Automotive Properties REIT Annual & Special Meeting June 8, 2016
AUTOMOTIVE PROPERTIES REIT ANNUAL & SPECIAL MEETING Milton Lamb President & Chief Executive Officer 2
AUTOMOTIVE PROPERTIES REIT ANNUAL & SPECIAL MEETING Kap Dilawri Chair of the Board 3
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 4
AUTOMOTIVE PROPERTIES REIT ANNUAL & SPECIAL MEETING Milton Lamb President & Chief Executive Officer 5
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. 6
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 $357.7 million acquisition of the 26 Initial Properties from the Dilawri Group • Dilawri Group retained a 55% equity ownership position in the REIT 7
INITIAL PROPERTIES • Modern, best-in-class dealerships, average age ~8 years • 26 properties, 42 rental buildings on ~88 acres, strategically located in high-traffic commercial corridors • 958,000 square feet of GLA • Long-term, triple-net leases with fixed rent escalators provides cash flow stability GVA Edmonton CALGARY GVA Calgary 6 Properties Regina 4 Properties Montréal REGINA GTA GTA 8 Properties 8 Properties 8
COMPELLING INDUSTRY FUNDAMENTALS Canadian Automotive Retail Industry Sales ($ billions) 128 120 96 100 105 112 96 94 92 88 87 83 83 83 78 74 70 65 64 56 53 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 REPRESENTING 6.5% OF 2015 GDP, THE AUTOMOTIVE RETAIL SALES INDUSTRY IS CANADA’S LARGEST RETAIL SEGMENT Source: Statistics Canada and DesRosiers Automotive Consultants Inc. 9
10 DEALERSHIP GROUPS: ONLY 9.3% OF MARKET 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 27 0.8% QC Group (1) 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 65% owned by individuals or small Murray Auto Group (1) 25 0.7% NS, MB, SK, AB, BC dealer groups Wheaton Auto Group (1) 16 0.5% SK, AB, BC Top 10 subtotal 322 9.3% Other 3,154 90.7% 3,469 (4) Total 100.0% THE AUTOMOTIVE DEALERSHIP INDUSTRY IS HIGHLY FRAGMENTED AND NOW CONSOLIDATING (1) Information based on publicly available information as at May 20, 2016. (2) Denotes current tenants of the REIT (3) Excludes collision centres and RV/Marine dealerships (4) Source: DesRosiers Automotive Consultants Inc. 10
PARTNERING WITH AUTOMOTIVE PROPERTIES REIT • Succession planning Established • Monetization of embedded capital • Wealth diversification / tax efficient Class B LP Units Dealers • Invest capital from underlying real estate in core business • Redeploy capital from underlying real estate in existing portfolio • Fund acquisition program / expand presence in emerging institutional Industry asset class Consolidators • Realize higher investment returns from core business • Strengthen competitive position / expedite economies of scale PROVIDING FINANCIAL LIQUIDITY TO AUTOMOTIVE DEALERSHIP OWNERS TO SUPPORT THE ADVANCEMENT OF THEIR STRATEGIC OBJECTIVES 11
STRATEGIC ALLIANCE WITH THE DILAWRI GROUP • REIT has right of first offer on Dilawri Dilawri 5-Year Historical Revenues ($millions) development and acquisition pipeline $2,000 • Over the last six years, Dilawri has, on average, opened or acquired five new $1,641 dealerships per year, including two to $1,324 $1,016 three dealership properties $930 2011 2012 2013 2014 2015 EBITDAR $58 $65 $81 $100 $108 17% CAGR ATTRACTIVE PIPELINE OF ACQUISITION OPPORTUNITIES FROM THE DILAWRI GROUP 12
ADVANCING THE REIT’S ACQUISITION PROGRAM Toyota Woodland (Montreal, Quebec) • $7.2 million purchase price Entry into Canada’s 2nd • 50,000 square feet (GLA) / ~1 acre largest urban market • Built in 2007 / 2008 • 16-year triple-net lease Porsche Centre and Jaguar Land Rover Edmonton (Edmonton, Alberta) 1st transaction with third- • $23.0 million purchase price • 44,800 square feet (GLA) / 5.2 acres party dealership tenant • Built in 2014 • 17-year triple-net lease Audi Barrie (Innisfil, Ontario) • $11.1 million purchase price Acquisition of first Dilawri • 25,000 square feet (GLA) / 3.1 acres Development Property • Built in 2015 • 19-year triple-net lease ACCRETIVE ACQUISTIONS ENHANCE BRAND, GEOGRAPHIC AND TENANT DIVERSIFICATION, WHILE EXTENDING WEIGHTED AVERAGE PORTFOLIO LEASE TERM 13
PORTFOLIO TODAY • 3 accretive acquisitions completed since IPO • Over 1 million square feet of GLA • 29 properties, 45 rental buildings on ~100 • Enhanced tenant, brand and geographic acres diversification Edmonton GVA Calgary Regina Montréal GTA & Barrie 14
AUTOMOTIVE PROPERTIES REIT ANNUAL & SPECIAL MEETING Andrew Kalra Chief Financial Officer 15
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