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Automotive Properties Real Estate Investment
Symbol C : APR.UN
Shares Issued 21,796,552
Close 2018-11-13 C$ 10.21
Recent Sedar Documents

Automotive Properties earns $5.67-million in Q3

2018-11-13 17:43 ET - News Release

Mr. Milton Lamb reports

AUTOMOTIVE PROPERTIES REIT REPORTS FINANCIAL RESULTS FOR THIRD QUARTER OF 2018

Automotive Properties Real Estate Investment Trust has released its financial results for the three-month (Q3 2018) and nine-month (YTD (year-to-date) 2018) periods ended Sept. 30, 2018.

Q3 2018 highlights:

  • Property rental revenue was $11.8-million, an increase of 11.7 per cent from the third quarter of 2017 (Q3 2017).
  • Net operating income (1) (NOI) was $10.0-million, an increase of 10.8 per cent from Q3 2017.
  • Total and same-property cash NOI (1) was $9.3-million and $8.4-million, respectively, representing increases of 11.9 per cent and 1.4 per cent, respectively, from Q3 2017.
  • Net income was $5.7-million, compared with $12.7-million in Q3 2017.
  • Funds from operations (1) (FFO) increased 4.1 per cent to $6.7-million, from $6.4-million in Q3 2017. FFO per unit of the REIT was 24.9 cents (diluted), up from 24.4 cents (diluted) in Q3 2017.
  • Adjusted funds from operations (1) (AFFO) increased 5.3 per cent to $6.1-million, from $5.8-million in Q3 2017. AFFO per unit was 22.8 cents (diluted), up from 22.2 cents (diluted) in Q3 2017.
  • The REIT acquired the BMW Laval and Sherwood Park Volkswagen dealership properties from AutoCanada Inc. for a purchase price of $55.5-million.
  • The REIT declared monthly cash distributions of 6.7 cents per unit, resulting in total distributions declared and paid of approximately $5.4-million, representing an AFFO payout ratio (1) of approximately 88.2 per cent.
  • The REIT's debt to gross book value (1) (GBV) was 53.1 per cent as at Sept. 30, 2018, compared with 48.5 per cent as at Dec. 31, 2017.

Subsequent event:

  • On Oct. 16, 2018, the REIT closed a bought deal equity offering of 5.1 million units at a price of $10.80 per unit, resulting in gross proceeds of approximately $55.1-million.

"Our property acquisition program, combined with our contractual rent increases, continues to drive growth in revenue, NOI, FFO and AFFO. Through our acquisitions we have continued to diversify our tenant base while continuing our focus on metropolitan markets," said Milton Lamb, chief executive officer of Automotive Properties. "With our acquisition of the BMW Laval and Sherwood Park Volkswagen properties from AutoCanada Inc. in the quarter, our portfolio now includes four of the top automotive dealership groups in Canada. Looking ahead, with the recent completion of our $55.1-million equity offering, we will continue to strengthen our portfolio, grow cash flow and drive long-term value for our unitholders by capitalizing on accretive consolidation opportunities."

                     FINANCIAL RESULTS SUMMARY 
   (in thousands of dollars, except per-unit amounts and as noted)

                              Three months ended    Nine months ended      
                                        Sept. 30             Sept. 30
                                                                                
                                   2018     2017        2018     2017
   
Rental revenue (1)              $11,834  $10,599     $34,513  $30,947
NOI                               9,993    9,017      29,252   26,264
Cash NOI                          9,278    8,293      27,030   24,047
Same-property cash NOI (1)        8,410    8,294      23,006   22,690
Net income (2)                    5,675   12,729      25,484   19,655
FFO                               6,666    6,405      19,973   18,882
AFFO                              6,117    5,811      18,232   17,015
Distributions per unit          $ 0.201  $ 0.201     $ 0.603  $ 0.603
FFO per unit -- basic (3)       $ 0.250  $ 0.245     $ 0.758  $ 0.738
FFO per unit -- diluted (4)     $ 0.249  $ 0.244     $ 0.755  $ 0.737
AFFO per unit -- basic (3)      $ 0.230  $ 0.222     $ 0.692  $ 0.665
AFFO per unit -- diluted (4)    $ 0.228  $ 0.222     $ 0.689  $ 0.664
Ratios (%)                                                           
FFO payout ratio                  80.7%    82.4%       79.9%    81.8%
AFFO payout ratio                 88.2%    90.5%       87.5%    90.8%
Debt to GBV                       53.1%    45.8%       53.1%    45.8%

(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 Q3 2018 is primarily due to 
changes in the fair value adjustments for interest rate swaps, the 
Class B limited partnership units of Automotive Properties LP and 
investment properties. Please refer to the consolidated financial 
statements of the REIT 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 Q3 2018 was 26,629,805.

