Subject: ERN
Automotive Properties REIT Reports Financial Results for Third Quarter of 2018
TORONTO, Nov. 13, 2018 /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 2018") and nine-month ("YTD 2018") periods ended September 30, 2018.
Q3 2018 Highlights
- Property rental revenue was $11.8 million, an increase of 11.7% from the third quarter of 2017 ("Q3 2017");
- Net Operating Income1 ("NOI") was $10.0 million, an increase of 10.8% from Q3 2017;
- Total and Same Property Cash NOI1 were $9.3 million and $8.4 million, respectively, representing increases of 11.9% and 1.4%, respectively, from Q3 2017;
- Net Income was $5.7 million, compared to $12.7 million in Q3 2017;
- Funds from Operations1 ("FFO") increased 4.1% to $6.7 million, from $6.4 million in Q3 2017. FFO per unit of the REIT ("Unit") was $0.249 (diluted), up from $0.244 (diluted) in Q3 2017;
- Adjusted Funds from Operations1 ("AFFO") increased 5.3% to $6.1 million, from $5.8 million in Q3 2017. AFFO per Unit was $0.228 (diluted), up from $0.222 (diluted) in Q3 2017;
- The REIT acquired the BMW Laval and Sherwood Park Volkswagen dealership properties from AutoCanada Inc. for a purchase price of $55.5 million;
- The REIT declared monthly cash distributions of $0.067 per Unit, resulting in total distributions declared and paid of approximately $5.4 million, representing an AFFO payout ratio1 of approximately 88.2%; and
- The REIT's debt to gross book value1 ("Debt to GBV") was 53.1% as at September 30, 2018, compared to 48.5% as at December 31, 2017.
Subsequent Event
- On October 16, 2018, the REIT closed a bought deal equity offering of 5,100,000 Units at a price of $10.80 per Unit, resulting in gross proceeds of approximately $55.1 million.
"Our property acquisition program, combined with our contractual rent increases, continues to drive growth in revenue, NOI, FFO and AFFO. Through our acquisitions we have continued to diversify our tenant base while continuing our focus on metropolitan markets," said Milton Lamb, CEO of Automotive Properties REIT. "With our acquisition of the BMW Laval and Sherwood Park Volkswagen properties from AutoCanada Inc. in the quarter, our portfolio now includes four of the top automotive dealership groups in Canada. Looking ahead, with the recent completion of our $55.1 million equity offering, we will continue to strengthen our portfolio, grow cash flow and drive long-term value for our unitholders by capitalizing on accretive consolidation opportunities."
1 NOI, Cash NOI, Same Property Cash NOI, FFO, AFFO, Debt to GBV and ACFO (as defined below) 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 Q3 2017, thus removing the impact of acquisitions. |
Financial Results Summary
Three months ended | Nine months ended | |||||
September 30, | September 30, | |||||
($000s, except per Unit amounts) | 2018 | 2017 | Change | 2018 | 2017 | Change |
Rental revenue (1) | $11,834 | $10,599 | 11.7% | $34,513 | $30,947 | 11.5% |
NOI | 9,993 | 9,017 | 10.8% | 29,252 | 26,264 | 11.4% |
Cash NOI | 9,278 | 8,293 | 11.9% | 27,030 | 24,047 | 12.4% |
Same Property Cash NOI (1) | 8,410 | 8,294 | 1.4% | 23,006 | 22,690 | 1.4% |
Net Income (2) | 5,675 | 12,729 | -55.4% | 25,484 | 19,655 | 29.7% |
FFO | 6,666 | 6,405 | 4.1% | 19,973 | 18,882 | 5.8% |
AFFO | 6,117 | 5,811 | 5.3% | 18,232 | 17,015 | 7.2% |
Distributions per Unit | $0.201 | $0.201 | - | $0.603 | $0.603 | - |
FFO per Unit ? basic (3) | 0.250 | 0.245 | 0.005 | 0.758 | 0.738 | 0.020 |
FFO per Unit - diluted (4) | 0.249 | 0.244 | 0.005 | 0.755 | 0.737 | 0.018 |
AFFO per Unit - basic (3) | 0.230 | 0.222 | 0.008 | 0.692 | 0.665 | 0.027 |
AFFO per Unit - diluted (4) | 0.228 | 0.222 | 0.006 | 0.689 | 0.664 | 0.025 |
Ratios (%) | ||||||
FFO payout ratio | 80.7% | 82.4% | -1.7% | 79.9% | 81.8% | -1.9% |
AFFO payout ratio | 88.2% | 90.5% | -2.3% | 87.5% | 90.8% | -3.3% |
Debt to GBV | 53.1% | 45.8% | 7.3% | 53.1% | 45.8% | 7.3% |
(1) | 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. |
(2) | The decrease in net income for Q3 2018 is primarily due to changes in the fair value adjustments for interest rate swaps, the Class B limited partnership units of Automotive Properties Limited Partnership ("Class B LP Units"), and investment properties. Please refer to the consolidated financial statements of the REIT and notes thereto. |
(3) | 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 LP Units. The total weighted average number of Units outstanding (including Class B LP Units) - basic for Q3 2018 was 26,629,805. |
(4) | 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 Q3 2018 was 26,780,847. |
Rental revenue increased 11.7% to $11.8 million in Q3 2018, as compared to $10.6 million in Q3 2017. The increase in rental revenue reflects growth from properties acquired subsequent to Q3 2017 and contractual annual rent increases across a significant portion of the portfolio.
