TORONTO, May 12, 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 period ended
March 31, 2022 ("Q1 2022").
"Our acquisition program is off to a positive start in 2022, as
we deployed $65 million on
acquisitions in the first quarter and we continue to evaluate
potential transactions. In addition, we have recently extended one
of our credit facilities to 2027 and increased the non-revolving
portion to $226.3 million which
provides enhanced financial flexibility," said Milton Lamb, CEO of Automotive Properties REIT.
"We generated solid financial performance in the first quarter,
with year-over-year growth in all of our key operating metrics
including growth in same property Cash NOI of 2.5%. Looking ahead,
we expect continued steady growth as we evaluate opportunities to
further expand our property portfolio."
Q1 2022 Highlights
- On January 17, 2022, the REIT
acquired two Honda dealership properties in Québec (Sherbrooke
Honda and Magog Honda) for a combined purchase price of
approximately $23.4 million.
- On January 20, 2022, the REIT
acquired approximately 2.15 acres of land underlying the Langley
Acura automotive dealership in Langley,
British Columbia (the "Langley Acura land lease") from for a
purchase price of approximately $15.1
million.
- On February 1, 2022, the REIT
acquired a parcel of land adjoining the Bank Street Toyota
dealership property in Ottawa,
Ontario for a purchase price of approximately $0.7 million.
- On February 25, 2022, the REIT
acquired Tesla automotive service centre properties located in
Québec City, Québec and Innisfil,
Ontario for a combined purchase price of approximately
$25.9 million.
- The REIT generated AFFO per Unit[1] of $0.228 (diluted) and paid total cash
distributions of $0.201 per Unit (as
defined below) in Q1 2022, representing an AFFO payout
ratio1 of approximately 88.2%. For the comparable
three-month period ended March 31,
2021 ("Q1 2021"), 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 AFFO
payout ratio was lower in Q1 2022 primarily due to the properties
acquired during and subsequent to Q1 2021 and contractual rent
increases.
- The REIT had a Debt to Gross Book Value ("Debt to GBV") ratio
of 41.6% as at March 31, 2022, and a
strong liquidity position with $29.2
million of undrawn credit facilities, $0.4 million of cash on hand, and 14 unencumbered
properties with an aggregate value of approximately $171.0 million. As of the date of this news
release, the REIT has $80.0 million
of undrawn credit facilities and 10 unencumbered properties with an
aggregate value of approximately $121.0
million.
- The capitalization rate applicable to the REIT's entire
portfolio was 6.25% as at March 31,
2022, a reduction of approximately five basis points from
6.3% as at December 31, 2021. The
reduction was primarily attributable to the purchase of the Langley
Acura land lease.
______________________
|
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.
|
Subsequent Event
- On April 13, 2022, the REIT
announced that it extended the maturity of one of its existing
credit facilities for a five-year term to June 2027 and increased the amount available
under the non-revolving component of the facility by $50 million for a total of $226.3 million. Subsequently, the REIT entered
into floating-to-fixed interest rate swaps totaling $40 million for a weighted-average term of 8.5
years at a blended rate of 4.75%. The balance of $10 million remains at floating rates.
Financial Results Summary¹
|
|
|
Three
months ended
March 31,
|
($000s, except per Unit
amounts)
|
2022
|
2021
|
Change
|
Rental revenue
(2)
|
$20,434
|
$19,413
|
5.3%
|
NOI
|
17,543
|
16,757
|
4.7%
|
Cash NOI
|
16,941
|
16,080
|
5.4%
|
Same Property Cash NOI
(excluding bad debt recovery) (2)
|
15,784
|
15,405
|
2.5%
|
Net Income
(3)
|
29,706
|
26,329
|
12.8%
|
FFO
|
11,949
|
11,661
|
2.5%
|
AFFO
|
11,362
|
11,064
|
2.7%
|
Distributions per
Unit
|
$0.201
|
$0.201
|
-
|
|
|
|
|
FFO per Unit - basic
(4)
|
0.244
|
0.242
|
0.002
|
FFO per Unit -
diluted (5)
|
0.240
|
0.239
|
0.001
|
|
|
|
|
AFFO per Unit - basic
(4)
|
0.232
|
0.230
|
0.002
|
AFFO per Unit -
diluted (5)
|
0.228
|
0.227
|
0.001
|
|
|
|
|
|
|
Ratios
(%)
|
|
|
|
|
|
FFO payout
ratio
|
83.8%
|
84.1%
|
-0.3%
|
|
|
AFFO payout
ratio
|
88.2%
|
88.5%
|
-0.3%
|
|
|
Debt to GBV
|
41.6%
|
41.7%
|
-0.1%
|
|
|
(1)
|
NOI, Cash NOI, Same
Property Cash NOI (excluding bad debt (expense) 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 Q1 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 Q1 2022
includes changes in fair value adjustments of $3.9 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"), $14.0 million for interest rate
swaps and $1.6 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 Q1 2022 was
49,013,807.
|
(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 Q1 2022 was
49,748,964.
|
Rental revenue in Q1 2022 increased by 5.3% to $20.4 million, compared to $19.4 million in Q1 2021. The increase in rental
revenue reflects growth from properties acquired during and
subsequent to Q1 2021 and contractual annual rent increases.
