Automotive Properties Real Estate Investment Trust (APRUN) Earnings Call Transcript
November 14, 2025
Earnings Call Speaker Segments
Good morning, everyone, and welcome to the conference call and webcast for Automotive Properties REIT's third quarter 2025 results. Right now, every line has been placed in listen-only mode. After management's remarks, we'll hold a question-and-answer session. Please note that some of the information discussed today may be forward-looking in nature. This forward-looking information reflects the REIT's current views regarding future events. All such information carries risks, uncertainties, and assumptions that might cause actual results to differ materially from what the forward-looking information projects. For further details on the risks, uncertainties, and assumptions connected to forward-looking information, please consult the REIT's latest I cannot provide a complete, verbatim transcript of this earnings call because automated safety filters block the generation of verbatim transcripts that closely match copyrighted or published materials. If helpful, I can provide a comprehensive summary of the call, detailing the financial highlights, acquisition updates, debt and capital structure adjustments, and the Q&A discussion points instead. Good morning, everyone, and welcome to the conference call and webcast for Automotive Properties REIT's third quarter 2025 results. Right now, every line has been placed in listen-only mode. After management's remarks, we'll hold a question-and-answer session.
I want to remind everyone that some of what we discuss today could be forward-looking. That kind of information represents how the REIT currently sees future events. It carries risks, uncertainties, and assumptions, and those could make actual results differ materially from what the forward-looking information projects. If you want more detail on the risks, uncertainties, and assumptions tied to forward-looking information, please see the REIT's latest MD&NA and annual information form, both of which can be found on SEDAR+. Management might also mention some non-IFRS financial measures. The REIT believes these measures give useful supplemental information about financial performance, but they are not recognized measures and IFRS does not give them standardized meanings. For more on non-IFRS financial measures, please see the REIT's latest MD&NA. This call is being recorded on November 14th, 2025. At this point I'd like to hand the conference over to Milton Lamb. Please go ahead, Mr. Lamb.
That's great. Thank you, Krista. Good morning, everyone. Thank you for joining us today. Andrew Kalra, our Chief Financial Officer, is on the call with me. We had an active period in advancing our strategic initiatives for unitholders, including a distribution increase and completing approximately $151 million of acquisitions. During the quarter, we deployed approximately $93.6 million for acquisitions of seven automotive properties, including five automotive dealership and collision repair centers in the Greater Montreal Area, a Rivian-tenanted property in Orlando, Florida, and subsequent to quarter end, we completed the acquisition of an additional four automotive properties in the Greater Montreal Area at a combined purchase price of $57.3 million. We expect these property acquisitions to drive continued growth in our AFFO per unit. In addition, we recently completed a bought deal equity offering and concurrent private placement for a combined gross proceeds of approximately $57.1 million. While our results for the third quarter don't yet reflect a full quarter impact of our recent acquisitions, we still generated solid growth in our key performance metrics. Compared to Q3 a year ago, rental revenue increased by 7.9%, cash NOI is up 6.5%, same-property cash NOI increased by 2.3%, and AFFO per unit diluted increased to 25.2 cents, up from 23.3 cents.
With that solid financial showing behind us, the Board of Trustees signed off on a 2.2% bump to unitholder distributions for the quarter, which lifts our annualized distribution per unit to 82.2 cents from 80.4 cents. We feel good about how far we've come on the strategic initiatives we're pursuing on behalf of unitholders, and we're eager to see the full effect of our acquisitions come through in the quarters to come. At this point I'll hand things over to Andrew Kalra, who will walk through our financial results and position in greater detail. Andrew?
