TORONTO, March 20, 2018 /CNW/ - Automotive Properties Real
Estate Investment Trust (TSX: APR.UN) ("Automotive Properties REIT"
or the "REIT") today announced its financial results for the fourth
quarter ("Q4 2017") and year ended December
31, 2017 ("2017"). The REIT's audited consolidated financial
statements and the related Management's Discussion & Analysis
("MD&A") for the three and twelve-month periods ended
December 31, 2017 are available on
the REIT's website at www.automotivepropertiesreit.ca and on SEDAR
at www.sedar.com.
Q4 2017 Highlights
- Property rental revenue was $10.9
million, an increase of 18.9% from the fourth quarter of
2016 ("Q4 2016");
- Net Operating Income1 ("NOI") was $9.2 million, up 19.6% from Q4 2016;
- Total and Same Property Cash NOI1 were $8.5 million and $7.0
million, respectively, representing increases of 20.3% and
1.4%, respectively, from Q4 2016;
- Net Income increased 16.9% to $6.6
million from $5.6 million in
Q4 2016;
- Funds from Operations1 ("FFO") increased 24.0% to
$6.2 million, from $5.0 million in Q4 2016. FFO per unit of the REIT
("Unit"), was $0.237 (diluted), up
from $0.229 (diluted) in Q4
2016;
- Adjusted Funds from Operations1 ("AFFO") increased
22.8% to $5.6 million, from
$4.6 million in Q4 2016. AFFO
per Unit was $0.215 (diluted), up
from $0.210 (diluted) in Q4
2016;
- On December 1, 2017, the REIT
acquired the Ericksen Infiniti automotive dealership property,
Southtown Hyundai automotive dealership property and Kentwood Ford vehicle service compound facility
in Edmonton, Alberta from a
third-party vendor for $23.2 million.
The REIT assumed the existing triple-net leases on these
properties;
- On December 15, 2017, the REIT
acquired the Mazda des Sources automotive dealership property in
Dorval, Quebec for $8.0 million. The operating tenant, owned by the
Dliawri Group, entered into a 19-year, triple-net lease with the
REIT;
- On December 18, 2017, the
REIT extended and increased one of its credit facilities,
providing enhanced financial flexibility and overall acquisition
capacity;
- 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 93.5%; and
- The REIT's debt to gross book value ("Debt to
GBV")1 was 48.5% as at December 31, 2017, compared to 51.5% as at
December 31, 2016.
Subsequent Events
- On February 13, 2018, the REIT
acquired an automotive dealership property in Kitchener-Waterloo, Ontario that will be
redeveloped for a luxury, high-end car company that will occupy the
premises. The REIT estimates that the total expenditures in
connection with this acquisition, including the purchase price,
redevelopment costs and related expenses will be approximately
$7.5 million.
"We generated solid year-over-year growth in property revenue,
NOI, FFO and AFFO in both our fourth quarter and 2017 fiscal
year, supported by the continued execution of our acquisition
program and annual rent increases across the majority of our
property portfolio," said Milton
Lamb, CEO of Automotive Properties REIT. "During 2017, we
completed seven property acquisitions through which we further
diversified our portfolio in terms of geography, tenants and
automotive brand representation. The pace of our acquisition
program has been slowed primarily due to the continued record
levels of automotive sales, which has delayed dealer disposition
activity. Looking ahead, we remain well positioned to continue
advancing our acquisition program with a sound balance sheet, an
elevated profile among dealership owners and our continued
expectation of consolidation within the dealership industry."
1 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 for the equivalent periods in 2016, thus removing
the impact of acquisitions.
2017 Financial Results Summary ($000s, except per Unit
amounts)
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Three months
ended
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Twelve months
ended
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Dec.
31,
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Dec.
