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Automotive Properties REIT Reports Financial Results for Third Quarter of 2019 and Announces Agreement to Acquire Dealership Property in Calgary

TORONTO , Nov. 14, 2019 /CNW/ - Automotive Properties Real Estate Investment Trust (APR-UN.TO) ("Automotive Properties REIT" or the "REIT") today announced its financial results for the three-month ("Q3 2019") and nine-month ("YTD 2019") periods ended September 30, 2019 . The REIT also announced that it has entered into an agreement to acquire the Straightline Kia automotive dealership property (the "Straightline Kia Property") located in Calgary, Alberta , from an affiliate of the JV Driver Group ("JV Driver") for a purchase price of approximately $8.4 million (the "Transaction").

Q3 2019 Highlights

  • Property rental revenue was $17.3 million , an increase of 46.6% from the third quarter of 2018 ("Q3 2018");
  • Net Operating Income1 ("NOI") was $14.7 million , an increase of 46.8% from Q3 2018;
  • Total and Same Property Cash NOI1 were $13.8 million and $9.4 million , respectively, representing increases of 48.6% and 1.5%, respectively, from Q3 2018;   
  • Net Income was $1.1 million , compared to $5.7 million in Q3 2018;
  • Funds from Operations1 ("FFO") increased 47.5% to $9.8 million , from $6.7 million in Q3 2018. FFO1 per unit of the REIT ("Unit") was $0.246 (diluted), compared to $0.249 (diluted) in Q3 2018;
  • Adjusted Funds from Operations1 ("AFFO") increased 52.0% to $9.0 million , from $5.9 million in Q3 2018. AFFO1 per Unit increased 1.8% to $0.224 (diluted), compared to $0.220 (diluted) in Q3 2018;
  • The REIT completed the acquisition of the Audi Queensway dealership property in Toronto, Ontario , from the Dilawri Group ("Dilawri") for a purchase price of approximately $36.5 million . The REIT paid Dilawri $31.5 million on closing of the acquisition, with the remaining $5.0 million of the purchase price anticipated to be paid by the end of 2019 upon completion by Dilawri of certain post-closing obligations; and
  • The REIT paid monthly cash distributions of $0.067 per Unit, resulting in total distributions declared and paid of approximately $8.0 million , representing an AFFO payout ratio of approximately 89.7%.


"Our year to date increase in AFFO per unit reflects the accretive nature of our acquisition program and contractual rent increases across our portfolio," said Milton Lamb , CEO of Automotive Properties REIT. "We remain well positioned to continue expanding our portfolio with high-quality property acquisitions in strategic metropolitan markets, while increasing AFFO per unit in support of unitholder distributions."   

1 NOI, Cash NOI, Same Property Cash NOI, FFO, AFFO, Debt to GBV, FFO Payout Ratio, AFFO Payout Ratio, and ACFO (as defined below) 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 2018, thus removing the impact of acquisitions.

Straightline Kia Acquisition

The REIT has entered into an agreement to acquire the Straightline Kia Property for approximately $8.4 million . Upon closing of the Transaction, Straightline Motor Group, an affiliate of JV Driver, will be the operating tenant of the Straightline Kia Property and will enter into a 15-year, triple-net lease with the REIT that includes two five-year renewal options at market rates. Contractual annual rent increases after the first year of the lease will track Alberta's Consumer Price Index. The lease obligations will be indemnified by JV Driver Investments Inc., an affiliate of JV Driver.

The Straightline Kia Property consists of a 21,808 square foot full-service dealership located on 1.96 acres and underwent major renovations in 2018/2019, situated in the Calgary Auto Mall. The Calgary Auto Mall is located near the intersection of Deerfoot Trail and Glenmore Trail , two of the city's major highways.

The REIT will fund the Transaction purchase price through draws on its revolving credit facilities. The Transaction is expected to close in the fourth quarter of 2019, subject to customary closing conditions.

Financial Results Summary







  Three months ended
September 30,


Nine months ended
September 30,







($000s, except per Unit amounts)

2019

2018

Change

2019

2018

Change

Rental revenue (1)

$17,349

$11,834

46.6%

$49,458

$34,513

43.3%








NOI

14,667

9,993

46.8%

42,210

29,252

44.3%








Cash NOI

13,783

9,278

48.6%

39,543

27,030

46.3%








Same Property Cash NOI (1)

9,420

9,278

1.5%

27,404

26,978

1.6%








Net Income (Loss)(2)

1,054

5,675

-81.4%

(8,393)

25,484

-132.9%








FFO

9,830

6,666

47.5%

27,165

19,973

36.0%








AFFO

8,974

5,904

52.0%

24,680

17,614

40.1%








Distributions per Unit

$0.201

$0.201

-

$0.603

$0.603

-








FFO per Unit - basic (3)

