TORONTO, Aug. 11, 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 ("Q2 2021") and six-month ("YTD 2021") periods ended
June 30, 2021.
"While automotive dealerships, including our tenant group,
continued to operate under COVID-19 related business restrictions
during the quarter, automotive retail sales continue to rebound
with significant year-over-year growth to date in 2021, reflecting
the resiliency of the automotive dealership industry. Our portfolio
remains fully leased and we have 100% contractual base rent
collection under our leases, plus contractual base rent that is due
under the Deferral Agreements," said Milton
Lamb, CEO of Automotive Properties REIT. "We expect the pace
of industry consolidation to accelerate supported by the strong
recovery in sales. We remain well positioned to capitalize on
acquisition opportunities to drive growth in AFFO per unit."
Q2 2021 Highlights
- The REIT collected 100% of its Q2 2021 contractual base rent
due under its leases and rent deferral agreements with its tenants
(the "Deferral Agreements"). As at June
30, 2021, the remaining tenant deferral rent receivable was
approximately $0.5
million.
- The REIT generated AFFO per Unit (as defined below) of
$0.221 (diluted) and paid total cash
distributions of $0.201 per Unit in
Q2 2021, representing an AFFO payout ratio of approximately 91.0%.
For the three-month period ended June 30,
2020 ("Q2 2020"), the REIT generated AFFO per Unit of
$0.205 (diluted) and paid cash
distributions of $0.201 per Unit,
representing an AFFO payout ratio of approximately 98.0%. The AFFO
payout ratio was lower in Q2 2021 and YTD 2021 primarily due to the
reversal of the bad debt related to the tenant receivables and
contractual rent increases. The higher AFFO payout ratio in Q2 2020
and YTD 2020 also reflect the temporary dilutive effective of the
December 2019 equity offering.
- The REIT had a Debt to Gross Book Value ("Debt to GBV") ratio
of 41.3% and a strong liquidity position with $75.0 million of undrawn credit
facilities as at June 30, 2021
and seven unencumbered properties with an aggregate value of
approximately $101.4 million.
- The capitalization rate applicable to the REIT's entire
portfolio was 6.5% as at June 30,
2021, a reduction of approximately 10 basis points from 6.6%
as at March 31, 2021 and a reduction
of approximately 20 basis points from 6.7% as at December 31, 2020. The reduction of the
capitalization rate in Q2 2021 is a result of the REIT decreasing
the discount rate for its properties in the greater Toronto and Montreal areas by approximately 20 basis
points during the quarter, primarily due to industry-wide single
tenant retail and industrial capitalization rate reductions.
Financial Results Summary¹
|
Three months
ended
June 30,
|
|
Six months
ended
June 30,
|
|
($000s, except
per Unit amounts)
|
2021
|
2020
|
Change
|
2021
|
2020
|
Change
|
|
|
|
|
|
|
|
Rental revenue
(2)
|
$19,562
|
$18,800
|
4.1%
|
$38,975
|
$37,406
|
4.2%
|
NOI
|
16,860
|
15,586
|
8.2%
|
33,617
|
31,380
|
7.1%
|
Cash NOI
|
16,025
|
14,755
|
8.6%
|
32,106
|
29,671
|
8.2%
|
Same Property Cash
NOI (excluding bad debt (expense)/reversal)
(2)
|
15,337
|
15,177
|
1.1%
|
29,729
|
29,348
|
1.3%
|
Net Income (Loss)
(3)
|
17,858
|
(23,356)
|
N/A
|
44,187
|
(7,609)
|
N/A
|
FFO
|
11,750
|
10,662
|
10.2%
|
23,412
|
21,428
|
9.3%
|
AFFO
|
10,994
|
9,856
|
11.5%
|
22,059
|
19,827
|
11.3%
|
Distributions per
Unit
|
$0.201
|
$0.201
|
-
|
$0.402
|
$0.402
|
-
|
|
|
|
|
|
|
|
FFO per Unit - basic
(4)
|
0.240
|
0.224
|
0.016
|
0.482
|
0.450
|
0.032
|
FFO per Unit -
diluted (5)
|
0.236
|
0.222
|
0.014
|
0.477
|
0.446
|
0.031
|
|
|
|
|
|
|
|
AFFO per Unit - basic
(4)
|
0.224
|
0.207
|
0.017
|
0.454
|
0.416
|
0.038
|
AFFO per Unit -
diluted (5)
|
0.221
|
0.205
|
0.016
|
0.449
|
0.412
|
0.037
|
|
|
|
|
|
|
|
Ratios
(%)
|
|
|
|
|
|
|
FFO payout
ratio
|
85.2%
|
90.5%
|
-5.3%
|
84.3%
|
90.1%
|
-5.8%
|
AFFO payout
ratio
|
91.0%
|
98.0%
|
-7.0%
|
89.5%
|
97.6%
|
-8.1%
|
Debt to
GBV
|
41.3%
|
44.4%
|
-3.1%
|
41.3%
|
44.4%
|
-3.1%
|
(1)
|
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 Q2
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 Q2
2021 includes changes in fair value adjustments of $10.4 million
for Class B limited partnership units of Automotive Properties
Limited Partnership ("Class B LP Units"), deferred units ("DUs")
and income deferred units ("IDUs"), $0.4 million for interest rate
swaps and $18.8 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 Q2 2021 was
49,005,099.
