Mr. Milton Lamb reports

AUTOMOTIVE PROPERTIES REIT REPORTS FINANCIAL RESULTS FOR THIRD QUARTER OF 2023

Automotive Properties Real Estate Investment Trust today released its financial results for the three-month (Q3 2023) and nine-month (YTD 2023) periods ended Sept. 30, 2023.

"Our property portfolio generated growth in all our key financial metrics in the quarter, reflecting the continued impact of our acquisitions and contractual rent increases. Our triple-net lease structure with both fixed and CPI-linked annual increases continues to demonstrate resilience in this environment of elevated inflation and interest rates," said Milton Lamb, chief executive officer of Automotive Properties REIT. "We remain well positioned to generate continued same property NOI growth with an increasing proportion of our leases containing CPI-linked adjustments."

Q3 2023 highlights

• The REIT generated AFFO (adjusted funds from operations) per unit of 23 cents (diluted) and paid total cash distributions of 20.1 cents per unit (as defined herein) in Q3 2023, representing an AFFO payout ratio of approximately 87.4 per cent. For the comparable three-month period ended Sept. 30, 2022, the REIT generated AFFO per unit of 22.7 cents (diluted) and paid cash distributions of 20.1 cents per unit, representing an AFFO payout ratio of approximately 88.5 per cent.
• The REIT had a debt to gross book value (debt to GBV) ratio of 44.5 per cent as at Sept. 30, 2023, and $60.8-million of undrawn capacity under its revolving credit facilities, $300,000 of cash on hand and five unencumbered properties with an aggregate value of approximately $70.6-million.
• The REIT's valuation of its investment properties decreased nominally in Q3 2023 compared with the prior quarter to reflect current market conditions, resulting in a fair value loss of $800,000. The capitalization rate applicable to the REIT's entire portfolio increased to 6.56 per cent as at Sept. 30, 2023, compared with 6.42 per cent as at Dec. 31, 2022, and 6.37 per cent as at Sept. 30, 2022.

Rental revenue in Q3 2023 increased by 13.0 per cent to $23.4-million, compared with $20.7-million in Q3 2022. The increase in rental revenue reflects growth from properties acquired subsequent to Q3 2022, and contractual annual rent increases.

The REIT generated total cash NOI (net operating income) of $19.2-million in Q3 2023, representing an increase of 11.6 per cent compared with Q3 2022. The increase was primarily attributable to the properties acquired subsequent to Q3 2022 and contractual rent increases. Same property cash NOI was $17.1-million in Q3 2023, representing an increase of 2.5 per cent compared with Q3 2022. The increase was primarily attributable to contractual rent increases.

The REIT recorded net income of $28.3-million in Q3 2023, compared with $8.9-million in Q3 2022. The increase was primarily due to higher NOI and favourable changes in non-cash fair value adjustments for interest rate swaps, investment properties and 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 of $10.6-million in Q3 2023, compared with an increase of $2.3-million in Q3 2022.

FFO in Q3 2023 increased 1.5 per cent to $12.0-million, or 23.9 cents per unit (diluted), compared with $11.8-million, or 23.7 cents per unit (diluted) in Q3 2022. The increase in FFO was primarily attributable to the properties acquired subsequent to Q3 2022 and contractual rent increases.

AFFO in Q3 2023 increased 1.9 per cent to $11.5-million, or 23 cents per unit (diluted), compared with $11.3-million, or 22.7 cents per unit (diluted), in Q3 2022. The increase in AFFO reflects the impact of the properties acquired subsequent to Q3 2022 and contractual rent increases.

Adjusted cash flow from operations (ACFO) for Q3 2023 was $11.5-million, compared with $11.6-million in Q3 2022.

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 Q3 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 Q3 2023 compared with the 88.5 per cent AFFO payout ratio in Q3 2022 primarily due to the increase in NOI from properties acquired subsequent to Q3 2022 and contractual rent increases.

Liquidity and capital resources

As at Sept. 30, 2023, the REIT had a debt to GBV ratio of 44.5 per cent, $60.8-million of undrawn capacity under its revolving credit facilities, $300,000 of cash on hand and five unencumbered properties with an aggregate value of approximately $70.6-million. As of the date of this news release, the REIT has approximately $65.9-million of undrawn capacity under its revolving credit facilities and five unencumbered properties with an aggregate value of approximately $70.6-million.

As at Sept. 30, 2023, 91 per cent of the REIT's debt was fixed with a weighted average interest rate of 4.18 per cent, a weighted average interest swap term and mortgages remaining of 5.1 years and a weighted average term to maturity of debt of 3.1 years.

Units outstanding

As at Sept. 30, 2023, there were 39,727,346 REIT units and 9,327,487 Class B LP units outstanding.

Outlook

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.

The vehicle supply chain continues to be constrained for specific models and brands. Management believes these supply chain constraints 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 REIT is subject to risks associated with rising inflation, interest rates and the availability of capital. The REIT anticipates that elevated interest rates and inflation 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.

Financial statements

The REIT's unaudited consolidated financial statements and related management's discussion and analysis (MD&A) for Q3 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, Nov. 14, 2023, at 9 a.m. ET. To join the conference call without operator assistance, participants can register and enter their phone number on-line 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.

To access a replay of the conference call, dial 416-764-8677 or 888-390-0541, pass code: 397375 followed by the pound key. The replay will be available until Nov. 21, 2023.

About Automotive Properties Real Estate Investment Trust

Automotive Properties is an 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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