TORONTO, Nov. 10,
2022 /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 2022") and nine-month ("YTD 2022") periods ended September 30, 2022.
"Our acquisition program and contractual annual rent increases
across our portfolio drove continued growth in revenue, Cash NOI
and AFFO per Unit in the quarter," said Milton Lamb, CEO of Automotive Properties REIT.
"Our contractual rent increases and triple-net lease structure
generated 2.2% same property NOI growth in the quarter, which
lessens our exposure to inflation and rising interest rates.
Supported by our strong liquidity position, we are well positioned
to continue pursuing attractive acquisition opportunities in our
target markets."
Q3 2022 Highlights
- The REIT generated AFFO per Unit1 of $0.227 (diluted) and paid total cash
distributions of $0.201 per Unit (as
defined below) in Q3 2022, representing an AFFO payout
ratio1 of approximately 88.5%. For the comparable
three-month period ended September 30,
2021 ("Q3 2021"), the REIT generated AFFO per Unit of
$0.221 (diluted) and paid cash
distributions of $0.201 per Unit,
representing an AFFO payout ratio of approximately 91.0%. The AFFO
payout ratio was lower in Q3 2022 primarily due to the properties
acquired subsequent to Q3 2021 and contractual rent increases.
- The REIT had a Debt to Gross Book Value ("Debt to GBV") ratio
of 41.2% as at September 30, 2022,
and a strong liquidity position with $69.9
million of undrawn credit facilities, $0.3 million of cash on hand, and 10 unencumbered
properties with an aggregate value of approximately $121.0 million. As of the date of this news
release, the REIT has approximately $75.5
million of undrawn credit facilities.
- The REIT's valuation of its investment properties decreased
slightly compared to the prior quarter to reflect current market
conditions, resulting in a fair value loss of $5.8 million in Q3 2021. The capitalization rate
applicable to the REIT's entire portfolio increased to 6.37% as at
September 30, 2022, a nominal
adjustment from 6.30% as at both June 30,
2022 and December 31,
2021.
- The REIT entered into an agreement to sell its Kingston Toyota
automotive dealership property to a third party at a capitalization
rate of 6.1%, resulting in a sale price of approximately
$18.0 million and a gain of
approximately $1.7 million over
June 30, 2022 IFRS fair value. The
sale is expected to be completed by the end of November 2022.
________________________________
|
1 AFFO per
Unit 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.
|
Financial Results Summary(¹)
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
September 30,
|
|
September 30,
|
|
|
|
|
|
|
|
|
($000s, except per
Unit amounts)
|
2022
|
2021
|
Change
|
2022
|
2021
|
Change
|
|
|
|
|
|
|
|
Rental revenue
(2)
|
$20,691
|
$19,462
|
6.3 %
|
$61,960
|
$58,438
|
6.0 %
|
NOI
|
17,719
|
16,688
|
6.2 %
|
52,946
|
50,306
|
5.2 %
|
Cash NOI
|
17,217
|
15,992
|
7.7 %
|
51,270
|
48,257
|
6.2 %
|
Same Property Cash NOI
(excluding bad
debt recovery) (2)
|
16,205
|
15,852
|
2.2 %
|
48,085
|
46,984
|
2.3 %
|
Net Income
(3)
|
8,897
|
30,824
|
-71.1 %
|
69,777
|
75,013
|
-7.0 %
|
FFO
|
11,791
|
11,626
|
1.4 %
|
35,739
|
35,039
|
2.0 %
|
AFFO
|
11,288
|
11,008
|
2.5 %
|
34,065
|
33,067
|
3.0 %
|
Distributions per
Unit
|
$0.201
|
$0.201
|
-
|
$0.603
|
$0.603
|
-
|
|
|
|
|
|
|
|
FFO per Unit - basic
(4)
|
0.240
|
0.237
|
0.003
|
0.729
|
0.719
|
0.010
|
FFO per Unit -
diluted (5)
|
0.237
|
0.234
|
0.003
|
0.718
|
0.710
|
0.008
|
|
|
|
|
|
|
|
AFFO per Unit - basic
(4)
|
0.230
|
0.225
|
0.005
|
0.695
|
0.679
|
0.016
|
AFFO per Unit -
diluted (5)
|
0.227
|
0.221
|
0.006
|
0.684
|
0.670
|
0.014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
(%)
|
|
|
|
|
|
|
FFO payout
ratio
|
84.8 %
|
85.9 %
|
-1.1 %
|
84.0 %
|
84.9 %
|
-0.9 %
|
AFFO payout
ratio
|
88.5 %
|
91.0 %
|
-2.5 %
|
88.2 %
|
90.0 %
|
-1.8 %
|
Debt to GBV
|
41.2 %
|
40.1 %
|
1.1 %
|
41.2 %
|
40.1 %
|
1.1 %
|
|
|
(1)
|
NOI, Cash NOI, Same
Property Cash NOI (excluding bad debt (recovery)), 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 2021, 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 2022
includes changes in fair value adjustments of $2.3 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"), $2.4 million for interest rate
swaps and $5.8 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 2022 was
49,041,338.
