Automotive Properties REIT storyboard

Automotive Properties REIT
Investor Presentation
November 2015
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 NO’’) 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
• Canada’s only public vehicle focused on consolidating automotive
dealership real estate properties
• Current portfolio of 26 high-quality and strategically located automotive
dealership properties with geographic diversification
• Broad manufacturer / brand diversification
• Experienced executive management and strong, independent board
• REIT-friendly management agreement (fixed fee for forecast period and
cost-recovery thereafter, no termination fee, no acquisition fees)
PORTFOLIO IS EXPECTED TO GENERATE A RELIABLE STREAM OF CASH DISTRIBUTIONS
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AUTOMOTIVE PROPERTIES REIT CAPITAL MARKET PROFILE
IPO: July 2015 / TSX: APR.UN
Market capitalization: ~ $175 million1,2
REIT Units outstanding: 8.12 million
Class B LP Units:
9.93 million
Monthly distribution per unit: $0.067
($0.80 annualized)
Unit Price: $9.652
Distribution yield: 8.3%2
Public ownership: 55% institutional
45% retail
Q3 2015 AFFO payout ratio: 91.3%
“SUCCESSFUL REIT IPO GIVES SECTOR MUCH-NEEDED CONFIDENCE BOOST”
GLOBE & MAIL, JULY 22, 2015
(1) Includes Class B Units.
(2) Trailing 20-day average at November 11, 2015.
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PORTFOLIO OVERVIEW
• Modern, best-in-class dealerships,
with an average age of 8 years
• 26 properties, with 42 rental
buildings on 88 acres
• 958,000 square feet of GLA
• Forecast Cash NOI: $23.4 million1
• Forecast AFFO: $15.5 million1
GVA
CALGARY
6 Properties
4 Properties
REGINA
GTA
8 Properties
8 Properties
GROWTH DRIVERS: PORTFOLIO EXPANSION AND RENT INCREASES
1 Financial forecast included in the REIT’s IPO prospectus for the 12-month period ended June 30. 2016
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PORTFOLIO DIVERSIFICATION
Geographic
By Cash NOI
By GLA
Regina
19%
GVA
16%
GVA
21%
GTA
46%
Regina
15%
Calgary
19%
GTA
48%
Calgary
16%
Manufacturer / Brand (By Cash NOI)
22.8%
14.6%
10.3%
9.3%
8.3%
6.6%
5.4%
5.1%
4.7%
4.6%
4.1%
4.1%
Other
7
4
3
2
# of REIT Locations
1
2
3
2
1
2
1
7
PROPERTIES BENEFIT FROM PRIME LOCATIONS IN STRATEGIC URBAN MARKE TS, AND
BROAD DIVERSIFICATION OF INDUSTRY-LEADING BRANDS
6
MANUFACTURER AND BRAND DIVERSIFICATION
Manufacturers by Region
(% of Cash NOI from Dealership Properties)
North
America
9%
Europe
26%
Asia
65%
Brands by Segment
(% of Cash NOI from Dealership Properties)
UltraLuxury (3)
Luxury(2) 9%
27%
Mass (1)
Market
64%
STRONG MIX OF LUXURY AND MASS MARKET BRANDS EXHIBITING STABILITY IN
INITIAL PROPERTIES
(1) Mass Market segment includes: Chrysler, Ford, General Motors, Kia, Nissan, Nissan Infiniti, Honda, Hyundai, Mazda, Mitsubishi, Toyota and Volkswagen.
(2) Luxury segment includes: Acura, Audi, BMW and Infiniti.
(3) Ultra-Luxury segment includes: Aston Martin, Bentley, Lamborghini, Land Rover, Lincoln, Porsche, Maserati, McLaren and Mercedes-Benz.
