TORONTO, Aug. 14,
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
("Q2 2023") and six-month ("YTD 2023") periods ended June 30, 2023.
"We generated further organic growth in the second quarter,
while continuing to execute on our acquisition program," said
Milton Lamb, CEO of Automotive
Properties REIT. "In addition to driving growth in revenue and NOI
through our prior acquisitions and our contractual rent increases,
we partnered with StorageVault Canada to complete a joint purchase
in the greater Montreal area.
Looking forward, with our growing portion of leases with CPI-linked
adjustments and overall essential retail portfolio, we remain well
positioned to continue to generate stable financial performance and
pursue external growth opportunities."
Q2 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 Q2 2023, representing an AFFO payout
ratio1 of approximately 87.4%. For the comparable
three-month period ended June 30,
2022 ("Q2 2022"), the REIT generated AFFO per Unit of
$0.229 (diluted) and paid cash
distributions of $0.201 per Unit,
representing an AFFO payout ratio of approximately 87.8%.
- The REIT had a Debt to Gross Book Value ("Debt to
GBV")2 ratio of 45.1% as at June
30, 2023, and $62.4 million of
undrawn capacity under its revolving credit facilities,
$0.5 million of cash on hand, and
five unencumbered properties with an aggregate value of
approximately $69.7 million. As of
the date of this news release, the REIT has approximately
$67.7 million of undrawn capacity
under its revolving credit facilities and five unencumbered
properties with an aggregate value of approximately $69.7 million.
- The REIT's valuation of its investment properties increased
nominally in Q2 2023 compared to the prior quarter to reflect
current market conditions, resulting in a fair value gain of
$0.4 million. The capitalization rate
applicable to the REIT's entire portfolio increased to 6.52% as at
June 30, 2023, compared to 6.42% as
at December 31, 2022, and 6.30% as at
June 30, 2022.
- In May 2023, $25 million of the outstanding revolving portion
of Credit Facility 1 was converted to a non-revolving balance,
which is currently at floating rates.
- On June 2, 2023, the REIT entered
into a 50/50 joint arrangement (the "Joint Arrangement") with
StorageVault Canada Inc. ("StorageVault") to acquire the real
estate underlying the Volvo and Jaguar Land Rover automotive
dealership located in Brossard,
Quebec (the "Taschereau Volvo and JLR Property"), from a
third-party vendor. Under the terms of the Joint Arrangement, the
REIT and StorageVault each funded 50% of the $16.1 million purchase price. The Taschereau
Volvo and JLR Property is a full-service automotive dealership,
totaling 50,415 square feet of GLA situated on approximately 3.4
acres of land and is currently under triple-net leases with Groupe
Park Avenue Volvo and Jaguar Land Rover, which are subject to
annual adjustments linked to the consumer price index in
Quebec. The REIT funded its
portion of the acquisition by drawing on its revolving credit
facilities and cash on hand.
