TORONTO, March 22, 2022 /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 2021") and year ended December
31, 2021 ("2021").
"The resiliency of our tenants' businesses throughout the
pandemic underlines the essential nature of the automotive retail
industry in Canada. The real
estate underlying essential retail in Canada has generally experienced an increase
in market valuation over the past year. This has contributed to the
enhanced fair market value of our property portfolio, as the
capitalization rate applicable to our portfolio improved to 6.3% at
2021 year end," said Milton Lamb,
CEO of Automotive Properties REIT. "We continue to generate
year-over-year growth in revenue, NOI and AFFO per unit, driven by
organic growth from contractual rent increases and property
acquisitions."
"We have seen increased acquisition opportunities in the market
and have made solid progress with our acquisition program to date
in 2022 with the deployment of $65.1
million on acquisitions."
Q4 2021 Highlights
- The REIT collected 100% of its Q4 2021 contractual base rent
due under its leases and rent deferral agreements with its tenants
(the "Deferral Agreements"). All remaining amounts owed under the
Deferral Agreements were collected during the quarter.
- The REIT generated AFFO per Unit[1] of $0.220 (diluted) and paid total cash
distributions of $0.201 per Unit (as
defined below) in Q4 2021, representing an AFFO payout
ratio1 of approximately 91.4%. For the comparable
three-month period ended December 31,
2020 ("Q4 2020"), the REIT generated AFFO per Unit of
$0.214 (diluted) and paid cash
distributions of $0.201 per Unit,
representing an AFFO payout ratio of approximately 93.9%. The AFFO
payout ratio was lower in Q4 2021 primarily due to organic growth
in NOI and acquisitions made subsequent to Q4 2020.
- The REIT had a Debt to Gross Book Value ("Debt to GBV") ratio
of 40.2% as at December 31, 2021, and
a strong liquidity position with $72.3
million of undrawn credit facilities, $0.5 million of cash on hand, and seven
unencumbered properties with an aggregate value of approximately
$105.8 million.
- The capitalization rate applicable to the REIT's entire
portfolio was 6.3% as at December 31,
2021, a reduction of approximately 10 basis points from 6.4%
as at September 30, 2021, and a
reduction of approximately 40 basis points from 6.7% as at
December 31, 2020. The reductions
were primarily due to overall capitalization rate compression,
including, in particular, single tenant retail and industrial
capitalization rate reductions. In addition, the REIT continued its
amortization of two land lease properties. The improved
capitalization rate as at December 31,
2021 resulted in a fair value gain of $21.1 million and $75.2
million for Q4 2021 and 2021, respectively.
_______________________________
|
1 AFFO per Unit and AFFO payout ratio
are non-IFRS measures or non-IFRS ratios, as applicable. See
"Non-IFRS Financial Measures" at the end of this news
release.
|
Subsequent Events
- On January 17, 2022, the REIT
acquired two Honda dealership properties in Québec (Sherbrooke
Honda and Magog Honda) from a third party for a combined purchase
price of approximately $23.4
million.
- On January 21, 2022, the REIT
acquired approximately 2.15 acres of land underlying the Langley
Acura automotive dealership in Langley,
British Columbia from a third party for a purchase price of
approximately $15.1 million.
- On February 25, 2022, the REIT
acquired Tesla automotive services properties located in Québec
City, Québec and Innisfil, Ontario
from a third party for a combined purchase price of approximately
$25.9 million.
