Automotive Properties Real Est Invt TR Q2 Earnings Call Highlights

Key Points

• Q2 2026 results strengthened: Property rental revenue rose 22.8% year over year to CAD 30.2 million, cash NOI increased 20% to CAD 24.8 million, and AFFO grew 18.6%. Diluted AFFO per unit reached a record CAD 0.263.
• Distribution increased approximately 2%: The annual cash distribution will rise to CAD 0.839 per unit, with the monthly payment increasing to CAD 0.0699. The AFFO payout ratio improved to 78.3% from 80.7%.
• Portfolio and growth expanded: Lease renewals extended the REIT’s material lease-expiration schedule to 2028, while a Vaughan joint arrangement secured a 16-year triple-net lease and preserved redevelopment potential. The REIT also continued U.S. expansion, supported by acquisitions and available credit capacity.

Automotive Properties Real Est Invt TR TSE: APR.UN reported higher revenue, net operating income and adjusted funds from operations in the second quarter of 2026, supported by acquisitions completed during 2025 and the first quarter as well as partial-period contributions from three properties acquired in California early in the second quarter.

President and CEO Milton Lamb said the quarter reflected both acquisition activity and the REIT’s net-lease structure, which includes contractual fixed or CPI-adjusted rent increases. Property rental revenue rose 22.8% from a year earlier, while cash net operating income increased 20% and AFFO rose 18%.

Record AFFO Per Unit and Distribution Increase

Property rental revenue totaled CAD 30.2 million in the quarter, compared with CAD 24.6 million in the prior-year period, CFO Andrew Kalra said. Total cash NOI was CAD 24.8 million, up 20% year over year, while same-property cash NOI rose 2.2% to CAD 21.1 million.

Net income and other comprehensive income increased to CAD 18.1 million from CAD 11.2 million a year earlier. Kalra attributed the increase primarily to higher NOI, changes in non-cash fair-value adjustments on investment properties and a foreign-exchange gain, partly offset by higher interest costs and changes in non-cash fair-value adjustments for interest-rate swaps.

FFO increased 19.4% from the second quarter of 2025, while AFFO increased 18.6%. Diluted FFO per unit was CAD 0.270, compared with CAD 0.244 a year earlier, and diluted AFFO per unit reached a record CAD 0.263, up from CAD 0.249.

The REIT paid distributions of CAD 0.206 per unit during the quarter, resulting in an AFFO payout ratio of 78.3%, down from 80.7% in the prior-year quarter.

Based on the results, the board approved an approximately 2% increase in the annual cash distribution to CAD 0.839 per unit from CAD 0.822 per unit. The monthly distribution will rise to CAD 0.0699 per unit from CAD 0.0685, effective with the distribution expected to be paid around Sept. 15 to unitholders of record on Aug. 31.

Lamb said the increase marked the second consecutive year the REIT has raised its distribution and reflected management’s confidence in the stability of cash flow.

Lease Renewals Extend Maturity Profile

During the quarter, Automotive Properties REIT renewed leases at dealership properties in Vancouver and Regina. The extensions averaged 7.5 years and included base-rent increases of about 4.8%, followed by annual fixed rent increases.

The REIT also extended the lease for its VW Des Sources dealership property in Montreal for six years beyond its 2027 maturity, subject to a CPI adjustment in 2027. A dealership property in Calgary was extended for five years, with rents to be determined when that renewal begins.

Lamb said the new lease activity, together with a subsequent Vaughan, Ontario, transaction, means the REIT has no material lease expirations until 2028. He added that demand for automotive facilities has helped the company maintain a fully leased portfolio despite changes in OEM franchises at certain locations.

In discussing the renewals with analysts, Lamb said some reflected option periods, while others were aided by backup demand for the facilities. He also noted that dealership groups have in some instances used properties for different OEM franchises, supporting demand for the real estate even when a dealership operation changes.

Vaughan Joint Arrangement Includes Redevelopment Option

Subsequent to quarter-end, the REIT entered into a new lease and joint arrangement with a member of the Dilawri Group for its 69,000-square-foot dealership property at 9088 Jane Street in Vaughan.

Under the agreement, the property will be leased for 16 years on a triple-net basis, with the landlord retaining a redevelopment option. Rent payments are expected to begin Dec. 1. The REIT also agreed to sell a 50% interest in the property for CAD 16 million in cash, implying a CAD 32 million value for the full property. The transaction is expected to close in September, and the parties have waived conditions.

Lamb said the REIT bought the property for just over CAD 17 million in 2016. He characterized the arrangement as a balance between securing income from a high-quality tenant and preserving flexibility for potential future mixed-use redevelopment. He said the company does not view the current environment as the right time to pursue redevelopment, but expects the property’s land value could benefit as the market matures.

The prior tenant was Pfaff, later acquired by Lithia, operating an Audi dealership at the site, Lamb said. The former tenant relocated nearby to a larger newly built facility. Management did not disclose the incoming OEM or the new lease’s cap rate.

Debt Position and U.S. Expansion

Interest expense and other financing charges rose to CAD 8.1 million from CAD 6.4 million in the prior-year quarter, reflecting debt incurred to fund acquisitions. General and administrative expense was CAD 1.6 million, up about CAD 80,000 year over year.

During the quarter, the REIT increased the non-revolving portion of Facility Two by CAD 35 million and extended its maturity to June 2030 while maintaining the same credit spread. At quarter-end, 74% of debt was fixed, with a weighted-average interest rate of 4.49%.

• Weighted-average remaining interest-rate swap and mortgage term: 3.9 years
• Weighted-average debt maturity: 2.9 years
• Debt-to-gross book value ratio as of Aug. 13: 47.5%
• Undrawn credit-facility capacity: approximately CAD 64 million
• Unencumbered properties: 11, valued at CAD 166.7 million

Lamb said the REIT’s U.S. portfolio now includes properties in Ohio, Florida and California, with tenants and automotive brands including Tesla, Rivian, Penske Automotive Group, Audi and Volkswagen. He said the broader geographic and tenant base provides additional acquisition opportunities in Canada and the United States, particularly in U.S. markets with population and GDP growth.

About Automotive Properties Real Est Invt TR (TSE:APR.UN)

Automotive Properties REIT is an unincorporated, open-ended real estate investment trust focused on owning and acquiring primarily income-producing automotive and other OEM dealership and service properties located in Canada and the United States. The REIT's portfolio currently consists of 91 income-producing commercial properties, representing approximately 3.4 million square feet of gross leasable area, in metropolitan markets across British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Québec in Canada, and Florida and Ohio in the United States.

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