Automotive Properties REIT Reports Financial Results for Third Quarter of 2023

TORONTO, Nov. 13, 2023 /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 2023") and nine-month ("YTD 2023") periods ended September 30, 2023.         

"Our property portfolio generated growth in all our key financial metrics in the quarter, reflecting the continued impact of our acquisitions and contractual rent increases.  Our triple-net lease structure with both fixed and CPI-linked annual increases continues to demonstrate resilience in this environment of elevated inflation and interest rates," said Milton Lamb, CEO of Automotive Properties REIT. "We remain well positioned to generate continued same property NOI growth with an increasing proportion of our leases containing CPI-linked adjustments."

Q3 2023 Highlights                               

• The REIT generated AFFO per Unit¹ of $0.230 (diluted) and paid total cash distributions of $0.201 per Unit (as defined below) in Q3 2023, representing an AFFO payout ratio¹ of approximately 87.4%. For the comparable three-month period ended September 30, 2022 ("Q3 2022"), the REIT generated AFFO per Unit of $0.227 (diluted) and paid cash distributions of $0.201 per Unit, representing an AFFO payout ratio of approximately 88.5%.
• The REIT had a Debt to Gross Book Value ("Debt to GBV")² ratio of 44.5% as at September 30, 2023, and $60.8 million of undrawn capacity under its revolving credit facilities, $0.3 million of cash on hand, and five unencumbered properties with an aggregate value of approximately $70.6 million.
• The REIT's valuation of its investment properties decreased nominally in Q3 2023 compared to the prior quarter to reflect current market conditions, resulting in a fair value loss of $0.8 million. The capitalization rate applicable to the REIT's entire portfolio increased to 6.56% as at September 30, 2023, compared to 6.42% as at December 31, 2022, and 6.37% as at September 30, 2022.

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^1	AFFO per Unit and AFFO payout ratio are non-IFRS measures and non-IFRS ratios, respectively. See "Non-IFRS Financial Measures" at the end of this news release.
^2	Debt to GBV is a supplementary financial measure. See "Non-IFRS Financial Measures" at the end of this news release.

Financial Results Summary

	Three months ended  September 30,		Nine months ended  September 30,
($000s, except per Unit amounts)	2023	2022	Change	2023	2022	Change
Rental revenue ^(1)	$23,378	$20,691	13.0 %	$69,193	$61,960	11.7 %
NOI ^(2)	19,671	17,719	11.0 %	58,672	52,946	10.8 %
Cash NOI ^(2)	19,213	17,217	11.6 %	57,026	51,270	11.2 %
Same Property Cash NOI ^(1) (2)	17,149	16,729	2.5 %	50,289	49,096	2.4 %
Net Income^(3)	28,332	8,897	218.4 %	66,190	69,777	-5.1 %
FFO ^(2)	11,967	11,791	1.5 %	36,071	35,739	0.90 %
AFFO ^(2)	11,499	11,288	1.9 %	34,398	34,065	1.0 %
Distributions per Unit	$0.201	$0.201	-	$0.603	$0.603	-
FFO per Unit - basic ^(2) (4)	0.244	0.240	0.004	0.735	0.729	0.006
FFO per Unit - diluted ^(2)^(5)	0.239	0.237	0.002	0.721	0.718	0.003
AFFO per Unit - basic ^(2) (4)	0.234	0.230	0.004	0.701	0.695	0.006
AFFO per Unit - diluted ^(2)^(5)	0.230	0.227	0.003	0.688	0.684	0.004
Ratios (%)
FFO payout ratio ^(2)	84.1 %	84.8 %	-0.7 %	83.6 %	84.0 %	-0.4 %
AFFO payout ratio ^(2)	87.4 %	88.5 %	-1.1 %	87.6 %	88.2 %	-0.6 %
Debt to GBV ^(6)	44.5 %	41.2 %	3.3 %	44.5 %	41.2 %	3.3 %

