Automotive Properties REIT Reports Financial Results for Third Quarter of 2021

TORONTO, Nov. 11, 2021 /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 ("Q3 2021") and nine-month ("YTD 2021") periods ended September 30, 2021.

"The third quarter was another strong one for the REIT, highlighted by solid increases in revenue, NOI and AFFO per unit," said Milton Lamb, CEO of Automotive Properties REIT. "Our strong financial performance is supported by the resiliency of the automotive dealership industry, which is experiencing year-over-year growth in sales this year. We are collecting 100% of contractual base rent under our leases every month, in addition to contractual rent that is due under the Deferral Agreements. We expect the pace of industry consolidation to accelerate in the months ahead as the economy continues to recover, and we are well positioned to capitalize on accretive opportunities to expand our property portfolio."

Q3 2021 Highlights

• The REIT collected 100% of its Q3 2021 contractual base rent due under its leases and rent deferral agreements with its tenants (the "Deferral Agreements").
• The REIT generated AFFO per Unit (as defined below) of $0.221 (diluted) and paid total cash distributions of $0.201 per Unit in Q3 2021, representing an AFFO payout ratio of approximately 91.0%. For the comparable three-month period ended September 30, 2020 ("Q3 2020"), the REIT generated AFFO per Unit of $0.215 (diluted) and paid cash distributions of $0.201 per Unit, representing an AFFO payout ratio of approximately 93.5%. The AFFO payout ratio was lower in Q3 2021 primarily due to contractual rent increases, in addition to the temporary dilutive effect of the REIT's December 2019 equity offering.
• The REIT had a Debt to Gross Book Value ("Debt to GBV") ratio of 40.1% as at September 30, 2021, and a strong liquidity position with $74.2 million of undrawn credit facilities, $5.0 million of cash on hand, and seven unencumbered properties with an aggregate value of approximately $103.2 million.
• The capitalization rate applicable to the REIT's entire portfolio was 6.4% as at September 30, 2021, a reduction of approximately 10 basis points from 6.5% as at June 30, 2021, and a reduction of approximately 30 basis points from 6.7% as at December 31, 2020. The reduction of the capitalization rate in Q3 2021 is a result of the REIT decreasing the discount rate for its properties in the Greater Vancouver Area and Alberta by 25 basis points, and decreasing discount rates for specific properties in certain markets. The reductions were primarily due to industry-wide single tenant retail and industrial capitalization rate reductions. In addition, the REIT continued its amortization of two land lease properties.

Financial Results Summary¹          

	Three months ended September 30,			Nine months ended September 30,
($000s, except per Unit amounts)	2021	2020	Change	2021	2020	Change
Rental revenue ^(2)	$19,462	$18,627	4.5%	$58,438	$56,033	4.3%
NOI	16,688	16,168	3.2%	50,306	47,548	5.8%
Cash NOI	15,992	15,243	4.9%	48,257	44,914	7.4%
Same Property Cash NOI (excluding bad debt (expense)/reversal) ^(2)	15,410	15,120	1.9%	44,698	44,031	1.5%
Net Income (Loss)^(3)	30,824	4,395	601.3%	75,013	(3,214)	N/A
FFO	11,626	11,124	4.5%	35,039	32,552	7.6%
AFFO	11,008	10,338	6.5%	33,067	30,165	9.6%
Distributions per Unit	$0.201	$0.201	-	$0.603	$0.603	-
FFO per Unit - basic ^(4)	0.237	0.234	0.003	0.719	0.683	0.036
FFO per Unit - diluted ^(5)	0.234	0.231	0.003	0.710	0.677	0.033
AFFO per Unit - basic ^(4)	0.225	0.217	0.008	0.679	0.633	0.046
AFFO per Unit - diluted ^(5)	0.221	0.215	0.006	0.670	0.627	0.043
Ratios (%)
FFO payout ratio	85.9%	87.0%	-1.1%	84.9%	89.1%	-4.2%
AFFO payout ratio	91.0%	93.5%	-2.5%	90.0%	96.2%	-6.2%
Debt to GBV	40.1%	44.8%	-4.7%	40.1%	44.8%	-4.7%

(1)	NOI, Cash NOI, Same Property Cash NOI, FFO, AFFO, Debt to GBV, FFO Payout Ratio, AFFO Payout Ratio and ACFO 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 2020, 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 Q3 2021 includes changes in fair value adjustments of $3.1 million for Class B limited partnership units of Automotive Properties Limited Partnership ("Class B LP Units"), deferred units ("DUs") and income deferred units ("IDUs"), $2.0 million for interest rate swaps and $22.3 million for investment properties. 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 Q3 2021 was 49,013,407.
(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, DUs and 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 2021 was 49,717,307.

