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Automotive Properties Real Estate Investment Trust (TSX: APR.UN) (the “REIT”) announced today that it has entered into agreements to purchase two automotive dealership properties in Winnipeg, Manitoba from AutoCanada Inc. (TSX: ACQ) (“AutoCanada”) for a total purchase price of approximately $23.95 million(the “Transaction”), excluding closing costs.

The two dealership properties included in the Transaction are the McNaught Cadillac Buick GMC automotive dealership property (the “McNaught GM Property”) and the St. James Volkswagen automotive dealership property (the “St. James VW Property”). The additions of the McNaught GM Property and the St. James VW Property are expected to be accretive to the REIT’s run-rate Adjusted Funds from Operations (“AFFO”)¹ per unit on a leverage-neutral basis.

“We are pleased to enter our second property acquisition transaction with AutoCanada, one of Canada’s largest automotive retailers. We look forward to expanding our portfolio into the metropolitan Winnipeg market with these high-quality assets and further diversifying our tenant base,” said Milton Lamb, President and CEO of the REIT.

The McNaught GM Property includes a 56,641 square foot full-service General Motors dealership facility that was built in 2003, with extensive renovations completed in 2015. The McNaught GM Property occupies approximately 5.6 acres of land within the Waverley Automall in southwestern Winnipeg, with convenient access to major highways in an area of substantial commercial development. Upon closing of the Transaction, an affiliate of AutoCanada will be the operating tenant of the McNaught GM Property and will enter into a 19-year, triple-net lease with the REIT. The lease will include a contractual annual rent increase after the first year of the lease term, based on the Manitoba Consumer Price Index (“Manitoba CPI”).

The REIT has agreed to fund capital development expenses for the McNaught GM Property up to a maximum of $3.0 million, expected to be undertaken by the end of 2021. In return for the development funds, the tenant will pay an incremental monthly rental amount based on the amount of development expenses incurred calculated at not less than the capitalization rate of the property purchase price, for the duration of the lease term, plus annual Manitoba CPI escalations thereafter.

The St. James VW Property includes a 39,494 square foot, full-service Volkswagen dealership facility built in 2004 / 2005. The St. James VW Property occupies approximately 3.9 acres of land located at 670 Century Street, in close proximity to the Winnipeg International Airport and CF Polo Park, Manitoba’s largest shopping centre, with convenient access to the TransCanada Highway. Upon closing of the Transaction, an affiliate of AutoCanada will be the operating tenant of the St. James VW Property and will enter into a 19-year, triple-net lease with the REIT. The lease will include a contractual annual rent increase after the first year of the lease term, based on the Manitoba CPI.

The REIT has agreed to fund capital development expenses for the St. James VW Property up to a maximum of $3.5 million, expected to be undertaken by early 2020. In return for the development funds, the tenant will pay an incremental monthly rental amount based on the amount of development expenses incurred calculated at the capitalization rate of the property purchase price, for the duration of the lease term, plus annual Manitoba CPI escalations thereafter.

AutoCanada Holdings Inc. will provide an indemnity to the REIT in respect of the lease obligations for both the McNaught GM Property and the St. James VW Property. The REIT will finance the Transaction through draws on its revolving credit facilities and through the expansion of one of its credit facilities, which the REIT will facilitate by using the McNaught GM Property and the St. James VW Property as security. The Transaction is expected to close later this month, subject to customary closing conditions. The REIT may close on one of the properties in advance of closing on the second property if closing conditions are satisfied on one property before conditions are satisfied on the other property.

 

SOURCE Automotive Properties Real Estate Investment Trust