Automotive Properties Real Estate Investment Trust (APRUN) Earnings Call Transcript
March 5, 2026
Earnings Call Speaker Segments
Good morning, everyone, and thank you for joining us for Automotive Properties REIT's conference call and webcast covering fourth quarter and year-end 2025 results. Right now, every line has been placed in listen-only mode. After management finishes its remarks, we'll open things up for a question and answer session. I'd like to note that some of the information discussed today may be forward-looking in nature. That 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 tied to forward-looking information, please consult the REIT's latest MD&A and annual information form, both of which can be found on SEDAR+. Management may also reference certain non-IFRS financial measures. While the REIT believes these measures offer useful supplemental information about financial performance, they are not recognized measures and lack standardized meanings under IFRS. For additional details concerning non-IFRS financial measures, please see the REIT's latest MD&A. Today's call is being recorded on March 5th, 2026. I'll now hand the conference over to Milton Lamb. Please go ahead, Mr. Lamb.
Thanks, Morgan, and good morning to all of you. I appreciate you being with us today. Joining me on this call is Andrew Kalra, who serves as our Chief Financial Officer. For Automotive Properties REIT, 2025 proved to be a pivotal year. We completed acquisitions of 13 automotive properties — among them our first three in the United States — at a total purchase price of roughly CAD 200 million. Those acquisitions fueled considerable expansion in our rental revenue, cash NOI, and AFFO per unit during 2025, and that supported the distribution increase that took effect in August of 2025. Property rental revenue rose 8.5% versus 2024. Cash NOI climbed 8.4%, while diluted AFFO per unit grew to CAD 0.998 from CAD 0.932. Because most of the acquisitions closed in the latter half of the year, our Q4 figures reflect even stronger growth, with property rental revenue rising 19.3% over Q4 of the prior year. Cash NOI was up 18.6%, and diluted AFFO per unit rose to CAD 0.251 from CAD 0.232. The CAD 57.1 million equity offering we completed during the quarter, which helped fund our acquisitions, weighed on Q4 AFFO per unit, yet we still delivered an increase of close to CAD 0.02 in AFFO per unit. With the support of contractual annual rent increases that are fixed or CPI adjusted, same property cash NOI grew 1.9% for Q4 2025 and 2.1% for the full year.
In Q4, we spent roughly CAD 57.3 million to buy four dealership properties in Greater Montreal. That included a three-property portfolio in Dorval — full service Subaru, Honda and VW dealership properties leased to affiliates of Dilawri — plus a full service Honda dealership in Île-Perrot, leased to an affiliate of Groupe AutoForce. That adds to the six-property portfolio we acquired earlier in Q3, which is also leased to affiliates of Groupe AutoForce. We expect the full benefit of our 2025 acquisitions to show up in 2026. After year-end, on January 1st, we closed on a full service 40,000 sq ft Hyundai dealership on 6 acres of land in Quebec City, at a purchase price of CAD 13.25 million. Yesterday, we announced that conditions have been waived for the purchase, from a third party, of the real estate underlying the automotive and service property at 328 Corporate View in Vista, California, for a purchase price of $16 million. That site sits in northern San Diego County. The Vista property is leased to Rivian under a midterm net lease featuring contractual fixed annual rent increases and renewal options. It consists of a 60,000 sq ft Rivian delivery and service facility on approximately 3.7 acres of land.
We anticipate the deal will be finalized in the first half of 2026, and we plan to cover the purchase price by drawing on our revolving credit facilities. We expect these property acquisitions to fuel ongoing growth in our AFFO per unit, and we're heading into 2026 with strong growth momentum. At this point I'd like to hand things over to Andrew Kalra, who will review our Q4 financial results and position in greater detail. Andrew.
