Mr. Milton Lamb reports

AUTOMOTIVE PROPERTIES REIT REPORTS FINANCIAL RESULTS FOR FIRST QUARTER OF 2023

Automotive Properties Real Estate Investment Trust has released its financial results for the three-month period ended March 31, 2023 (Q1 2023).

"Our positive momentum continued in the first quarter as acquisitions and contractual rent increases drove year-over-year growth in revenue, cash NOI and AFFO per unit," said Milton Lamb, chief executive officer of Automotive Properties REIT. "We've made strong progress with our acquisition program to date this year with the purchase of six properties in Quebec during the first quarter, and our agreement announced today to purchase the Groupe Park Avenue Volvo and Jaguar Land Rover dealership property in greater Montreal. Looking ahead, we are well positioned to generate continued solid performance with our expanded property portfolio and embedded fixed and CPI-adjusted rental growth. We are also well insulated from potential interest rate increases due to the measures we have taken to secure 94 per cent of our debt at fixed rates at quarter-end."

Q1 2023 highlights:

• The REIT generated AFFO (adjusted funds from operations) per unit of 22.9 cents (diluted) and paid total cash distributions of 20.1 cents per unit in Q1 2023, representing an AFFO payout ratio of approximately 87.8 per cent. For the comparable three-month period ended March 31, 2022 (Q1 2022), the REIT generated AFFO per unit of 22.8 cents (diluted) and paid cash distributions of 20.1 cents per unit, representing an AFFO payout ratio of approximately 88.2 per cent. The AFFO payout ratio was lower in Q1 2023 primarily due to the impact of the properties acquired during and subsequent to Q1 2022 and contractual rent increases.
• The REIT had a debt to gross book value (GBV) ratio of 45.2 per cent as at March 31, 2023, and $52.4-million of undrawn capacity under its revolving credit facilities, $100,000 of cash on hand and four unencumbered properties with an aggregate value of approximately $61.5-million. As of the date of this news release, the REIT has approximately $82.0-million of undrawn capacity under its revolving credit facilities and four unencumbered properties with an aggregate value of approximately $61.5-million.
• The REIT's valuation of its investment properties declined nominally in Q1 2023 compared with the prior quarter to reflect current market conditions, resulting in a fair value loss of $3.0-million. The capitalization rate applicable to the REIT's entire portfolio increased to 6.48 per cent as at March 31, 2023, compared with 6.42 per cent as at Dec. 31, 2022, and 6.25 per cent as at March 31, 2022.
• On Jan. 3, 2023, the REIT acquired the real estate underlying six automotive dealership properties in Quebec from separate third parties for an aggregate purchase price of approximately $98.5-million. Four of the Quebec properties are located in Laval and St. Eustache in the greater Montreal area (Hamel Honda, Honda Ste-Rose, Chomedey Toyota and Mazda de Laval), and two of the Quebec properties are located in Sorel-Tracy, northeast of Montreal (Hyundai Sorel and Kia Sorel). On closing of the REIT's acquisition of the Quebec properties, the operating tenants entered into long-term, triple-net leases with the REIT that include a contractual annual rent increase based on the Quebec Consumer Price Index, subject to a minimum of 1.5 per cent, after year 1 of the lease term.
• In February, 2023, the REIT entered into a new mortgage in the amount of $9.0-million for a term of five years at an interest rate of 5.05 per cent.

Subsequent events:

• In May, 2023, $25-million of the outstanding revolving portion of credit facility was converted to a non-revolving balance, which is currently at floating rates.
• On May 3, 2023, the REIT waived conditions for the purchase of the real estate underlying an automotive dealership property located in Brossard, Que., from a third party vendor. The Brossard property is under lease with Groupe Park Avenue Volvo and Jaguar Land Rover. Such lease is subject to annual adjustments linked to the consumer price index (CPI) in Quebec. The REIT expects that the total expenditure, including the purchase price, will be approximately $16.1-million. The property comprises 50,415 square feet of gross leasable area on approximately 3.4 acres of land. The REIT expects to finance the acquisition of the Brossard property through draws on its non-revolving and revolving credit facilities, and cash on hand. The acquisition of the Brossard property is expected to close by the end of June, 2023.