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EXCELLENT LEASING PROFILE
• Triple-net leases
• Weighted average term of 15 years at IPO
• Rent indemnified by Dilawri Group
- 2014 EBITDAR to rent coverage ratio
of 3.7x
• Fixed 1.5% annual rent escalator for Initial
Properties over the next 11 – 19 years
- +1.5% in rent = +2.4% in AFFO
Lease Maturity Schedule
17%
$3.7
$4.0
17%
$3.2
14%
16%
$2.2
$1.9
$1.5
6%
No Lease Maturities for the Next 11 Years
'15
'16
'17
'18
'19
'20
'21
'22
'23
9%
'24
'25
'26
'27
$1.3
$1.5
6%
6%
'33
'34
8%
'28
'29
'30
'31
'32
% of Cash NOI
Cash NOI ($million)
$4.0
RELIABLE LONG-TERM CASH FLOW, WITH CONTRACTED, LONG-TERM
RENTAL INCOME GROWTH AND NO LEASE EXPIRATIONS UNTIL 2026
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CANADIAN AUTOMOTIVE DEALERSHIP INDUSTRY
Retail Sales
15.3% - 17.1%
112 120
105
96 94 88 96 100
87 92
83
83
83
74 78
65 70
64
50 53 56
Proportion of Canada’s ~ 3,400 Dealerships
Owned by Size of Ownership Group
5 or more
Dealerships
35%
50%
15%
Single
Dealership
2-4
Dealerships
Number of Owners With 5 or
More Dealerships
($billions)
10-year Range of Gross Profit
Margins of North American
Publicly Listed Automotive
Dealership Groups
Automotive Dealership Industry in Early
Stages of Consolidation
120
110
100
90
80
70
60
2009
2010
2011
2012
2013
AS CANADA’S LARGEST RETAIL SEGMENT (6.1% OF 2014 GDP), THE AUTOMOTIVE
DEALERSHIP INDUSTRY IS HIGHLY FRAGMENTED AND NOW CONSOLIDATING
Source: Statistics Canada and DesRosiers Automotive Consultants Inc.
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10 DEALERSHIP GROUPS: ONLY 9.1% OF MARKET
Company
Dealerships
% of Total
Dealership Locations
Dilawri Group(1)
57
1.6%
QC, ON, SK, AB, BC
AutoCanada(1)
48
1.4%
NS, NB, ON, MB, SK, AB, BC
Go Auto(1)
35
1.0%
AB, BC, NWT, Y
Gabriel-Prestige-President Group(1)
27
0.8%
QC
Pattison Auto Group(1)
27
0.8%
NS, NB, ON, MB, SK, AB, BC
Humberview(1)
27
0.8%
ON
O’Regan Group(1)
26
0.7%
NS
Murray Auto Group(1)
25
0.7%
NS, MB, SK, AB, BC
Zanchin Automotive Group(1)
24
0.7%
ON
Wheaton(1)
19
0.5%
SK, AB, BC
Top 10 subtotal
315
9.1%
Other
3,154
90.9%
Total
3,469(2)
100.0%
OPPORTUNITY TO CONSOLIDATE HIGHLY FRAGMENTED INDUSTRY
(1) Information based on latest publicly available information or as at the date hereof in respect of the Dilawri Group.
(2) Source: DesRosiers Automotive Consultants Inc.
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PARTNERING WITH AUTOMOTIVE PROPERTIES REIT
Established
Dealers
•
•
•
•
Succession planning
Monetization of embedded capital
Wealth diversification / Tax efficient Class B LP Units
Invest in core business
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
PROVIDING FINANCIAL LIQUIDITY TO AUTOMOTIVE DEALERSHIP OWNERS TO
SUPPORT THE ADVANCEMENT OF THEIR STRATEGIC OBJECTIVES
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STRONG NATIONAL TENANT
• 57 franchised automotive dealerships,
Dilawri 5-Year Historical Revenues ($millions)
representing 30 brands
• Presence in QC, ON, SK, AB, BC
$1,641
$1,324
• 2014 combined revenues of
approximately $1.6 billion
(20% 4-year CAGR)
$795
$930
$1,016
• 2014 combined EBITDAR of
approximately $100 million
(24% 4-year CAGR)
EBITDAR
2010
2011
2012
2013
$43
$58
$65
$81
2014
$100
ALIGNMENT OF INTERESTS THROUGH DILAWRI’S ~55% EFFECTIVE OWNERSHIP
INTEREST IN THE REIT
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PIPELINE OF DILAWRI PROPERTIES
• Strong track record of developing
automotive dealerships
- Over the last five years, Dilawri has, on
average
opened or acquired five new automotive
dealerships per year
> including, on average, two to three automotive
dealership properties
>
Audi, Barrie
- 12 of the 26 initial properties were
either opened or acquired within the
last five years
- Three development properties
currently in pipeline
>
>
Barrie: 2 dealerships (Audi, VW)
Calgary: 1 dealership (Honda)
Volkswagen, Barrie
- Aggregate of 97,000 sq. ft. of GLA