Financial Results Summary¹
|
Three months
ended December 31,
|
|
12 months
ended December 31,
|
|
($000s, except per
Unit amounts)
|
2021
|
2020
|
Change
|
2021
|
2020
|
Change
|
Rental revenue
(2)
|
$19,781
|
$19,091
|
3.6%
|
$78,218
|
$75,124
|
4.1%
|
NOI
|
16,776
|
16,471
|
1.9%
|
67,081
|
64,019
|
4.8%
|
Cash NOI
|
16,128
|
15,486
|
4.1%
|
64,225
|
60,400
|
6.3%
|
Same Property Cash
NOI (excluding bad
debt (expense) recovery) (2)
|
15,613
|
15,225
|
2.5%
|
60,375
|
59,256
|
1.9%
|
Net Income
(3)
|
10,409
|
30,180
|
-65.5%
|
85,418
|
26,965
|
216.8%
|
FFO
|
11,491
|
11,237
|
2.3%
|
46,529
|
43,789
|
6.3%
|
AFFO
|
10,921
|
10,333
|
5.7%
|
43,987
|
40,498
|
8.6%
|
Distributions per
Unit
|
$0.201
|
$0.201
|
-
|
$0.804
|
$0.804
|
-
|
|
|
|
|
|
|
|
FFO per Unit - basic
(4)
|
0.234
|
0.236
|
-0.002
|
0.954
|
0.919
|
0.035
|
FFO per Unit -
diluted (5)
|
0.231
|
0.233
|
-0.002
|
0.941
|
0.910
|
0.031
|
|
|
|
|
|
|
|
AFFO per Unit - basic
(4)
|
0.223
|
0.217
|
0.006
|
0.902
|
0.850
|
0.052
|
AFFO per Unit -
diluted (5)
|
0.220
|
0.214
|
0.006
|
0.890
|
0.841
|
0.049
|
|
|
|
|
|
|
|
Ratios
(%)
|
|
|
|
|
|
|
FFO payout
ratio
|
87.0%
|
86.3%
|
0.7%
|
85.4%
|
88.4%
|
-3.0%
|
AFFO payout
ratio
|
91.4%
|
93.9%
|
-2.5%
|
90.3%
|
95.6%
|
-5.3%
|
Debt to
GBV
|
40.2%
|
43.2%
|
-3.0%
|
40.2%
|
43.2%
|
-3.0%
|
|
|
(1)
|
NOI, Cash NOI, Same
Property Cash NOI (excluding bad debt (expense) recovery), FFO,
AFFO, FFO per Unit, AFFO per Unit, FFO payout ratio and AFFO
payout ratio are non-IFRS measures or non-IFRS ratios, as
applicable. See "Non-IFRS Financial Measures" at the end of
this news release. References to "Same Property" correspond to
properties that the REIT owned in Q4 2020, thus removing the impact
of acquisitions.
|
(2)
|
Rental revenue is
based on rents from leases entered into with tenants, 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.
|
(3)
|
Net income for Q4
2021 includes changes in fair value adjustments of $23.5 million
for Class B limited partnership units of Automotive Properties
Limited Partnership ("Class B LP Units"), deferred units ("DUs"),
income deferred units ("IDUs"), performance deferred units ("PDUs")
and restricted deferred units ("RDUs"), $3.3 million for interest
rate swaps and $21.1 million for investment properties. Please
refer to the consolidated financial statements of the REIT and
notes thereto.
|
(4)
|
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
trust units of the REIT ("REIT Units" and together with the Class B
LP Units, "Units") and Class B LP Units. The total weighted average
number of Units outstanding – basic for Q4 2021 was
49,013,407.
|
(5)
|
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, DUs, IDUs, PDUs and RDUs granted to certain independent
trustees and management of the REIT. The total weighted average
number of Units outstanding (including Class B LP Units, DUs, IDUs,
PDUs and RDUs) on a fully diluted basis was 49,733,057 for Q4 2021
and 49,446,138 for 2021.
|
Rental revenue was $19.8
million in Q4 2021 and $78.2
million in 2021, representing increases of 3.6% and 4.1%,
respectively, from Q4 2020 and the year ended December 31, 2020 ("2020"). Increased rental
revenue in Q4 2021 and 2021 reflects growth from properties
acquired subsequent to Q4 2020 and during and subsequent to 2020,
respectively, and contractual annual rent increases.
The REIT generated total Cash NOI of $16.1 million in Q4 2021 and $64.2 million in 2021, representing increases of
4.1% and 6.3%, respectively, from Q4 2020 and 2020. The increases
were primarily attributable to the properties acquired subsequent
to Q4 2020 and during and subsequent to 2020, respectively, as well
as contractual rent increases. Same Property Cash NOI (excluding
bad debt (expense) recovery) was $15.6
million in Q4 2021 and $60.4
million in 2021, representing increases of 2.5% and 1.9%,
respectively, from Q4 2020 and 2020. The increases were
attributable to contractual rent increases.
The REIT recorded net income of $10.4
million in Q4 2021, compared to $30.2
million in Q4 2020. Net income was $85.4 million in 2021, compared to $27.0 million in 2020. The variances were
primarily due to non-cash fair value adjustments for interest rate
swaps, investment properties, 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 in Q4 2021 of $23.5
million (Q4 2020 – increase of $7.6
million) and an increase of $44.6
million for 2021 (2020 – decrease of $14.4 million).