|
(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 2022 was
49,834,877.
|
Rental revenue in Q3 2022 increased by 6.3% to $20.7 million, compared to $19.5 million in Q3 2021. The increase in rental
revenue reflects growth from properties acquired subsequent to Q3
2021 and contractual annual rent increases.
The REIT generated total Cash NOI of $17.2 million in Q3 2022, representing an
increase of 7.7% compared to Q3 2021. The increase was primarily
attributable to the properties acquired subsequent to Q3 2021 and
contractual rent increases. Same Property Cash NOI was $16.2 million in Q3 2022, representing an
increase of 2.2% compared to Q3 2021. The increase was primarily
attributable to contractual rent increases.
The REIT recorded net income of $8.9
million in Q3 2022, compared to net income of $30.8 million in Q3 2021. The negative variance
was primarily due to a non-cash fair value adjustment on investment
properties, partially offset by higher NOI and non-cash fair value
adjustments for Class B LP Units, 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 in Q3 2022 of $2.3
million, compared to a decrease of $3.1 million in Q3 2021.
FFO in Q3 2022 was $11.8 million,
or $0.237 per Unit (diluted),
compared to $11.6 million, or
$0.234 per Unit (diluted), in Q3
2021. The increase was primarily due to the properties acquired
subsequent to Q3 2021 and contractual rent increases.
AFFO in Q3 2022 was $11.3 million,
or $0.227 per Unit (diluted),
compared to $11.0 million, or
$0.221 per Unit (diluted), in Q3
2021. The increase reflects the impact of the properties acquired
subsequent to Q3 2021 and contractual rent increases.
Adjusted Cash Flow from Operations ("ACFO")2 for Q3
2022 was $11.4 million, compared to
$12.5 million in Q3 2022. The
decrease was primarily due to higher interest expense, partially
offset by contractual rent increases.
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 2022, the REIT declared and paid total distributions
of $9.86 million, or $0.201 per Unit, representing an AFFO payout
ratio of 88.5%. The AFFO payout ratio was lower in Q3 2022 compared
to the 91.0% AFFO payout ratio in Q3 2021 primarily due to the
impact of the properties acquired subsequent to Q3 2021 and
contractual rent increases.
Liquidity and Capital Resources
As at September 30, 2022, the REIT
had a Debt to GBV ratio of 41.2% and a strong liquidity position
with $69.9 million of undrawn credit
facilities, $0.3 million of cash on
hand, and 10 unencumbered properties with an aggregate value of
approximately $121.0 million. As of
the date of this news release, the REIT has approximately
$75.5 million of undrawn credit
facilities.
Units Outstanding
As at September 30, 2022, there
were 39,727,346 REIT Units and 9,327,487 Class B LP Units
outstanding.
____________________________
|
2 ACFO
is a non-IFRS measure. See "Non-IFRS Financial Measures" at the end
of this news release.
|
Outlook
The REIT is subject to risks associated with rising inflation
and interest rates. As a result of rising inflation and various
factors occurring globally, the Bank of Canada ("BoC") has already raised the
overnight rate by 350 basis points so far in 2022. As at the date
of this news release, the longer-term rates have increased, with
the BoC 10-Year benchmark bond yield increasing by 1.5% since the
beginning of 2022 to approximately 3.3%. Management will continue
to monitor the impact of the rising rate environment and inflation
on its property portfolio and the overall real estate
industry. The REIT's annual contractual rent increases across
its portfolio partially insulate it from rising inflation.
