Mr. Milton Lamb reports
AUTOMOTIVE PROPERTIES REIT REPORTS FINANCIAL RESULTS FOR SECOND QUARTER OF 2018
Automotive Properties Real Estate Investment Trust has released its financial results for the three-month and six-month periods ended June 30, 2018. The REIT's unaudited condensed consolidated financial statements and the related Management's Discussion & Analysis ("MD&A") for Q2 2018 / YTD 2018 are available on the REIT's website at www.automotivepropertiesreit.ca and on SEDAR at www.sedar.com.
Q2 2018 Highlights
Property rental revenue was $11.4 million, an increase of 8.7% from the second quarter of 2017 ("Q2 2017");
Net Operating Income1 ("NOI") was $9.7 million, an increase of 7.5% from Q2 2017;
Total and Same Property Cash NOI1 were $8.9 million and $7.8 million, respectively, representing increases of 8.7% and 1.4%, respectively, from Q2 2017;
Net Income was $5.3 million, compared to $5.8 million in Q2 2017;
Funds from Operations1 ("FFO") increased 1.7% to $6.6 million, from $6.5 million in Q2 2017. FFO per unit of the REIT ("Unit") was $0.252 (diluted), up from $0.249 (diluted) in Q2 2017;
Adjusted Funds from Operations1 ("AFFO") increased 3.4% to $6.0 million, from $5.8 million in Q2 2017. AFFO per Unit was $0.229 (diluted), up from $0.223 (diluted) in Q2 2017;
The REIT acquired the Country Hills Volkswagen dealership property in Calgary, Alberta for a purchase price of $18 million;
The REIT increased one of its largest credit facilities to $151.2 million and extended the term to maturity to June 2023;
The REIT declared monthly cash distributions of $0.067 per Unit, resulting in total distributions declared and paid of approximately $5.3 million, representing an AFFO payout ratio1 of approximately 87.8%; and
The REIT's debt to gross book value ("Debt to GBV")1 was 49.1% as at June 30, 2018, compared to 48.5% as at December 31, 2017.
"We continue to generate reliable distributions for our unitholders supported by our long-term, triple-net leases and contractual annual rent increases, as well as continued growth from our property acquisition program," said Milton Lamb, CEO of Automotive Properties REIT. "We remain focused on taking advantage of the dealership consolidation trend and expanding our property portfolio in strategic markets across Canada."
NOI, Cash NOI, Same Property Cash NOI, FFO, AFFO, and Debt to GBV are non-IFRS financial measures. See "Non-IFRS Financial Measures" in this news release. Reference to "Same Property" correspond to properties that the REIT owned in Q2 2017, thus removing the impact of acquisitions.
Financial Results Summary ($000s, except per Unit amounts)
Three months ended Six months ended
June 30, June 30,
($000s, except per Unit amounts)2018 2017 Change2018 2017 Change
Rental revenue (1) $11,373 $10,467 8.7% $22,679 $20,348 11.5%
NOI 9,659 8,988 7.5% 19,259 17,247 11.7%
Cash NOI 8,906 8,195 8.7% 17,752 15,754 12.7%
Same Property Cash NOI (1) 7,790 7,683 1.4% 15,438 15,226 1.4%
Net Income(2) 5,317 5,793 -8.2% 19,809 6,926 186%
FFO 6,640 6,531 1.7% 13,307 12,477 6.7%
AFFO 6,048 5,849 3.4% 12,115 11,204 8.1%
Distributions per Unit $0.201 $0.201 - $0.402 $0.402 -
FFO per Unit - basic (3) 0.253 0.250 0.003 0.508 0.494 0.014
FFO per Unit - diluted (4) 0.252 0.249 0.003 0.506 0.493 0.013
AFFO per Unit - basic (3) 0.231 0.224 0.007 0.463 0.443 0.020
AFFO per Unit - diluted (4) 0.229 0.223 0.006 0.461 0.443 0.018
FFO payout ratio 79.8% 80.7% -0.9% 79.4% 81.5% -2.1%
AFFO payout ratio 87.8% 90.1% -2.3% 87.2% 90.7% -3.5%
Debt to GBV 49.1% 46.5% 2.6% 49.1% 46.5% 2.6%
(1)Rental revenue is based on rents from leases entered into with tenants on closing of the applicable acquisitions, 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)The decrease in net income for Q2 2018 is primarily due to changes in the fair value adjustments for the Class B LP Units limited partnership units of Automotive Properties Limited Partnership ("Class B LP Units"), please refer to financial statements and notes thereto.