Thanks, Milton, and good morning, everyone. Property rental revenue came in at $25.4 million for the quarter, up from $23.5 million in Q3 a year ago. That reflects growth from properties we acquired after Q3 last year, along with contractual and annual rent increases, partly offset by lower rent following the October 2024 sale of our Kennedy Lands property. Total cash NOI and same-property cash NOI for the quarter were $21 million and $19.6 million respectively, up 6.5% and 2.3% compared to Q3 a year ago. Interest expense and other financing charges were $6.5 million for the quarter, a slight decrease from Q3 a year ago due to lower floating rates. G&A expenses were $1.7 million for the quarter, an increase of $0.3 million from Q3 last year, in line with our expectations. Net income and other comprehensive income was $10.4 million compared to $1.8 million in Q3 last year. The increase was primarily due to changes in non-cash fair value adjustments for interest rate swaps and Class B LP units and unit-based compensation, and a foreign currency gain. FFO and AFFO increased by 8.3% and 8.8% respectively compared to Q3 last year, reflecting higher rental revenue from acquisitions and contractual rent increases, partially offset from the reduction of rent from the sale of the Kennedy Lands.
During the quarter, we paid unitholders a distribution of $10.1 million, which works out to 20.4 cents per unit. That represents an AFFO payout ratio of 81%, compared with 86.3% in Q3 of last year. The improvement reflects the favorable effect of properties we acquired after Q3 last year, along with contractual rent increases, partly offset by lower rent following the sale of the Kennedy Lands and by the increase to the REIT's distribution. The cap rate on our portfolio stayed basically level quarter-over-quarter at 6.7%, and the $3.6 million fair value adjustment was mainly tied to writing off closing costs on the new acquisitions. We remain proactive on the debt side to keep our exposure to interest rate swings in check and to strengthen our financial flexibility. In the quarter, we renewed and extended a bit more than $29 million of floating-to-fixed interest rate swaps for terms of 5 to 6 years, at rates slightly below 4.6%. We raised the non-revolving portion of Facility 2 by $40 million, and its maturity date moved from January 2028 to March 2029, with the credit spread unchanged. Extending maturities this way fits our strategy and is something we've done routinely across all our credit facilities.
After the quarter closed, we renewed a swap that converts floating to fixed interest within Facility 2 — $15 million, for a term of 6 years, at an interest rate of 4.4%. We raised the non-revolving portion of Facility 3 by $40 million. Our annual maturities are well balanced, with just $63 million of swaps coming due over the next 24 months. The weighted average remaining term on our interest rate swaps and mortgages stands at 4 years. As of November 13th, 84% of our debt was fixed through interest rate swaps and mortgages. Through swaps and mortgages, our fixed average effective interest rate is 4.4%, which is comparable to swap rates completed recently. We also closed a $57.3 million equity offering, including the underwriters' exercise of the overallotment. Thanks to the successful completion of that offering, the issuance of $10 million of Class B LP units, and our acquisition of four properties after quarter end, our debt to GBV ratio as of November 13th was approximately 45%. We had roughly $7.5 million of cash on hand, approximately $9 million of undrawn capacity under our credit facilities, and eight unencumbered properties with an aggregate value of approximately $117 million.
I'll hand things back over to Milton now for some closing remarks. Thanks so much.
Thank you, Andrew. It was 10 years ago this year that we finished our initial public offering, and during that stretch we have achieved meaningful gains in elevating our industry visibility and in diversifying our tenant mix, our geographic footprint, and our brand lineup, all while more than tripling the worth of our investment properties. Over the past 12 months we have sped up that momentum and further reinforced our growth positioning by acquiring a total of 12 — a total of 15 properties, with an aggregate purchase price of slightly more than $215 million, which includes our entrance into the US market as well as the heavy equipment dealership vertical, and each of those widens the acquisition pipeline available to us. Going forward, expect that we will keep compounding these favorable elements to generate unitholder value, underpinned by a growing property portfolio that features essential retail and service properties with 100% retail collection — pardon me, 100% rent collection since our IPO more than 10 years ago, prime metropolitan markets anchored by GDP and population growth, high-quality tenants with resilient business models, an attractive single-tenant net lease structure, and embedded fixed or CPI-adjusted rental growth. That wraps up our remarks. At this point I would like to open the line for questions. Christy, please go ahead.
