TORONTO, March 7, 2024 /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 2023”) and year ended December 31, 2023 (“2023”).
“We continued to generate strong financial performance with growth in rental revenue, Cash NOI, same property Cash NOI and AFFO per Unit for both the fourth quarter and full year,” said Milton Lamb, CEO of Automotive Properties REIT. “Given the combination of fixed and CPI-linked annual rent increases built into our triple-net leases, our property portfolio is well positioned to continue generating solid returns for unitholders.”
- The REIT generated AFFO per Unit1 of $0.230 (diluted) and paid total cash distributions of $0.201 per Unit (as defined below) in Q4 2023, representing an AFFO payout ratio1 of approximately 87.4%. For the comparable three-month period ended December 31, 2022 (“Q4 2022”), the REIT generated AFFO per Unit of $0.213 (diluted) and paid cash distributions of $0.201 per Unit, representing an AFFO payout ratio of approximately 94.4%.
- The REIT had a Debt to Gross Book Value (“Debt to GBV”)2 ratio of 45.0% as at December 31, 2023, and $57.2 million of undrawn capacity under its revolving credit facilities, $0.3 million of cash on hand, and five unencumbered properties with an aggregate value of approximately $70.6 million.
- The REIT’s valuation of its investment properties decreased nominally in Q4 2023 compared to the prior quarter to reflect current market conditions, resulting in a fair value loss of $0.8 million. The capitalization rate applicable to the REIT’s entire portfolio increased to 6.59% as at December 31, 2023, compared to 6.56% as at September 30, 2023 and 6.42% as at December 31, 2022.
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______________________________ |
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1 AFFO per Unit and AFFO payout ratio are non-IFRS measures and non-IFRS ratios, respectively. See “Non-IFRS Financial Measures” at the end of this news release. |
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2 Debt to GBV is a supplementary financial measure. See “Non-IFRS Financial Measures” at the end of this news release. |
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Three months ended |
12 months ended |
|||||
|
($000s, except per Unit amounts) |
2023 |
2022 |
Change |
2023 |
2022 |
Change |
|
Rental revenue (1) |
$23,291 |
$20,901 |
11.4 % |
$92,484 |
$82,861 |
11.6 % |
|
NOI (2) |
19,741 |
17,629 |
12.0 % |
78,413 |
70,575 |
11.1 % |
|
Cash NOI (2) |
19,317 |
17,263 |
11.9 % |
76,372 |
68,533 |
11.4 % |
|
Same Property Cash NOI (1) (2) |
17,279 |
16,866 |
2.4 % |
67,568 |
65,962 |
2.4 % |
|
Net (Loss) Income (3) |
(15,199) |
13,588 |
N/A |
50,991 |
83,365 |
-38.8 % |
|
FFO (2) |
11,939 |
11,008 |
8.5 % |
48,010 |
46,748 |
2.7 % |
|
AFFO (2) |
11,532 |
10,641 |
8.4 % |
45,930 |
44,707 |
2.7 % |
|
Distributions per Unit |
$0.201 |
$0.201 |
– |
$0.804 |
$0.804 |
– |
|
FFO per Unit – basic (2) (4) |
0.243 |
0.224 |
0.019 |
0.979 |
0.953 |
0.026 |
|
FFO per Unit – diluted (2) (5) |
0.238 |
0.221 |
0.017 |
0.959 |
0.939 |
0.020 |
|
AFFO per Unit – basic (2) (4) |
0.235 |
0.217 |
0.018 |
0.936 |
0.912 |
0.024 |
|
AFFO per Unit – diluted (2) (5) |
0.230 |
0.213 |
0.017 |
0.918 |
0.898 |
0.020 |
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Ratios (%) |
||||||
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FFO payout ratio (2) |
84.5 % |
91.0 % |
6.5 % |
83.8 % |
85.6 % |
1.8 % |
|
AFFO payout ratio (2) |
87.4 % |
94.4 % |
7.0 % |
87.6 % |
89.5 % |
1.9 % |
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Debt to GBV (6) |
45.0 % |
40.0 % |
-5.0 % |
45.0 % |
40.0 % |
-5.0 % |
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(1) |
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. |
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(2) |
NOI, Cash NOI, Same Property Cash NOI, 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 2022, thus removing the impact of acquisitions. |
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(3) |
Net income for Q4 2023 includes changes in fair value adjustments of $3.6 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”), $21.0 million for interest rate swaps and $0.8 million for investment properties. Net income for 2023 includes changes in fair value adjustments of $22.2 million Class B LP Units, DUs, IDUs, PDUs and RDUs, $7.7 million for interest rate swaps and $4.1 million for investment properties. For 2023 net income, please refer to the consolidated financial statements of the REIT and notes thereto. |
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(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 2023 was 49,054,833. |
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(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 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 for Q4 2023 was 50,082,627. |
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(6) |
Debt to GBV is a supplementary financial measure. See “Non-IFRS Financial Measures” at the end of this news release. |
Rental revenue was $23.3 million in Q4 2023 and $92.5 million in 2023, representing increases of 11.4% and 11.6%, respectively, from Q4 2022 and the year ended December 31, 2022 (“2022”). Increased rental revenue in Q4 2023 and 2023 reflects growth from properties acquired subsequent to Q4 2022 and during and subsequent to 2022, respectively, and contractual annual rent increases.