Property costs were $1.8 million in Q3 2018, as compared to $1.6 million in Q3 2017. The increase is attributable to the properties acquired subsequent to Q3 2017. Property costs as a percentage of revenue were 15.6% in Q3 2018 as compared to 14.9% in Q3 2017, primarily due to a timing difference in realty tax payments. 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 Q3 2018 totaled $9.3 million and $8.4 million, respectively, representing increases of 11.9% and 1.4%, respectively, as compared to Q3 2017. The increase in Cash NOI was attributable to the properties acquired subsequent to Q3 2017 and annual contractual rent increases across a significant portion of the portfolio. Growth in Same Property Cash NOI reflects contractual rent increases.
Net Income was $5.7 million in Q3 2018, as compared to $12.7 million in Q3 2017. The decrease was primarily attributable to the change in the fair value adjustment for Class B LP Units, partially offset by the growth in NOI, changes in the fair value adjustment for interest rate swaps and investment properties.
FFO in Q3 2018 was $6.7 million, or $0.249 per Unit (diluted), as compared to $6.4 million, or $0.244 per Unit diluted, in Q3 2017. The increase was primarily due to the impact of the properties acquired subsequent to Q3 2017.
AFFO in Q3 2018 was $6.1 million, or $0.228 per Unit (diluted), as compared to $5.8 million, or $0.222 per Unit diluted, in Q3 2017. The increase was primarily due to the impact of the properties acquired subsequent to Q3 2017.
Adjusted Cash Flow from Operations1 ("ACFO") in Q3 2018 was $7.5 million, representing an increase of 32.2% from $5.7 million in Q3 2017. The ACFO payout ratio was 71.5% in Q3 2018, compared to 92.7% in Q3 2017. The lower ACFO payout ratio for Q3 2018 reflects the adjustment for the timing of non-cash working capital related to non-sustainable cash flow activities, which was primarily a result of acquisition costs related to the purchase of the BMW Laval and Sherwood Park Volkswagen dealership properties.
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 $5.4 million to unitholders in Q3 2018, or $0.201 per Unit, representing an AFFO payout ratio of 88.2%. The lower AFFO payout ratio for Q3 2018 relative to Q3 2017 was primarily attributable to the impact of the properties acquired subsequent to Q3 2017.
Units Outstanding
As at September 30, 2018, there were 16,696,552 Units and 9,933,253 Class B LP Units outstanding (21,796,552 Units following completion of the Equity offering on October 16, 2018).
Financial Statements
The REIT's unaudited condensed consolidated interim financial statements and related Management's Discussion & Analysis ("MD&A") for Q3 2018 / YTD 2018 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, November 14, 2018 at 10:00 a.m. (ET). The dial-in numbers for the conference call are (416) 764-8609 or (888) 390-0605. 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: 120257. The replay will be available November 21, 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. The REIT's portfolio currently consists of 42 income-producing commercial properties, representing approximately 1.7 million square feet of gross leasable area, and one development property, 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 Q3 2018 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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