|
(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 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 Q2 2021 was 49,685,935.
|
Rental revenue in Q2 2021 increased by 4.1% to $19.6 million, compared to $18.8 million in Q2 2020. The increase in rental
revenue reflects growth from properties acquired subsequent to Q2
2020 and contractual annual rent increases.
The REIT generated total Cash NOI of $16.0 million in Q2 2021, representing an
increase of 8.6% compared to Q2 2020. The increase was primarily
attributable to the properties acquired subsequent to Q2 2020 and
contractual rent increases, partially offset by capital reserve
expenses. Same Property Cash NOI (excluding bad debt expense and
reversal) was $15.3 million in Q2
2021, representing an increase of 1.1% compared to Q2 2020. The
increase was attributable to contractual rent increases.
The REIT recorded net income of $17.9
million in Q2 2021, compared to a net loss of $23.4 million in Q2 2020. The positive variance
was primarily due to higher NOI and fair value adjustments on
investment properties, Class B LP Units and Unit-based
compensation.
FFO in Q2 2021 was $11.8 million,
or $0.236 per Unit (diluted), as
compared to $10.7 million, or
$0.222 per Unit (diluted), in Q2
2020. The increase was primarily due to the impact of the
properties acquired subsequent to Q2 2020, bad debt reversal
related to the tenant receivables and contractual rent increases.
AFFO in Q2 2021 was $11.0 million,
or $0.221 per Unit (diluted), as
compared to $9.9 million, or
$0.205 per Unit (diluted), in Q2
2020. The increase was primarily due to the impact of the
properties acquired subsequent to Q2 2020, bad debt reversal
related to the tenant receivables and contractual rent increases,
partially offset by capital reserve expenses.
Adjusted Cash Flow from Operations1 ("ACFO") for
Q2 2021 increased 60.0% to $12.1
million, compared to $7.6
million in Q2 2020. The increase was primarily due to the
impact of the properties acquired subsequent to Q2 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 Q2 2021, the REIT declared and paid total distributions
of $9.85 million, or $0.201 per Unit, representing an AFFO payout
ratio of 91.0%. The AFFO payout ratio was lower in Q2 2021 compared
to the 98.0% AFFO payout ratio in Q2 2020 primarily due to the bad
debt reversal related to the tenant receivables and contractual
rent increases. The higher AFFO payout ratio in Q2 2020 also
reflects the temporary dilutive effective of the December 2019 equity offering.
Liquidity and Capital Resources
As at June 30, 2021, the REIT had
a Debt to GBV ratio of 41.3% and a strong liquidity position with
$75.0 million of undrawn credit
facilities and seven unencumbered properties with an aggregate
value of approximately $101.4
million.
Units Outstanding
As at June 30, 2021, there were
39,066,154 REIT Units and 9,933,253 Class B LP Units
outstanding.
Outlook
The REIT has collected 100% of its July and August 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.
Since the end of Q2 2021, provincial governments across
Canada have eased COVID-19 related
business restrictions, including those that impact automotive
dealerships, as COVID-19 vaccination rates of Canadians have
increased significantly and case counts have stabilized. As
provincial COVID-19 related restrictions continue to ease, pent-up
consumer demand is expected to support the continued recovery in
Canadian auto sales and service work performed by automotive
dealerships. COVID-19 has also impacted the vehicle supply chain,
resulting in constraints of specific parts, models and brands.
Management believes these supply constraints are temporary and will
not have a material impact on the REIT's tenants. The REIT believes
that the overall fundamentals of the automotive dealership business
remain strong and that the industry is resilient and will continue
to grow as the pandemic continues to stabilize. While the current
outlook regarding the pandemic is more positive than at the end of
Q1 2021, future developments related to the pandemic could result
in additional restrictions being implemented throughout 2021 that
could impact the financial performance and financial position of
the REIT and its tenants in future periods.
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 REIT's 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 financial resources.
Financial Statements
The REIT's unaudited consolidated financial statements and
related Management's Discussion & Analysis ("MD&A") for Q2
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 Thursday, August 12,
2021 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: 434134 #. The replay will be available
until August 19, 2021.
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 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.
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 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 Q2 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