Automotive Properties Real Est Invt TR TSE: APR.UN reported higher first-quarter revenue and cash flow, with management citing the impact of acquisitions completed in 2025 and early 2026, along with contractual rent increases embedded in its net lease portfolio.
President and CEO Milton Lamb said the REIT’s “strong first quarter performance” reflected the contribution from 13 property acquisitions completed in 2025 for an aggregate purchase price of approximately CAD 200 million, as well as partial contributions from two additional acquisitions completed during the quarter.
Compared with the first quarter of last year, property rental revenue rose 21.7%, cash net operating income increased 19%, and adjusted funds from operations per unit on a diluted basis rose to CAD 0.262 from CAD 0.247. Lamb said the quarterly AFFO per unit represented a record for the REIT and demonstrated the positive impact of acquisitions and annual rent increases tied to fixed or CPI-adjusted contractual provisions.
The AFFO payout ratio declined to 78.6% in the quarter, even after a distribution increase in 2025.
Revenue, NOI and AFFO Rise
Chief Financial Officer Andrew Kalra said property rental revenue increased to CAD 29.1 million from CAD 23.9 million in the prior-year quarter, driven by properties acquired during and after the first quarter of last year and contractual annual rent increases.
Total cash NOI was CAD 23.8 million, while same-property cash NOI was CAD 20.4 million, representing increases of 19% and 2.1%, respectively, from the first quarter of last year. Interest expense and other financing charges increased by CAD 1.3 million to CAD 7.3 million, reflecting additional debt used to fund acquisitions. General and administrative expenses were CAD 1.6 million, up CAD 0.1 million and in line with expectations, Kalra said.
Net income and other comprehensive income was CAD 25.3 million, compared with CAD 7.6 million a year earlier. Kalra attributed the increase primarily to higher NOI and non-cash fair value adjustments for investment properties and interest rate swaps, partially offset by higher interest costs and changes in non-cash fair value adjustments for Class B units and unit-based compensation.
Funds from operations and AFFO increased 20.4% and 19.1%, respectively. On a per-unit diluted basis, FFO rose to CAD 0.268 from CAD 0.251, and AFFO rose to CAD 0.262 from CAD 0.247. The REIT paid distributions totaling CAD 0.206 per unit, compared with CAD 0.201 per unit in the first quarter of last year.
Acquisitions Expand U.S. Footprint
During the quarter, the REIT completed two acquisitions: a full-service Hyundai dealership in Quebec City and a Rivian-tenanted sales, delivery and service facility in Vista, California, in San Diego County.
After quarter-end, on April 7, Automotive Properties REIT completed another Southern California acquisition, consisting of two Penske Automotive dealership properties in Santa Ana, California, within the Santa Ana Auto Mall. The assets include Audi South Coast, a 32,000-square-foot full-service Audi dealership, and South Coast Volkswagen, a 29,000-square-foot full-service Volkswagen dealership. Both are operated by Penske Automotive Group.
Lamb said acquisitions completed last year and so far in 2026 are expected to support continued growth in AFFO per unit. He also said the REIT is approaching just under 100 properties in its total portfolio.
Following its entry into the U.S. market last year, Lamb said the REIT has increased its geographic and tenant diversity through acquisitions south of the border. The portfolio now includes properties in Ohio, Florida and California with automotive brands and tenants including Tesla, Rivian and Penske Automotive’s Audi and Volkswagen dealerships.
Balance Sheet and Debt Strategy
Kalra said the capitalization rate applicable to the portfolio was 6.75% at quarter-end, unchanged from year-end 2025 and slightly above 6.7% at the end of the first quarter of last year.
During the quarter, the REIT entered into floating-to-fixed interest rate swaps within one of its facilities totaling CAD 45 million, with terms of five to seven years and rates between 4.45% and 4.59%. The REIT also increased the revolving portion of another facility by CAD 25 million and extended its maturity to June 2029 at the same credit spread.
At quarter-end, the REIT’s debt-to-gross book value ratio was 46.3%, which Kalra said provided further acquisition capacity. As of March 31, 2026, 77% of debt was fixed, with a weighted average interest rate of 4.48%. The weighted average term to maturity of mortgages was 4.2 years, while the weighted average debt term to maturity was 2.8 years.
As of May 13, the REIT had approximately CAD 32.5 million of undrawn capacity under its credit facilities and 13 unencumbered properties valued at approximately CAD 195.4 million.
Management Discusses U.S. Deal Activity and Canadian Pipeline
In response to a question from TD Cowen analyst Jonathan Kelcher about U.S. acquisition activity, Lamb said the U.S. has more metropolitan markets with GDP and population growth, as well as higher transaction velocity. He contrasted that with Canada, where owners tend to hold assets for long periods and REIT activity is more often tied to dealership mergers and acquisitions.
Lamb said M&A-driven opportunities are likely to occur on both sides of the border, but the U.S. offers larger markets and more trading activity.
Asked by ATB Cormark analyst Sairam Srinivas about capital requirements for dealerships in the U.S. versus Canada, Lamb said OEM requirements are broadly similar, but the cost to complete them is often higher in Canada due to higher land and construction costs in markets such as Toronto, Vancouver, Montreal and Calgary.
On competition for acquisitions, RBC Capital Markets analyst Jimmy Shan asked about a recent W.P. Carey transaction with Go Auto. Lamb said it was the first such deal in some time in what he described as the REIT’s “sandbox,” and said competition could emerge. However, he said the REIT has remained active in its pipeline and disciplined in deploying capital.
Desjardins analyst Zemin Liu asked about the REIT’s acquisition pipeline with Dilawri. Lamb said the REIT continues to have a strategic alliance with Dilawri and expects to pursue opportunities with the group as it grows. However, he added that because of the fragmented nature of the Canadian dealership market, the REIT expects many opportunities to come from other dealership groups as well.
Leasing and Property Strategy
Asked by Raymond James analyst Brad Sturges about the Orange County acquisition’s rent growth terms, Lamb said the CPI-linked rent mechanism includes a floor and cap, but did not disclose specifics. He said the structure is not uncommon in the market.
Sturges also asked about the REIT’s Vaughan property and whether management was considering re-leasing or a potential asset sale. Lamb said the property’s roughly 3 acres of land have both high-density potential and retail value, and management is evaluating the balance between a long-term tenancy, a possible termination option, or a shorter-term deal that could preserve redevelopment flexibility.
On lease expirations, Lamb said the Pfaff lease is the only outstanding 2026 lease expiry and added that there is very little lease rollover in 2027 as well. He did not provide a specific NOI impact for the Pfaff lease expiry.
Lamb closed by saying the REIT remains focused on driving AFFO per unit and building value for unitholders, supported by a growing portfolio of properties with high-quality tenants, 100% occupancy and rent collection, prime metropolitan locations and net lease structures with embedded rent growth.
About Automotive Properties Real Est Invt TR TSE: APR.UN
Automotive Properties Real Estate Investment Trust is an unincorporated open-ended real estate investment trust focused on investing in high-quality Canadian automotive properties tenanted by automotive dealership groups and automotive brands ranging from mass-market to ultra-luxury. The company holds a portfolio of best-in-class properties located in strategic Canadian urban markets across Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, and Quebec. The primary objectives of the REIT are to provide Unitholders with stable, sustainable and growing cash distributions, and to enhance and expand the REIT's asset portfolio to maximize Unitholder value.
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