Automotive Properties REIT Reports Financial Results for First Quarter of 2016

TORONTO, May 12, 2016 /CNW/ - Automotive Properties Real Estate Investment Trust (TSX: APR.UN) ("Automotive Properties REIT" or the "REIT") today announced its financial results for the first quarter ended March 31, 2016 ("Q1 2016"). 

The REIT completed its initial public offering ("IPO") and commenced trading on the Toronto Stock Exchange on July 22, 2015. The REIT had no operations prior to July 22, 2015. Accordingly, the following summary of the REIT's financial results is presented in comparison to the Adjusted Financial Forecast (as defined below) included in the REIT's Management's Discussion and Analysis ("MD&A") for Q1 2016. The REIT's financial forecast that was included in its IPO prospectus (the "Financial Forecast") has been adjusted ( "Adjusted Financial Forecast") to reflect the issuance of 620,000 REIT Units pursuant to the partial exercise of the overallotment option granted by the REIT to the underwriters in the IPO. The REIT's unaudited condensed consolidated interim financial statements and the related MD&A for Q1 2016 are available on the REIT's website at www.automotivepropertiesreit.ca and on SEDAR at www.SEDAR.com.

Q1 2016 Highlights

• Property Revenue, Net Operating Income ("NOI"), Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") all exceeded the Adjusted Financial Forecast¹. Excluding the impact of acquisitions, each of these metrics was in line with the Adjusted Financial Forecast;
• Declared monthly distributions of $0.067 per Unit resulting in total cash distributions declared of approximately $3.6 million;
• On January 14, 2016, the REIT completed the acquisition of the Audi Barrie property, a newly constructed 24,982 square foot automotive dealership property located on 3.1 acres at 2484 Doral Drive in Innisfil, near Barrie, Ontario, for a purchase price of approximately $11.1 million. On closing, the tenant entered into a 19-year triple-net lease with the REIT. Audi Barrie was one of three development properties owned by the Dilawri Group at the time of the IPO and was offered for purchase to the REIT pursuant to its strategic alliance agreement with the Dilawri Group. 

"Our financial results in the first quarter of 2016 were in-line with management's expectations. The performance of the initial portfolio was consistent with the Adjusted Financial Forecast, while the acquisitions we completed in the fourth quarter of 2015 and first quarter of 2016 similarly performed well," said Milton Lamb, CEO of Automotive Properties REIT. "This consistency reflects the REIT's triple-net lease structure, providing predictable cash flows. In our third quarter, our results will begin to reflect the contractual rental increases that are also built into these leases."

Outlook

Management of the REIT continues to actively focus on identifying opportunities to expand its property portfolio, targeting prime automotive dealership properties with cash flow stability in strategic markets across Canada that can enhance the REIT's brand, dealer owner and geographic diversification. As Canada's only publicly traded vehicle focused on consolidating automotive dealership properties, the REIT is uniquely positioned to provide owners of automotive dealership businesses with the opportunity to monetize their real estate for succession planning, directly investing in upgrading their dealerships or facilitating acquisitions in this period of industry consolidation. This dealer proposition has been well received and is expected to result in consistent asset expansion for the REIT as the capital markets environment continues to improve.

Q1 2016 Financial Results Summary

($000s, except per Unit amounts)	Q1 2016	Adjusted Financial Forecast
Property revenue^1	$8,308	$7,475
NOI^2	7,235	6,479
FFO^2	5,028	4,544
AFFO^2	4,301	3,880
Cash NOI^2	6,526	5,844
Number of Units outstanding (including Class B LP Units)	18,053,253	18,053,253
FFO per Unit	$0.279	$0.252
AFFO per Unit	$0.238	$0.215
Distributions per Unit	$0.201	$0.201
AFFO payout ratio^2	84.5%	93.5%

1. Property revenue of $7,475 is attributable to the 26 properties in the initial portfolio (the "Initial Properties"). The remaining balance of $833 is attributable to the three properties acquired subsequent to the IPO (Toyota Woodland, Porsche JLR Edmonton and Audi Barrie).