(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)	NOI, Cash NOI, Same Property Cash NOI, FFO, AFFO, FFO per Unit, AFFO per Unit, FFO payout ratio and AFFO payout ratio are non-IFRS measures or non-IFRS ratios, as applicable. See "Non-IFRS Financial Measures" at the end of this news release. References to "Same Property" correspond to properties that the REIT owned in Q3 2022, thus removing the impact of acquisitions.
(3)	Net income for Q3 2023 includes changes in fair value adjustments of $10.6 million for Class B Limited Partnership Units of Automotive Properties Limited Partnership ("Class B LP Units"), Deferred Units ("DUs"), Income Deferred Units ("IDUs"), Performance Deferred Units ("PDUs") and Restricted Deferred Units ("RDUs"), $8.3 million for interest rate swaps and $0.8 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 2023 was 49,054,833.
(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, IDUs, PDUs and RDUs granted to certain independent trustees and management of the REIT. The total weighted average number of Units outstanding (including Class B LP Units, DUs, IDUs, PDUs and RDUs) on a fully diluted basis for Q3 2023 was 50,052,016.
(6)	Debt to GBV is a supplementary financial measure. See "Non-IFRS Financial Measures" at the end of this news release.

Rental revenue in Q3 2023 increased by 13.0% to $23.4 million, compared to $20.7 million in Q3 2022. The increase in rental revenue reflects growth from properties acquired subsequent to Q3 2022, and contractual annual rent increases.

The REIT generated total Cash NOI of $19.2 million in Q3 2023, representing an increase of 11.6% compared to Q3 2022. The increase was primarily attributable to the properties acquired subsequent to Q3 2022 and contractual rent increases. Same Property Cash NOI was $17.1 million in Q3 2023, representing an increase of 2.5% compared to Q3 2022. The increase was primarily attributable to contractual rent increases.

The REIT recorded net income of $28.3 million in Q3 2023, compared to $8.9 million in Q3 2022. The increase was primarily due to higher NOI and favourable changes in non-cash fair value adjustments for interest rate swaps, investment properties and Class B LP Units and DUs, IDUs, PDUs and RDUs (collectively "Unit-based compensation"). The impact of the movement in the traded value of the REIT Units resulted in an increase in fair value adjustment for Class B LP Units and Unit-based compensation of $10.6 million in Q3 2023, compared to an increase of $2.3 million in Q3 2022.

FFO in Q3 2023 increased 1.5% to $12.0 million, or $0.239 per unit (diluted), compared to $11.8 million, or $0.237 per unit (diluted) in Q3 2022. The increase in FFO was primarily attributable to the properties acquired subsequent to Q3 2022 and contractual rent increases.

AFFO in Q3 2023 increased 1.9% to $11.5 million, or $0.230 per unit (diluted), compared to $11.3 million, or $0.227 per unit (diluted), in Q3 2022. The increase in AFFO reflects the impact of the properties acquired subsequent to Q3 2022 and contractual rent increases.

Adjusted Cash Flow from Operations ("ACFO")[3] for Q3 2023 was $11.5 million, compared to $11.6 million in Q3 2022.

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^3	ACFO is a non-IFRS measure. See "Non-IFRS Financial Measures" at the end of this news release.

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 2023, the REIT declared and paid total distributions of $9.86 million, or $0.201 per Unit, representing an AFFO payout ratio of 87.4%. The AFFO payout ratio was lower in Q3 2023 compared to the 88.5% AFFO payout ratio in Q3 2022 primarily due to the increase in NOI from properties acquired subsequent to Q3 2022 and contractual rent increases.

Liquidity and Capital Resources 

As at September 30, 2023, the REIT had a Debt to GBV ratio of 44.5%, $60.8 million of undrawn capacity under its revolving credit facilities, $0.3 million of cash on hand, and five unencumbered properties with an aggregate value of approximately $70.6 million. As of the date of this news release, the REIT has approximately $65.9 million of undrawn capacity under its revolving credit facilities and five unencumbered properties with an aggregate value of approximately $70.6 million.