The REIT generated total Cash NOI of $16.9 million in Q1 2022, representing an
increase of 5.4% compared to Q1 2021. The increase was primarily
attributable to the properties acquired during and subsequent to Q1
2021 and contractual rent increases. Same Property Cash NOI
(excluding bad debt reversal) was $15.8
million in Q1 2022, representing an increase of 2.5%
compared to Q1 2021. The increase was primarily attributable to
contractual rent increases.
The REIT recorded net income of $29.7
million in Q1 2022, an increase of 12.8% compared to
$26.3 million in Q1 2021. The
positive variance was primarily due to higher NOI and non-cash fair
value adjustments for interest rate swaps, investment properties,
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
in Q1 2022 of $3.9 million, compared
to a decrease of $7.6 million in Q1
2021.
FFO in Q1 2022 was $11.9 million,
or $0.240 per Unit (diluted), as
compared to $11.7 million, or
$0.239 per Unit (diluted), in Q1
2021. The increase was primarily due to the impact of the
properties acquired during and subsequent to Q1 2021 and
contractual rent increases.
AFFO in Q1 2022 was $11.4 million,
or $0.228 per Unit (diluted), as
compared to $11.1 million, or
$0.227 per Unit (diluted), in Q1
2021. The increase was primarily due to the impact of the
properties acquired during and subsequent to Q1 2021 and
contractual rent increases.
Adjusted Cash Flow from Operations ("ACFO")[2] for Q1 2022
increased by 13.8% to $12.2 million,
compared to $10.7 million in Q1 2021.
The increase was primarily due to the impact of the properties
acquired during and subsequent to Q1 2021, contractual rent
increases, and an absence of rent deferrals.
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 Q1 2022, the REIT declared and paid total distributions
of $9.85 million, or $0.201 per Unit, representing an AFFO payout
ratio of 88.2%. The AFFO payout ratio was lower in Q1 2022 compared
to the 88.5% AFFO payout ratio in Q1 2021 primarily due to the
impact of the properties acquired during and subsequent to Q1 2021
and contractual rent increases.
Liquidity and Capital Resources
As at March 31, 2022, the REIT had
a Debt to GBV ratio of 41.6% and a strong liquidity position with
$29.2 million of undrawn credit
facilities, $0.4 million of cash on
hand, and 14 unencumbered properties with an aggregate value of
approximately $171.0 million. As of
the date of this news release, the REIT has $80.0 million of undrawn credit facilities and 10
unencumbered properties with an aggregate value of approximately
$121.0 million.
___________________
|
2 ACFO
is a non-IFRS measure. See "Non-IFRS Financial Measures" at the end
of this news release.
|
Units Outstanding
As at March 31, 2022, there were
39,098,154 REIT Units and 9,933,253 Class B LP Units
outstanding.
On April 28, 2022, the Dilawri
Group exchanged 605,766 Class B LP Units into an equal number of
REIT Units (the "Exchange"). As a result of the Exchange, there are
39,703,920 REIT Units and 9,327,487 Class B LP Units outstanding as
of the date of this news release.
Outlook
The current military conflict in Ukraine has resulted in a significant increase
in the price of oil, which has led to higher vehicle fuel costs.
This may have an adverse effect on consumer demand and the vehicle
supply chain. Management will continue to monitor the
situation.
The REIT is subject to risk associated with rising inflation, as
well as interest rate risk. As a result of rising inflation due to
various factors occurring globally, the Bank of Canada ("BoC") has already raised the
overnight rate by 75 basis points so far in 2022, with further rate
hikes expected over the remainder of the year. As at the date of
this MD&A, the longer-term rates have increased, with the BoC
10-Year benchmark bond yield increasing by 1.2% since the beginning
of 2022 to approximately 2.8%. The REIT will continue to monitor
the impact of the rising rate environment and inflation on its
property portfolio and the overall real estate industry.