FFO was $11.5 million, or
$0.231 per Unit (diluted), in Q4 2021
and $46.5 million, or $0.941 per Unit (diluted), in 2021. That compares
to FFO of $11.2 million, or
$0.233 per Unit (diluted), in Q4 2020
and $43.8 million, or $0.910 per Unit (diluted), in 2020. The increases
in FFO in Q4 2021 and 2021 were primarily attributable to the
impact of the properties acquired subsequent to Q4 2020 and during
and subsequent to 2020, respectively, and contractual rent
increases. The decrease in FFO per Unit in Q4 2021 was due to a
reduction of the straight-line rent adjustment resulting from the
termination of a lease in the first quarter of 2021 and the
issuance of 1,369,102 REIT Units as consideration for the purchase
of Lexus Laval on March 1, 2021. The increase in FFO per Unit in
2021 was primarily attributable to the impact of the properties
acquired during and subsequent to 2020, contractual rent increases,
and bad debt reversals related to tenant receivables.
AFFO was $10.9 million, or
$0.220 per Unit (diluted), in Q4 2021
and $44.0 million, or $0.890 per Unit (diluted), in 2021. That compares
to AFFO of $10.3 million, or
$0.214 per Unit (diluted), in Q4 2020
and $40.5 million, or $0.841 per Unit (diluted), in 2020. The increases
in AFFO and AFFO per Unit in Q4 2021 were primarily attributable to
the impact of the properties acquired subsequent to Q4 2020, and
contractual rent increases. The increase in AFFO in 2021 was
primarily attributable to the impact of the properties acquired
during and subsequent to 2020 and contractual rent increases,
partially offset by bad debt expense. The increase in AFFO per Unit
in 2021 was primarily attributable to the impact of the properties
acquired during and subsequent to 2020, contractual rent increases,
and bad debt reversals related to accounts receivable associated
with the Deferral Agreements.
Adjusted Cash Flow from Operations ("ACFO") [2] for 2021
increased by 20.0% to $48.4 million,
compared to $40.3 million in 2020,
and cash flow from operating activities increased to $62.1 million in 2021 from $57.2 million in 2020. The increases were
primarily due to the impact of the properties acquired during and
subsequent to 2020, contractual rent increases and the collection
of rent receivables under the Deferral Agreements.
Cash Distributions
The REIT is currently paying monthly cash distributions of
$0.067 per Unit, representing
$0.804 per Unit on an annualized
basis. For Q4 2021, the REIT declared and paid total distributions
of $9.85 million, or $0.201 per Unit, representing an AFFO payout
ratio of 91.4%. The AFFO payout ratio was lower in Q4 2021 compared
to the 93.9% AFFO payout ratio in Q4 2020 primarily due to organic
growth in NOI and acquisitions made subsequent to Q4 2020. For the
year ended December 31, 2021, the
REIT declared and paid distributions of $39.2 million, or $0.804 per Unit, representing an AFFO payout
ratio of 90.3%. The AFFO payout ratio was lower in 2021 compared to
the 95.6% AFFO payout ratio in 2020 primarily due to organic growth
in NOI and properties acquired during and subsequent to 2020.
Liquidity and Capital Resources
As at December 31, 2021, the REIT
had a Debt to GBV ratio of 40.2% and a strong liquidity position
with $72.3 million of undrawn credit
facilities, cash on hand of $0.5
million, and seven unencumbered properties with an aggregate
value of approximately $105.8
million. As of the date of this news release, the REIT had
approximately $34.0 million of
undrawn credit facilities and 13 unencumbered properties with an
aggregate value of approximately $170.6
million.
Units Outstanding
As at December 31, 2021, there
were 39,080,154 REIT Units and 9,933,253 Class B LP Units
outstanding.
Outlook
As COVID-19 vaccination rates of Canadians have increased,
provincial governments across Canada have eased COVID-19 related emergency
measures and business restrictions. The REIT's tenants' businesses
are and expect to continue to remain fully operational. The
pandemic has also impacted the vehicle supply chain, resulting in
constraints of specific parts, 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. The easing of business
restrictions and pent-up consumer demand is expected to support the
continued strength in the Canadian auto sales and service sector.
