Canada NewsWire
TORONTO
,
Nov. 10, 2022
/CNW/ – Automotive Properties Real Estate Investment Trust (TSX: APR.UN) (“Automotive Properties REIT” or the “REIT”) today announced its financial results for the three-month (“Q3 2022”) and nine-month (“YTD 2022”) periods ended
September 30, 2022
.
“Our acquisition program and contractual annual rent increases across our portfolio drove continued growth in revenue, Cash NOI and AFFO per Unit in the quarter,” said
Milton Lamb
, CEO of Automotive Properties REIT. “Our contractual rent increases and triple-net lease structure generated 2.2% same property NOI growth in the quarter, which lessens our exposure to inflation and rising interest rates. Supported by our strong liquidity position, we are well positioned to continue pursuing attractive acquisition opportunities in our target markets.”
Q3 2022 Highlights
-
The REIT generated AFFO per Unit
1
of
$0.227
(diluted) and paid total cash distributions of
$0.201
per Unit (as defined below) in Q3 2022, representing an AFFO payout ratio
1
of approximately 88.5%. For the comparable three-month period ended
September 30, 2021
(“Q3 2021”), the REIT generated AFFO per Unit of
$0.221
(diluted) and paid cash distributions of
$0.201
per Unit, representing an AFFO payout ratio of approximately 91.0%. The AFFO payout ratio was lower in Q3 2022 primarily due to the properties acquired subsequent to Q3 2021 and contractual rent increases. -
The REIT had a Debt to Gross Book Value (“Debt to GBV”) ratio of 41.2% as at
September 30, 2022
, and a strong liquidity position with
$69.9 million
of undrawn credit facilities,
$0.3 million
of cash on hand, and 10 unencumbered properties with an aggregate value of approximately
$121.0 million
. As of the date of this news release, the REIT has approximately
$75.5 million
of undrawn credit facilities. -
The REIT’s valuation of its investment properties decreased slightly compared to the prior quarter to reflect current market conditions, resulting in a fair value loss of
$5.8 million
in Q3 2021. The capitalization rate applicable to the REIT’s entire portfolio increased to 6.37% as at
September 30, 2022
, a nominal adjustment from 6.30% as at both
June 30, 2022
and
December 31, 2021
. -
The REIT entered into an agreement to sell its Kingston Toyota automotive dealership property to a third party at a capitalization rate of 6.1%, resulting in a sale price of approximately
$18.0 million
and a gain of approximately
$1.7 million
over
June 30, 2022
IFRS fair value. The sale is expected to be completed by the end of
November 2022
.
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Financial Results Summary
(
¹
)
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Rental revenue in Q3 2022 increased by 6.3% to
$20.7 million
, compared to
$19.5 million
in Q3 2021. The increase in rental revenue reflects growth from properties acquired subsequent to Q3 2021 and contractual annual rent increases.
The REIT generated total Cash NOI of
$17.2 million
in Q3 2022, representing an increase of 7.7% compared to Q3 2021. The increase was primarily attributable to the properties acquired subsequent to Q3 2021 and contractual rent increases. Same Property Cash NOI was
$16.2 million
in Q3 2022, representing an increase of 2.2% compared to Q3 2021. The increase was primarily attributable to contractual rent increases.
The REIT recorded net income of
$8.9 million
in Q3 2022, compared to net income of
$30.8 million
in Q3 2021. The negative variance was primarily due to a non-cash fair value adjustment on investment properties, partially offset by higher NOI and non-cash fair value adjustments for Class B LP Units, 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 Q3 2022 of
$2.3 million
, compared to a decrease of
$3.1 million
in Q3 2021.
FFO in Q3 2022 was
$11.8 million
, or
$0.237
per Unit (diluted), compared to
$11.6 million
, or
$0.234
per Unit (diluted), in Q3 2021. The increase was primarily due to the properties acquired subsequent to Q3 2021 and contractual rent increases.
AFFO in Q3 2022 was
$11.3 million
, or
$0.227
per Unit (diluted), compared to
$11.0 million
, or
$0.221
per Unit (diluted), in Q3 2021. The increase reflects the impact of the properties acquired subsequent to Q3 2021 and contractual rent increases.
Adjusted Cash Flow from Operations (“ACFO”)
2
for Q3 2022 was
$11.4 million
, compared to
$12.5 million
in Q3 2022. The decrease was primarily due to higher interest expense, partially offset by contractual rent increases.
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 Q3 2022, the REIT declared and paid total distributions of
$9.86 million
, or
$0.201
per Unit, representing an AFFO payout ratio of 88.5%. The AFFO payout ratio was lower in Q3 2022 compared to the 91.0% AFFO payout ratio in Q3 2021 primarily due to the impact of the properties acquired subsequent to Q3 2021 and contractual rent increases.
Liquidity and Capital Resources
As at
September 30, 2022
, the REIT had a Debt to GBV ratio of 41.2% and a strong liquidity position with
$69.9 million
of undrawn credit facilities,
$0.3 million
of cash on hand, and 10 unencumbered properties with an aggregate value of approximately
$121.0 million
. As of the date of this news release, the REIT has approximately
$75.5 million
of undrawn credit facilities.
Units Outstanding
As at
September 30, 2022
, there were 39,727,346 REIT Units and 9,327,487 Class B LP Units outstanding.
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Outlook
The REIT is subject to risks associated with rising inflation and interest rates. As a result of rising inflation and various factors occurring globally, the Bank of
Canada
(“BoC”) has already raised the overnight rate by 350 basis points so far in 2022. As at the date of this news release, the longer-term rates have increased, with the BoC 10-Year benchmark bond yield increasing by 1.5% since the beginning of 2022 to approximately 3.3%. Management will continue to monitor the impact of the rising rate environment and inflation on its property portfolio and the overall real estate industry. The REIT’s annual contractual rent increases across its portfolio partially insulate it from rising inflation.
The continued military conflict in
Ukraine
has resulted in higher oil prices, which has led to continued high vehicle fuel costs. Combined with higher interest rates and inflation, this may have an adverse effect on consumer demand. Management continues to monitor the situation.
Management believes that the overall fundamentals of the automotive dealership business remain solid, and that the industry is resilient and essential and will continue to grow. However, future developments related to the pandemic, including new COVID-19 variants, could result in restrictions being re-implemented that could impact the financial performance and financial position of the REIT and its tenants in future periods. 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 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, management intends to pursue acquisitions on a strategic basis.
Financial Statements
The REIT’s unaudited consolidated financial statements and related Management’s Discussion & Analysis (“MD&A”) for Q3 2022 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
Friday, November 11, 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: 275915 #. The replay will be available until
November 18, 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 Q3 2022 MD&A 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
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Same Property Cash Net Operating Income
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Reconciliation of Cash Flow from Operating Activities to ACFO
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SOURCE Automotive Properties Real Estate Investment Trust
View original content:
http://www.newswire.ca/en/releases/archive/November2022/10/c3810.html
Featured image: Deposit Photos © ridofranz
