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 2018”) and year ended December 31, 2018 (“2018”).

Q4 2018 Highlights

• Property rental revenue was $13.7 million, an increase of 26.6% from the fourth quarter of 2017 (“Q4 2017”);
• Net Operating Income¹ (“NOI”) was $11.5 million, an increase of 25.1% from Q4 2017;
• Total and Same Property Cash NOI¹ were $10.8 million and $8.4 million, respectively, representing increases of 27.5% and 1.3%, respectively, from Q4 2017;
• Net Income was $13.7 million, compared to $6.6 million in Q4 2017;
• Funds from Operations¹ (“FFO”) increased 16.8% to $7.3 million, from $6.2 million in Q4 2017. FFO¹ per unit of the REIT (“Unit”) was $0.234 (diluted), compared to $0.237 (diluted) in Q4 2017;
• Adjusted Funds from Operations¹ (“AFFO”) increased 20.5% to $6.8 million, from $5.6 million in Q4 2017. AFFO¹ per Unit was $0.219 (diluted), up from $0.215 (diluted) in Q4 2017;
• Acquisition of the Brimell Toyota dealership property in Toronto from a third-party vendor for a purchase price of $26.0 million;
• Acquisition of a portfolio of properties located in Ottawa and Kingston, Ontario from a privately-held automotive dealership group for a purchase price of $101.4 million; and
• The REIT paid monthly cash distributions of $0.067 per Unit, resulting in total distributions paid of approximately $6.0 million, representing an AFFO payout ratio¹ of approximately 91.8%.

2018 Highlights

• Property rental revenue was $48.3 million, an increase of 15.4% from the year ended December 31, 2017 (“2017”);
• NOI¹ increased 14.9% to $40.7 million compared to the prior year;
• FFO¹ increased 8.5% to $27.2 million, from $25.1 million in 2017. FFO¹ per Unit was $0.987 (diluted), compared to $0.974 (diluted) in 2017;
• AFFO¹ increased 10.5% to $25.0 million, from $22.7 million in 2017. AFFO¹ per Unit was $0.906 (diluted), up from $0.879 (diluted) in 2017;
• The REIT paid distributions totaling $0.804 per Unit, resulting in total distributions paid of approximately $21.9 million, representing an AFFO payout ratio¹ of approximately 88.7%.
• The REIT completed approximately $209 million in acquisitions and ended the year with 54 income-producing commercial properties comprising 2.0 million square feet of gross leasable area, compared with 39 properties comprising 1.4 million square feet at year-end 2017; and
• The REIT continued to diversify its tenant base, adding three new dealership groups as tenants, resulting in the Dilawri Group representing approximately 64% of the REIT’s total GLA at year-end, compared to approximately 88% as at December 31, 2017.

“We continued to deliver on our growth and diversification strategy in 2018. We completed approximately $127 million in acquisitions in the fourth quarter and a total of approximately $209 million for the year. We added three new dealership group tenants to our portfolio and generated strong growth in revenue, NOI, FFO and AFFO,” said Milton Lamb, CEO of Automotive Properties REIT. “Through these acquisitions, we expanded our tenant base and market presence and increased our automotive brand representation. Looking ahead, we are well positioned to continue driving value for our unitholders.”

¹ NOI, Cash NOI, Same Property Cash NOI, FFO, AFFO, Debt to GBV, FFO Payout Ratio, AFFO Payout Ratio, 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 Q4 2017 and 2017, thus removing the impact of acquisitions.

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Financial Results Summary

	Three months ended  December 31,			Twelve months ended  December 31,
	2018	2017 Advertisement	Change	2018	2017	Change
($000s, except per Unit amounts) Advertisement
Rental revenue (1)	$13,741	$10,856	26.6%	$48,254 Advertisement	$41,803	15.4%
NOI	11,493	9,188 Advertisement	25.1%	40,745	35,452	14.9%
Cash NOI Advertisement	10,805	8,475	27.5%	37,835	32,522 Advertisement	16.3%
Same Property Cash NOI (1)	8,436	8,326	1.3% Advertisement	30,743	30,326	1.4%
Net Income (2)	13,666 Advertisement	6,594	107.2%	39,150	26,249	49.1% Advertisement
FFO	7,274	6,228	16.8%	27,247 Advertisement	25,110	8.5%
AFFO	6,796	5,642 Advertisement	20.5%	25,028	22,657	10.5%
Distributions per Unit Advertisement	$0.201	$0.201	–	$0.804	$0.804 Advertisement	–
FFO per Unit – basic (3)	0.235	0.238	-0.003 Advertisement	0.991	0.976	0.015
FFO per Unit – diluted (4)	0.234 Advertisement	0.237	-0.003	0.987	0.974	0.013 Advertisement
AFFO per Unit – basic (3)	0.220	0.216	0.004	0.911 Advertisement	0.881	0.030
AFFO per Unit – diluted (4)	0.219	0.215 Advertisement	0.004	0.906	0.879	0.027
Ratios (%) Advertisement
FFO payout ratio	85.9%	84.8%	1.1%	81.5% Advertisement	82.5%	-1.0%
AFFO payout ratio	91.8%	93.5% Advertisement	-1.7%	88.7%	91.5%	-2.8%
Debt to GBV Advertisement	54.7%	48.5%	6.2%	54.7%	48.5% Advertisement	6.2%

(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.
(2)	The increase in Net Income for Q4 2018 includes 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. Advertisement
(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 Q4 2018 and 2018 was 30,898,283 and 27,483,193 respectively.
(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 Q4 2018 and 2018 was 31,057,609 and 27,617,646 respectively.

