Automotive Properties REIT Reports 2019 Fourth Quarter and Year-End Results

TORONTO, March 23, 2020 /CNW/ - Automotive Properties Real Estate Investment Trust (TSX: APR.UN) ("Automotive Properties REIT" or the "REIT") today announced its financial results for the fourth quarter ("Q4 2019") and year ended December 31, 2019 ("2019").

"We continue to expand our property portfolio through acquisitions with the addition of seven dealership properties in 2019 and two more to date in 2020. Through these acquisitions, we have further diversified our tenant base and geographic presence in attractive metropolitan markets across Canada. To support our growth, we completed two public equity offerings in 2019, raising aggregate gross proceeds of approximately $176 million. As a result of the REIT's strong growth, we reached an important milestone at the end of 2019, with the internalization of the REIT's management and operations," said Milton Lamb, CEO of Automotive Properties REIT. "We are monitoring the COVID-19 impact and the REIT is in a strong liquidity position with 100% leased portfolio under a triple-net lease structure."

Q4 2019 Highlights

• The REIT's management was internalized ("Internalization") as a result of the termination of the Administration Agreement with the Dilawri Group ("Dilawri") effective December 31, 2019;
• The REIT completed a public offering of 7,900,500 trust units of the REIT ("Trust Units") at a price of $11.65 per Trust Unit, resulting in gross proceeds of approximately $92 million; and
• The REIT completed the acquisition of the Straightline Kia dealership property in Calgary, Alberta from an affiliate of the JV Driver Group for a purchase price of approximately $8.4 million.

Subsequent Events

• The COVID-19 outbreak is likely to have an adverse impact on consumer spending, which will impact the REIT's tenants' overall business. The REIT is in a strong liquidity position with a debt to gross book value of 43.6%, $75 million of undrawn credit facilities and with approximately $13 million cash on hand. The REIT is closely monitoring the impact of the COVID-19 pandemic on the REIT's business and the business of the REIT's tenants, and will prudently manage the REIT's available resources during this economic uncertainty.
• In February 2020, the REIT completed the acquisitions of the Regina BMW dealership property in Regina, Saskatchewan and the Acura North Vancouver dealership property in North Vancouver, British Columbia from Dilawri for a total combined purchase price of approximately $28.9 million.

Financial Results Summary

	Three months ended			Twelve months ended
	December 31,			December 31,
	2019	2018	Change	2019	2018	Change
($000s, except per Unit amounts)
Rental revenue ^(1)	$18,122	$13,741	31.9%	$67,580	$48,254	40.1%
NOI	15,144	11,493	31.8%	57,354	40,745	40.8%
Cash NOI	14,301	10,805	32.4%	53,844	37,835	42.3%
Same Property Cash NOI ^(1)	10,377	10,254	1.2%	36,164	35,624	1.5%
Net Income (Loss)^(2)	3,894	13,666	-71.5%	(4,499)	39,150	-111.5%
FFO	8,983	7,274	23.5%	36,148	27,247	32.7%
AFFO	8,227	6,531	26.0%	32,906	24,145	36.3%
Distributions per Unit	$0.201	$0.201	-	$0.804	$0.804	-
FFO per Unit - basic ^(3)	0.222	0.235	-0.013	1.003	0.991	0.012
FFO per Unit - diluted ^(4)	0.220	0.234	-0.014	0.997	0.987	0.010
AFFO per Unit - basic ^(3)	0.203	0.211	-0.008	0.913	0.879	0.034
AFFO per Unit - diluted ^(4)	0.202	0.210	-0.008	0.908	0.874	0.034
Ratios (%)
FFO payout ratio	91.2%	85.9%	5.3%	80.6%	81.5%	-0.9%
AFFO payout ratio	99.6%	95.6%	4.0%	88.6%	92.0%	-3.4%
Debt to GBV	43.6%	54.7%	-11.1%	43.6%	54.7%	-11.1%

(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 Q4 2019 includes changes in fair value adjustments of $10.8 million for Class B limited partnership units of Automotive Properties Limited Partnership ("Class B LP Units") and $6.4 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 Q4 2019 was 40,502,680 and for 2019 was 36,023,242.
(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 Q4 2019 was 40,767,092 and for 2019 was 36,257,034.

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 Q4 2018 and 2018, thus removing the impact of acquisitions.

Rental revenue was $18.1 million in Q4 2019 and $67.6 million in 2019, representing increases of 31.9% and 40.1%, respectively, from Q4 2018 and 2018. Increased rental revenue in both periods reflects growth from properties acquired during and subsequent to 2018, and contractual rent increases across a significant portion of the REIT's portfolio.

