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TORONTO, May 12, 2021 /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 period ended March 31, 2021 ("Q1 2021").
"The automotive dealership industry in Canada has faced unprecedented challenges since the onset of the pandemic. Dealership operators, including our tenant group, responded rapidly and effectively to the pandemic with enhanced e-commerce solutions and streamlined operations. As a result, our property portfolio remains fully leased, we continue to receive 100 percent of rent payments and the overall capitalization rate applicable to our property portfolio has returned to its pre-pandemic level," said Milton Lamb, CEO of Automotive Properties REIT. "As macroeconomic conditions and automotive sales and service levels continue to recover, we expect the pace of consolidation in the automotive dealership industry to rebound, which should present increased opportunities to continue advancing our acquisition program. With our low debt to GBV ratio and strong liquidity position, we are well positioned to capitalize."
Q1 2021 Highlights
The REIT collected 100% of its Q1 2021 contractual base rent due under its leases and the payments due subject to the rent deferral agreements with its tenants (the "Deferral Agreements").
On March 1, 2021, the REIT acquired the real estate underlying the Lexus Laval automotive dealership located in Laval, Quebec from the Dilawri Group ("Dilawri") for a purchase price of approximately $14.8 million. The REIT satisfied the purchase price by issuing 1,369,102 trust units of the REIT to Dilawri, raising Dilawri's effective interest in the REIT to approximately 28.1%.
The REIT generated AFFO per unit of $0.227 (diluted) and paid total cash distributions of $0.201 per Unit (defined below) in Q1 2021, representing an AFFO payout ratio of approximately 88.5%. For the three-month period ended March 31, 2020 ("Q1 2020"), the REIT generated AFFO per Unit of $0.208 (diluted) and paid cash distributions of $0.201 per Unit, representing an AFFO payout ratio of approximately 96.6%. The lower AFFO payout ratio in Q1 2021 primarily reflects the impact of the properties acquired during and subsequent to Q1 2020, contractual rent increases and a lease termination fee.
The REIT had a Debt to Gross Book Value ratio ("Debt to GBV") of 41.7% and a strong liquidity position with $56.9 million of undrawn credit facilities as at March 31, 2021.
The capitalization rate applicable to the REIT's entire portfolio was 6.6% as at March 31, 2021, a reduction of approximately 10 basis points from 6.7% as at December 31, 2020, primarily due to the resilience demonstrated by the REIT's tenants' businesses, 100% contractual rent collection and no tenant rent deferrals in the quarter. The capitalization rate is now equal to the rate used as at December 31, 2019, prior to the impact of the COVID-19 pandemic.
Financial Results Summary¹
Three months ended
($000s, except per Unit amounts)
Rental revenue (2)
Same Property Cash NOI (excluding bad debt recovery) (2)
Net Income (Loss) (3)
Distributions per Unit
FFO per Unit - basic (4)
FFO per Unit - diluted (5)
AFFO per Unit - basic (4)
AFFO per Unit - diluted (5)
FFO payout ratio
AFFO payout ratio
Debt to GBV
NOI, Cash NOI, Same Property Cash NOI, FFO, AFFO, Debt to GBV, FFO Payout Ratio, AFFO Payout Ratio and ACFO are non-IFRS financial measures. See "Non-IFRS Financial Measures" in this news release. References to "Same Property" correspond to properties that the REIT owned in Q1 2020, thus removing the impact of acquisitions.
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.
Net income for Q1 2021 includes changes in fair value adjustments of $7.6 million for Class B limited partnership units of Automotive Properties Limited Partnership ("Class B LP Units"), deferred units ("DUs") and income deferred units ("IDUs"), $11.1 million for interest rate swaps and $13.1 million for investment properties. Please refer to the consolidated financial statements of the REIT and notes thereto.
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 Q1 2021 was 48,101,885.
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 and 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 Q1 2021 was 48,693,512.
Rental revenue in Q1 2021 increased 4.3% to $19.4 million, compared to $18.6 million in Q1 2020. The increase in rental revenue reflects growth from properties acquired during and subsequent to Q1 2020, contractual annual rent increases and a lease termination fee paid by a former tenant during Q1 2021.
The REIT generated total Cash NOI of $16.1 million in Q1 2021, representing an increase of 7.8% compared to Q1 2020. The increase was primarily attributable to the properties acquired during and subsequent to Q1 2020, contractual rent increases and a lease termination fee. Same Property Cash NOI (excluding bad debt recovery) was $14.8 million in Q1 2021, representing an increase of 1.3% compared to Q1 2020. The increase was attributable to contractual rent increases.
