TORONTO, Nov. 11, 2021 /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 2021") and nine-month ("YTD 2021") periods ended
September 30, 2021.
"The third quarter was another strong one for the REIT,
highlighted by solid increases in revenue, NOI and AFFO per unit,"
said Milton Lamb, CEO of Automotive
Properties REIT. "Our strong financial performance is supported by
the resiliency of the automotive dealership industry, which is
experiencing year-over-year growth in sales this year. We are
collecting 100% of contractual base rent under our leases every
month, in addition to contractual rent that is due under the
Deferral Agreements. We expect the pace of industry consolidation
to accelerate in the months ahead as the economy continues to
recover, and we are well positioned to capitalize on accretive
opportunities to expand our property portfolio."
Q3 2021 Highlights
- The REIT collected 100% of its Q3 2021 contractual base rent
due under its leases and rent deferral agreements with its tenants
(the "Deferral Agreements").
- The REIT generated AFFO per Unit (as defined below) of
$0.221 (diluted) and paid total cash
distributions of $0.201 per Unit in
Q3 2021, representing an AFFO payout ratio of approximately 91.0%.
For the comparable three-month period ended September 30, 2020 ("Q3 2020"), the REIT
generated AFFO per Unit of $0.215
(diluted) and paid cash distributions of $0.201 per Unit, representing an AFFO payout
ratio of approximately 93.5%. The AFFO payout ratio was lower in Q3
2021 primarily due to contractual rent increases, in addition to
the temporary dilutive effect of the REIT's December 2019 equity offering.
- The REIT had a Debt to Gross Book Value ("Debt to GBV") ratio
of 40.1% as at September 30, 2021,
and a strong liquidity position with $74.2
million of undrawn credit facilities, $5.0 million of cash on hand, and seven
unencumbered properties with an aggregate value of approximately
$103.2 million.
- The capitalization rate applicable to the REIT's entire
portfolio was 6.4% as at September 30,
2021, a reduction of approximately 10 basis points from 6.5%
as at June 30, 2021, and a reduction
of approximately 30 basis points from 6.7% as at December 31, 2020. The reduction of the
capitalization rate in Q3 2021 is a result of the REIT decreasing
the discount rate for its properties in the Greater Vancouver Area and Alberta by 25 basis points, and decreasing
discount rates for specific properties in certain markets. The
reductions were primarily due to industry-wide single tenant retail
and industrial capitalization rate reductions. In addition, the
REIT continued its amortization of two land lease properties.
Financial Results Summary¹
|
|
|
|
Three months
ended
September 30,
|
Nine months
ended
September 30,
|
($000s, except
per Unit amounts)
|
2021
|
2020
|
Change
|
2021
|
2020
|
Change
|
|
|
|
|
|
|
|
Rental revenue
(2)
|
$19,462
|
$18,627
|
4.5%
|
$58,438
|
$56,033
|
4.3%
|
NOI
|
16,688
|
16,168
|
3.2%
|
50,306
|
47,548
|
5.8%
|
Cash NOI
|
15,992
|
15,243
|
4.9%
|
48,257
|
44,914
|
7.4%
|
Same Property Cash
NOI (excluding bad
debt (expense)/reversal) (2)
|
15,410
|
15,120
|
1.9%
|
44,698
|
44,031
|
1.5%
|
Net Income (Loss)
(3)
|
30,824
|
4,395
|
601.3%
|
75,013
|
(3,214)
|
N/A
|
FFO
|
11,626
|
11,124
|
4.5%
|
35,039
|
32,552
|
7.6%
|
AFFO
|
11,008
|
10,338
|
6.5%
|
33,067
|
30,165
|
9.6%
|
Distributions per
Unit
|
$0.201
|
$0.201
|
-
|
$0.603
|
$0.603
|
-
|
|
|
|
|
|
|
|
FFO per Unit - basic
(4)
|
0.237
|
0.234
|
0.003
|
0.719
|
0.683
|
0.036
|
FFO per Unit -
diluted (5)
|
0.234
|
0.231
|
0.003
|
0.710
|
0.677
|
0.033
|
|
|
|
|
|
|
|
AFFO per Unit - basic
(4)
|
0.225
|
0.217
|
0.008
|
0.679
|
0.633
|
0.046
|
AFFO per Unit -
diluted (5)
|
0.221
|
0.215
|
0.006
|
0.670
|
0.627
|
0.043
|
|
|
|
|
|
|
|
Ratios
(%)
|
|
|
|
|
|
|
FFO payout
ratio
|
85.9%
|
87.0%
|
-1.1%
|
84.9%
|
89.1%
|
-4.2%
|
AFFO payout
ratio
|
91.0%
|
93.5%
|
-2.5%
|
90.0%
|
96.2%
|
-6.2%
|
Debt to
GBV
|
40.1%
|
44.8%
|
-4.7%
|
40.1%
|
44.8%
|
-4.7%
|
|
|
(1)
|
NOI, Cash NOI, Same
Property Cash NOI, FFO, AFFO, Debt to GBV, FFO Payout Ratio, AFFO
Payout Ratio and ACFO are non-IFRS financial measures. See
"Non-IFRS Financial Measures" in this news release. References to
"Same Property" correspond to properties that the REIT owned in Q3
2020, thus removing the impact of acquisitions.
|
(2)
|
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.
|
(3)
|
Net income for Q3
2021 includes changes in fair value adjustments of $3.1 million for
Class B limited partnership units of Automotive Properties Limited
Partnership ("Class B LP Units"), deferred units ("DUs") and income
deferred units ("IDUs"), $2.0 million for interest rate swaps and
$22.3 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 Q3 2021 was
49,013,407.
|
(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 and IDUs granted to certain independent trustees and
management of the REIT. The total weighted average number of Units
outstanding (including Class B LP Units, DUs and IDUs) on a fully
diluted basis for Q3 2021 was 49,717,307.
|
Rental revenue in Q3 2021 increased by 4.5% to $19.5 million, compared to $18.6 million in Q3 2020. The increase in rental
revenue reflects growth from properties acquired during and
subsequent to Q3 2020 and contractual annual rent
increases.