- REIT-suitable within 12 to 18 months
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OPERATING RESULTS
71-day period
ended
Sept. 30, 2015
Forecast for 71day period
ended
Sept. 30, 20151
Revenue from investment properties
5,801
5,783
Cash NOI
4,544
4,538
FFO
3,600
3,516
AFFO
3,086
3,003
Fair value adjustment to investment properties
1,155
(480)
Distributions
0.156
0.156
FFO
0.199
0.195
AFFO
0.171
0.166
FFO payout ratio
78.2%
80.2%
AFFO payout ratio
91.3%
93.9%
($thousands, except per unit amounts and as otherwise noted)
Per Unit Amounts
(1) The financial forecast for the 3-month period ended Sept. 30, 2015 included in the REIT’s IPO prospectus has been adjusted to reflect the start of operations
occurring on July 22, 2015 in order to facilitate comparison with actual results for all line items. The adjusted property revenue was calculated as follows: total rent
revenue of $23,951 for the twelve month period divided by 365 days and multiplied by 10 days in July, and including August and September monthly rental revenue.
Also included is the prorated amounts for realty tax and straight-line rent adjustment.
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BALANCE SHEET METRICS
($thousands, unless otherwise noted)
Total assets
Units outstanding (includes Class B LP Units)
At September 30, 2015
$370,414
18,053,253
Market capitalization (includes Class B LP Units)
$175,839
Weighted average effective interest rate on debt
3.15%
Proportion of debt at fixed rates
100%
Weighted average debt term remaining (years)
6.1
Interest coverage ratio
3.7
Debt to GBV
52.4%
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DEBT STRATEGY
•
•
REIT’s Indebtedness to GBV at September 30, 2015: 52.4% (target range of 55%-60%)
With interest rate SWAPs, the weighted average term to maturity is approximately 6.1 years
($thousands)
Loan
Maturity
Principal Amount at
September 30, 2015
Effective Fixed
Rate of Interest
Repayment
Non-revolving Facility 1
5 years
$119,510
3.1%
Open
Non-revolving Facility 2
5 years
59,646
3.1%
Open
Non-revolving Facility 3
4 years
13,996
3.5%
Closed
$193,152
3.15%
Total/Weighted Average:
Principal Mortgage Repayment Schedule ($thousands)
148,261
1,892
7,622
7,713
7,887
2015
2016
2017
2018
19,777
2019
Thereafter
SUBSTANTIAL LEASE TERM REMAINING AT DEBT MATURITY
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STRONG MAJORITY INDEPENDENT BOARD
Name, Province and
Country
of Residence
Position/Title
Independent
Committees
Principal Occupation
Kapil Dilawri
Ontario, Canada
Chair
No
N/A
Co-founder of the Dilawri
Group and Vice President
and Secretary of Dilawri
James Matthews
Ontario, Canada
Trustee
No
N/A
Chief Financial Officer of
the Dilawri Group
Janet Graham
Ontario, Canada
Trustee
Yes
Audit Committee
Governance, Compensation
and Nominating Committee
Managing Director
IQ Alliance Incorporated
Stuart Lazier
Ontario, Canada
Trustee
Yes
Audit Committee
Partner, Co-Founder and
Governance, Compensation Chief Executive Officer Fiera
and Nominating Committee
Properties Limited
Yes
Audit Committee
Governance, Compensation
and Nominating Committee
John Morrison
Ontario, Canada
Lead Trustee
President and Chief
Executive Officer
Choice Properties Real
Estate Investment Trust
EXPERTISE IN AUTO, REAL ESTATE AND CAPITAL MARKETS
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INVESTMENT HIGHLIGHTS
• Opportunity to gain exposure to a unique real estate asset class
• Portfolio of high-quality and strategically located automotive
dealership properties
• Strong national tenant with significant alignment of interest
• Long-term, triple-net leases
• Automotive dealership properties benefit from strong
underlying fundamentals
• Stable, predictable cash flows and sound balance sheet
• Significant growth opportunities
• Experienced executive management and strong, independent board
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