31,
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($000s, except per
Unit amounts)
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2017
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2016
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Change
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2017
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2016
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Change
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Rental revenue
(1)
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$10,856
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$9,127
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18.9%
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$41,803
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$34,274
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22.0%
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NOI
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9,188
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7,683
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19.6%
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35,452
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29,486
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20.2%
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Cash NOI
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8,475
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7,043
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20.3%
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32,522
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26,772
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21.5%
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Same Property Cash
NOI (1)
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7,034
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6,937
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1.4%
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25,947
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25,576
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1.45%
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Net Income
(Loss)
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6,594
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5,643
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16.9%
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26,249
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(5,387)
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587%
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FFO
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6,228
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5,021
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24.0%
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25,110
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19,902
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26.2%
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AFFO
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5,642
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4,596
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22.8%
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22,657
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17,627
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28.5%
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Distributions per
Unit
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$0.201
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$0.201
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-
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$0.804
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$0.804
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-
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FFO per Unit - basic
(2)
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0.238
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0.229
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0.009
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0.976
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1.040
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- 0.064
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FFO per Unit -
diluted (3)
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0.237
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0.229
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0.008
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0.974
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1.040
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- 0.066
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AFFO per Unit - basic
(2)
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0.216
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0.210
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0.006
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0.881
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0.921
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- 0.040
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AFFO per Unit -
diluted (3)
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0.215
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0.210
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0.005
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0.879
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0.921
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- 0.042
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Payout ratios
(%)
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FFO
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84.8%
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87.8%
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-3.0%
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82.5%
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77.3%
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5.2%
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AFFO
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93.5%
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95.7%
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-2.2%
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91.5%
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87.3%
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4.2%
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Debt to
GBV
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48.5%
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51.5%
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-3.0%
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48.5%
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51.5%
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-3.0%
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(1)
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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.
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(2)
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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 limited partnership units of Automotive
Properties Limited Partnership ("Class B LP Units"). The total
weighted average number of Units outstanding (including Class B LP
Units) - basic for Q4 2017 and fiscal year 2017 was 26,149,053 and
25,717,724, respectively.
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(3)
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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 Q4 2017 and 2017 was 26,226,225 and 25,773,940,
respectively.
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Rental revenue was $10.9 million
in Q4 2017 and $41.8 million in 2017,
representing increases of 18.9% and 22.0%, respectively, over Q4
2016 and the twelve months ended December
31, 2016 ("2016"). Increased rental revenue reflects growth
from properties acquired subsequent to 2016 and contractual annual
rent increases of 1.5% across a significant portion of the
portfolio, which were partially offset by the accounting of the
straight-line lease adjustments.
Property costs were $1.7 million
in Q4 2017 and $6.4 million in 2017
compared to $1.4 million and
$4.8 million, respectively, in Q4
2016 and 2016. The increase in property costs in both periods was
attributable to the properties acquired subsequent to 2016.
Property costs as a percentage of revenue decreased from 15.8% in
Q4 2016 to 15.4% in Q4 2017, primarily due to higher rental revenue
from the properties acquired subsequent to Q4 2016. For 2017,
property costs as a percentage of revenue increased to 15.2% from
14.0% in 2016, primarily due to an increase in realty tax payments
in respect of the properties acquired subsequent to 2016. 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 Q4 2017
totaled $8.5 million and $7.0 million, respectively, representing
increases of 20.3% and 1.4%, respectively, from Q4 2016. For 2017,
total and Same Property Cash NOI were $32.5
million and $25.9 million,
respectively, representing increases of 21.5% and 1.45%,
respectively, from 2016. The quarterly and annual increases in
total and Same Property Cash NOI were attributable to the
properties acquired subsequent to 2016 and the annual contractual
rent increases of 1.5% per year across a significant portion of the
portfolio.
Net Income was $6.6 million in Q4
2017 and $26.2 million in 2017, up
16.9% and 587%, respectively, from the comparable periods in the
prior year. The increases were primarily due to the growth in NOI
and the change in the fair value adjustments for Class B LP Units,
investment properties, and interest rate swaps.
