Mr. Milton Lamb reports

AUTOMOTIVE PROPERTIES REIT REPORTS FINANCIAL RESULTS FOR SECOND QUARTER OF 2023

Automotive Properties Real Estate Investment Trust has released its financial results for the three-month and six-month 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, chief executive officer of Automotive Properties. "In addition to driving growth in revenue and [net operating income] 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 [consumer-price-index]-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 adjusted funds from operations per unit (1) of 23.0 cents (diluted) and paid total cash distributions of 20.1 cents per unit (as defined below) in Q2 2023, representing an AFFO payout ratio (1) of approximately 87.4 per cent. For the comparable three-month period ended June 30, 2022, the REIT generated AFFO per unit of 22.9 cents (diluted) and paid cash distributions of 20.1 cents per unit, representing an AFFO payout ratio of approximately 87.8 per cent.
• The REIT had a debt to gross book value (2) ratio of 45.1 per cent as at June 30, 2023, and $62.4-million of undrawn capacity under its revolving credit facilities, $500,000 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 with the prior quarter to reflect current market conditions, resulting in a fair value gain of $400,000. The capitalization rate applicable to the REIT's entire portfolio increased to 6.52 per cent as at June 30, 2023, compared with 6.42 per cent as at Dec. 31, 2022, and 6.30 per cent 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 with Storagevault Canada Inc. to acquire the real estate underlying the Volvo and Jaguar Land Rover automotive dealership located in Brossard, Que. (the Taschereau Volvo and JLR property), from a third party vendor. Under the terms of the joint arrangement, the REIT and Storagevault each financed 50 per cent of the $16.1-million purchase price. The Taschereau Volvo and JLR property is a full-service automotive dealership, totalling 50,415 square feet of gross leasable area 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 financed 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-international financial reporting standard measures and non-IFRS ratios, respectively.

(2) Debt to GBV is a supplementary financial measure.

Rental revenue in Q2 2023 increased by 10.1 per cent to $22.9-million, compared with $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 net operating income of $18.9-million in Q2 2023, representing an increase of 10.7 per cent compared with 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 per cent compared with Q2 2022. The increase was primarily attributable to contractual rent increases.

The REIT recorded net income of $20.9-million in Q2 2023, compared with $31.2-million in Q2 2022. The decrease was primarily due to changes in non-cash fair value adjustments for Class B limited partnership units and DUs, IDUs, PDUs and RDUs, 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 $600,000, compared with an increase of $11.2-million in Q2 2022.

FFO in Q2 2023 increased 0.6 per cent to $12.1-million, or 24.1 cents per unit (diluted), compared with $12.0-million, or 24.1 cents 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 per cent to $11.5-million, or 23.0 cents per unit (diluted), compared with $11.4-million, or 22.9 cents 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 (3) for Q2 2023 increased 1.1 per cent to $12.7-million, compared with $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 6.7 cents per unit, representing 80.4 cents per unit on an annualized basis. For Q2 2023, the REIT declared and paid total distributions of $9.86-million, or 20.1 cents per unit, representing an AFFO payout ratio of 87.4 per cent. The AFFO payout ratio was lower in Q2 2023 compared with the 87.8-per-cent 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 per cent, $62.4-million of undrawn capacity under its revolving credit facilities, $500,000 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 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 5.3 years, and a weighted-average term to maturity of debt of 3.3 years.

(3) ACFO is a non-IFRS measure.

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 over all 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.

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 mid to long term due to increased industry sophistication and growing capital requirements for owner operators, which encourage them to pursue increased economies of scale.

Financial statements

The REIT's unaudited consolidated financial statements and related management's discussion and analysis for Q2 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 Tuesday, Aug. 15, 2023, at 9 a.m. ET. To join the conference call without operator assistance, participants can register and enter their phone number to receive an instant automated callback. 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 on the REIT's website.

To listen to a replay of the conference call, dial 416-764-8677 or 888-390-0541, passcode: 369302 followed by the number sign. The replay will be available until Aug. 22, 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 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 Quebec. Automotive Properties is the only public vehicle in Canada focused on consolidating automotive dealership real estate properties.

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