Thank you, Milton. Morning, everyone. Property rental revenue came in at CAD 27.9 million for the quarter, up from CAD 23.4 million in Q4 of last year. That reflects growth from properties we acquired during and after Q4 last year, along with contractual annual rent increases, partly offset by lower rent following the October 2024 sale of our Kennedy Lands property. Total cash NOI was CAD 23.2 million and same property cash NOI was CAD 19.6 million for the quarter, which works out to increases of 18.6% and 1.9%, respectively, versus Q4 a year ago. Interest expense and other financing charges were CAD 7.5 million for the quarter, which is CAD 1.9 million higher than Q4 last year, reflecting additional debt taken on to acquire properties during and after Q4 2024, plus increased interest rates. G&A expenses came to CAD 1.8 million for the quarter, down CAD 0.4 million from Q4 last year, in line with what we expected. Net income and other comprehensive income was CAD 13.9 million, compared with CAD 12 million in Q4 last year. The increase was mainly due to higher NOI and a change in non-cash fair value adjustments for interest rate swaps, partly offset by higher interest costs and changes in non-cash fair value adjustments for investment properties and for Class B LP units and unit-based compensation, partly offset by a foreign exchange loss of CAD 1 million.
FFO rose 20.4% and AFFO rose 18.4%, respectively, versus Q4 of last year. That reflects higher rental revenue from acquisitions and contractual rent increases, partly offset by lower rent resulting from the sale of the Kennedy Lands. On a per unit basis, FFO for the quarter increased to CAD 0.259 diluted, compared with CAD 0.236 in Q4 last year, while AFFO per unit rose to CAD 0.251 from CAD 0.232. Distributions paid to unitholders totaled CAD 11.32 million, or CAD 0.206 per unit, an AFFO payout ratio of 82.1%, versus 86.6% in Q4 last year. That reflects the positive impact of properties acquired during and after Q4 last year and contractual rent increases, partly offset by lower rent from the sale of the Kennedy Lands and the increase in our monthly cash distributions effective August 2025. The cap rate applicable to our portfolio stood at 6.75% at year-end, essentially flat quarter-over-quarter. The CAD 6.8 million fair value adjustment for the year was mainly tied to write-off of closing costs, including land transfer taxes related to the new acquisitions. We remain proactive with our debt strategy to limit exposure to interest rate fluctuations and enhance our financial flexibility.
In the quarter, we renewed or entered into floating-to-fixed interest rate swaps totaling CAD 25 million, with terms of five to six years, at a rate of 4.5% or less. We raised the non-revolving portion of Facility 3 by CAD 40 million and pushed its maturity out to March 2028, keeping the same credit spread. At year-end, our debt to GBV ratio stood at 49.9%, which gives us additional capacity for acquisitions. After year-end, within Facility 3, we entered into floating-to-fixed interest rate swaps amounting to CAD 45 million, for terms of five to seven years, at interest rates ranging from 4.45% to 4.59%. We added CAD 25 million to the revolving portion of Facility 1 and moved its maturity from June 2027 to June 2029. As of the date of this MD&A, on a trailing 12-month basis, borrowing capacity across our three credit facilities has grown by a total of CAD 140 million, and we have extended maturities. Our annual maturities are well balanced, with under CAD 40 million of swaps coming due in the next 12 months. At year-end, the weighted average interest rate term and mortgages remaining was 4.1 years.
By March 4th, interest rate swaps and mortgages had locked in 87% of our debt. Under our revolving credit facilities, roughly CAD 102.3 million remained undrawn, and we held 10 unencumbered properties worth an aggregate of about CAD 130.2 million. I'll now hand the call back to Milton for closing remarks. Thank you very much.
Okay, thank you, Andrew. 2025 is the year we celebrate 10 years since the REITs were created. During that time, we have become a key partner for major automotive dealership groups and OEMs across Canada and, more recently, in the United States. Thanks to that, we have diversified our tenant base, our market footprint, and our brand representation, while the value of our investment properties has more than tripled. We kept building on that momentum in 2025 and reinforced our growth position by acquiring 13 properties for a total purchase price of roughly CAD 200 million. Our move into the U.S., together with our expansion into the heavy equipment dealership vertical late last year, has widened both our revenue base and our potential acquisition pipeline. We are delivering on our core objectives, which includes growing AFFO per unit to create value for unitholders. We are happy to have put through a 2.2% increase to unitholder distributions this past year. Going forward, expect us to keep leveraging these positive factors to drive unitholder value, backed by an expanding property portfolio of essential retail and service properties that has had 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, attractive single tenant net lease structures, and embedded fixed or CPI-adjusted rental growth.