FFO was $6.2 million in Q4 2017
and $25.1 million in 2017, up 24.0%
and 26.2%, respectively, from the comparable periods in the prior
year. The increases were primarily due to the impact of the
properties acquired subsequent to 2016. On a per Unit basis, Q4
2017 FFO was $0.237 (diluted),
compared to $0.229 in Q4 2016, while
2017 FFO was $0.974 (diluted),
compared to $1.040 in 2016. The per
Unit decline in 2017 was primarily attributable to the dilutive
effect of the REIT's equity offering in February 2017, which resulted in a lower Debt to
GBV of 48.5%, which provides the REIT with capacity to acquire
approximately $65.0 million of
additional properties in the future.
AFFO was $5.6 million in Q4 2017
and $22.7 million in 2017,
representing increases of 22.8% and 28.5%, respectively, from the
comparable prior-year periods. The increases were primarily due to
the properties acquired subsequent to Q4 2016. On a per Unit basis,
Q4 2017 AFFO was $0.215 (diluted)
compared to $0.210 in Q4 2016, while
2017 AFFO was $0.879 (diluted),
compared to $0.921 in 2016. The per
Unit decline in 2017 was primarily attributable to the impact of
the equity offering, as noted above.
Adjusted Cash Flow from Operations ("ACFO") for Q4 2017 and 2017
increased to $5.9 million and
$22.6 million, respectively, compared
to $4.8 million and $18.0 million, respectively, in Q4 2016 and 2016.
The increases in both periods were primarily attributable to the
impact of the properties acquired subsequent to 2016.
Cash Distributions
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 Q4
2017, or $0.201 per Unit,
representing an AFFO payout ratio of 93.5%. For 2017, the REIT
declared distributions of $20.7
million and paid $20.5 million
to unitholders, representing an AFFO payout ratio of 91.5%. The
AFFO payout ratio for Q4 2017 was lower than Q4 2016 due to the
impact of the properties acquired subsequent to 2016. The AFFO
payout ratio for 2017 was higher due to financial deleveraging
resulting from the equity offering noted above.
Investment Properties
The REIT valued the investment properties using a discounted
cash flow approach whereby a current discount rate was applied to
the projected net operating income which a property can reasonably
be expected to produce in the future. The REIT's valuation
inputs are supported by quarterly market reports from an
independent appraiser which indicate a decrease in capitalization
rates in the Vancouver and
Alberta markets which were
partially offset by a capitalization rate increase for the Regina
market from December 31, 2016. The
overall capitalization rate applicable to the entire portfolio
remained at 6.5%, which is equivalent to the REIT's overall
assessment as at December 31, 2016.
The fair value of the REIT's investment properties was $543.1 million as at December 31, 2017.
Liquidity and Capital Structure
During Q4 2017, the REIT put in place a new non-revolving loan
in the amount of $20.0 million and a
new revolving credit facility in the amount of $14.0 million maturing in December 2022, which replaced its prior
$14.6 million revolving credit
facility, maturing in October
2019.
As at December 31, 2017, the REIT
had cash and cash equivalents of $0.2
million and access to $27.0
million in undrawn revolving credit facilities. The REIT had
$265.3 million outstanding on its
credit facilities with an effective weighted average fixed interest
rate on its debt of 3.35%. Interest rates on $190.0 million have been effectively fixed for a
term of 5.3 years by way of interest rate swaps. The REIT's Debt to
GBV as at December 31, 2017 was
48.5%.
Units Outstanding
As at December 31, 2017, there
were 16,216,000 REIT Units and 9,933,253 Class B LP Units
outstanding.
Outlook
The Canadian automotive retail industry is a large and stable
business with a track record of long-term growth. According to
Statistics Canada, automotive retail industry sales totaled a
record $156 billion in 2017 (up 9%
from $143 billion in 2016),
representing approximately 27% of Canada's overall retail sales of products and
merchandise. Over the last 20 years, Canadian automobile retail
industry sales grew at a compound annual rate of 4.6%. Sales of new
automobiles in 2017 totaled a record 2,076,970 units, up 4.7% from
2016, which was previously the annual all-time high for automobile
sales in Canada. Management
expects continued steady industry sales levels for 2018.
