Automotive Properties REIT Annual & Special Meeting June 8, - - PowerPoint PPT Presentation

Automotive Properties REIT

Annual & Special Meeting

June 8, 2016

Milton Lamb

President & Chief Executive Officer

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AUTOMOTIVE PROPERTIES REIT ANNUAL & SPECIAL MEETING

Kap Dilawri

Chair of the Board

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AUTOMOTIVE PROPERTIES REIT ANNUAL & SPECIAL MEETING

AGENDA

• Appointment of Secretary / Scrutineers
• Notice of Meeting / Quorum
• Presentation of Financial Statements / Auditors Report
• Election of the Board of Trustees
• Appointment of the Auditors
• Equity Incentive Plan

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Milton Lamb

President & Chief Executive Officer

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AUTOMOTIVE PROPERTIES REIT ANNUAL & SPECIAL MEETING

DISCLAIMER

FORWARD-LOOKING STATEMENTS Certain statements contained in this presentation constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to the REIT’s future outlook and anticipated events or results and may include statements regarding the financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the REIT. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the REIT or the real estate or automotive dealership industry are forward-looking

• statements. The REIT has based these forward-looking statements on factors and assumptions about future events and financial trends that it believes may

affect its financial condition, results of operations, business strategy and financial needs, including that the Canadian economy will remain stable over the next 12 months, that inflation will remain relatively low, that interest rates will remain stable, that tax laws remain unchanged, that conditions within the automotive dealership real estate industry and the automotive dealership industry generally, including competition for acquisitions, will be consistent with the current climate, that the Canadian capital markets will provide the REIT with access to equity and/or debt at reasonable rates when required and that the Dilawri Organization will continue its involvement with the REIT. Although the forward-looking statements contained in this presentation are based upon assumptions that management believes are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond the REIT’s control, that may cause the REIT’s or the industry’s actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. The forward-looking statements made in this presentation relate only to events or information as of the date of this presentation. Except as required by law, the REIT and Dilawri undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. Please refer to “Forward-Looking Statements” in the REIT’s regulatory filings. NON-IFRS MEASURES This presentation makes reference to certain non-IFRS measures. Funds from operations (‘‘FFO’’), adjusted funds from operations (‘‘AFFO’’), net operating income (‘‘NOI’’) and cash net operating income (‘‘Cash NOI’’) are key measures of performance used by real estate businesses. However, such measures are not defined by IFRS and do not have standardized meanings prescribed by IFRS. The REIT believes that AFFO is an important measure of economic performance and is indicative of the REIT’s ability to pay distributions, while FFO, NOI and Cash NOI are important measures of operating performance and the performance of real estate properties. The IFRS measurement most directly comparable to FFO, AFFO, NOI and Cash NOI is net income. Please refer to “Non-IFRS Measures” in the REIT’s regulatory filings.

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AUTOMOTIVE PROPERTIES REIT IPO

• $81.2 million IPO completed on July 22, 2015 (TSX: APR.UN)
• Canada’s only public vehicle focused on consolidating automotive dealership real estate properties
• Globe and Mail: “Successful REIT IPO gives sector much-needed confidence boost”
• IPO net proceeds used to partially fund the $357.7 million acquisition of the 26 Initial Properties

from the Dilawri Group

• Dilawri Group retained a 55% equity ownership position in the REIT

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• Modern, best-in-class dealerships, average age ~8 years
• 26 properties, 42 rental buildings on ~88 acres, strategically located in high-traffic commercial

corridors

• 958,000 square feet of GLA
• Long-term, triple-net leases with fixed rent escalators provides cash flow stability

INITIAL PROPERTIES

GVA Calgary Regina Edmonton GTA Montréal

8 GTA

8 Properties

REGINA

8 Properties

CALGARY

4 Properties

GVA

6 Properties

COMPELLING INDUSTRY FUNDAMENTALS

Canadian Automotive Retail Industry Sales ($ billions)

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REPRESENTING 6.5% OF 2015 GDP, THE AUTOMOTIVE RETAIL SALES INDUSTRY IS CANADA’S LARGEST RETAIL SEGMENT

53 56 64 65 70 74 78 83 83 83 87 92 96 94 88 96 100 105 112 120 128

Company Dealerships % of Total Dealership Locations Dilawri Group(1)(2) 58 1.7% QC, ON, SK, AB, BC AutoCanada(1) 53 1.5% NS, NB, QC, ON, MB, SK, AB, BC Go Auto(1)(2)(3) 37 1.1% AB, BC, NWT Zanchin Automotive Group(1) 28 0.8% ON Gabriel-Prestige-President Group(1) 27 0.8% QC Humberview Group(1) 27 0.8% ON O’Regan Group(1) 26 0.7% NS Pattison Auto Group(1) 25 0.7% MB, AB, BC Murray Auto Group(1) 25 0.7% NS, MB, SK, AB, BC Wheaton Auto Group(1) 16 0.5% SK, AB, BC Top 10 subtotal 322 9.3% Other 3,154 90.7% Total 3,469(4) 100.0%