The REIT believes that the overall fundamentals of the automotive
dealership business remain strong and that the industry is
resilient, essential and will continue to grow as the pandemic
continues to stabilize. However, future developments related to the
pandemic, including new COVID-19 variants, could result in
additional restrictions being implemented that could impact the
financial performance and financial position of the REIT and its
tenants in future periods. Furthermore, the current military
conflict in Ukraine has resulted
in a significant increase in the price of oil which has led to
higher vehicle fuel cost. This may have an adverse effect on
consumer demand. Management will continue to monitor the
situation.
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. Given the REIT's
strong balance sheet position, the REIT intends to pursue
acquisitions on a strategic basis through debt financing and
available liquidity.
____________________________
|
1 ACFO is a non-IFRS measure. See
"Non-IFRS Financial Measures" at the end of this news
release.
|
Financial Statements
The REIT's audited consolidated financial statements and related
Management's Discussion & Analysis ("MD&A") for the year
ended December 31, 2021 are available
on the REIT's website at www.automotivepropertiesreit.ca and on
SEDAR at www.sedar.com.
Conference Call
Management of the REIT will host a conference call for analysts
and investors on Wednesday, March 23,
2022 at 9:00 a.m. (ET). The
dial-in numbers for the conference call are (416) 764-8688 or (888)
390-0546. 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: 151056 #. The replay will be available
until March 30, 2022.
About Automotive Properties REIT
Automotive Properties REIT 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 72 income-producing commercial properties,
representing approximately 2.7 million square feet of gross
leasable area, in metropolitan markets across British
Columbia, Alberta, Saskatchewan, Manitoba, Ontario 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 impact of the COVID-19
pandemic on the REIT and its tenants. 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 &
Uncertainties, Critical Judgments & Estimates" in the REIT's
MD&A for the year ended December 31,
2021 and in the REIT's annual information form dated
March 22, 2022, which are available
on SEDAR (www.sedar.com) and the REIT's website
(www.automotivepropertiesreit.ca). 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 and
ratios which are not defined under International Financial
Reporting Standards ("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,
Cash NOI, Same Property Cash NOI and ACFO 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, Cash NOI and Same Property
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. For reconciliations of NOI,
FFO, AFFO and Cash NOI to net income and comprehensive income and
ACFO to cash flow from operating activities, please see the tables
below. For further information regarding these non-IRFS measures
and Debt to GBV, please refer to Section 1 "General Information and
Cautionary Statements – Non-IFRS Financial Measures" and Section 6
"Non-IFRS Financial Measures" in the REIT's MD&A for the year
ended December 31,
2021 which is incorporated by reference herein
and is available on the REIT's website at
www.automotivepropertiesreit.ca and on SEDAR at
www.sedar.com.
Reconciliation of NOI, Cash NOI, FFO and AFFO to Net Income
and Comprehensive Income
|
Three Months
Ended
December 31,
|
|
12 Months
Ended
December 31,
|
|
($000s, except per
Unit amounts)
|
2021
|
2020
|
Variance
|
2021
|
2020
|
Variance
|
Calculation of
NOI
|
|
|
|
|
|
|
Property
revenue
|
$19,781
|
$19,091
|
$690