Rental revenue in Q3 2021 increased by 4.5% to $19.5 million, compared to $18.6 million in Q3 2020. The increase in rental revenue reflects growth from properties acquired during and subsequent to Q3 2020 and contractual annual rent increases. 

The REIT generated total Cash NOI of $16.0 million in Q3 2021, representing an increase of 4.9% compared to Q3 2020. The increase was primarily attributable to the properties acquired during and subsequent to Q3 2020 and contractual rent increases, partially offset by capital reserve expenses. Same Property Cash NOI (excluding bad debt expense and reversal) was $15.4 million in Q3 2021, representing an increase of 1.9% compared to Q3 2020. The increase was primarily attributable to contractual rent increases.

The REIT recorded net income of $30.8 million in Q3 2021, compared to $4.4 million in Q3 2020. The positive variance was primarily due to higher NOI and fair value adjustments on investment properties.

FFO in Q3 2021 was $11.6 million, or $0.234 per Unit (diluted), as compared to $11.1 million, or $0.231 per Unit (diluted), in Q3 2020. The increase was primarily due to the impact of the properties acquired during and subsequent to Q3 2020 and contractual rent increases.   

AFFO in Q3 2021 was $11.0 million, or $0.221 per Unit (diluted), as compared to $10.3 million, or $0.215 per Unit (diluted), in Q3 2020. The increase was primarily due to the impact of the properties acquired during and subsequent to Q3 2020 and contractual rent increases, partially offset by capital reserve expenses.

Adjusted Cash Flow from Operations¹ ("ACFO") for Q3 2021 increased by 22.7% to $12.5 million, compared to $10.2 million in Q3 2020. The increase was primarily due to the impact of the properties acquired during and subsequent to Q3 2020, contractual rent increases and the collection of rent receivables under the Deferral Agreements.

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 2021, the REIT declared and paid total distributions of $9.85 million, or $0.201 per Unit, representing an AFFO payout ratio of 91.0%. The AFFO payout ratio was lower in Q3 2021 compared to the 93.5% AFFO payout ratio in Q3 2020 primarily due to contractual rent increases. The higher AFFO payout ratio in Q3 2020 also reflects the temporary dilutive effect of the December 2019 equity offering.

Liquidity and Capital Resources 

As at September 30, 2021, the REIT had a Debt to GBV ratio of 40.1% and a strong liquidity position with $74.2 million of undrawn credit facilities, cash on hand of $5.0 million, and seven unencumbered properties with an aggregate value of approximately $103.2 million.

Units Outstanding

As at September 30, 2021, there were 39,080,154 REIT Units and 9,933,253 Class B LP Units outstanding.

Outlook 

The REIT has collected 100% of its expected October and November 2021 contractual base rent under the leases, plus contractual base rent that is due under the Deferral Agreements. Since the end of Q3 2021, provincial governments across Canada have eased COVID-19 related business restrictions, as COVID-19 vaccination rates of Canadians have continued to increase and case counts have stabilized. As provincial COVID-19 related restrictions continue to ease, pent-up consumer demand is expected to support the continued strength in Canadian auto sales and service work performed by automotive dealerships. The pandemic has also impacted the vehicle supply chain, resulting in constraints of specific parts, models and brands. Management believes these supply constraints will continue into 2022, but will not have a material impact on the REIT's tenants. The REIT believes that the overall fundamentals of the automotive dealership business remain strong and that the industry is resilient and will continue to grow as the pandemic continues to stabilize. While the current outlook regarding the pandemic is more positive than at the end of the second quarter of 2021, future developments related to the pandemic could result in additional restrictions being implemented throughout the remainder of 2021 that could impact the financial performance and financial position of the REIT and its tenants in future periods.

The REIT expects that the pace of consolidation in the automotive dealership industry will rebound as the pandemic is brought under control and the overall economy strengthens. Given the REIT's strong balance sheet position, the REIT has the ability to pursue acquisitions on a strategic basis through debt financing and available liquidity. Management and the trustees will continue to closely monitor the impact of the pandemic on the REIT's business and the business of the REIT's tenants, and will continue to prudently manage the REIT's financial resources.

Financial Statements

The REIT's unaudited consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for Q3 2021 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 12, 2021 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: 276501 #. The replay will be available until November 19, 2021.

About Automotive Properties REIT

Automotive Properties REIT is an internally managed, 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 66 income-producing commercial properties, representing approximately 2.5 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, 2020 and in the REIT's annual information form dated March 23, 2021, 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 Q3 2021 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, Tel: [phone]; Andrew Kalra, CFO & Corporate Secretary, Automotive Properties REIT Automotive Properties REIT, Tel: [phone]

Related Links

www.automotivepropertiesreit.ca