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.

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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   

• 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           

	Three months ended  September 30,			Nine months ended September 30,
($000s, except per Unit amounts)	2024	2023	Change	2024	2023	Change
Rental revenue (1)	$23,533	$23,378	0.7 %	$70,461	$69,193	1.8 %
NOI (2)	19,897	19,671	1.1 %	59,564	58,672	1.5 %
Cash NOI (2)	19,680	19,213	2.4 %	58,724	57,026	3.0 %
Same Property Cash NOI (1) (2)	19,643	19,214	2.2 %	56,247	54,922	2.4 %
Net Income (3)	1,766	28,332	-93.8 %	59,955	66,190	-9.4 %
FFO (2)	11,920	11,967	-0.4 %	36,004	36,071	-0.2 %
AFFO (2)	11,690	11,499	1.7 %	35,127	34,398	2.1 %
Distributions per Unit	$0.201	$0.201	-	$0.603	$0.603	-
FFO per Unit - basic (2) (4)	0.243	0.244	-0.001	0.734	0.735	-0.001
FFO per Unit - diluted (2) (5)	0.237	0.239	-0.002	0.717	0.721	-0.004
AFFO per Unit - basic (2) (4)	0.238	0.234	0.004	0.716	0.701	0.015
AFFO per Unit - diluted (2) (5)	0.233	0.230	0.003	0.699	0.688	0.011
Ratios (%)
FFO payout ratio (2)	84.8 %	84.1 %	0.7 %	84.1 %	83.6 %	0.5 %
AFFO payout ratio (2)	86.3 %	87.4 %	-1.1 %	86.3 %	87.6 %	-1.3 %
Debt to GBV (6)	43.7 %	44.5 %	-0.8 %	43.7 %	44.5 %	-0.8 %

(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, 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 Q3 2023, thus removing the impact of acquisitions.
(3)	Net income for Q3 2024 includes changes in fair value adjustments of $2.8 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"), $12.5 million for interest rate swaps and $5.1 million for investment properties and investment properties held for sale. Please refer to the unaudited, condensed consolidated interim 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 2024 was 49,072,488.
(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 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 Q3 2024 was 50,286,264.
(6)	Debt to GBV is a supplementary financial measure. See "Non-IFRS Financial Measures" at the end of this news release.

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.  

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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 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 [phone] or [phone] 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 [phone] or [phone], 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 the Property Acquisitions is subject to the further risk that the customary closing conditions may not be satisfied or waived such that one or more of the Property Acquisitions do not close on current 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

	Three Months Ended September 30,				Nine Months Ended September 30,
($000s, except per Unit amounts)	2024	2023	Variance		2024		2023	Variance
Calculation of NOI
Property revenue	$23,533	$23,378	$155		70,461		$69,193	$1,268
Property costs	(3,636)	(3,707)	71		(10,897)		(10,521)	(376)
NOI (including straight–line adjustments)	$19,897	$19,671	$226		59,564		58,672	$892
Adjustments:
Land lease payments	(86)	(86)	-		(259)		(259)	-
Straight–line adjustment	(131)	(372)	241		(582)		(1,387)	806
Cash NOI	$19,680	$19,213	$467		58,724		$57,026	$1,698
Reconciliation of net income to FFO and AFFO
Net income and comprehensive income	$1,766	$28,332	$(26,566)		59,955		$66,190	$(6,235)
Adjustments:
Change in fair value — Interest rate swaps	12,485	(8,335)	20,820		9,763		(13,233)	22,996
Distributions on Class B LP Units	-	1,874	(1,874)		3,125		5,624	(2,499)
Change in fair value – Class B LP Units and Unit-based compensation	2,821	(10,641)	13,462		(7,514)		(25,728)	18,214
Change in fair value — investment properties and investment properties held for sale(1)	(5,074)	779	(5,853)		(29,105)		3,345	(32,450)
ROU asset net balance of depreciation/interest and lease payments	(78)	(42)	(36)		(220)		(127)	(93)
FFO	$11,920	$11,967	$(47)		$36,004		$36,071	$(67)
Adjustments:
Straight–line adjustment	(131)	(372)	241		(582)		(1,387)	805
Capital expenditure reserve	(98)	(96)	(2)		(295)		(286)	(9)
AFFO	$11,690	$11,499	$192		$35,127		$34,398	$729
Number of Units outstanding (including Class B LP Units)	49,090,142	49,054,833	35,309		49,090,142		49,054,833	35,309
Weighted average Units Outstanding — basic	49,072,488	49,054,833	17,655		49,060,783		49,054,833	5,950
Weighted average Units Outstanding — diluted	50,286,264	50,052,016	234,248		50,232,596		50,036,392	196,204
FFO per Unit – basic(2)	$0.243	$0.244	$(0.001)		$0.734		$0.735	$(0.001)
FFO per Unit – diluted(3)	$0.237	$0.239	$(0.002)		$0.717		$0.721	$(0.004)
AFFO per Unit – basic(2)	$0.238	$0.234	$0.004		$0.716		$0.701	$0.015
AFFO per Unit – diluted(3)	$0.233	$0.230	$0.003		$0.699		$0.688	$0.011
Distributions per Unit	$0.201	$0.201	­-		$0.603		$0.603	-
FFO payout ratio	84.8 %	84.1 %	0.7 %		84.1 %		83.6 %	0.5 %
AFFO payout ratio	86.3 %	87.4 %	(1.1 %)		86.3 %		87.6 %	(1.3 %)

(1)	The Change in fair value — investment properties in respect of the three and nine months ended September 30, 2024 is inclusive of the $23,760 fair value gain as a result of entering into the Sale Agreement, thereby classifying the Kennedy Lands as investment properties held for sale. The Sale Transaction was completed on October 1, 2024.
(2)	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.
(3)	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 Unit-based compensation granted to independent trustees and management of the REIT.

Same Property Cash Net Operating Income

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024	2023	Variance		2024		2023	Variance
Same property base rental revenue	$19,742	$19,300	$442		$56,532		$55,180	$1,352
Land lease payments	(99)	(86)	(13)		(285)		(259)	(26)
Same Property Cash NOI	$19,643	$19,214	$429		$56,247		$54,922	1,325

Reconciliation of Cash Flow from Operating Activities to ACFO

	Three Months Ended September 30,			Nine Months Ended September 30,
($000s)	2024	2023	Variance	2024	2023		Variance
Cash flow from operating activities	$18,590	$20,704	$(2,114)	$57,029		$54,207	$2,822
Change in non-cash working capital	(242)	(2,709)	2,467	(1,065)		787	(1,852)
Interest paid	(6,290)	(6,030)	(260)	(18,604)		(17,496)	(1,108)
Amortization of financing fees	(235)	(246)	11	(636)		(729)	93
Amortization of other assets	(36)	(72)	36	(108)		(172)	64
Net interest expense and other financing charges in excess of interest paid	28	(6)	34	84		(19)	103
Capital expenditure reserve	(99)	(96)	(3)	(295)		(286)	(9)
ACFO	$11,717	$11,545	$172	$36,406		$36,292	$114
ACFO payout ratio	84.2 %	85.4 %	(1.2 %)	81.3 %		81.5 %	(0.2 %)

SOURCE Automotive Properties Real Estate Investment Trust

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