Automotive Properties Real Estate Investment Trust (APRUN) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us for Automotive Properties REIT's conference call and webcast covering our first quarter 2026 results. Right now, all callers are muted. After the management presentation, there will be an opportunity to ask questions. I'd like to note that some of what we discuss today could be forward-looking in nature. That forward-looking information mirrors how the REIT currently sees upcoming events. All of it carries risks, uncertainties and assumptions, and those could make actual outcomes differ materially from what the forward-looking information projects. If you want further detail on the risks, uncertainties and assumptions tied to forward-looking information, we point you to the REIT's most recent MD&A and annual information form, both of which can be found on SEDAR+. Management might also mention some non-IFRS financial measures. The REIT considers these measures to offer helpful supplementary insight into 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 most recent MD&A. Today is May 14, 2026, and this call is being recorded. I'll now hand the conference over to Milton Lamb, President and CEO. Please go ahead, Mr. Lamb.

That's great. Thank you, Joanne, and good morning, everyone. Thanks for being with us today. Andrew Kalra, our Chief Financial Officer, is here alongside me. Our strong first quarter performance reflects the positive impact of the 13 property acquisitions we completed in 2025 for an aggregate purchase price of approximately $200 million, and the partial contributions of the two additional property acquisitions completed during the quarter. Compared to Q1 of last year, our property rental revenue has increased by 21.7%. Cash NOI was up 19%, and AFFO per unit diluted increased to CAD 0.262 from CAD 0.247. This represents a record quarterly AFFO per unit amount for APR, demonstrating the positive impact of our acquisitions and the embedded growth from contractual fixed or CPI-adjusted annual rent increases in our net lease structure. This is further reflected in a reduced AFFO payout ratio of 78.6% in the quarter, even after our 2025 distribution increase. The two acquisitions we completed during the quarter, a full-service Hyundai dealership located in Quebec City and a Rivian-tenanted sales, delivery, and service facility in Vista, San Diego County, California. Subsequent to quarter end, on April 7th, we completed our second property acquisition in Southern California, consisting of two Penske Automotive dealership properties in Santa Ana in Orange County.

These dealerships sit on roughly 6 acres of land in the Santa Ana Auto Mall, which is one of the premier dealership corridors in the area. Among them are Audi South Coast, a full-service Audi dealership spanning 32,000 sq ft, and South Coast Volkswagen, a full-service VW dealership of 29,000 sq ft, with both run by Penske Automotive Group. We anticipate that our acquisitions from last year — sorry — and to date in 2026 will fuel continued growth in our AFFO per unit going forward. With that, I'd like to hand things over to Andrew Kalra, who will walk through our financial results in more detail. Andrew.

Thanks, Milton, and good morning, everyone. Property rental revenue came in at CAD 29.1 million for the quarter, up from CAD 23.9 million in Q1 a year ago, driven by growth from properties acquired during and after Q1 last year as well as contractual annual rent increases. Total Cash NOI and Same Property Cash NOI for the quarter were CAD 23.8 million and CAD 20.4 million, respectively, which represent increases of 19% and 2.1% compared to Q1 last year. Interest expense and other financing charges for the quarter were CAD 7.3 million, up CAD 1.3 million from Q1 last year, reflecting additional debt incurred to fund our acquisitions. G&A expenses were CAD 1.6 million for the quarter, an increase of CAD 0.1 million from Q1 last year, and in line with our expectations. Net income and other comprehensive income was CAD 25.3 million, compared to CAD 7.6 million in Q1 last year. That increase was primarily due to higher NOI changes in non-cash fair value adjustments for investment properties and interest rate swaps, partially offset by higher interest costs and the change in non-cash fair value adjustments for Class B units and unit-based compensation. FFO and AFFO increased by 20.4% and 19.1% respectively compared to Q1 last year, reflecting higher rental revenue from the acquisitions and contractual rent increases.

Looking at it per unit, FFO rose to CAD 0.268 diluted, compared with CAD 0.251 in Q1 of last year, while AFFO climbed to CAD 0.262 from CAD 0.247. During the quarter we distributed a total of CAD 0.206 per unit to unitholders, which works out to an AFFO payout ratio of 78.6%. That's against distributions of CAD 0.201 per unit in Q1 last year, when the payout ratio was 81.4%. Even with the monthly cash distribution increase that took effect last year, in 2025, our payout ratio came down — and that shows the positive effect of both the properties we bought after Q1 last year and our contractual rent increases. At quarter end, the cap rate on our portfolio stood at 6.75%, unchanged from the 2025 year end and a touch above the 6.7% recorded at the close of Q1 last year. We remain proactive on the debt side, capping our exposure to interest rate movements and boosting our financial flexibility. In the quarter, we put in place floating-to-fixed interest rate swaps under facility three, amounting to CAD 45 million, for terms ranging from five to seven years at rates of 4.45% to 4.59%. We also raised the revolving portion of facility one by CAD 25 million and pushed its maturity out to June 2029, keeping the same credit spread.