The REIT recorded net income of $26.3 million in Q1 2021, compared to net income of $15.7 million in Q1 2020, an increase of 67.2%. The positive variance was primarily due to higher NOI and fair value adjustments for interest rate swaps and investment properties, partially offset by fair value adjustments for Class B LP Units, DUs and IDUs.
FFO in Q1 2021 was $11.7 million, or $0.239 per Unit (diluted), as compared to $10.8 million, or $0.224 per Unit (diluted), in Q1 2020. The increase was primarily due to the impact of the properties acquired during and subsequent to Q1 2020, contractual rent increases and a lease termination fee that was offset by the reduction of the straight-line rent adjustment due to the termination of the lease.
AFFO in Q1 2021 was $11.1 million, or $0.227 per Unit (diluted), as compared to $10.0 million, or $0.208 per Unit (diluted), in Q1 2020. The increase was primarily due to the impact of the properties acquired during and subsequent to Q1 2020, contractual rent increases and a lease termination fee that was offset by the reduction of the straight-line rent adjustment due to the termination of the lease.
Adjusted Cash Flow from Operations1 ("ACFO") for Q1 2021 increased 1.1% to $10.7 million, compared to $10.6 million in Q1 2020. The increase was primarily due to the impact of the properties acquired during and subsequent to Q1 2020, contractual rent increases and a lease termination fee that was offset by the reduction of the straight-line rent adjustment due to the termination of the lease.
The REIT is currently paying monthly cash distributions of $0.067 per Unit, representing $0.804 per Unit on an annualized basis. For Q1 2021, the REIT declared total distributions of $9.7 million and paid total distributions of $9.6 million to unitholders, or $0.201 per Unit, representing an AFFO payout ratio of 88.5%. The AFFO payout ratio was lower in Q1 2021 compared to Q1 2020 primarily due to the impact of the properties acquired during and subsequent to Q1 2020, contractual rent increases and a lease termination fee.
Liquidity and Capital Resources
As at March 31, 2021, the REIT had a Debt to GBV of 41.7% and a strong liquidity position with $56.9 million of undrawn credit facilities, and 10 unencumbered properties with a value of approximately $166.8 million.
As at March 31, 2021, there were 39,066,154 REIT Units and 9,933,253 Class B LP Units outstanding.
The REIT has collected 100% of its April and May 2021 contractual base rent under the leases plus contractual base rent that is due under the Deferral Agreements. As of the date of this news release, no additional rent deferrals have been requested by the REIT's tenants.
Provincial governments across Canada continued emergency measures in Q1 2021 to combat the spread of COVID-19, including: stay-at-home orders, travel restrictions, self-imposed quarantine periods, temporary closures or restrictions of non-essential businesses, limitations on public gatherings, and social distancing guidelines, many of which continue to this date. As a result of these measures, most of the REIT's tenants' businesses continue to be operated on a limited basis. As provincial COVID-19 related restrictions ease, pent-up consumer demand is expected to drive continued growth in Canadian auto sales and service work performed by the automotive dealerships. COVID-19 has also impacted the vehicle supply chain, resulting in constraints of specific models and brands. The REIT believes that the overall fundamentals of the automotive dealership business are strong and that the industry is resilient and will continue to grow as the COVID-19 pandemic is stabilized. However, the duration of the pandemic is unknown at this time.
The REIT expects that the pace of consolidation in the automotive dealership industry will rebound as the pandemic is brought under control and the overall economy strengthens. Given the REITs strong balance sheet position, the REIT can pursue acquisitions on a strategic basis through debt financing and available liquidity. Management and the Trustees will continue to closely monitor the impact of the pandemic on the REIT's business and the business of the REIT's tenants, and will continue to prudently manage the REIT's available resources during this period of economic uncertainty.
The REIT's unaudited consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for Q1 2021 are available on the REIT's website at www.automotivepropertiesreit.ca and on SEDAR at www.sedar.com.
Management of the REIT will host a conference call for analysts and investors on Thursday, May 13, 2021 at 8:30 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: 949794 #. The replay will be available until May 20, 2021.
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 66 income-producing commercial properties, representing approximately 2.5 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.
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 including with respect to payment of rents and deferrals thereof. 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 Judgements & Estimates" in the REIT's MD&A for the year ended December 31, 2020 and in the REIT's annual information form dated March 23, 2021, which are available on SEDAR (www.sedar.com) and the REIT's website (www.automotivepropertiesreit.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, 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, 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. See the REIT's Q1 2021 MD&A 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
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