2,010)
|
Amortization of
financing fees
|
(238)
|
(170)
|
(68)
|
Amortization of other
assets
|
(46)
|
(57)
|
11
|
Net interest expense
and other financing charges in excess of interest paid
|
4
|
(219)
|
223
|
Capital expenditure
reserve
|
(86)
|
(84)
|
(2)
|
ACFO
|
$12,077
|
$12,176
|
$(99)
|
ACFO payout
ratio
|
81.6 %
|
80.9 %
|
0.7 %
|
SOURCE Automotive Properties Real Estate Investment Trust