The REIT generated total Cash NOI of $14.3 million in Q4 2019 and $53.8 million in 2019, representing increases of 32.4% and 42.3%, respectively, from Q4 2018 and 2018. The increases were primarily attributable to the properties acquired during and subsequent to 2018.

The REIT generated Same Property Cash NOI of $10.4 million in Q4 2019 and $36.2 million in 2019, representing increases of 1.2% and 1.5%, respectively, compared to Q4 2018 and 2018. The increases were primarily attributable to contractual rent increases. Same Property Cash NOI for 2019 was also impacted by a rent escalation of 10% on three investment properties which occurred in August 2018.

Net Income was $3.9 million in Q4 2019, compared to $13.7 million in Q4 2018. For 2019, Net Loss was $4.5 million, compared to Net Income of $39.2 million in 2018. The negative variances in both periods are primarily attributable to the change in fair value adjustments for Class B LP Units, as well as higher interest expense and other financing charges, partially offset by growth in NOI and fair value adjustments on investment properties.

FFO was $9.0 million, or $0.220 per Unit (diluted) in Q4 2019 and $36.1 million, or $0.997 per Unit (diluted) in 2019. That compares to FFO of $7.3 million, or $0.234 per Unit (diluted) in Q4 2018 and $27.2 million, or $0.987 per Unit (diluted) in 2018, respectively.

AFFO was $8.2 million, or $0.202 per Unit (diluted) in Q4 2019 and $32.9 million, or $0.908 per Unit (diluted) in 2019. That compares to AFFO of $6.5 million, or $0.210 per Unit (diluted) in Q4 2018 and $24.1 million, or $0.874 per Unit (diluted) in 2018, respectively. Excluding costs of approximately $1 million associated with internalization, AFFO for 2019 would have been $33.9 million, or $0.934 per Unit (diluted).

The increases in FFO and AFFO in Q4 2019 and 2019, as well as the increases in FFO per Unit and AFFO per Unit in 2019, were primarily due to the impact of the properties acquired during and subsequent to 2018, and contractual rent increases. The declines in FFO per Unit and AFFO per Unit in Q4 2019 were primarily attributable to the one-time Internalization cost and to the timing difference (the "Timing Difference") between the closing of the $92 million equity offering in December 2019 (the "Offering") and the deployment of proceeds from the Offering. A portion of the proceeds of the Offering was used to fund the purchase price for the acquisitions of: the Straightline Kia automotive dealership property, which closed in December 2019, and the Regina BMW and Acura North Vancouver automotive dealership properties, which closed in February 2020.

Adjusted Cash Flow from Operations¹ ("ACFO") for Q4 2019 and 2019 increased to $8.8 million and $34.1 million, respectively, compared to $6.5 million and $25.5 million, respectively, in Q4 2018 and 2018. The quarterly and annual increases in ACFO were primarily due to the impact of the properties acquired during and subsequent to 2018, and contractual rent increases.

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 Q4 2019, the REIT paid total distributions of $8.0 million to unitholders, or $0.201 per Unit, representing an AFFO payout ratio of 99.6%. For 2019, the REIT paid total distributions of $28.7 million to unitholders, or $0.804 per Unit, representing an AFFO payout ratio of 88.6%. Excluding one-time costs of approximately $1 million associated with Internalization, the AFFO payout ratio for 2019 would have been 86.1%. The AFFO payout ratio was 95.6% for Q4 2018 and 92.0% for 2018. The higher AFFO payout ratio for Q4 2019 relative to Q4 2018 was due to the one-time Internalization cost and Timing Difference described above. The lower AFFO payout ratio for 2019 relative to 2018 was primarily attributable to organic growth in NOI and the impact of the properties acquired during and subsequent to 2018.

Units Outstanding
As at December 31, 2019, there were 37,697,052 Units and 9,933,253 Class B LP Units outstanding.

Financial Statements
The REIT's audited consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for the year ended December 31, 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 Tuesday, March 24, 2020 at 9:00 a.m. (ET). The dial-in numbers for the conference call are [phone] or [phone]. 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: 500541 #. The replay will be available until March 31, 2020.

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 64 income-producing commercial properties, representing approximately 2.4 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 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 & Uncertainties, Critical Judgements & Estimates" in the REIT's MD&A for the year ended December 31, 2019 and in the REIT's annual information form dated March 23, 2020, 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, 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 MD&A for the year ended December 31, 2019 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

Bruce Wigle, Investor Relations, Bay Street Communications, Tel: [phone]; Milton Lamb, President & CEO, Automotive Properties REIT, Tel: [phone]; Andrew Kalra, CFO & Corporate Secretary, Automotive Properties REIT, Tel: [phone]

Related Links

www.automotivepropertiesreit.ca