The REIT generated total Cash NOI of $19.3 million in Q4 2023 and $76.4 million in 2023, representing increases of 11.9% and 11.4%, respectively, from Q4 2022 and 2022. The increases were primarily attributable to the properties acquired subsequent to Q4 2022 and during and subsequent to 2022, respectively, as well as contractual rent increases. Same Property Cash NOI was $17.3 million in Q4 2023 and $67.6 million in 2023, representing increases of 2.4% compared to each of the corresponding prior-year periods. The increases were primarily attributable to contractual rent increases.
The REIT recorded a net loss of $15.2 million in Q4 2023, compared to net income of $13.6 million in Q4 2022. Net income was $51.0 million in 2023, compared to $83.4 million in 2022. The variances were primarily due to changes in non-cash fair value adjustments for interest rate swaps, investment properties, and Class B LP Units and Unit-based compensation, partially offset by higher NOI. The impact of the movement in the traded value of the REIT Units resulted in a decrease in fair value adjustment for Class B LP Units and Unit-based compensation in Q4 2023 of $3.6 million (2023 – increase of $22.2 million), compared to an increase of $2.8 million in Q4 2022 (2022 – increase of $20.2 million).
FFO was $11.9 million, or $0.238 per unit (diluted), in Q4 2023 and $48.0 million, or $0.959 per unit (diluted), in 2023. That compares to FFO of $11.0 million, or $0.221 per unit (diluted), in Q4 2022 and $46.7 million, or $0.939 per unit (diluted), in 2022. The increases in FFO in Q4 2023 and 2023 were primarily attributable to the impact of the properties acquired subsequent to Q4 2022 and during and subsequent to 2022, respectively, and contractual rent increases.
AFFO was $11.5 million, or $0.230 per unit (diluted), in Q4 2023 and $45.9 million, or $0.918 per unit (diluted), in 2023. That compares to AFFO of $10.6 million, or $0.213 per unit (diluted), in Q4 2022 and $44.7 million, or $0.898 per unit (diluted), in 2022. The increases in AFFO in Q4 2023 and 2023 were primarily attributable to the impact of the properties acquired subsequent to Q4 2022 and during and subsequent to 2022, respectively, and contractual rent increases.
Adjusted Cash Flow from Operations (“ACFO”)3 for 2023 was $49.3 million, an increase of 6.7% compared to $46.2 million in 2022. The increase was primarily attributable to the properties acquired during and subsequent to 2022 and contractual rent increases.
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3 ACFO is a non-IFRS measure. See “Non-IFRS Financial Measures” at the end of this news release. |
The REIT is currently paying monthly cash distributions of $0.067 per Unit, representing $0.804 per Unit on an annualized basis. For Q4 2023, the REIT declared and paid total distributions of $9.86 million, or $0.201 per Unit, representing an AFFO payout ratio of 87.4%. The AFFO payout ratio was lower in Q4 2023 compared to the 94.4% AFFO payout ratio in Q4 2022 primarily due to the positive impact of acquisitions completed subsequent to Q4 2022 and contractual rent increases, partially offset by increased interest expense, short and long-term performance awards, and the vesting of long-term Unit-based compensation.