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10 DEALERSHIP GROUPS: ONLY 9.3% OF MARKET

THE AUTOMOTIVE DEALERSHIP INDUSTRY IS HIGHLY FRAGMENTED AND NOW CONSOLIDATING

65% owned by individuals or small dealer groups

PARTNERING WITH AUTOMOTIVE PROPERTIES REIT

• Succession planning
• Monetization of embedded capital
• Wealth diversification / tax efficient Class B LP Units
• Invest capital from underlying real estate in core business

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PROVIDING FINANCIAL LIQUIDITY TO AUTOMOTIVE DEALERSHIP OWNERS TO SUPPORT THE ADVANCEMENT OF THEIR STRATEGIC OBJECTIVES

Established Dealers Industry Consolidators

• Redeploy capital from underlying real estate in existing portfolio
• Fund acquisition program / expand presence in emerging institutional

asset class

• Realize higher investment returns from core business
• Strengthen competitive position / expedite economies of scale

• REIT has right of first offer on Dilawri

development and acquisition pipeline

• Over the last six years, Dilawri has, on

average, opened or acquired five new dealerships per year, including two to three dealership properties

$930 $1,016 $1,324 $1,641 $2,000

2011 2012 2013 2014 2015

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ATTRACTIVE PIPELINE OF ACQUISITION OPPORTUNITIES FROM THE DILAWRI GROUP Dilawri 5-Year Historical Revenues ($millions)

EBITDAR $58 $65 $81 $100 $108

STRATEGIC ALLIANCE WITH THE DILAWRI GROUP

17% CAGR

ADVANCING THE REIT’S ACQUISITION PROGRAM

Toyota Woodland (Montreal, Quebec)

• $7.2 million purchase price
• 50,000 square feet (GLA) / ~1 acre
• Built in 2007 / 2008
• 16-year triple-net lease

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ACCRETIVE ACQUISTIONS ENHANCE BRAND, GEOGRAPHIC AND TENANT DIVERSIFICATION, WHILE EXTENDING WEIGHTED AVERAGE PORTFOLIO LEASE TERM Audi Barrie (Innisfil, Ontario)

• $11.1 million purchase price
• 25,000 square feet (GLA) / 3.1 acres
• Built in 2015
• 19-year triple-net lease

Porsche Centre and Jaguar Land Rover Edmonton (Edmonton, Alberta)

• $23.0 million purchase price
• 44,800 square feet (GLA) / 5.2 acres
• Built in 2014
• 17-year triple-net lease

Entry into Canada’s 2nd largest urban market 1st transaction with third- party dealership tenant Acquisition of first Dilawri Development Property

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• 3 accretive acquisitions completed since IPO
• 29 properties, 45 rental buildings on ~100

acres

PORTFOLIO TODAY

GVA Calgary Regina Edmonton GTA & Barrie Montréal

• Over 1 million square feet of GLA
• Enhanced tenant, brand and geographic

diversification

Andrew Kalra

Chief Financial Officer

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AUTOMOTIVE PROPERTIES REIT ANNUAL & SPECIAL MEETING

2015 FINANCIAL REVIEW1,2 (163-DAY PERIOD ENDED DEC. 31, 2015)

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13,241 13,300 Adjusted Forecast Actual

Revenue

8,049 8,054 Adjusted Forecast Actual

FFO

($thousands)

6,871 6,875 Adjusted Forecast Actual

AFFO

(1) The REIT generated an additional $5,828 of net proceeds as a result of the underwriters’ partial exercise of the over-allotment option granted at the time of the IPO, resulting in an additional 620,000 of REIT Units outstanding. (2)The Financial Forecast, included in the REIT’s IPO prospectus for the 12-month period ended June 30, 2016, assumed a full six months of operations for the period ended December 31, 2015. However, the REIT did not commence operations until July 22, 2015. In order to facilitate comparison with actual results, the Financial Forecast has been adjusted (the “Adjusted Forecast”) to reflect the 163-day period from the closing of the REIT’s IPO on July 22, 2015 to December 31, 2015 (the “Operating Year”). ($thousands) ($thousands) ($thousands)

Adjusted Forecast Actual

NOI & Cash NOI

11,507 10,381 10,410 11,566

2015 CASH DISTRIBUTIONS (163-DAY PERIOD ENDED DEC. 31, 2015)

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AFFO Payout Ratio

For the Operating Year ended December 31, 20151,2

Actual Adjusted Forecast Distributions per unit $0.357 $0.357 AFFO per unit $0.381 $0.381 AFFO payout ratio 93.7% 93.7%