(3)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 Units and Class B LP Units The total weighted average number of Units outstanding (including Class B LP Units) - basic for Q2 2018 was 26,212,622.
(4)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, Class B LP Units, deferred units ("DUs") and income deferred units ("IDUs") granted to certain independent trustees and management of the REIT. The total weighted average number of Units outstanding (including Class B LP Units, DUs and IDUs) on a fully diluted basis for Q2 2018 was 26,355,338.
Rental revenue increased 8.7% to $11.4 million in Q2 2018, compared to $10.5 million in Q2 2017. The increase reflects growth from properties acquired subsequent to Q2 2017 and contractual annual rent increases across a significant portion of the portfolio.
Property costs were $1.7 million in Q2 2018, compared to $1.5 million in Q2 2017. The increase is attributable to the properties acquired subsequent to Q2 2017. Property costs as a percentage of revenue were 15.1% in Q2 2018 compared to 14.1% in Q2 2017, primarily due to a timing difference in realty tax payments. These costs are recoverable from the applicable tenants pursuant to the terms of the applicable triple-net leases.
Total and Same Property Cash NOI generated during Q2 2018 totaled $8.9 million and $7.8 million, respectively, representing increases of 8.7% and 1.4%, respectively, compared to Q2 2017. The increase in Cash NOI was attributable to the properties acquired subsequent to Q2 2017 and annual contractual rent increases across a significant portion of the portfolio. Growth in Same Property Cash NOI reflects contractual rent increases.
Net Income was $5.3 million in Q2 2018, compared to $5.8 million in Q2 2017. The decrease was primarily attributable to the change in the fair value adjustments for the Class B LP Units and investment properties, partially offset by the growth in NOI.
FFO in Q2 2018 was $6.6 million, or $0.252 per Unit (diluted), compared to $6.5 million, or $0.249 per Unit diluted, in Q2 2017. The increase was primarily due to the impact of the properties acquired subsequent to Q2 2017.
AFFO in Q2 2018 was $6.0 million, or $0.229 per Unit (diluted), compared to $5.8 million, or $0.223 per Unit diluted, in Q2 2017. The increase was primarily due to the impact of the properties acquired subsequent to Q2 2017.
Adjusted Cash Flow from Operations ("ACFO") in Q2 2018 was $6.2 million, representing an increase of 8.4% from $5.7 million in Q2 2017. The ACFO payout ratio was 85.0% in the quarter, compared to 91.5% in Q2 2017.
The REIT is currently paying monthly cash distributions of $0.067 per Unit, representing $0.804 per Unit on an annualized basis. The REIT declared and paid total distributions of $5.3 million to unitholders in Q2 2018, or $0.201 per Unit, representing an AFFO payout ratio of 87.8%. The lower AFFO payout ratio for Q2 2018 relative to Q2 2017 was primarily attributable to the impact of the properties acquired subsequent to Q2 2017.
As at June 30, 2018, there were 16,696,552 REIT Units and 9,933,253 Class B LP Units outstanding.
Management of the REIT will host a conference call for analysts and investors on Tuesday, August 14, 2018 at 10:00 a.m. (ET). The dial-in numbers for the conference call are (416) 764-8609 or (888) 390-0605. 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: 546285. The replay will be available August 21, 2018.
About Automotive Properties REIT
Automotive Properties REIT 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 40 income-producing commercial properties, representing approximately 1.5 million square feet of gross leasable area, and one development property, in metropolitan markets across Ontario, Saskatchewan, Alberta, British Columbia and Quebec. Automotive Properties REIT is the only public vehicle in Canada focused on consolidating automotive dealership real estate properties.
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