In 2026, we expect to see a full year of the financial benefit from the acquisitions we made in 2025. That brings our remarks to a close. At this point, we'd like to take questions. Morgan, you have the floor.
Thank you. We'll now start the question and answer portion. For this segment, we do ask that you keep your questions to one plus a follow-up. Should you wish to ask something, please press star followed by the number one on your telephone keypad to raise your hand and join the queue. To withdraw your question, just press star one once more. Our first question is from Sairam Srinivas at ATB Pharma Capital Markets. Your line is open.
Thanks, operator. Morning, everyone. Nice work—
Morning, everyone.
Well, it's been a really strong 2025. Obviously, the acquisitions pipeline has been quite active throughout 2025, and 2026 appears as though it will be active too. Could you speak to the outlook going forward and to what you see taking shape in your markets?
So during COVID and right after it, we saw a bit of euphoria, and pricing on some of these properties reached a level we weren't comfortable moving forward at. That has since normalized back to what we've traditionally seen, where we're able to acquire properties in that, let's say, 6.5% to low 7% range and secure financing in the mid 5% — sorry, the mid 4%. That lets us land at a number and on opportunities that appeal to us. We're still being selective, as you can see, looking at Florida and California plus Montreal — these are markets that are very healthy for real estate and for the economy overall.
That is certainly true. Perhaps, just to add to that point, when you look at the U.S., you have essentially been concentrating on Rivian and Tesla tenant dealerships in that market. Does that also form part of your wider strategy for the U.S. market?
Broadly speaking, that's definitely a strategy we have faith in. You know, we kept an eye on Tesla for a good while prior to completing our first one, and then, you know, right now we've got seven. We're enthusiastic about Rivian's plans with the R2, which is set to come out soon. You know, there are typically some merchant developers across the States who offer long-term leases with Rivian and Tesla in major markets that, you know, when we're underwriting the real estate — for the current tenant as well as for the actual, you know, dirt and the building in a given area — we're excited about. That isn't the only strategy we pursue. We continue to believe we'll seek out and manage to close on some automotive, you know, traditional dealership properties too. It's early days, but we still think we'll end up with a diversified portfolio that we build out.
Milton, that's really helpful context—thanks a lot. I'll hand it back to you now.
Jonathan Kelcher from TD Cowen has the next question, and your line is open.
Thank you. Good morning. I suppose I'll just pick up where that last line of questioning left off. On a pro forma basis, once this deal closes, what percentage of your net rents will be derived from Rivian?
We're not providing a precise forward-looking figure. It will come in below 5%. I mean, it could involve three properties, though those properties aren't especially large. Once again, we definitely underwrite it based on the land beneath. We like the assets, and we like the tenant.
Alright, that's useful. Well, for my second follow-up — my second question, really. On the balance sheet, you mentioned moving CAD 45.9 million that came after the quarter into fixed rate. So in Q4, you had 20% floating. Where would that stand pro forma at this point?
Regarding the swaps that are maturing, across the coming 24 months, we have roughly 40 of them. Through the acquisitions, we make use of a revolving balance. Our revolver is going to increase.
That's right.
Regarding the situation as of the MD&A date, the portion of our total non-revolving debt that carries a fixed rate stands at 87%.
Alright, thank you very much.
We find ourselves in a comfortable position, and.
That's right.
So we ended up executing swaps at a favorable moment early in February, and we secured some attractive rates too.
That's great. I'll hand it back to you now. Thanks.
I appreciate it.
I appreciate that.
If you'd like to pose a question now, simply hit star and then the digit one on your phone's keypad. We have Jimmy Shan from RBC Capital Markets as our following questioner. Your line is live.
Thank you. On the subject of how quickly you're making acquisitions, should we expect this year to be as busy as last year?
