Automotive Properties REIT Announces Agreement to Acquire a Portfolio of Three Dealership Properties from AutoCanada Inc., a Non-binding Letter of Intent with the Dilawri Group to Acquire the Audi Queensway Dealership Property in Toronto, ON and a $73.2 Million Equity Offering

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TORONTO, June 12, 2019 /CNW/ - Automotive Properties Real Estate Investment Trust (TSX: APR.UN) (the "REIT") announced today that it has entered into an agreement to purchase a portfolio of three automotive dealership properties from AutoCanada Inc. (TSX: ACQ) ("AutoCanada") for a total purchase price of approximately $30.4 million, excluding closing costs (the "AutoCanada Acquisition"). In addition, the REIT has entered into a non-binding letter of intent with the Dilawri Group to acquire the Audi Queensway automotive dealership property for $36.5 million ("Audi Queensway" and, together with the AutoCanada Acquisition, the "Transactions"). The Transactions are expected to be accretive to the REIT's run-rate Adjusted Funds from Operations ("AFFO")¹ per unit on a leverage-neutral basis. Including the Transactions, the REIT has announced $90.9 million in acquisitions in 2019 year-to-date.

The REIT also announced that it has entered into an agreement to sell 7,000,000 units of the REIT (the "Units") on a bought deal basis at a price of $10.45 per Unit (the "Offering Price") to a syndicate of underwriters bookrun by TD Securities Inc. and BMO Capital Markets (the "Bookrunners") for gross proceeds of approximately $73.2 million (the "Offering").

In addition, the REIT has granted the syndicate of underwriters an over-allotment option (the "Over-Allotment Option"), exercisable in whole or in part at any one time up to 30 days following closing of the Offering, to purchase up to an additional 1,050,000 Units (the "Over-Allotment Units") at the Offering Price which, if exercised in full, would increase the gross proceeds of the Offering to approximately $84.1 million. 893353 Alberta Inc. (Dilawri) has waived its pre-emptive right in connection with the Offering.

The three properties included in the AutoCanada Acquisition are: the Abbotsford Volkswagen property ("Abbotsford VW"), located at 30150 / 30195 Automall Drive in Abbotsford, British Columbia; the Guelph Hyundai property, located at 765 Woodlawn Road West in Guelph, Ontario; and the Wellington Motors property, a Chrysler dealership located at 935 Woodlawn Road West in Guelph, Ontario.  

"We are pleased to continue building our relationship with AutoCanada, one of Canada's largest automotive retailers," said Milton Lamb, President and CEO of the REIT. "We look forward to adding these high-quality dealership properties in the rapidly growing cities of Abbotsford in the greater Vancouver area and Guelph in the Kitchener-Waterloo area to our portfolio, and further strengthening our asset base in and around Greater Vancouver and Toronto."

The Abbotsford VW property includes a 22,921 square foot full-service Volkswagen dealership facility located at 30150 Automall Drive that was expanded and underwent a major renovation in 2018, and adjoining land which is used as a vehicle compound facility at 30195 Automall Drive. The Abbotsford VW property occupies 3.44 acres of land within the Fraser Valley Auto Mall, with convenient access to the Trans-Canada Highway in an area of substantial commercial development, including multiple automotive dealerships. Abbotsford is the fifth largest city in B.C. and is located approximately 70 kilometres east of downtown Vancouver, along the Canada-U.S. border.

The Guelph Hyundai property includes a 28,007 square foot, full-service Hyundai dealership facility built in 2014 and renovated in 2018, located on 2.96 acres of land in Guelph, Ontario, and with accessibility to major provincial highways. The Wellington Motors property includes a 40,793 square foot, full-service Chrysler (Dodge, Jeep, Ram, Fiat) dealership facility built in 2003, and is located on 3.9 acres.

Upon closing of the AutoCanada Acquisition, affiliates of AutoCanada will be the respective operating tenants of the Abbotsford VW, Guelph Hyundai and Wellington Motors dealerships, and each will enter into a 19-year, triple-net lease with the REIT. Each lease will include a contractual annual rent increase after the first year of the lease term, based on the respective provincial Consumer Price Indices ("CPI").

The REIT has agreed to fund capital development expenses for the Wellington Motors property up to a maximum of $2.5 million, expected to be undertaken by the end of the fourth quarter of 2021.  

AutoCanada Holdings Inc. will provide an indemnity to the REIT in respect of the lease obligations for the three dealership properties comprising the AutoCanada Acquisition. The REIT will finance the AutoCanada Acquisition through draws on its revolving credit facilities and, initially, through the expansion of one of its existing non-revolving credit facilities. The AutoCanada Acquisition is expected to close before the closing of the Offering, subject to customary closing conditions. The REIT may close on some of the properties in advance of closing on the others if closing conditions are satisfied on some properties before conditions are satisfied on the others.

Audi Queensway is a newly constructed, 65,547 square foot automotive dealership located on 2.4 acres of land along an attractive commercial corridor in Toronto, Ontario. Pursuant to the strategic alliance agreement entered into with the Dilawri Group at closing of the REIT's initial public offering, the REIT has a right of first offer to acquire any REIT-suitable properties from the Dilawri Group's property development pipeline. Audi Queensway, operated by the Dilawri Group, will enter into an 18-year triple-net lease with the REIT on closing of the acquisition. The lease will include a contractual 1.5% annual rent increase after the first year of the lease term and is indemnified by Dilawri. Following completion of the Offering and Transactions, Dilawri's ownership of the REIT will decline from 32.8% to 26.9%.

The REIT intends to use the net proceeds from the Offering to fund the Transactions (or to repay the debt incurred to fund the Transactions) and for general trust purposes, including the repayment of indebtedness. Closing of the Offering is expected to occur on June 28, 2019, and is subject to customary conditions, including approval of the Toronto Stock Exchange. The Offering is not conditional on the closing of any of the Transactions.

Following closing of the Offering and the expansion of one of the REIT's non-revolving credit facilities, the REIT will have additional capacity to fund its acquisition strategy.

The Units will be offered by way of a short form prospectus to be filed on or about June 17, 2019 with the securities commissions and other similar regulatory authorities each of the provinces of Canada.

The first distribution which purchasers under the Offering are expected to be entitled to receive is expected to be payable on or about July 15, 2019 to unitholders of record on June 28, 2019.

The securities offered have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This new release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. 

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 57 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.

(1) Non-IFRS Financial Measure
This news release contains a financial measure which is not defined under IFRS and may not be comparable to similar measures presented by other real estate investment trusts or enterprises. AFFO is a key measure of earnings performance used by real estate businesses. This measure is not defined by IFRS and does not have a standardized meaning prescribed by IFRS, and therefore should not be construed as an alternative 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. The IFRS measurement most directly comparable to AFFO is net income. Please refer to the REIT's MD&A most recently filed on SEDAR for further discussion of this non-IFRS financial measure. 

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", "intends", "anticipates" and "expected". Forward-looking information includes statements regarding the Transactions, including the timing of closing of the acquisitions of one or more of the properties and the funding of the tenants' future capital development expenses, and statements regarding the REIT's 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 failure to successfully close the Transactions on the terms described, or at all, the failure of the Transactions to be accretive to the REIT's run-rate AFFO on a leverage-neutral basis and the factors discussed under "Risks and Uncertainties" in the REIT's management's discussion and analysis ("MD&A") most recently filed on SEDAR (www.sedar.com) and in the REIT's current annual information form, which is available on SEDAR. 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 as of the date of this news release.

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