2. NOI, FFO, AFFO, Cash NOI and AFFO payout ratio are non-IFRS financial measures.  See "Non-IFRS Financial Measures" in this press release.

The REIT performed in line management's expectations for the period. The Initial Properties performed in line with the Adjusted Financial Forecast for the period, while the acquisitions accounted for the incremental revenue, NOI, FFO, AFFO and Cash NOI and improved AFFO payout ratio.

Property revenue totaled $7.5 million for the Initial Properties and was in line with the Adjusted Financial Forecast. Acquisitions accounted for the remaining of $0.8 million of property revenue. Property costs were $1.1 million, with $1.0 million relating to the Initial Properties and the balance related to the acquisitions. The amount applicable to the Initial properties was consistent with the Adjusted Financial Forecast.

General and administrative ("G&A") expenses were $0.4 million, which was above the Adjusted Financial Forecast due to additional tax filings required for the three acquisitions and additional legal and regulatory filing costs for the REIT.

NOI and Cash NOI generated during Q1 2016 of $7.2 million and $6.5 million, respectively, were both higher than the Adjusted Financial Forecast due to the contribution of the three acquisitions. 

FFO and AFFO of $5.0 million and $4.3 million, respectively, or $0.279 and $0.238 per Unit, respectively, were both also higher than the Adjusted Financial Forecast, as a result of the impact of the three acquisitions.

Cash Distributions

The REIT is currently paying monthly cash distributions of $0.067 per Unit, representing $0.80 per Unit on an annualized basis. The REIT declared total distributions of $3.6 million to unitholders in Q1 2016, or $0.201 per Unit, representing an AFFO payout ratio of 84.5%.

Fair Value of Investment Properties

The REIT and an external appraiser assessed the valuation of the investment properties by reviewing the overall implied capitalization rate, which remained consistent with December 31, 2015 at approximately at 6.5%.  The implied capitalization rate of approximately 6.5% was applied to the net operating income over the following 12 months, this resulted in a total value for the investment properties of $403.9 million as at March 31, 2016, an increase of $2.0 million for Q1 2016.

Liquidity and Capital Structure

As at March 31, 2016, the REIT had cash and cash equivalents of $0.7 million and access to $6.4 million in undrawn credit facilities. The REIT had $226.9 million outstanding on its credit facilities with an effective weighted average interest rate of 3.16% and an effective interest term of 5.7 years. The REIT's debt to gross book value² as at March 31, 2016 was 55.9%.

Units Outstanding

As at March 31, 2016, there were 8,120,000 REIT units and 9,933,253 Class B limited partnership units outstanding. 

Conference Call

Management of the REIT will host a conference call for analysts and investors on Friday, May 13, 2016 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.

To access a replay of the conference call dial [phone] or [phone], passcode: 96932383. The replay will be available until May 20, 2016.

Annual & Special Meeting

Automotive Properties REIT will host its Annual & Special Meeting on Wednesday, June 8, 2016, at 9:00 a.m. at the Toronto Board of Trade, First Canadian Place, 77 Adelaide Street West, in the Ketchum / Osgoode Room.

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 of 29 income producing commercial properties represents approximately 1.1 million square feet of gross leasable area in Ontario, Saskatchewan, Alberta, British Columbia 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 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 management's discussion and analysis for the year ended December 31, 2015 and in the REIT's current annual information form, 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 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. Funds from operations ("FFO"), adjusted funds from operations ("AFFO"), AFFO payout ratio, net operating income ("NOI") and cash net operating income ("Cash NOI"), are key measures of performance used by real estate businesses.  Debt to gross book value 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 performance and is indicative of the REIT's ability to pay distributions, while FFO, NOI and 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. See the REIT's Q1 2016 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 of AFFO to cash flow from operating activities.

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¹ NOI, FFO and AFFO are non-IFRS financial measures.  See "Non-IFRS Financial Measures" in this press release.
² Debt to gross book value is a non-IFRS financial measure.  See "Non-IFRS Financial Measures" in this press 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]