______________________
|
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
June 30,
|
|
Six months
ended
June 30,
|
|
($000s, except per Unit
amounts)
|
2023
|
2022
|
Change
|
2023
|
2022
|
Change
|
|
|
|
|
|
|
|
Rental revenue
(1)
|
$22,939
|
$20,835
|
10.1 %
|
$45,815
|
$41,269
|
11.0 %
|
NOI
(2)
|
19,544
|
17,684
|
10.5 %
|
39,001
|
35,227
|
10.7 %
|
Cash NOI
(2)
|
18,933
|
17,100
|
10.7 %
|
37,814
|
34,040
|
11.1 %
|
Same Property Cash NOI
(1) (2)
|
17,005
|
16,607
|
2.4 %
|
33,140
|
32,367
|
2.4 %
|
Net Income
(3)
|
20,891
|
31,174
|
-33.0 %
|
37,858
|
60,880
|
-37.8 %
|
FFO
(2)
|
12,075
|
11,999
|
0.6 %
|
24,104
|
23,947
|
0.7 %
|
AFFO
(2)
|
11,490
|
11,415
|
0.7 %
|
22,899
|
22,776
|
0.5 %
|
Distributions per
Unit
|
$0.201
|
$0.201
|
-
|
$0.402
|
$0.402
|
-
|
|
|
|
|
|
|
|
FFO per Unit - basic
(2) (4)
|
0.246
|
0.245
|
0.001
|
0.491
|
0.488
|
0.003
|
FFO per Unit - diluted
(2) (5)
|
0.241
|
0.241
|
-
|
0.482
|
0.481
|
0.001
|
|
|
|
|
|
|
|
AFFO per Unit - basic
(2) (4)
|
0.234
|
0.233
|
0.001
|
0.467
|
0.465
|
0.002
|
AFFO per Unit - diluted
(2) (5)
|
0.230
|
0.229
|
0.001
|
0.458
|
0.458
|
-
|
|
|
|
|
|
|
|
Ratios
(%)
|
|
|
|
|
|
|
FFO payout ratio
(2)
|
83.4 %
|
83.4 %
|
-
|
83.6 %
|
83.6 %
|
-
|
AFFO payout ratio
(2)
|
87.4 %
|
87.8 %
|
-0.4 %
|
87.8 %
|
87.8 %
|
-
|
Debt to GBV
(6)
|
45.1 %
|
41.2 %
|
3.9 %
|
45.1 %
|
41.2 %
|
3.9 %
|
(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 Q2 2022, thus
removing the impact of acquisitions.
|
(3)
|
Net income for Q2 2023
includes changes in fair value adjustments of $0.6 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"), $9.7 million for interest rate
swaps and $0.4 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 Q2 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 Q2 2023 was
50,024,870.
|
(6)
|
Debt to GBV is a
supplementary financial measure. See "Non-IFRS Financial Measures"
at the end of this news release.
|
Rental revenue in Q2 2023 increased by 10.1% to $22.9 million, compared to $20.8 million in Q2 2022. The increase in rental
revenue reflects growth from properties acquired subsequent to Q2
2022 and contractual annual rent increases.
The REIT generated total Cash NOI of $18.9 million in Q2 2023, representing an
increase of 10.7% compared to Q2 2022. The increase was primarily
attributable to the properties acquired subsequent to Q2 2022 and
contractual rent increases. Same Property Cash NOI was $17.0 million in Q2 2023, representing an
increase of 2.4% compared to Q2 2022. The increase was primarily
attributable to contractual rent increases.
The REIT recorded net income of $20.9
million in Q2 2023, compared to $31.2
million in Q2 2022. The decrease was primarily due to
changes in non-cash fair value adjustments for Class B LP Units and
DUs, IDUs, PDUs and RDUs (collectively "Unit-based compensation"),
partially offset by higher NOI. 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 Q2 2023 of $0.6 million, compared
to an increase of $11.2 million in Q2
2022.
FFO in Q2 2023 increased 0.6% to $12.1
million, or $0.241 per unit
(diluted), compared to $12.0 million,
or $0.241 per unit (diluted) in Q2
2022. The increase in FFO was primarily attributable to the
properties acquired subsequent to Q2 2022, and contractual rent
increases.
AFFO in Q2 2023 increased 0.7% to $11.5
million, or $0.230 per unit
(diluted), compared to $11.4 million,
or $0.229 per unit (diluted), in Q2
2022. The increase in AFFO reflects the impact of the properties
acquired subsequent to Q2 2022, and contractual rent increases.
Adjusted Cash Flow from Operations ("ACFO")3 for Q2
2023 increased 1.1% to $12.7 million,
compared to $12.5 million in Q2 2022.
The increase was primarily attributable to the properties acquired
subsequent to Q2 2022 and contractual rent increases, partially
offset by higher interest costs.
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 Q2 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 Q2 2023 compared
to the 87.8% AFFO payout ratio in Q2 2022 primarily due to the
impact of the properties acquired subsequent to Q2 2022, and
contractual rent increases.