Rental revenue was $13.7 million in Q4 2018 and $48.3 million in 2018, representing increases of 26.6% and 15.4%, respectively, from Q4 2017 and 2017. Increased rental revenue in both periods reflects growth from properties acquired subsequent to 2017 and contractual annual rent increases across a significant portion of the REIT’s portfolio.

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Property costs were $2.2 million in Q4 2018 and $7.5 million in 2018, compared to $1.7 million and $6.4 million, respectively, in Q4 2017 and 2017. The increases in property costs in both periods were attributable to the properties acquired subsequent to 2017. Property costs as a percentage of revenue increased from 15.4% in Q4 2017 to 16.4% in Q4 2018, and from 15.2% in 2017 to 15.6% in 2018. The increases in both periods were primarily due to higher realty tax payments in respect of the properties acquired subsequent to 2017. These costs are recoverable from the applicable tenants pursuant to the terms of the applicable triple-net leases.

Total and Same Property Cash NOI totaled $10.8 million and $8.4 million, respectively, representing increases of 27.5% and 1.3%, respectively, as compared to Q4 2017. For 2018, Total and Same Property Cash NOI were $37.8 million and $30.7 million, respectively, representing increases of 16.3% and 1.4%, respectively, as compared to 2017. The quarterly and annual increases in Cash NOI were primarily attributable to the properties acquired subsequent to 2017. The growth in quarterly and annual Same Property Cash NOI reflects annual contractual rent increases across a significant portion of the REIT’s portfolio.

Net Income increased to $13.7 million in Q4 2018 and $39.2 million in 2018, compared to $6.6 million in Q4 2017 and $26.2 million in 2017. The quarterly and annual increases were primarily due to the growth in NOI and the change in fair value adjustments for Class B LP Units, partially offset by the change in the fair value adjustments for interest rate swaps and investment properties, higher interest expense and other financing charges, and general and administrative expenses.

FFO was $7.3 million in Q4 2018 and $27.2 million in 2018, representing increases of 16.8% and 8.5%, respectively, from Q4 2017 and 2017. The increases in both periods were primarily due to the impact of the properties acquired subsequent to 2017. On a per Unit basis, Q4 2018 FFO was $0.234 (diluted), compared to $0.237 (diluted) in Q4 2017, while 2018 FFO was $0.987 (diluted), compared to $0.974 (diluted) in 2017. The per Unit decline in Q4 2018 was primarily attributable to the dilutive effect of the REIT’s equity offering in October 2018. The per Unit increase in 2018 was primarily due to the impact of the properties acquired subsequent to 2017.

AFFO was $6.8 million in Q4 2018 and $25.0 million in 2018, representing increases of 20.5% and 10.5%, respectively, from the comparable prior-year periods. On a per Unit basis, Q4 2018 AFFO was $0.219 (diluted), compared to $0.215(diluted) in Q4 2017, while 2018 AFFO was $0.906 (diluted), compared to $0.879 (diluted) in 2017. The increases in AFFO and AFFO per Unit in both periods were primarily attributable to the impact of the properties acquired subsequent to 2017.

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Adjusted Cash Flow from Operations¹ (“ACFO”) for Q4 2018 and 2018 increased to $6.6 million and $25.7 million, respectively, compared to $5.9 million and $22.6 million, respectively, in Q4 2017 and 2017. The quarterly and annual increases in ACFO were primarily due to the impact of the properties acquired subsequent to 2017. The ACFO payout ratio was 97.4% in Q4 2018 and 86.8% in 2018, compared to 89.4% and 91.6% in Q4 2017 and 2017, respectively. The higher ACFO payout ratio for Q4 2018 reflects the REIT’s equity offering in October 2018. The lower ACFO payout ratio for 2018 was attributable to the properties acquired subsequent to 2017.

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 Q4 2018, the REIT paid total distributions of $6.0 million to unitholders, or $0.201 per Unit, representing an AFFO payout ratio of 91.8%. For 2018, the REIT paid total distributions of $21.9 million to unitholders, or $0.804 per Unit, representing an AFFO payout ratio of 88.7%. The lower AFFO payout ratios for Q4 2018 and 2018 were primarily attributable to the impact of the properties acquired subsequent to 2017.

Units Outstanding
As at December 31, 2018, there were 21,796,552 Units and 9,933,253 Class B LP Units outstanding.

Financial Statements 
The REIT’s audited consolidated financial statements and related Management’s Discussion & Analysis (“MD&A”) for the year ended December 31, 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 Friday, March 22, 2019 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.

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To access a replay of the conference call, dial (416) 764-8677 or (888) 390-0541, passcode: 133034. The replay will be available until March 29, 2019.

SOURCE Automotive Properties Real Estate Investment Trust