When the quarter wrapped up, our Debt to GBV ratio stood at 46.3, which gives us more room for acquisitions. As of March 31st, 2026, 77% of our debt carried fixed rates, with a weighted average interest rate of 4.48%, a weighted average interest rate and mortgages remaining of 4.2 years, and a weighted average term maturity of debt of 2.8 years, as we keep growing and extending our credit facilities. As of May 13th, we held roughly CAD 32.5 million in undrawn capacity through our credit facilities, along with 13 unencumbered properties valued at about CAD 195.4 million. I'll now hand the call back to Milton for his closing remarks. Thank you so much.

Thank you, Andrew. After entering the U.S. market in the prior year, we are happy with the greater geographic and tenant variety we have achieved via our most recent acquisitions south of the border. Our holdings now include properties in Ohio, Florida, and California, featuring leading automotive brands such as Tesla, Rivian, and Penske Automotive through their Audi and Volkswagen locations. We keep positioning APR as an appealing partner for major automotive dealerships, groups, and OEMs across Canada and the United States. After a very active 2025 acquisition year and a strong beginning to 2026, our portfolio is now nearing just under 100 properties in total, with tenant leases involving top automotive groups and OEMs adding to our cash flows that support unitholder distributions. We are effectively delivering on our main goals, which include growing AFFO per unit and creating value for unitholders. We anticipate sustaining our positive momentum over the coming year, backed by an expanding property portfolio with high-quality tenants that offer essential retail and services, 100% occupancy and rent collection, positions in prime metropolitan markets characterized by GDP and population growth, along with appealing net lease structures and built-in fixed or CPI-adjusted rental growth. That brings our remarks to a close.

I'd like to begin the Q&A portion now. Joanne, you have the floor.

Thanks. If you'd like to pose a question, hit star and then the number one on your phone's keypad. To save time, we ask that each of you stick to a single question plus one follow-up. Thanks. Jonathan Kelcher of TD Cowen has our first question. The floor is yours — your line is open.

Appreciate it, and morning to everyone.

Morning, everyone.

I’d like to ask about what kinds of factors are fueling activity in the U.S. In Canada, I think a lot of your deals tend to come from dealer M&A. How does that compare with the U.S.?

First, the U.S. simply contains a greater number of metropolitan markets experiencing growth in both GDP and population. Second, whether you look at the underlying 1031 tax structure or the big, beautiful bill, there just tends to be a higher velocity of trading. People are more willing to take profits and losses, whereas in Canada, people tend to buy assets and hold onto them for significant amounts of time, if not perpetuity. That's a lot of the reason why we end up being more active when it is a transaction related to M&A, where we stand beside dealers as they do the operations acquisition.

All right. So with a few of those groups you’re speaking with in the U.S., do you see that opportunity as well?

My sense is that M&A activity will be a shared feature on both sides of the border. The U.S. simply has considerably more velocity, along with bigger markets. The M&A theme we've been pursuing as we grow and have assembled a solid portfolio by working with dealers — that, I believe, will happen on both sides of the border.

All right, thank you — I'll hand it back over.

Sairam Srinivas of ATB Cormark has our next question. The floor is yours — your line is open.

Thanks, operator. Everyone, clearly, returning to that U.S. acquisitions question, could you sort of align that with what OEMs require and the capital needs of the business? Do you see U.S. dealerships being much more aggressive when it comes to, you know, holding capital coverage and really putting substantial capital into their assets, whereas in Canada it's likely less so? Is that something you're observing?

Actually, I'd put it the other way around, if anything. In Canada, there's somewhat more of a cost element on the land itself, varying by market, though definitely in the ones we're focused on — Toronto, Vancouver, Montreal, Calgary. Building costs run higher up north. The OEM specs are fairly comparable, yet meeting those specs, in my view, tends to cost more in Canada.

That’s reasonable—appreciate it. Thanks a lot. I’ll hand it back over.

Brad Sturges of Raymond James has our next question. The floor is yours — your line is open.

Morning, everyone — thanks for joining.

Morning to you, Brad.

Regarding that Orange County acquisition, my understanding is that contractual rent increases are tied to California CPI, though a ceiling applies. I'm simply wondering whether you might shed a bit more light on how that ceiling would function.