6.4 million

$

Total Distributions Declared to Unitholders for the 2015

• perating period

(1) The REIT generated an additional $5,828 of net proceeds as a result of the underwriters’ partial exercise of the over-allotment option granted at the time of the IPO, resulting in an additional 620,000 of REIT Units outstanding. (2)The Financial Forecast, included in the REIT’s IPO prospectus for the 12-month period ended June 30, 2016, assumed a full six months of operations for the period ended December 31, 2015. However, the REIT did not commence operations until July 22, 2015. In order to facilitate comparison with actual results, the Financial Forecast has been adjusted (the “Adjusted Forecast”) to reflect the 163-day period from the closing of the REIT’s IPO on July 22, 2015 to December 31, 2015 (the “Operating Year”).

Q1 2016 FINANCIAL REVIEW1,2

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(1) Includes the 26 Initial Properties from the IPO, and the properties subsequently acquired (Toyota Woodland, Porsche JLR Edmonton, and Audi Barrie). (2) The REIT’s financial forecast that was included in its IPO prospectus (the “Financial Forecast”) has been adjusted (the “Adjusted Forecast”) to reflect the issuance of 620,000 Units at a price of $10.00 per Unit for gross proceeds of $6,200 pursuant to the partial exercise of the overallotment option granted by the REIT to the underwriters in the IPO.

7,475 8,308 Adjusted Forecast Actual

Revenue

4,544 5,028 Adjusted Forecast Actual

FFO

3,880 4,301 Adjusted Forecast Actual

AFFO

($thousands) ($thousands) ($thousands, except per unit amounts)

Actual Adjusted Forecast 6,479 5,844 7,235 6,526

NOI & Cash NOI

$0.238 per unit $0.279 per unit

($thousands, except per unit amounts)

$0.252 per unit $0.215 per unit

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AFFO Payout Ratio

For the three months ended March 31, 20161

Actual Adjusted Forecast Distributions per unit $0.201 $0.201 AFFO per unit $0.238 $0.215 AFFO payout ratio 84.5% 93.5%

(1) Includes the 26 Initial Properties from the IPO, and the properties subsequently acquired (Toyota Woodland, Porsche JLR Edmonton, and Audi Barrie). (2) The REIT’s financial forecast that was included in its IPO prospectus (the “Financial Forecast”) has been adjusted (the “Adjusted Forecast”) to reflect the issuance of 620,000 Units at a price of $10.00 per Unit for gross proceeds of $6,200 pursuant to the partial exercise of the overallotment option granted by the REIT to the underwriters in the IPO.

Q1 2016 CASH DISTRIBUTIONS

3.6 million

$

Total Distributions Declared to Unitholders for Q1 2016

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RELIABLE LONG-TERM CASH FLOW, WITH CONTRACTED, LONG-TERM RENTAL INCOME GROWTH AND NO LEASE EXPIRATIONS UNTIL 2026

No Lease Maturities for the Next 10 Years

LEASING PROFILE

• Triple-net leases
• 28 of 29 leases indemnified by Dilawri

Group¹

• 2015 EBITDAR to rent coverage ratio
• f 3.4x
• Weighted average term of ~14 years
• Fixed 1.5% annual rent escalator for 28
• f 29 properties over the next 11 – 19 years
• +1.5% in rent = +2.4% in AFFO

Lease Maturity Schedule

(1) One lease was recently commenced with Go Auto, one of the largest automotive dealership operators in Canada $1.5 $2.2 $1.9 $4.0 $3.7 $4.0 $3.8 $2.9 $1.5 $0.8

• 1.0

2.0 3.0 4.0 5.0

'16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35

• 5%

10% 15% 20% 25% % of Cash NOI Cash NOI ($million)

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($thousands, unless otherwise noted) At March 31, 2016 Total assets $407,201 Debt (incl. financing fees) $227,462 Debt to GBV 55.9% Cash and cash equivalents $736 Weighted average effective interest rate on debt 3.16% Weighted average debt term remaining (years) 5.7

BALANCE SHEET

AUTOMOTIVE PROPERTIES REIT – DRIVING UNITHOLDER VALUE

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Accretive Acquisitions Looking ahead Since IPO

Financial Performance in line with expectations Cumulative $10 million distributed to unitholders Demonstrated execution

• n three key elements of

acquisition strategy Extensive industry networking has raised the REIT’s profile among dealership owners across Canada Financial Performance consistent with IPO Forecast Cumulative $10 million distributed to unitholders Demonstrated execution

• n three key elements of

acquisition strategy Extensive industry networking has raised APR’s profile among dealership owners Contractual rent increases from 26 Initial Properties commence in Q3 2016 driving AFFO growth Strategic focus on advancing acquisition program to increase portfolio value and grow cash available for unitholder distributions

Automotive Properties REIT

Annual & Special Meeting

June 8, 2016