The continued military conflict in Ukraine has resulted in higher oil prices,
which has led to continued high vehicle fuel costs. Combined with
higher interest rates and inflation, this may have an adverse
effect on consumer demand. Management continues to monitor the
situation.
Management believes that the overall fundamentals of the
automotive dealership business remain solid, and that the industry
is resilient and essential and will continue to grow. However,
future developments related to the pandemic, including new COVID-19
variants, could result in restrictions being re-implemented that
could impact the financial performance and financial position of
the REIT and its tenants in future periods. The pandemic has also
impacted the vehicle supply chain, resulting in constraints of
specific parts, models and brands. Management
believes these supply chain constraints will continue into the
foreseeable future but will not have a significant impact on the
REIT's tenants' ability to pay rent.
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. Given the REIT's
strong balance sheet position, management intends to pursue
acquisitions on a strategic basis.
Financial Statements
The REIT's unaudited consolidated financial statements and
related Management's Discussion & Analysis ("MD&A") for Q3
2022 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 11,
2022 at 9:00 a.m. (ET). The
dial-in numbers for the conference call are (416) 764-8688 or (888)
390-0546. 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 (416) 764-8677
or (888) 390-0541, passcode: 275915 #. The replay will be available
until November 18, 2022.
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 72 income-producing commercial properties,
representing approximately 2.7 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. 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,
2021 and in the REIT's annual information form dated
March 22, 2022, which are available
on SEDAR (www.sedar.com) 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 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-IRFS measures
and Debt to GBV, 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 2022 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.sedar.com.
Reconciliation of NOI, Cash NOI, FFO and AFFO to Net Income
and Comprehensive Income
|
Three Months
Ended
September 30,
|
|
Nine months
Ended
September 30,
|
|
($000s, except per Unit
amounts)
|
2022
|
2021
|
Variance
|
2022
|
2021
|
Variance
|
Calculation of
NOI
|
|
|
|
|
|
|
Property
revenue
|
$20,691
|
$19,462
|
$1,229
|
$61,960
|
$58,438
|
$3,522
|
Property
costs
|
(2,972)
|
(2,774)
|
(198)
|
(9,014)
|
(8,132)
|
(882)
|
NOI (including
straight‑line adjustments)
|
$17,719
|
$16,688
|
$1,031
|
$52,946
|
$50,306
|
$2,640
|
Adjustments:
|
|
|
|
|
|
|
Land lease
payments
|
(86)
|
(159)
|
73
|
(259)
|
(317)
|
58
|
Straight‑line
adjustment
|
(416)
|
(537)
|
121
|
(1,417)
|
(1,732)
|
315
|
Cash
NOI
|
$17,217
|
$15,992
|
$1225
|
$51,270
|
$48,257
|
$3,013
|
Reconciliation of
net income to FFO and AFFO
|
|
|
|
|
|
|
Net income and
comprehensive income
|
$8,897
|
$30,824
|
$(21,927)
|
$69,777
|
$75,013
|
$(5,236)
|
Adjustments:
|
|
|
|
|
|
|
Change in fair value —
Interest rate swaps
|
(2,444)
|
(2,007)
|
(437)
|
(26,179)
|
(12,708)