The REIT generated total Cash NOI of $16.0 million in Q3 2021, representing an
increase of 4.9% compared to Q3 2020. The increase was primarily
attributable to the properties acquired during and subsequent to Q3
2020 and contractual rent increases, partially offset by capital
reserve expenses. Same Property Cash NOI (excluding bad debt
expense and reversal) was $15.4
million in Q3 2021, representing an increase of 1.9%
compared to Q3 2020. The increase was primarily attributable to
contractual rent increases.
The REIT recorded net income of $30.8
million in Q3 2021, compared to $4.4
million in Q3 2020. The positive variance was primarily due
to higher NOI and fair value adjustments on investment
properties.
FFO in Q3 2021 was $11.6 million,
or $0.234 per Unit (diluted), as
compared to $11.1 million, or
$0.231 per Unit (diluted), in Q3
2020. The increase was primarily due to the impact of the
properties acquired during and subsequent to Q3 2020 and
contractual rent increases.
AFFO in Q3 2021 was $11.0 million,
or $0.221 per Unit (diluted), as
compared to $10.3 million, or
$0.215 per Unit (diluted), in Q3
2020. The increase was primarily due to the impact of the
properties acquired during and subsequent to Q3 2020 and
contractual rent increases, partially offset by capital reserve
expenses.
Adjusted Cash Flow from Operations1 ("ACFO") for
Q3 2021 increased by 22.7% to $12.5
million, compared to $10.2
million in Q3 2020. The increase was primarily due to the
impact of the properties acquired during and subsequent to Q3 2020,
contractual rent increases and the collection of rent receivables
under the Deferral Agreements.
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 2021, the REIT declared and paid total distributions
of $9.85 million, or $0.201 per Unit, representing an AFFO payout
ratio of 91.0%. The AFFO payout ratio was lower in Q3 2021 compared
to the 93.5% AFFO payout ratio in Q3 2020 primarily due to
contractual rent increases. The higher AFFO payout ratio in Q3 2020
also reflects the temporary dilutive effect of the December 2019 equity offering.
Liquidity and Capital Resources
As at September 30, 2021, the REIT
had a Debt to GBV ratio of 40.1% and a strong liquidity position
with $74.2 million of undrawn credit
facilities, cash on hand of $5.0
million, and seven unencumbered properties with an aggregate
value of approximately $103.2
million.
Units Outstanding
As at September 30, 2021, there
were 39,080,154 REIT Units and 9,933,253 Class B LP Units
outstanding.
Outlook
The REIT has collected 100% of its expected October and
November 2021 contractual base rent
under the leases, plus contractual base rent that is due under the
Deferral Agreements. Since the end of Q3 2021, provincial
governments across Canada have
eased COVID-19 related business restrictions, as COVID-19
vaccination rates of Canadians have continued to increase and case
counts have stabilized. As provincial COVID-19 related restrictions
continue to ease, pent-up consumer demand is expected to support
the continued strength in Canadian auto sales and service work
performed by automotive dealerships. The pandemic has also impacted
the vehicle supply chain, resulting in constraints of specific
parts, models and brands. Management believes these supply
constraints will continue into 2022, but will not have a material
impact on the REIT's tenants. The REIT believes that the overall
fundamentals of the automotive dealership business remain strong
and that the industry is resilient and will continue to grow as the
pandemic continues to stabilize. While the current outlook
regarding the pandemic is more positive than at the end of the
second quarter of 2021, future developments related to the pandemic
could result in additional restrictions being implemented
throughout the remainder of 2021 that could impact the financial
performance and financial position of the REIT and its tenants in
future periods.
The REIT expects that the pace of consolidation in the
automotive dealership industry will rebound as the pandemic is
brought under control and the overall economy strengthens. Given
the REIT's strong balance sheet position, the REIT has the ability
to pursue acquisitions on a strategic basis through debt financing
and available liquidity. Management and the trustees will continue
to closely monitor the impact of the pandemic on the REIT's
business and the business of the REIT's tenants, and will continue
to prudently manage the REIT's financial resources.
Financial Statements
The REIT's unaudited consolidated financial statements and
related Management's Discussion & Analysis ("MD&A") for Q3
2021 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, November 12,
2021 at 9:00 a.m. (ET). The
dial-in numbers for the conference call are (416) 764-8688 or (888)
390-0546. 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: 276501 #. The replay will be available
until November 19, 2021.
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 66 income-producing commercial properties,
representing approximately 2.5 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 impact of the COVID-19
pandemic on the REIT and its tenants including with respect to
payment of rents and deferrals thereof. 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 Judgements & Estimates" in the REIT's
MD&A for the year ended December 31,
2020 and in the REIT's annual information form dated
March 23, 2021, which are available
on SEDAR (www.sedar.com) and the REIT's website
(www.automotivepropertiesreit.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 only 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. FFO, AFFO, FFO payout ratio, AFFO payout ratio, NOI,
Cash NOI and Same Property Cash NOI are key measures of performance
used by the REIT's management and real estate businesses. Debt to
GBV 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. See the REIT's Q3 2021
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 ACFO to cash flow from
operating activities.
SOURCE Automotive Properties Real Estate Investment Trust