(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 Q3 2018 was 26,780,847.

Rental revenue increased 11.7 per cent to $11.8-million in Q3 2018, as compared with $10.6-million in Q3 2017. The increase in rental revenue reflects growth from properties acquired subsequent to Q3 2017 and contractual annual rent increases across a significant portion of the portfolio.

Property costs were $1.8-million in Q3 2018, as compared with $1.6-million in Q3 2017. The increase is attributable to the properties acquired subsequent to Q3 2017. Property costs as a percentage of revenue were 15.6 per cent in Q3 2018 as compared with 14.9 per cent in Q3 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 Q3 2018 totalled $9.3-million and $8.4-million, respectively, representing increases of 11.9 per cent and 1.4 per cent, respectively, as compared with Q3 2017. The increase in cash NOI was attributable to the properties acquired subsequent to Q3 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 $5.7-million in Q3 2018, as compared with $12.7-million in Q3 2017. The decrease was primarily attributable to the change in the fair value adjustment for Class B LP units, partially offset by the growth in NOI, changes in the fair value adjustment for interest rate swaps and investment properties.

FFO in Q3 2018 was $6.7-million or 24.9 cents per unit (diluted), as compared with $6.4-million, or 24.4 cents per unit diluted in Q3 2017. The increase was primarily due to the impact of the properties acquired subsequent to Q3 2017.

AFFO in Q3 2018 was $6.1-million or 22.8 cents per unit (diluted), as compared with $5.8-million or 22.2 cents per unit diluted in Q3 2017. The increase was primarily due to the impact of the properties acquired subsequent to Q3 2017.

Adjusted cash flow from operations (1) (ACFO) in Q3 2018 was $7.5-million, representing an increase of 32.2 per cent from $5.7-million in Q3 2017. The ACFO payout ratio was 71.5 per cent in Q3 2018, compared with 92.7 per cent in Q3 2017. The lower ACFO payout ratio for Q3 2018 reflects the adjustment for the timing of non-cash working capital related to non-sustainable cash flow activities, which was primarily a result of acquisition costs related to the purchase of the BMW Laval and Sherwood Park Volkswagen dealership properties.

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. The REIT declared and paid total distributions of $5.4-million to unitholders in Q3 2018, or 20.1 cents per unit, representing an AFFO payout ratio of 88.2 per cent. The lower AFFO payout ratio for Q3 2018 relative to Q3 2017 was primarily attributable to the impact of the properties acquired subsequent to Q3 2017.

Units outstanding

As at Sept. 30, 2018, there were 16,696,552 units and 9,933,253 Class B LP units outstanding (21,796,552 units following completion of the equity offering on Oct. 16, 2018).

Financial statements

The REIT's unaudited condensed consolidated interim financial statements and related management's discussion and analysis (MD&A) for Q3 2018/YTD 2018 are available on the REIT's website and on SEDAR.

(1) NOI, cash NOI, same-property cash NOI, FFO, AFFO, debt to GBV and ACFO are non-IFRS (international financial reporting standards) financial measures.

Conference call

Management of the REIT will host a conference call for analysts and investors on Wednesday, Nov. 14, 2018, at 10 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.

To access a replay of the conference call, dial 416-764-8677 or 888-390-0541, passcode 120257. The replay will be available Nov. 21, 2018.

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 42 income-producing commercial properties, representing approximately 1.7 million square feet of gross leasable area, and one development property, in metropolitan markets across Ontario, Saskatchewan, Alberta, British Columbia and Quebec. Automotive Properties is the only public vehicle in Canada focused on consolidating automotive dealership real estate properties.

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