As at September 30, 2023, 91% of the REIT's debt was fixed with a weighted average interest rate of 4.18%, a weighted average interest swap term and mortgages remaining of 5.1 years, and a weighted average term to maturity of debt of 3.1 years.

Units Outstanding

As at September 30, 2023, there were 39,727,346 REIT Units and 9,327,487 Class B LP Units outstanding.

Outlook 

The Canadian automotive dealership industry remains highly fragmented, and the REIT expects continued consolidation over the mid to long term due to increased industry sophistication and growing capital requirements for owner operators, which encourages them to pursue increased economies of scale.

The vehicle supply chain continues to be constrained for specific models and brands. Management believes these supply chain constraints will not have a significant impact on the REIT's tenants' ability to pay rent. Overall, the REIT believes that the fundamentals of the automotive dealership business remain solid, and that the industry is resilient and essential.

The REIT is subject to risks associated with rising inflation, interest rates and the availability of capital. The REIT anticipates that elevated interest rates and inflation may have an adverse effect on consumer demand and the overall economy. The REIT will continue to monitor these factors and strategically move its floating and short-term debt into fixed and/or long-term debt in an effort to minimize the impact of any potential future interest rate increases. The fluctuation in the interest rate environment, inflation and credit environment impacts rental growth and capitalization rates overall in the real estate industry and may also provide attractive buying opportunities for the REIT.

Financial Statements

The REIT's unaudited consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for Q3 2023 are available on the REIT's website at www.automotivepropertiesreit.ca and on SEDAR+ at www.sedarplus.ca.

Conference Call

Management of the REIT will host a conference call for analysts and investors on Tuesday, November 14, 2023 at 9:00 a.m. (ET). To join the conference call without operator assistance, participants can register and enter their phone number at https://emportal.ink/45rvVOz to receive an instant automated call back. Alternatively, they can dial [phone] or [phone] to reach a live operator who will join them into the call. 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: 397375 #. The replay will be available until November 21, 2023.

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 77 income-producing commercial properties, representing approximately 2.9 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 expectations with respect to inflation and interest rates, including the impact of each of the foregoing on the REIT and its tenants; and the expected timing of the closing of the Brossard Property acquisition. 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 Judgments & Estimates" in the REIT's MD&A for the year ended December 31, 2022 and in the REIT's annual information form dated March 16, 2023, which are available on SEDAR+ (www.sedarplus.ca) and the REIT's website (www.automotivepropertiesreit.ca). 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 and ratios which are not defined under International Financial Reporting Standards ("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, Same Property Cash NOI and ACFO are key measures of performance used by the REIT's management and real estate businesses. Debt to GBV, a supplementary financial measure, 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. For reconciliations of NOI, FFO, AFFO and Cash NOI to net income and comprehensive income, and ACFO to cash flow from operating activities, please see the tables below. For further information regarding these non-IFRS measures and supplementary financial measures, please refer to Section 1 "General Information and Cautionary Statements – Non-IFRS Financial Measures" and Section 6 "Non-IFRS Financial Measures" in the REIT's Q3 2023 MD&A which is incorporated by reference herein and is available on the REIT's website at www.automotivepropertiesreit.ca and on SEDAR+ at www.sedarplus.ca. 