Given the large size of the industry, there are opportunities
for the REIT to acquire additional properties on an accretive basis
in support of stable and growing cash available for unitholder
distributions. The Canadian automotive dealership industry is
highly fragmented, with the top 10 dealership groups in aggregate
comprising less than 10% of the overall market. Industry
consolidation is continuing to gain momentum and, to this end, the
REIT has been actively expanding its automotive dealer and industry
relationships to build its acquisition pipeline. In addition, the
REIT has a right of first offer to acquire any REIT-suitable
properties that the Dilawri Group acquires or develops. Although,
the REIT has been actively expanding its automotive dealer and
industry relationships to build its acquisition pipeline,
Management believes the pace of the REIT's acquisition program has
been slowed primarily due to the continued record levels of
automotive sales, which has delayed dealer disposition activity.
The REIT's Debt to GBV of 48.5% provides the REIT with the capacity
to acquire approximately $65.0
million of additional properties in the future.
Conference Call
Management of the REIT will host a conference call for analysts
and investors on Wednesday, March 21,
2018 at 10:00 a.m. (ET). The
dial-in numbers for the conference call are (647) 427-7450 or (888)
231-8191. 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) 849-0833
or (855) 859-2056, passcode: 4699823. The replay will be available
until March 28, 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. Currently, the REIT's
portfolio consists of 39 income-producing commercial properties
representing approximately 1.4 million square feet of gross
leasable area in metropolitan markets across Ontario, Saskatchewan, Alberta, British
Columbia and Québec. Automotive Properties REIT is the only
public vehicle in Canada focused
on consolidating automotive dealership real estate properties. For
more information, please visit:
www.automotivepropertiesreit.ca.
Forward-Looking Information
This news release contains forward-looking information within
the meaning of applicable securities legislation, which reflects
the REIT's current expectations regarding future events and in some
cases can be identified by such terms as "will" and "expected".
Forward looking information includes the REIT's future acquisition
capacity. Forward-looking information is based on a number of
assumptions and is subject to a number of risks and uncertainties,
many of which are beyond the REIT's control that could cause actual
results and events to differ materially from those that are
disclosed in or implied by such forward-looking information. Such
risks and uncertainties include, but are not limited to, the
factors discussed under "Risks and Uncertainties" in the REIT's
MD&A for the year ended December 31,
2017 and in the REIT's current annual information form, both
of which are available on SEDAR (www.sedar.com). The REIT does not
undertake any obligation to update such forward-looking
information, whether as a result of new information, future events
or otherwise, except as expressly required by applicable law. This
forward-looking information speaks only as of the date of this news
release.
Non-IFRS Financial Measures
This news release contains certain financial measures which are
not defined under IFRS and may not be comparable to similar
measures presented by other real estate investment trusts or
enterprises. FFO, AFFO, FFO payout ratio, AFFO payout ratio, NOI,
Same Property NOI, Cash NOI, and Same Property Cash NOI are key
measures of performance used by the REIT's management and real
estate businesses. Debt to GBV is a measure of financial position
defined by the REIT's declaration of trust. These measures, as well
as any associated "per Unit" amounts, are not defined by IFRS and
do not have standardized meanings prescribed by IFRS, and therefore
should not be construed as alternatives to net income or cash flow
from operating activities calculated in accordance with IFRS. The
REIT believes that AFFO is an important measure of economic
earnings performance and is indicative of the REIT's ability to pay
distributions from earnings, while FFO, NOI, Cash NOI and Same
Property Cash NOI are important measures of operating performance
of real estate businesses and properties. The IFRS measurement most
directly comparable to FFO, AFFO, NOI and Cash NOI is net income.
ACFO is a supplementary measure used by management to improve the
understanding of the operating cash flow of the REIT. The IFRS
measurement most directly comparable to ACFO is cash flow from
operating activities. See the REIT's MD&A for the year-ended
December 31, 2107 for further
discussion of these non-IFRS financial measures and for a
reconciliation of NOI, FFO, AFFO and Cash NOI to net income and
comprehensive income and ACFO to cash flow from operating
activities.
SOURCE Automotive Properties Real Estate Investment Trust