For 2023, the REIT declared and paid total distributions of $39.44 million, or $0.804 per Unit, representing an AFFO payout ratio of 87.6%. The AFFO payout ratio was lower in 2023 compared to the 89.5% AFFO payout ratio in 2022 primarily due to the impact of the properties acquired during and subsequent to 2022 and contractual rent increases.
As at December 31, 2023, the REIT had a Debt to GBV ratio of 45.0%, $57.2 million of undrawn capacity under its revolving credit facilities, $0.3 million of cash on hand, and five unencumbered properties with an aggregate value of approximately $70.6 million. As of the date of this news release, the REIT has approximately $63.2 million of undrawn capacity under its revolving credit facilities and five unencumbered properties with an aggregate value of approximately $70.6 million.
As at December 31, 2023, 95% of the REIT’s debt was fixed with a weighted average interest rate of 4.25%, a weighted average interest rate swap term and mortgages remaining of 4.8 years, and a weighted average term to maturity of debt of 2.9 years.
As at December 31, 2023, there were 39,727,346 REIT Units and 9,327,487 Class B LP Units outstanding.
The REIT is subject to risks associated with inflation, interest rates and availability of capital. The REIT anticipates that elevated interest rates and inflation may have an adverse effect on consumer demand and the overall economy. The fluctuation in the interest rate environment, inflation and credit environment impacts rental growth and capitalization rates overall in the real estate industry which, in turn, could provide attractive buying opportunities for the REIT.
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.
The REIT’s audited consolidated financial statements and related Management’s Discussion & Analysis (“MD&A”) for the year ended December 31, 2023 are available on the REIT’s website at www.automotivepropertiesreit.ca and on SEDAR+ at www.sedarplus.ca.
Management of the REIT will host a conference call for analysts and investors on Friday, March 8, 2024 at 9:00 a.m. (ET). To join the conference call without operator assistance, participants can register and enter their phone number at https://emportal.ink/4bbXrUj to receive an instant automated call back. Alternatively, they can dial (416) 764-8688 or (888) 390-0546 to reach a live operator who will join them into the call. 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: 647702 #. The replay will be available until March 15, 2024.
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 77 income-producing commercial properties, representing approximately 2.9 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 REIT’s expectations with respect to inflation and interest rates, including the impact of each of the foregoing on the REIT and its tenants; and the expected timing of the closing of the Brossard Property acquisition. 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, 2023 and in the REIT’s annual information form dated March 7, 2024, which are available on SEDAR+ (www.sedarplus.ca) 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.
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, a supplementary financial measure, 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-IFRS measures and supplementary financial measures, 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, 2023 which is incorporated by reference herein and is available on the REIT’s website at www.automotivepropertiesreit.ca and on SEDAR+ at www.sedarplus.ca.
Reconciliation of NOI, Cash NOI, FFO and AFFO to Net (Loss) Income and Comprehensive Income
|
Three Months Ended |
12 Months Ended |
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|
($000s, except per Unit amounts) |
2023 |
2022 |
Variance |
2023 |
2022 |
Variance |
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|
Calculation of NOI |
||||||||
|
Property revenue |
$23,291 |
$20,901 |
$2,390 |
$92,484 |
$82,861 |