0.247

0.250

-0.003

0.787

0.758

+0.029

FFO per Unit - diluted (4)

0.246

0.249

-0.003

0.782

0.755

+0.027








AFFO per Unit - basic (3)

0.226

0.222

0.004

0.715

0.669

+0.046

AFFO per Unit - diluted (4)   

0.224

0.220

0.004

0.711

0.666

+0.045








Ratios (%)







FFO payout ratio

81.7%

80.7%

1.0%

77.1%

79.9%

-2.8%

AFFO payout ratio

89.7%

91.4%

-1.7%

84.8%

90.5%

-5.7%

Debt to GBV

49.6%

53.1%

-3.5%

49.6%

53.1%

-3.5%

 

(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)

Net Income for Q3 2019 includes changes in fair value adjustments of $7.6 million for Class B limited partnership units of Automotive Properties Limited Partnership ("Class B LP Units") and $0.2 million for interest rate swaps. Please refer to the consolidated financial statements of the REIT and notes thereto.

(3)

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 Units and Class B LP Units. The total weighted average number of Units outstanding (including Class B LP Units) – basic for Q3 2019 was 39,729,805.

(4)

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, Class B LP Units, deferred units ("DUs") and income deferred units ("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 2019 was 39,981,885.

 

Rental revenue in Q3 2019 increased 46.6% to $17.3 million , compared to $11.8 million in Q3 2018. The increase in rental revenue reflects growth from properties acquired subsequent to Q3 2018 and contractual annual rent increases across a significant portion of the REIT's portfolio.

Property costs were $2.7 million in Q3 2019, as compared to $1.8 million in Q3 2018. The increase is attributable to higher realty tax payments for properties acquired subsequent to Q3 2018. These costs are recoverable from the applicable tenants pursuant to the terms of the related triple-net leases.

Total Cash NOI generated during Q3 2019 was $13.8 million , representing an increase of 48.6% compared to Q3 2018. The increase was primarily attributable to the properties acquired subsequent to Q3 2018.

Same Property Cash NOI generated during Q3 2019 totaled $9.4 million , representing an increase of 1.5% compared to Q3 2018. This increase is primarily attributable to contractual rent increases and a rent escalation of 10% on three investment properties which occurred in August 2018 .

Net Income was $1.1 million in Q3 2019, compared to $5.7 million in Q3 2018. The negative variance is primarily attributable to the change in the fair value adjustment for Class B LP Units, as well as higher interest expense and other financing charges, partially offset by growth in NOI.

FFO in Q3 2019 was $9.8 million , or $0.246 per Unit (diluted), as compared to $6.7 million , or $0.249 per Unit (diluted), in Q3 2018. The increase in FFO was primarily due to the impact of the properties acquired subsequent to Q3 2018 and contractual rent escalations. AFFO in Q3 2019 was $9.0 million , or $0.224 per Unit (diluted), as compared to $5.9 million , or $0.220 per Unit (diluted), in Q3 2018. The increases in AFFO and AFFO per Unit were primarily due to the impact of the properties acquired subsequent to Q3 2018 and contractual rent escalations. FFO per Unit and AFFO per Unit were relatively flat compared to Q3 2018 primarily due to a timing difference between the issuance by the REIT of 8,000,000 Units through an $83.6 million equity offering completed on June 28, 2019 (the "Offering"), and the deployment of proceeds from the Offering. A portion of the proceeds was used to fund the previously announced acquisition of the Audi Queensway automotive dealership property on September 19, 2019 and also, allows for over $100 million in acquisition capacity. 

Adjusted Cash Flow from Operations1 ("ACFO") for Q3 2019 was $8.6 million , representing an increase of 15.7% from $7.4 million in Q3 2018. The increase was primarily due to the impact of the properties acquired subsequent to Q3 2018.

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 2019, the REIT declared and paid total distributions of $8.0 million to unitholders, or $0.201 per Unit, representing an AFFO payout ratio of 89.7%. The lower AFFO payout ratio for Q3 2019 relative to Q3 2018 was primarily attributable to organic growth in NOI and the impact of the properties acquired subsequent to Q3 2018.

Units Outstanding
As at September 30, 2019 , there were 29,796,552 Units and 9,933,253 Class B LP Units outstanding.

Financial Statements
The REIT's unaudited consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for Q3 2019 / YTD 2019 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 15, 2019 at 9:00 a.m. (ET) . The dial-in numbers for the conference call are (416) 764-8609 or (888) 390-0605. 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: 966075 #. The replay will be available until November 22, 2019 .

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 currently consists of 61 income-producing commercial properties, representing more than two 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 anticipated acquisition of the Straightline Kia Property and the REIT's future 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 and Uncertainties" in the REIT's MD&A for the year ended December 31, 2018 and in the REIT's annual information form dated March 21, 2019 , both of which are available 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 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, Same Property 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 and 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 2019 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


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