I believe we're gaining some momentum in both Canada and the U.S. You know, we walked through part of that math a short while ago. That holds up. My view is that we need to be selective, and we keep being selective. From our standpoint, it comes down to the cost of capital, weighed against the opportunities we're seeing. We anticipate seeing some opportunities, and it'll be an interesting year. We still think our multiple carries a bit of a hangover from, you know, USMCA affecting auto, and they never complete that sentence that ends with auto manufacturing. I think we're stuck in the word scramble where a title of six words versus seven words makes a big difference in how we're viewed. Once that fades, I think our cost of capital will return to where it should be, and we're quite excited about what our pipeline can and should be.
All right. So as you're expanding the U.S. portfolio, what's your thinking on which markets you want to be in? Do you want to establish critical mass first, or are you now simply evaluating the credit and staying fairly market agnostic?
No, being market agnostic has never described us. I suppose I would respond to that in a couple of ways. First, the REIT's fundamental philosophy has always centered on metropolitan areas with population growth and GDP growth. Of course, simply because of the sheer size of the U.S., there are more markets there than in Canada that fit that description. The good news is that in a net lease business, we don't carry those operating requirements involving capabilities and risk management. It tends to lean a bit more toward asset management rather than property management at the leasing level. We still favor, say, that Southeast market, and then as you move across into Arizona, Texas and California. We want to see the dirt and the underlying economy and population supporting the real estate we acquire. That benefits our tenants, and it benefits the dirt.
Yeah. Okay. Sorry, just one final thing. Is there any news on Pfaff, that Audi space in Vaughan? What are your plans for it?
We’re still in the early stages. It’s something of a balancing act. I mean, it’s a fantastic property. I keep mentioning the land, but there’s also an excellent building sitting on it. What we’re weighing now is demand for leasing income against the fact that, you know, there’s a higher and better use with good density at that site. In the current market, density isn’t something you get compensated for. So it’s a question of balancing how long we’re willing to make a commitment on that property against how long it takes before we can potentially tap into that underlying value. That’s exactly what we’re working through at the moment as we examine various opportunities and various structures. We’re still in the early stages, and it’s a high-quality property.
Yeah, got it. Thanks.
The following question is from Giuliano Thornhill at National Bank. Your line is open.
Morning, everybody. Hi, folks.
Hello, everyone.
Just one question here. When you look at the cap rates on the Rivian deals versus what regular dealerships in those same areas get, how do they stack up? Are they roughly in the same range, or do they come out differently?
Naturally, it varies by market, though my sense is that Rivian, having existed for less time than certain other dealerships or Tesla, shows that somewhat in the numbers. What strikes me again is that they sit at market rates, or at figures I probably shouldn't characterize broadly. The deals we've completed have been at market rates we feel quite good about. Some have come across our desk at a high per-square-foot figure that leaves us deeply uneasy. There's a certain tension to manage between the property itself and the tenant occupying it. My view is that with Rivian's forthcoming R2, assuming that launch performs as well as expectations suggest, we might see some cap rate compression down the road.
When you look at the EV transition, would you frame it more as a risk or as an opportunity for your tenant—for the tenant base you already have?
My view is that this is generating additional demand for real estate in Canada that carries automotive zoning — whether that involves possible new Chinese entrants or is simply broad-based. For what you'd call the existing traditional dealer network, I believe many of them will need both service and delivery capability. Actually, for three categories: ICE, hybrid, and EV. That widens what they require. Ultimately consumer preference will drive it, and some investment is going to be necessary. This doesn't strike me as a sharp pivot. My expectation is a gradual shift across the coming 15 to 25 years. They'll need to keep servicing ICE vehicles while simultaneously progressing through hybrid and ICE — sorry, hybrid and EV.
That wraps up the question-and-answer portion. I'll now hand things back to management in case they have any closing comments.
We thank all of you for joining us, and we’re eager to speak with you again soon. Take care, everybody.
That wraps up today’s call. We really appreciate you joining us, and enjoy the rest of your day.
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