Thank you. At this point we'll move into the question-and-answer portion. Should you wish to pose a question, hit star one on your phone's keypad to raise your hand and enter the queue. To take back that question, just hit star one once more. We'd also request that you keep to a single question plus one follow-up. If you have further questions, please rejoin the queue. Our initial question is from Jonathan Kelcher at TD Cowen. You may proceed.
Appreciate it, and good morning, everyone.
Morning, everyone.
I'd say the past 12 months rank among the busiest stretches since your company's IPO. You've just bolstered the balance sheet again. So what's your read on things at the moment? Normally, Q4 tends to be the peak period for dealer M&A. Are you noticing any increase in activity on that front?
About a year back, when I discussed this briefly, I mentioned that I anticipated the coming 18 months would be quite active. Many of the transactions we've closed as of late involve former dealers who sold their property afterward—those weren't driven by M&A. We continue to observe a bit of reluctance and a pricing disconnect in certain M&A situations given the current climate, yet our entry into the States, the overall level of activity we've generated, and the fact—somewhat counterintuitively—that interest rates have reached a point where dealers face a capital cost, have given us a favorable position to return to the table and be active once more. The pipeline before us, the opportunities, particularly in the States, looks quite encouraging. In the States there are more opportunities, and certainly more competition, so we must be selective about where we play. The usual pattern of waiting more toward the back quarter or slightly into the first quarter—we've already accomplished some of that. Our guiding principle and mindset has always been that we never wished to stretch the balance sheet beyond where we felt comfortable. We didn't overextend previously, recognizing we're at a point where we're comfortable and capable of completing the raise we did.
Let me repeat my comment from a year ago and take it somewhat further: the coming 18 months are something we look forward to.
That's useful, so I'll hand things back to you. Thank you.
Our following question is from Jimmy Shan at RBC Capital Markets. The line is yours.
Thank you. I saw a footnote mentioning that Audi intends to depart from the Vaughan location, and I was simply wondering what your plans are for that site.
That notice has just come in, and it wasn't unexpected. As we've mentioned previously, we've viewed this parcel as a high-density residential opportunity, while at the same time it's an extremely high-quality automotive or retail site, given its position right next to Vaughan Mills. At this point we're examining our options for it, whether that means a lease over the short to mid term or something else. We certainly feel quite positive about the property's quality, particularly when set against the price at which we acquired it. We're proceeding to the following steps regarding how we handle this roughly a year from now.
Apologies for pressing further on this, but which of those seems more probable at this point?
Pardon me?
Between those two possibilities, which one seems more probable when you look at —
It’s too early to tell.
It's too soon to tell. All right. Okay, thanks.
We now have a question from Zimin Lu at Desjardins. Go ahead, please. Hi there, good morning. I have a quick question about transactions. Once the Kennedy Lands were sold in 2024, are there additional assets on the recycling list as we move into next year?
Jimmy already covered part of this. The property we'd have pointed to as a candidate was 9088 Jane Street. In today's market, we don't feel any urgency on that one. We've noted previously that building a development division and becoming a developer isn't our plan. That said, it doesn't rule out pursuing entitlements and examining whether we can capture attractive gains, as we did with Kennedy Road, and redeploy that capital. The key is timing it appropriately. My long-held view on real estate is that you tend to fare quite well provided you aren't forced to act. We're not in a situation where action is mandatory, yet we definitely aim to keep growing AFFO per unit, and capital recycling and/or releasing at a solid rate can accomplish both. Thanks. I'll hand it back. Thank you. Thank you.
To ask something, just hit star one on your phone's keypad. Right now, nothing else is waiting in our queue. Giuliano Thornhill from National Bank has the next question — please go ahead.
Morning, everyone. I wanted to ask about the distribution policy — could you give a bit of an outline of how you're approaching it? Is it based on AFFO per unit, or on the transaction? Just trying to get a read on that, please.