Liquidity and Capital Resources
As at June 30, 2023, the REIT had
a Debt to GBV ratio of 45.1%, $62.4
million of undrawn capacity under its revolving credit
facilities, $0.5 million of cash on
hand, and five unencumbered properties with an aggregate value
of approximately $69.7 million. As of
the date of this news release, the REIT has approximately
$67.7 million of undrawn capacity
under its revolving credit facilities and five unencumbered
properties with an aggregate value of approximately $69.7 million.
As at June 30, 2023, 91% of the
REIT's debt was fixed with a weighted average interest rate of
4.18%, with a weighted average interest swap term and mortgages
remaining of 5.3 years, and a weighted average term to maturity of
debt of 3.3 years.
__________________________
|
3 ACFO is a
non-IFRS measure. See "Non-IFRS Financial Measures" at the end of
this news release.
|
Units Outstanding
As at June 30, 2023, there were
39,727,346 REIT Units and 9,327,487 Class B LP Units
outstanding.
Outlook
The REIT is subject to risks associated with rising inflation,
interest rates and availability of capital. The REIT anticipates
that inflation and interest rates will remain elevated in the near
term, which 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.
Vehicle supply continues to be constrained for specific 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.
Overall, the REIT believes that the fundamentals of the
automotive dealership business remain solid, and that the industry
is resilient and essential.
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.
Financial Statements
The REIT's unaudited consolidated financial statements and
related Management's Discussion & Analysis ("MD&A") for Q2
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, August 15,
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/46Np1Fr to receive an instant automated
call back. Alternatively, they can dial (416) 764-8688 or (888)
390-0546 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 (416) 764-8677
or (888) 390-0541, passcode: 369302 #. The replay will be available
until August 22, 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
Q2 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.
Reconciliation of NOI, Cash NOI, FFO and AFFO to Net Income
and Comprehensive Income
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
($000s, except per Unit
amounts)
|
2023
|
2022
|
Variance
|
2023
|
2022
|
Variance
|
Calculation of
NOI
|
|
|
|
|
|
|
Property
revenue
|
$22,939
|
$20,835
|
$2,104
|
45,815
|
$41,269
|
$4,546
|
Property
costs
|
(3,395)
|
(3,151)
|
(244)
|
(6,814)
|
(6,042)
|
(772)
|
NOI (including
straight‑line adjustments)
|
$19,544
|
$17,684
|
$1,860
|
39,001
|
$35,227
|
$3,774
|
Adjustments:
|
|
|
|
|
|
|
Land lease
payments
|
(86)
|
(86)
|
(0)
|
(172)
|
(186)
|
(14)
|
Straight‑line
adjustment
|
(525)
|
(498)
|
(27)
|
(1,015)
|
(1,001)
|
(14)
|
Cash
NOI
|
$18,933
|
$17,100
|
$1,833
|
37,814
|
$34,040
|
$3,774
|
Reconciliation of
net income to FFO and AFFO
|
|
|
|
|
|
|
Net income and
comprehensive income
|
$20,891
|
$31,174
|
($10,283)
|
37,858
|
$60,880
|
($23,022)
|
Adjustments:
|
|
|
|
|
|
|
Change in fair value —
Interest rate swaps
|
(9,660)
|
(9,750)
|
90
|
(4,898)
|
(23,735)
|
18,837
|
Distributions on
Class B LP Units
|
1,875
|
1,875
|
-
|
3,750
|
3,871
|
(121)
|
Change in fair value –
Class B LP Units and Unit-based
compensation
|
(595)
|
(11,230)
|
10,635
|
(15,087)
|
(15,153)
|
66
|
Change in fair value —
investment properties
|
(391)
|
(44)
|
(347)
|
2,566
|
(1,686)
|
4,252
|
ROU asset net balance
of depreciation/interest and lease
payments(1)
|
(45)
|
(26)
|
(19)
|
(85)
|
(230)
|
145
|
FFO
|
$12,075
|
$11,999
|
$76
|
$24,104
|
$23,947
|
$157
|
Adjustments:
|
|
|
|
|
|
|
Straight‑line
adjustment
|
(490)
|
(498)
|
8
|
(1,015)
|
(1,001)
|
(14)
|
Capital expenditure
reserve
|
(95)
|
(86)
|
(9)
|
(190)
|
(170)
|
(20)
|
AFFO
|
$11,490
|
$11,415
|
$75
|
$22,899
|
$22,776
|
$123
|
Number of Units
outstanding (including Class B LP Units)
|
49,054,833
|
49,031,407
|
23,426
|
49,054,833
|
49,031,407
|
23,426
|
Weighted average Units
Outstanding — basic
|
49,054,833
|
49,031,407
|
23,426
|
49,054,833
|
49,022,656
|
32,177
|
Weighted average Units
Outstanding — diluted
|
50,024,870
|
49,799,512
|
225,358
|
49,826,177
|
49,752,897
|
73,280
|
FFO per Unit –
basic(2)
|
$0.246
|
$0.245
|
$0.001
|
$0.491
|
$0.488
|
$0.003
|
FFO per Unit –
diluted(3)
|
$0.241
|
$0.241
|
-
|
$0.482
|
$0.481
|
$0.001
|
AFFO per Unit –
basic(2)
|
$0.234
|
$0.233
|
$0.001
|
$0.467
|
$0.465
|
$0.002
|
AFFO per Unit –
diluted(3)
|
$0.230
|
$0.229
|
$0.001
|
$0.458
|
$0.458
|
-
|
Distributions per
Unit
|
$0.201
|
$0.201
|
-
|
$0.402
|
$0.402
|
-
|
FFO payout
ratio
|
83.4 %
|
83.4 %
|
0.4 %
|
83.6 %
|
83.6 %
|
0.0 %
|
AFFO payout
ratio
|
87.4 %
|
87.8 %
|
(0.4 %)
|
87.8 %
|
87.8 %
|
0.0 %
|
|
|
|
|
|
|
|
|
|
Same Property Cash Net Operating Income
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June
30,
|
|
($000s)
|
2023
|
2022
|
Variance
|
2023
|
2022
|
Variance
|
Same property base
rental revenue
|
$17,091
|
$16,693
|
$398
|
$33,313
|
$32,540
|
$773
|
Land lease
payments
|
(86)
|
(86)
|
—
|
(173)
|
(173)
|
—
|
Same Property Cash
NOI
|
$17,005
|
$16,607
|
$398
|
$33,140
|
$32,367
|
$773
|
|
|
|
|
|
|
|
|
|
Reconciliation of Cash Flow from Operating Activities to
ACFO
|
Three Months
Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
($000s)
|
2023
|
2022
|
Variance
|
2023
|
2022
|
Variance
|
Cash flow from
operating activities
|
$16,405
|
$15,854
|
$551
|
$33,503
|
$31,678
|
$1,825
|
Change in non-cash
working capital
|
2,416
|
1,446
|
970
|
2,493
|
2,054
|
1,439
|
Interest
paid
|
(5,731)
|
(4,336)
|
(1,395)
|
(11,467)
|
(8,061)
|
(3,405)
|
Amortization of
financing fees
|
(245)
|
(207)
|
(37)
|
(483)
|
(377)
|
(106)
|
Amortization of
indemnification fees
|
(54)
|
(215)
|
161
|
(100)
|
(272)
|
172
|
Net interest expense
and other financing charges
in excess of interest paid
|
(10)
|
86
|
(96)
|
(6)
|
(133)
|
127
|
Capital expenditure
reserve
|
(95)
|
(86)
|
(9)
|
(190)
|
(170)
|
(20)
|
ACFO
|
$12,686
|
$12,542
|
$144
|
$24,750
|
$24,718
|
$32
|
ACFO payout
ratio
|
77.7 %
|
78.6 %
|
(0.9) %
|
79.6 %
|
79.7 %
|
(0.01) %
|
SOURCE Automotive Properties Real Estate Investment Trust