$9,623 |
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|
Property costs |
(3550) |
(3,272) |
(278) |
(14,071) |
(12,286) |
(1,785) |
||
|
NOI (including straight–line adjustments) |
$19,741 |
$17,629 |
$2,112 |
$78,413 |
$70,575 |
$7,838 |
||
|
Adjustments: |
||||||||
|
Land lease payments |
(115) |
(86) |
(29) |
(345) |
(345) |
– |
||
|
Straight–line adjustment |
(309) |
(280) |
(29) |
(1,696) |
(1,697) |
1 |
||
|
Cash NOI |
$19,317 |
$17,263 |
$2,054 |
$76,372 |
$68,533 |
$7,839 |
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Reconciliation of net income to FFO and AFFO |
||||||||
|
Net (loss) income and comprehensive income |
($15,199) |
$13,588 |
($28,787) |
$50,991 |
$83,365 |
$(32,374) |
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|
Adjustments: |
||||||||
|
Change in fair value — Interest rate swaps |
20,972 |
180 |
20,792 |
7,739 |
(25,999) |
33,738 |
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|
Distributions on Class B LP Units |
1,875 |
1,875 |
– |
7,499 |
7,621 |
(122) |
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|
Change in fair value – Class B LP Units and Unit-based |
3,565 |
(2,804) |
6,369 |
(22,163) |
(20,215) |
(1,948) |
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|
Change in fair value — investment properties |
768 |
(1,791) |
2,559 |
4,113 |
2,285 |
1,828 |
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|
ROU asset net balance of depreciation/interest and lease |
(42) |
(40) |
(2) |
(169) |
(309) |
140 |
||
|
FFO |
$11,939 |
$11,008 |
$931 |
$48,010 |
$46,748 |
$1,262 |
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|
Adjustments: |
||||||||
|
Straight–line adjustment |
(309) |
(280) |
(29) |
(1,696) |
(1,697) |
1 |
||
|
Capital expenditure reserve |
(98) |
(87) |
(11) |
(384) |
(344) |
(40) |
||
|
AFFO |
$11,532 |
$10,641 |
$891 |
$45,930 |
$44,707 |
$1,223 |
||
|
Number of Units outstanding (including Class B LP Units) |
49,054,833 |
49,054,833 |
– |
49,054,833 |
49,054,833 |
– |
||
|
Weighted average Units Outstanding — basic |
49,054,833 |
49,054,833 |
– |
49,054,833 |
49,035,475 |
19,358 |
||
|
Weighted average Units Outstanding — diluted |
50,082,627 |
49,847,669 |
234,958 |
50,049,275 |
49,802,602 |
246,673 |
||
|
FFO per Unit – basic(2) |
$0.243 |
$0.224 |
$0.019 |
$0.979 |
$0.953 |
$0.026 |
||
|
FFO per Unit – diluted(3) |
$0.238 |
$0.221 |
$0.017 |
$0.959 |
$0.939 |
$0.020 |
||
|
AFFO per Unit – basic(2) |
$0.235 |
$0.217 |
$0.018 |
$0.936 |
$0.912 |
$0.024 |
||
|
AFFO per Unit – diluted(3) |
$0.230 |
$0.213 |
$0.017 |
$0.918 |
$0.898 |
$0.020 |
||
|
Distributions per Unit |
$0.201 |
$0.201 |
— |
$0.804 |
$0.804 |
— |
||
|
FFO payout ratio |
84.5 % |
91.0 % |
6.5 % |
83.8 % |
85.6 % |
1.8 % |
||
|
AFFO payout ratio |
87.4 % |
94.4 % |
7.0 % |
87.6 % |
89.5 % |
1.9 % |
||
Same Property Cash Net Operating Income
|
Three Months Ended |
12 Months Ended December 31, |
|||||||
|
($000s) |
2023 |
2022 |
Variance |
2023 |
2022 |
Variance |
||
|
Same property base rental revenue |
$17,365 |
$16,958 |
$407 |
$67,913 |
$66,307 |
$1,606 |
||
|
Land lease payments |
(86) |
(86) |
— |
(345) |
(345) |
— |
||
|
Same Property Cash NOI |
$17,279 |
$16,866 |
$407 |
$67,568 |
$65,962 |
$1,606 |
||
Reconciliation of Cash Flow from Operating Activities to ACFO
|
12 Months Ended |
|||
|
($000s) |
2023 |
2022 |
Variance |
|
Cash flow from operating activities |
$74,266 |
$64,547 |
$9,719 |
|
Change in non-cash working capital |
129 |
618 |
(489) |
|
Interest paid |
(23,569) |
(16,919) |
(6,650) |
|
Amortization of financing fees |
(932) |
(784) |
(148) |
|
Amortization of indemnification fees |
(262) |
(696) |
434 |
|
Net interest expense and other financing charges |
25 |
(254) |
279 |
|
Capital expenditure reserve |
(384) |
(344) |
(40) |
|
ACFO |
$49,273 |
$46,168 |
$3,105 |
|
ACFO payout ratio |
80.04 % |
85.4 % |
(5.35 %) |
SOURCE Automotive Properties Real Estate Investment Trust
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