|
$78,218
|
$75,124
|
$3,094
|
Property
costs
|
(3,005)
|
(2,620)
|
(385)
|
(11,137)
|
(11,105)
|
(32)
|
NOI (including
straight–line adjustments)
|
$16,776
|
$16,471
|
$305
|
$67,081
|
$64,019
|
$3,062
|
Adjustments:
|
|
|
|
|
|
|
Land lease
payments
|
(159)
|
(159)
|
—
|
(635)
|
(635)
|
—
|
Straight–line
adjustment
|
(489)
|
(826)
|
337
|
(2,221)
|
(2,984)
|
763
|
Cash
NOI
|
$16,128
|
$15,486
|
$642
|
$64,225
|
$60,400
|
$3,825
|
Reconciliation of
net income to FFO and AFFO
|
|
|
|
|
|
|
Net income and
comprehensive income
|
$10,409
|
$30,180
|
$(19,771)
|
$85,418
|
$26,965
|
$58,453
|
Adjustments:
|
|
|
|
|
|
|
Change in fair value
– interest rate swaps
|
(3,268)
|
(1,387)
|
(1,881)
|
(15,976)
|
17,832
|
(33,808)
|
Distributions on
Class B LP Units
|
1,997
|
1,997
|
—
|
7,988
|
7,988
|
—
|
Change in fair value
– Class B LP Units and Unit-based compensation
|
23,498
|
7,613
|
15,885
|
44,555
|
(14,403)
|
58,958
|
Change in fair value
– investment properties
|
(21,069)
|
(27,096)
|
6,027
|
(75,157)
|
5,684
|
(80,841)
|
ROU asset net balance
of depreciation/interest and lease payments
|
(76)
|
(70)
|
(6)
|
(299)
|
(277)
|
(22)
|
FFO
|
$11,491
|
$11,237
|
$254
|
$46,529
|
$43,789
|
$2,740
|
Adjustments:
|
|
|
|
|
|
|
Straight–line
adjustment
|
(489)
|
(826)
|
337
|
(2,221)
|
(2,984)
|
(763)
|
Capital expenditure
reserve
|
(81)
|
(78)
|
(4)
|
(321)
|
(307)
|
(14)
|
AFFO
|
$10,921
|
$10,333
|
$588
|
$43,987
|
$40,498
|
$3,489
|
Number of Units
outstanding (including Class B LP Units)
|
49,013,407
|
47,630,305
|
1,383,102
|
49,013,407
|
47,630,305
|
1,383,102
|
Weighted average
Units Outstanding – basic
|
49,013,407
|
47,630,305
|
1,383,102
|
48,786,577
|
47,630,305
|
1,156,272
|
Weighted average
Units Outstanding – diluted
|
49,733,057
|
48,203,686
|
1,529,371
|
49,446,138
|
48,135,920
|
1,310,218
|
FFO per Unit
– basic
|
$0.234
|
$0.236
|
$(0.002)
|
$0.954
|
$0.919
|
$0.035
|
FFO per Unit
– diluted
|
$0.231
|
$0.233
|
$(0.002)
|
$0.941
|
$0.910
|
$0.031
|
AFFO per Unit
– basic
|
$0.223
|
$0.217
|
$0.006
|
$0.902
|
$0.850
|
$0.052
|
AFFO per Unit
– diluted
|
$0.220
|
$0.214
|
$0.006
|
$0.890
|
$0.841
|
$0.049
|
Distributions per
Unit
|
$0.201
|
$0.201
|
—
|
$0.804
|
$0.804
|
—
|
FFO payout
ratio
|
87.0%
|
86.3%
|
0.7%
|
85.4%
|
88.4%
|
(3.0)%
|
AFFO payout
ratio
|
91.4%
|
93.9%
|
(2.5)%
|
90.3%
|
95.6%
|
(5.3)%
|
Same Property Cash Net Operating Income
|
Three Months
Ended
December 31,
|
|
12 Months Ended
December 31,
|
|
|
2021
|
2020
|
Variance
|
2021
|
2020
|
Variance
|
Same property base
rental revenue
|
$15,772
|
$15,384
|
$388
|
$61,010
|
$59,891
|
$1,119
|
Bad debt recovery
(expense)
|
—
|
55
|
(55)
|
277
|
(277)
|
554
|
Land lease
payments
|
(159)
|
(159)
|
—
|
(635)
|
(635)
|
—
|
Same Property Cash
NOI
|
$15,613
|
$15,280
|
$333
|
$60,652
|
$58,979
|
$1,673
|
Bad debt expense
(recovery)
|
—
|
(55)
|
55
|
(277)
|
277
|
(554)
|
Same Property Cash
NOI
(excluding bad debt (expense) recovery)
|
$15,613
|
$15,225
|
$388
|
$60,375
|
$59,256
|
$1,119
|
Reconciliation of Cash Flow from Operating Activities to
ACFO
|
Twelve Months
Ended
December 31,2021
|
|
($000s)
|
2021
|
2020
|
Variance
|
Cash flow from
operating activities
|
$62,212
|
$57,168
|
$5,044
|
Change in non-cash
working capital
|
2,262
|
(610)
|
2,872
|
Interest
paid
|
(14,674)
|
(14,876)
|
202
|
Amortization of
financing fees
|
(557)
|
(543)
|
(14)
|
Amortization of
indemnification fees
|
(183)
|
(183)
|
-
|
Net interest expense
and other financing charges
in excess of interest paid
|
(349)
|
(311)
|
(38)
|
Capital expenditure
reserve
|
(321)
|
(307)
|
(14)
|
ACFO
|
$48,390
|
$40,338
|
$8,052
|
ACFO payout
ratio
|
81.1%
|
94.9%
|
(13.8)%
|
SOURCE Automotive Properties Real Estate Investment Trust