Automotive Properties REIT Reports Financial Results for First Quarter of 2020

TORONTO, May 14, 2020 /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, 2020 ("Q1 2020") and provided an operational update.

"We generated solid increases in revenue, NOI and AFFO in Q1 2020, reflecting the continued growth from both our property acquisitions and contractual rent increases," said Milton Lamb, CEO of Automotive Properties REIT. "Since mid-March, the COVID-19 pandemic has caused unprecedented economic disruption across Canada. Our solid financial liquidity position enables us to provide support to certain tenants through limited rental deferrals for a three-month period commencing in April, with no expected impact to the REIT's distribution policy."  

Q1 2020 Highlights

• The REIT completed the acquisitions of the real estate underlying the Regina BMW automotive dealership property in Regina, Saskatchewan and the Acura North Vancouver automotive dealership property in North Vancouver, British Columbia from the Dilawri Group ("Dilawri") for a total combined purchase price of approximately $28.9 million.
• The REIT paid monthly cash distributions of $0.067 per Unit (defined below), resulting in total distributions declared and paid of approximately $9.6 million in Q1 2020, representing an AFFO payout ratio of approximately 96.6%, compared to total distributions declared and paid of approximately $6.4 million in the three-month period ended March 31, 2019 ("Q1 2019"), representing an AFFO payout of ratio of approximately 82.7%. The higher AFFO payout ratio in Q1 2020 reflects the REIT's issuance of 7.9 million REIT units for gross proceeds of $92 million in December 2019 (the "Equity Offering"), and the partial deployment of proceeds therefrom.
• The Equity Offering contributed to deleveraging the REIT's balance sheet and enhancing its liquidity position, resulting in a Debt to Gross Book Value ("Debt to GBV") of 44.9% as at March 31, 2020.
• The REIT made a fair value adjustment to its property portfolio for the three months ended March 31, 2020, resulting in a decrease of $23.1 million, mainly due to adjustments made to valuation inputs, reflecting the impact of COVID-19 on all tenants and the impact of depressed commodity prices in Alberta. The overall capitalization rate applicable to the REIT's entire portfolio increased to 6.8% as at March 31, 2020, compared to 6.6% as at December 31, 2019.

Subsequent Events

• On May 8, 2020, the REIT announced it has either collected base rents, or entered into rent deferral agreements with tenants, representing in the aggregate approximately 94% of the REIT's base rent in April and May, 2020. Specifically, the REIT has collected base rent from tenants representing approximately 75% of its aggregate monthly base rents in April and May.

Financial Results Summary¹

	Three months ended  March 31,
($000s, except per Unit amounts)	2020	2019	Change
Rental revenue ^(2)	$18,606	$15,684	18.6%
NOI	15,794	13,571	16.4%
Cash NOI	14,916	12,653	17.9%
Same Property Cash NOI ^(2)	12,659	12,518	1.1%
Net Income (Loss) ^(3)	15,748	(17,882)	N/A
FFO	10,766	8,581	25.5%
AFFO	9,972	7,758	28.5%
Distributions per Unit	$0.201	$0.201	-
FFO per Unit – basic ^(4)	0.226	0.270	-0.044
FFO per Unit - diluted ^(5)	0.224	0.269	-0.045
AFFO per Unit - basic ^(4)	0.209	0.245	-0.036
AFFO per Unit - diluted ^(5)	0.208	0.243	-0.035
Ratios (%)
FFO payout ratio	89.7%	74.7%	15.0%
AFFO payout ratio	96.6%	82.7%	13.9%
Debt to GBV	44.9%	56.3%	-11.4%

(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 Q1 2019, 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 Q1 2020 includes changes in fair value adjustments of $48.7 million for Class B limited partnership units of Automotive Properties Limited Partnership ("Class B LP Units") and $18.6 million for interest rate swaps. 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 2020 was 47,630,305.
(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, 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 Q1 2020 was 48,032,420.