Rental revenue in Q1 2023 increased by 12.0 per cent to $22.9-million, compared with $20.4-million in Q1 2022. The increase in rental revenue reflects growth from properties acquired during and subsequent to Q1 2022 and contractual annual rent increases.

The REIT generated total cash NOI (net operating income) of $18.8-million in Q1 2023, representing an increase of 11.2 per cent compared with Q1 2022. The increase was primarily attributable to the properties acquired during and subsequent to Q1 2022 and contractual rent increases. Same-property cash NOI was $16.1-million in Q1 2023, representing an increase of 2.4 per cent compared with Q1 2022. The increase was primarily attributable to contractual rent increases.

The REIT recorded a net income of $17.0-million in Q1 2023, compared with $29.7-million in Q1 2022. The decrease was primarily due to non-cash fair value adjustments for interest rate swaps and investment properties, partially offset by higher NOI and fair value adjustments for Class B LP (limited partnership) units and DUs (deferred units), IDUs (income deferred units), PDUs (professional development units) and RDUs (restricted deferred units) (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 2023 of $14.5-million, compared with an increase of $3.9-million in Q1 2022.

FFO (funds from operations) in Q1 2023 increased 0.7 per cent to $12.0-million or 24.1 cents per unit (diluted), compared with $11.9-million or 24.0 cents per unit (diluted) in Q1 2022. The increase was primarily attributable to the properties acquired during and subsequent to Q1 2022 and contractual rent increases.

AFFO in Q1 2023 increased 0.4 per cent to $11.4-million or 22.9 cents per unit (diluted), compared with $11.4-million or 22.8 cents per unit (diluted) in Q1 2022. The increase reflects the impact of the properties acquired during and subsequent to Q1 2022 and contractual rent increases.

ACFO (adjusted cash flow from operations) for Q1 2023 was $12.1-million, compared with $12.2-million in Q1 2022. The nominal decrease was primarily attributable to higher interest costs due to additional debt incurred by the REIT to acquire properties during and subsequent to Q1 2022 and higher interest rates.

Cash distributions

The REIT is currently paying monthly cash distributions of 6.7 cents per unit, representing 80.4 cents per unit on an annualized basis. For Q1 2023, the REIT declared and paid total distributions of $9.86-million or 20.1 cents per unit, representing an AFFO payout ratio of 87.8 per cent. The AFFO payout ratio was lower in Q1 2023, compared with the AFFO payout ratio of 88.2 per cent in Q1 2022, primarily due to the impact of the properties acquired during and subsequent to Q1 2022 and contractual rent increases.

Liquidity and capital resources

As at March 31, 2023, the REIT had a debt to GBV ratio of 45.2 per cent, $52.4-million of undrawn capacity under its revolving credit facilities, $100,000 of cash on hand and four unencumbered properties with an aggregate value of approximately $61.5-million. As of the date of this news release, the REIT has approximately $82.0-million of undrawn capacity under its revolving credit facilities and four unencumbered properties with an aggregate value of approximately $61.5-million.

As at March 31, 2023, 94 per cent of the REIT's debt was fixed with a weighted average interest rate of 4.18 per cent, with a weighted average interest swap term and mortgages remaining of 5.5 years, and a weighted average term to maturity of debt of 3.6 years.

Units outstanding

As at March 31, 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 over all in the real estate industry, and may also provide attractive buying opportunities for the REIT.

The COVID-19 pandemic and other factors have 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.

Over all, 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 midterm 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 and analysis (MD&A) for Q1 2023 are available on the REIT's website and on SEDAR.

Conference call

Management of the REIT will host a conference call for analysts and investors on Friday, May 12, 2023, at 9 a.m. ET. To join the conference call without operator assistance, you may register and enter your phone number on-line to receive an instant automated callback. Alternatively, you can dial 416-764-8688 or 888-390-0546 to reach a live operator who will join you into the call. A live and archived webcast of the call will be accessible via the REIT's website.

To access a replay of the conference call, dial 416-764-8677 or 888-390-0541, passcode 681401 followed by the pound key. The replay will be available until May 19, 2023.

About Automotive Properties Real Estate Investment Trust

Automotive Properties 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 76 income-producing commercial properties, representing approximately 2.8 million square feet of gross leasable area, in metropolitan markets across British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Quebec. Automotive Properties is the only public vehicle in Canada focused on consolidating automotive dealership real estate properties.

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