Automotive Properties REIT Investor Presentation January 2017 - PowerPoint PPT Presentation

Automotive Properties REIT Investor Presentation January 2017

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 NOI’’) 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. 2

REIT OVERVIEW • Canada’s only public vehicle focused on consolidating automotive dealership real estate properties • High-quality portfolio of strategically located dealership properties across Canada, representing 29 global manufacturers / brands • Long-term, triple-net leases with fixed rent escalators provide stable, predictable cash flows • Strong, independent board and REIT-friendly management agreement (fixed fee for forecast period and cost-recovery thereafter, no termination fee, no acquisition fees) PORTFOLIO WELL-POSITIONED TO GENERATE A RELIABLE STREAM OF CASH DISTRIBUTIONS 3

CAPITAL MARKET PROFILE Market capitalization: ~ $235 million 1 IPO: July 2015 / TSX: APR.UN REIT Units outstanding: 11.96 million Monthly distribution per unit: $0.067 Class B LP Units: 9.93 million ($0.80 annualized) Recent Unit Price: $10.80² Distribution yield: ~7.5%² 52-week high / low²: $11.10 / $8.29 Q3 2016 AFFO payout ratio: 85.2% Public ownership at IPO: 55% institutional Analyst Coverage: Sept 2016 Offering: 77% institutional (1) Includes Class B Units (2) As at Jan. 3, 2017 4

PORTFOLIO OVERVIEW • Modern, best-in-class dealerships • 6 accretive acquisitions since IPO • 32 properties, 49 rental buildings on > 100 acres • Acquisitions enhance tenant, brand and geographic diversification • ~ 1.3 million square feet of Gross Leasable Area (“GLA”) Edmonton GVA Calgary Montréal Regina GTA GROWTH DRIVERS: PORTFOLIO EXPANSION AND RENT INCREASES 5

PORTFOLIO DIVERSIFICATION 1 By GLA By Cash NOI Edmonton Edmonton Montreal Montreal 4% 5% 2% 4% GVA Regina Regina 14% GTA & GTA & 13% 16% Calgary Barrie Barrie Calgary 14% 48% 47% 16% GVA GVA 13% 18% 16.7% Manufacturer / Brand (By % of Dealership Rent) 16.9% 10.9% 10.9% 10.7% 7.8% 6.9% 4.4% 4.2% 3.8% 3.6% 3.2% Other # of REIT Locations 6 2 3 3 3 2 2 3 2 1 2 10 PROPERTIES BENEFIT FROM PRIME LOCATIONS IN STRATEGIC URBAN MARKETS, AND BROAD DIVERSIFICATION OF INDUSTRY-LEADING BRANDS (1) As at September 30, 2016. Does not include include the impact of the Audi / Volkswagen and Mercedes-Benz West Island dealership property acquisitions, which occurred subsequent to Q3 2016 6

MANUFACTURER AND BRAND DIVERSIFICATION 1 Manufacturers by Region Brands by Market Segment (% of Cash NOI from Dealership Properties) (% of Cash NOI from Dealership Properties) Ultra- North (4) Luxury (4) America 13% (2) 8% Asia Mass Europe Luxury (3) (2) 54% Market 38% 33% 54% STRONG MIX OF LUXURY AND MASS MARKET BRANDS (1) As at September 30, 2016. Does not include the impact of the Audi / Volkswagen and Mercedes-Benz West Island property acquisitions, which occurred subsequent to Q3 2016 (2) Mass Market segment includes: Chrysler, Ford, General Motors, Kia, Nissan (including Nissan Infiniti), Honda, Hyundai, Mazda, Mitsubishi, Toyota and Volkswagen. (3) Luxury segment includes: Acura, Audi, BMW and Infiniti. (4) Ultra-Luxury segment includes: Aston Martin, Bentley, Lamborghini, Land Rover, Lincoln, Porsche, Maserati, McLaren and Mercedes-Benz. 7

STRONG LEAD TENANT • 61 franchised automotive dealerships, Dilawri 5-Year Historical Revenues ($millions) representing 30 brands • Presence in QC, ON, SK, AB, BC $2,000 • REIT has the first right to acquire from $1,641 Dilawri development and acquisition $1,324 $1,016 pipeline $930 - Over the last five years, Dilawri has, on average opened or acquired five new automotive dealerships per year, including two to three automotive 2011 2012 2013 2014 2015 dealership properties EBITDAR $58 $65 $81 $100 $108 CAGR of ~17% ALIGNMENT OF INTERESTS THROUGH DILAWRI’S ~45% EFFECTIVE OWNERSHIP INTEREST IN THE REIT 8

LEASING PROFILE • Triple-net leases • Weighted average term of ~ 13.4 years • 30 of 32 leases indemnified by Dilawri • Fixed 1.5% annual rent escalator for 30 Group - 2015 EBITDAR to rent coverage ratio of 32 properties over the next 11 – 19 years of 3.4x - +1.5% in rent = +2.4% in AFFO Lease Maturity Schedule 5.0 25% $4.8 $4.6 $4.8 4.0 20% Cash NOI ($million) % of Cash NOI $3.2 3.0 17% 15% 17% 17% $2.2 $1.9 2.0 10% $1.5 $1.5 $1.4 11% $1.2 8% $0.8 1.0 5% 7% 5% 5% 5% 4% 3% - - '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 RELIABLE LONG-TERM CASH FLOW, WITH CONTRACTED, LONG-TERM RENTAL INCOME GROWTH AND NO LEASE EXPIRATIONS UNTIL 2026 (1) As at September 30, 2016. 9

ACQUISITIONS SUBSEQUENT TO IPO Toyota Woodland (Montreal, Quebec) # 1 • $7.2 million purchase price / 7.3% cap rate • Closed Dec. 24, 2015 Entry into Canada’s • 50,000 square feet (GLA) / ~1 acre 2 nd largest urban • Built in 2007 / 2008 market • 16-year triple-net lease • Funding: Cash from IPO over-allotment; and remaining balance from revolving credit facility. ACCRETIVE ACQUISTION ENHANCES BRAND, GEOGRAPHIC AND TENANT DIVERSIFICATION, WHILE EXTENDING WEIGHTED AVERAGE PORTFOLIO LEASE TERM 10

ACQUISITIONS SUBSEQUENT TO IPO Go Auto (Edmonton, Alberta) # 2 • $23.0 million purchase price / 6.6% cap rate • Closed Dec. 31, 2015 First transaction with • 44,800 square feet (GLA) / 5.2 acres third party dealership • Built in 2014 tenant • 17-year triple-net lease • Funding: $7.2 million draw on revolving credit facility; $15 million increase to existing credit facility, with a 7-year interest rate hedging program, fixing the interest rate at 3.17%; and balance in cash from IPO over-allotment. ACCRETIVE ACQUISTION ENHANCES BRAND, GEOGRAPHIC AND TENANT DIVERSIFICATION, WHILE EXTENDING WEIGHTED AVERAGE PORTFOLIO LEASE TERM 11