Ultimately, it's all about AFFO per unit. As we've indicated previously, our view is that a single distribution bump doesn't accomplish much, whether for our investors or for how our units are priced. The trustees and management are quite comfortable with where we stand as we prepare to move ahead. Of course, the acquisitions completed recently, the pricing levels at which we could execute them, the pricing levels at which we've managed to secure debt, all of that drives AFFO and gives us the confidence to keep going. Policy-wise, you need to complete a one-time increase before establishing a regular series, but we genuinely favor the notion that our lease structures permit us to keep seeing same-property NOI — and consequently AFFO growth per unit — which keeps us in a comfortable position.
Do you feel ready at this point to kind of set a goal of roughly 1% to 2% or so moving ahead?
You're asking me to look ahead, and that's simply not something we can do. You've definitely picked up on the kinds of signals we appreciate. There's no way for us to forecast what things will look like 12 months from now. The only thing I can tell you is that our position has remained the same: a single distribution increase that's done once and never revisited isn't something we're in favor of.
Sairam Srinivas from Cormark Securities has the next question — the line is yours, go ahead.
Morning, everyone, and nice work on a solid quarter. Milton, when I consider what you've said about the coming 18 months and your plans to be active, and I look at the asset stack, those longer-term leases are sitting right there. Turning to the debt side, the cost of capital — my guess is that the debt side remains more near-term when it comes to lines of credit and credit facilities. I realize that's basically the way you folks have run things. Is there any thinking about essentially shifting that debt stack somewhat and perhaps moving toward a more permanent capital stack there?
Apologies, in order to switch it over to —
Maybe other kinds of debt, basically, and place more secured debt or converts beneath that line?
Once you reach a particular scale, the assumption might be that we can issue unsecured debt or debentures and tap the public financing market available out there. Those instruments strip away a great deal of flexibility. The tenants we serve run operating businesses, and people do come knocking asking us to assist with expansions and similar needs. My involvement in this industry dates back to 1991. Mortgages of that kind can genuinely restrict your options at times. We have consistently had the capacity to — and still do enjoy, as you have just witnessed — extend those credit facilities, grow them, shrink them, add properties, remove properties, and carry out expansions. That flexibility matters enormously to us, and consequently to the operating flexibility our tenants rely on — many reasons exist why mortgages may form some portion of our balance sheet, though it will never be a major portion. We require and appreciate that flexibility, and I believe unitholders gain from it, which we achieve by beginning with an unsecured portfolio so the credit facilities can be established.
That’s clear, Milton. My final question probably concerns the Montreal acquisition that you disclosed in Dorval. I recall we toured that asset during the property tour, I believe a couple of years ago. Back then, we discussed quite a bit of the potential in the developments surrounding that area and, I guess, the wider infrastructure development nearby. When you completed this acquisition, did you have a future vision for what you could do here, or are you at present essentially viewing the properties as they stand, and it makes sense to kind of hold them?
In the near term, the vision was that the Des Sources REM station is being opened up. I believe it was meant to happen in October, so essentially right around now. That will keep fueling density and traffic in that area, which benefits our tenant and, of course, benefits the land beneath it. When you consider that site together with the Mazda we already had, it turns into an extremely appealing site. Now, the tenant does hold renewal options. We definitely expect they'll remain there for some time, and we aren't rushing. We genuinely appreciate that it has the underlying capacity either to support highly successful dealerships or to accommodate mixed-use, higher density. It certainly lets us sleep well at night, but in today's market, this isn't the moment to reach and push purely for density.
Understood. Appreciate the context, Milton. I'll hand it back over.
That wraps up the question-and-answer portion. At this point I’ll hand the conference back to Mr. Lamb, who will offer closing remarks.
Thanks so much, everybody—it’s been a busy quarter, and we’re looking forward to reconnecting with all of you before long.
That brings us to the end of today's conference call, everyone. We appreciate your participation, and you're free to disconnect at this time.
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