|
(13,471)
|
Distributions on
Class B LP Units
|
1,874
|
1,997
|
(123)
|
5,745
|
5,991
|
(246)
|
Change in fair value –
Class B LP Units and Unit-based
compensation
|
(2,258)
|
3,148
|
(5,406)
|
(17,411)
|
21,056
|
(38,467)
|
Change in fair value —
investment properties
|
5,762
|
(22,261)
|
28,023
|
4,076
|
(54,089)
|
58,165
|
ROU asset net balance
of depreciation/interest and lease
payments(1)
|
(40)
|
(75)
|
35
|
(102)
|
(224)
|
122
|
FFO
|
$11,791
|
$11,626
|
$165
|
$35,739
|
$35,039
|
$700
|
Adjustments:
|
|
|
|
|
|
|
Straight‑line
adjustment
|
(416)
|
(537)
|
121
|
(1,417)
|
(1,732)
|
315
|
Capital expenditure
reserve
|
(87)
|
(81)
|
(6)
|
(257)
|
(240)
|
(17)
|
AFFO
|
$11,288
|
$11,008
|
$280
|
$34,065
|
$33,067
|
$998
|
Number of Units
outstanding (including Class B LP Units)
|
49,054,833
|
49,013,407
|
41,426
|
49,054,833
|
49,013,407
|
41,426
|
Weighted average Units
Outstanding — basic
|
49,041,338
|
49,013,407
|
27,931
|
49,024,638
|
48,710,136
|
314,502
|
Weighted average Units
Outstanding — diluted
|
49,834,877
|
49,717,307
|
117,570
|
49,778,034
|
49,362,319
|
415,715
|
FFO per Unit –
basic(2)
|
$0.240
|
$0.237
|
$0.003
|
$0.729
|
$0.719
|
$0.010
|
FFO per Unit –
diluted(3)
|
$0.237
|
$0.234
|
$0.003
|
$0.718
|
$0.710
|
$0.008
|
AFFO per Unit –
basic(2)
|
$0.230
|
$0.225
|
$0.005
|
$0.695
|
$0.679
|
$0.016
|
AFFO per Unit –
diluted(3)
|
$0.227
|
$0.221
|
$0.006
|
$0.684
|
$0.670
|
$0.014
|
Distributions per
Unit
|
$0.201
|
$0.201
|
-
|
$0.603
|
$0.603
|
-
|
FFO payout
ratio
|
84.8 %
|
85.9 %
|
(1.1) %
|
84.0 %
|
84.9 %
|
(0.9) %
|
AFFO payout
ratio
|
88.5 %
|
91.0 %
|
(2.5) %
|
88.2 %
|
90.0 %
|
(1.8) %
|
|
|
|
|
|
|
|
|
|
Same Property Cash Net Operating Income
|
Three Months Ended
September 30,
|
|
Nine months Ended
September 30,
|
|
|
2022
|
2021
|
Variance
|
2022
|
2021
|
Variance
|
Same property base
rental revenue
|
$16,291
|
$15,938
|
$353
|
$48,344
|
$47,243
|
$1,101
|
Bad debt
recovery
|
-
|
-
|
-
|
-
|
277
|
(277)
|
Land lease
payments
|
(86)
|
(86)
|
-
|
(259)
|
(259)
|
-
|
Same Property Cash
NOI
|
$16,205
|
$15,852
|
$353
|
$48,085
|
$47,261
|
$824
|
Bad debt
recovery
|
-
|
-
|
-
|
-
|
(277)
|
277
|
Same Property Cash
NOI
(excluding bad debt recovery)
|
$16,205
|
$15,852
|
$353
|
$48,085
|
$46,984
|
$1,101
|
|
|
|
|
|
|
|
|
|
Reconciliation of Cash Flow from Operating Activities to
ACFO
|
Three Months
Ended
September 30,
|
|
Nine months
Ended
September 30,
|
|
($000s)
|
2022
|
2021
|
Variance
|
2022
|
2021
|
Variance
|
Cash flow from
operating activities
|
$15,021
|
$15,228
|
$(207)
|
$46,697
|
$46,127
|
$570
|
Change in non-cash
working capital
|
1,351
|
1,298
|
53
|
2,142
|
1,586
|
556
|
Interest
paid
|
(4,357)
|
(3,593)
|
(764)
|
(12,417)
|
(10,976)
|
(1,441)
|
Amortization of
financing fees
|
(203)
|
(150)
|
(53)
|
(581)
|
(384)
|
(197)
|
Amortization of
indemnification fees
|
(215)
|
(45)
|
(170)
|
(485)
|
(135)
|
(350)
|
Net interest expense
and other financing charges
in excess of interest paid
|
(102)
|
(134)
|
32
|
(236)
|
(262)
|
26
|
Capital expenditure
reserve
|
(86)
|
(81)
|
(5)
|
(170)
|
(240)
|
70
|
ACFO
|
$11,409
|
$12,523
|
$(1,114)
|
$34,950
|
$35,716
|
$(766)
|
ACFO payout
ratio
|
86.4 %
|
78.7 %
|
(7.8) %
|
84.6 %
|
82.2 %
|
2.4 %
|
SOURCE Automotive Properties Real Estate Investment Trust