	Three Months Ended September 30,					Nine Months Ended September 30,
($000s, except per Unit amounts)	2023	2022	Variance		2023		2022	Variance
Calculation of NOI
Property revenue	$23,378	$20,691	$2,687		$69,193		$61,960	$7,233
Property costs	(3,707)	(2,972)	(735)		(10,521)		(9,014)	(1,507)
NOI (including straight‑line adjustments)	$19,671	$17,719	$1,952		58,672		$52,946	$5,726
Adjustments:
Land lease payments	(86)	(86)	-		(259)		(259)	-
Straight‑line adjustment	(372)	(416)	44		(1,387)		(1,417)	30
Cash NOI	$19,213	$17,217	$1,996		$57,026		$51,270	$5,756
Reconciliation of net income to FFO and AFFO
Net income  and comprehensive income	$28,332	$8,897	19,435		$66,190		$69,777	($3,587)
Adjustments:
Change in fair value — Interest rate swaps	(8,335)	(2,444)	(5,891)		(13,233)		(26,179)	12,946
Distributions on Class B LP Units	1,874	1,874	-		5,624		5,745	(121)
Change in fair value — Class B LP Units and Unit-based compensation	(10,641)	(2,258)	(8,383)		(25,728)		(17,411)	(8,317)
Change in fair value — investment properties	779	5,762	(4,983)		3,345		4,076	(731)
ROU asset net balance of depreciation/interest and lease payments^(1)	(42)	(40)	(2)		(127)		(269)	142
FFO	$11,967	$11,791	$176		$36,071		$35,739	$332
Adjustments:
Straight‑line adjustment	(372)	(416)	44		(1,387)		(1,417)	30
Capital expenditure reserve	(96)	(87)	(9)		(286)		(257)	(29)
AFFO	$11,499	$11,288	$211		$34,398		$34,065	$333
Number of Units outstanding (including Class B LP Units)	49,054,833	49,054,833	-		49,054,833		49,054,833	-
Weighted average Units Outstanding — basic	49,054,833	49,041,338	13,495		49,054,833		49,024,638	30,195
Weighted average Units Outstanding — diluted	50,052,016	49,834,877	217,139		50,036,392		49,778,034	258,358
FFO per Unit – basic^(2)	$0.244	$0.240	$0.004		$0.735		$0.729	$0.006
FFO per Unit – diluted^(3)	$0.239	$0.237	$0.002		$0.721		$0.718	$0.003
AFFO per Unit – basic^(2)	$0.234	$0.230	$0.004		$0.701		$0.695	$0.006
AFFO per Unit – diluted^(3)	$0.230	$0.227	$0.003		$0.688		$0.684	$0.004
Distributions per Unit	$0.201	$0.201	­-		$0.603		$0.603	-
FFO payout ratio	84.1 %	84.8 %	(0.7 %)		83.6 %		84.0 %	(0.4 %)
AFFO payout ratio	87.4 %	88.5 %	(1.1 %)		87.6 %		88.2 %	(0.6 %)

Same Property Cash Net Operating Income

	Three Months Ended  September 30,					Nine Months Ended September 30,
($000s)	2023	2022	Variance		2023		2022	Variance
Same property base rental revenue	$17,235	$16,815	$421		$50,548		$49,355	$1,194
Land lease payments	(86)	(86)	—		(259)		(259)	—
Same Property Cash NOI	$17,149	$16,729	$421		$50,289		$49,096	$1,194

Reconciliation of Cash Flow from Operating Activities to ACFO

	Three Months Ended September 30,			Nine Months Ended September 30,
($000s)	2023	2022	Variance	2023	2022	Variance
Cash flow from operating activities	$20,704	$15,019	$5,685	$54,207	$46,696	$7,521
Change in non-cash working capital	(2,709)	1,351	(4,060)	787	2,142	(1,355)
Interest paid	(6,030)	(4,356)	(1,674)	(17,496)	(12,418)	(5,078)
Amortization of financing fees	(246)	(205)	(41)	(729)	(582)	(147)
Amortization of indemnification fees	(72)	(213)	141	(172)	(484)	312
Net interest expense and other financing charges in excess of interest paid	(6)	102	(108)	(19)	236	(255)
Capital expenditure reserve	(96)	(86)	(10)	(286)	(170)	(116)
ACFO	$11,545	$11,613	($68)	$36,292	$34,422	$870
ACFO payout ratio	85.4 %	84.9 %	0.5 %	81.5 %	83.5 %	(2.0 %)

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]