Rental revenue in Q1 2020 increased 18.6% to $18.6 million, compared to $15.7 million in Q1 2019. The increase in rental revenue reflects growth from properties acquired during and subsequent to Q1 2019, and contractual annual rent increases across a significant portion of the REIT's portfolio.

The REIT generated total Cash NOI of $14.9 million in Q1 2020, representing an increase of 17.9% compared to Q1 2019. The increase was primarily attributable to the properties acquired during and subsequent to Q1 2019, together with contractual rent increases. Same Property Cash NOI was $12.7 million in Q1 2020, representing an increase of 1.1% compared to Q1 2019. The increase was primarily attributable to contractual rent increases.

Net Income was $15.7 million in Q1 2020, compared to a Net Loss of $17.9 million in Q1 2019. The increase was primarily due to fair value adjustments for Class B LP Units, DUs and IDUs, increased NOI and lower interest expense and other financing charges, partially offset by fair value adjustments for investment properties and interest rate swaps.

FFO in Q1 2020 was $10.8 million, or $0.224 per Unit (diluted), as compared to $8.6 million, or $0.269 per Unit (diluted), in Q1 2019. The increase in FFO was primarily due to the impact of the properties acquired during and subsequent to Q1 2019, and contractual rent increases. The decline in FFO per Unit primarily reflects the closing of the Equity Offering, which deleveraged the REIT's balance sheet and enhanced its liquidity position.   

AFFO in Q1 2020 was $10.0 million, or $0.208 per Unit (diluted), as compared to $7.8 million, or $0.243 per Unit (diluted), in Q1 2019. The increase in AFFO was primarily due to the impact of the properties acquired during and subsequent to Q1 2019, and contractual rent increases. The decline in AFFO per Unit was primarily due to the same factors that impacted FFO per Unit, noted above.

Adjusted Cash Flow from Operations¹ ("ACFO") for Q1 2020 was $10.6 million, representing an increase of 35.0% from $7.8 million in Q1 2019. The increase was primarily due to the impact of the properties acquired during and subsequent to Q1 2019.

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 2020, the REIT declared and paid total distributions of $9.6 million to unitholders, or $0.201 per Unit, representing an AFFO payout ratio of 96.6%.

Liquidity and Capital Resources 

As at March 31, 2020, the REIT is in a strong liquidity position with a debt to gross book value of 44.9%, $65 million of undrawn credit facilities, approximately $20 million of cash on hand, and eight unencumbered properties with a value of approximately $129 million.

Units Outstanding

As at March 31, 2020, there were 37,697,052 REIT Units and 9,933,253 Class B LP Units outstanding.

Outlook 

As a result of COVID-19, the REIT's automotive dealership tenants have experienced full or partial closure of their operations in accordance with government measures implemented to combat the spread of COVID-19 and, according to industry analysts, new automotive sales in Canada are forecasted to decline by approximately 30% in 2020 compared to 2019, although no assurance can be given in that regard. Furthermore, as a result of COVID-19 and the related economic uncertainty and the REIT's own liquidity preservation, the REIT expects that its pace of consolidation in the automotive dealership industry will significantly decrease in 2020. Management and the Trustees are closely monitoring the impact of the COVID-19 pandemic on the REIT's business and the business of the REIT's tenants, and will continue to prudently manage the REIT's available resources during this period of economic uncertainty.

Management Information Circular

The REIT intends to rely on the blanket relief provided by the Canadian Securities Administrators (including the that contained in Ontario Instrument 51-504 – Temporary Exemptions from Certain Requirements to File or Send Securityholder Materials) to postpone the filing of its executive compensation disclosure until such time as it is filed and delivered to unitholders as part of the REIT's information circular relating to its 2020 annual meeting of unitholders scheduled for June 25, 2020.

Financial Statements

The REIT's unaudited consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for Q1 2020 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 15, 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: 096553 #. The replay will be available until May 22, 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 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, 2019 and in the REIT's annual information form dated March 23, 2020, both of 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 Q1 2020 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

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