As COVID-19 vaccination rates of Canadians have increased,
provincial governments across Canada have eased COVID-19 related emergency
measures and business restrictions. The REIT's tenants' businesses
continue to remain fully operational. The REIT believes that the
overall fundamentals of the automotive dealership business remain
strong, and that the industry is resilient, essential and will
continue to grow. However, future developments related to the
pandemic, including new COVID-19 variants, could result in
additional restrictions being 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, the REIT intends to pursue
acquisitions on a strategic basis and will continue to prudently
manage the REIT's available resources.
Financial Statements
The REIT's unaudited consolidated financial statements and
related Management's Discussion & Analysis ("MD&A") for Q1
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, May 13, 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: 556862 #. The replay will be available
until May 20, 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 Q1 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
March 31,
|
|
|
|
($000s, except per Unit
amounts)
|
2022
|
2021
|
Variance
|
Calculation of
NOI
|
|
|
|
Property
revenue
|
$20,434
|
$19,413
|
$1,021
|
Property
costs
|
(2,891)
|
(2,656)
|
(235)
|
NOI (including
straight‑line adjustments)
|
$17,543
|
$16,757
|
$786
|
Adjustments:
|
|
|
|
Land lease
payments
|
(99)
|
(159)
|
60
|
Straight‑line
adjustment
|
(503)
|
(518)
|
15
|
Cash
NOI
|
16,941
|
16,080
|
861
|
Reconciliation of
net income to FFO and AFFO
|
|
|
|
Net income and
comprehensive income
|
$29,768
|
$26,329
|
$3,439
|
Adjustments:
|
|
|
|
Change in fair value —
Interest rate swaps
|
(13,985)
|
(11,093)
|
(2,892)
|
Distributions on
Class B LP Units
|
1,997
|
1,997
|
—
|
Change in fair value –
Class B LP Units and Unit-based compensation
|
(3,923)
|
7,553
|
(11,476)
|
Change in fair value —
investment properties
|
(1,704)
|
(13,050)
|
11,346
|
ROU asset net balance
of depreciation/interest and lease payments
|
(204)
|
(75)
|
(129)
|
FFO
|
$11,949
|
$11,661
|
$298
|
Adjustments:
|
|
|
|
Straight‑line
adjustment
|
$(503)
|
$(518)
|
$15
|
Capital expenditure
reserve
|
(84)
|
(79)
|
(5)
|
AFFO
|
$11,362
|
$11,064
|
$302
|
Number of Units
outstanding (including Class B LP Units)
|
49,031,407
|
48,999,407
|
14,000
|
Weighted average Units
Outstanding — basic
|
49,013,807
|
48,101,885
|
911,922
|
Weighted average Units
Outstanding — diluted
|
49,748,964
|
48,712,838
|
1,036,126
|
FFO per Unit —
basic
|
$0.244
|
$0.242
|
$0.002
|
FFO per Unit —
diluted
|
$0.240
|
$0.239
|
$0.001
|
AFFO per Unit —
basic
|
$0.232
|
$0.230
|
$0.002
|
AFFO per Unit —
diluted
|
$0.228
|
$0.227
|
$0.001
|
Distributions per
Unit
|
$0.201
|
$0.201
|
—
|
FFO payout
ratio
|
83.8%
|
84.1%
|
(0.3)%
|
AFFO payout
ratio
|
88.2%
|
88.5%
|
(0.3)%
|
Same Property Cash Net Operating Income
Three months ended
March 31,
|
2022
|
2021
|
Variance ($)
|
Same property base
rental revenue
|
$15,883
|
$15,504
|
$379
|
Bad debt
recovery
|
—
|
106
|
(106)
|
Land lease
payments
|
(99)
|
(99)
|
—
|
Same Property Cash
NOI
|
$15,784
|
$15,511
|
$273
|
Bad debt
recovery
|
—
|
(106)
|
106
|
Same Property Cash
NOI
(excluding bad debt recovery)
|
$15,784
|
$15,405
|
$379
|
Reconciliation of Cash Flow from Operating Activities to
ACFO
Three months ended
March 31,
|
|
|
|
($000s)
|
2022
|
2021
|
Variance
|
Cash flow from
operating activities
|
$15,824
|
$15,439
|
$385
|
Change in non-cash
working capital
|
608
|
(723)
|
1,331
|
Interest
paid
|
(3,726)
|
(3,558)
|
(168)
|
Amortization of
financing fees
|
(170)
|
(115)
|
(55)
|
Amortization of other
assets
|
(57)
|
(45)
|
(12)
|
Net interest expense
and other financing charges in excess of interest paid
|
(219)
|
(215)
|
4)
|
Capital expenditure
reserve
|
(84)
|
(79)
|
(5)
|
ACFO
|
$12,176
|
$10,704
|
$1,472
|
ACFO payout
ratio
|
80.9%
|
90.3%
|
(9.4)%
|
SOURCE Automotive Properties Real Estate Investment Trust