Consolidating Canada’s Automotive Dealership Properties Investor Presentation September 2019
Disclaimer FORWARD-LOOKING STATEMENTS Certain statements contained in this presentation constitute forward-looking information within the meaning of applicable securities legislation. 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 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 an d 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 i n 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’’), cash net operating income (‘‘Cash NOI’’) and Same Property cash operating income (“Same Property Cash NOI”) are key measures of performance used by management and 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 a key measure of economic earnings performance and is indicative of the REIT’s ability to pay distributions from earnings, 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. 1
REIT Overview High-quality portfolio of dealership properties in metropolitan markets across Canada Ottawa / Greater Greater Greater Kitchener-Waterloo / Edmonton Calgary Regina Winnipeg Kingston Vancouver Area Toronto Area Montreal Area Guelph > 190 acres 60 Long-term, triple-net leases with contractual annual rent escalators of commercially-zoned Representing 32 global manufacturers / brands income-producing properties urban real estate 2.2 million > 80% Tesla square feet of Gross Leasable exposure to VECTOM Area (“GLA”) markets CANADA’S ONLY PUBLIC VEHICLE CONSOLIDATING AUTOMOTIVE DEALERSHIP PROPERTIES 2
Capital Market Profile (TSX: APR.UN) Recent price: $10.35¹ Investment properties: REIT Units: 29.8 million 1 $830 million 2 Market capitalization : Class B Units: 9.93 million 3-year total return: 27 % 2 $411 million 1 Annualized distribution Yield¹ Q2 2019 AFFO Payout Ratio 2018 tax treatment 85% Return of Capital $0.804 / unit 7.7% 81.4% 15% Interest income Analyst coverage (1) As at August 28, 2019 (2) As at June 30, 2019 3
» Canadian Automotive Dealership Industry 1 Retail Sales 162 160 146 ($billions) 27% 132 122 113 105 100 96 96 94 92 87 88 83 83 83 78 74 Auto industry’s proportion of 70 65 Canada’s overall retail sales of products and merchandise in 2018 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Canadian New Motor Vehicle Sales (# of units sold, 2018 and 2017) 2.04 Million 1,000,000 Motor vehicle unit 800,000 sales in Canada in 2018 600,000 2017 400,000 2018 2nd Highest 200,000 Annual unit sales in Canadian history 0 Atl. Provinces QC ON MB SK AB BC & Territories (slight ~2% decline from record levels in 2017) (1) Source: Statistics Canada THE AUTOMOTIVE RETAIL SALES INDUSTRY IS CANADA’S LARGEST RETAIL SEGMENT 4
Automotive Dealership Group Profit Centres Average revenue / profit % contribution per business segment for major North American automotive dealership groups¹ Parts, service and repair Finance and Insurance New vehicle sales Used vehicle sales 10% 20% 30% 40% 50% Percentage of total profit (average) Percentage of total revenue (average) (1) Chart data is derived from the public disclosure of Auto Canada, Lithia, Penske Automotive, AutoNation, Group 1 Automotive, Ashbury Automotive and Sonic Automotive for the six months ended June 30, 2019 80.7% OF PROFITS ARE GENERATED FROM REVENUE SOURCES OTHER THAN NEW CAR SALES 5
Automotive Retail Public CO’s Price Dividend Market Cap EV P/E EV/EBITDA CAGR 2017 - 2020E Gain Net Debt/EBITDA Company Ticker 8-6-19 Yield (USD MM) (USD MM) 2017 2018 2019E 2020E 2017 2018 2019E 2020E Revenue EBITDA EPS YTD MRQ/2019E Asbury Automotive ABG-US 92.85 0.2% 1,792 2,692 14.0x 11.0x 10.0x 9.6x 8.3x 8.5x 8.0x 7.8x 4.1% 2.0% 13.7% 39.3% 2.7x AutoNation AN-US 47.81 1.4% 4,312 6,701 10.8x 10.7x 10.7x 10.4x 7.2x 7.1x 6.8x 7.2x -0.7% 0.3% 1.1% 33.9% 2.4x Group 1 Automotive GPI-US 82.55 1.3% 1,480 2,810 8.2x 9.3x 8.1x 7.8x 6.5x 7.3x 7.0x 6.7x 2.0% -1.2% 1.7% 56.6% 3.3x Lithia Motors LAD-US 128.77 0.9% 3,026 4,331 13.2x 12.9x 11.5x 10.6x 9.0x 9.5x 8.8x 8.3x 8.5% 2.5% 7.7% 68.7% 2.7x Penske Automotive PAG-US 44.87 3.2% 3,720 5,924 6.3x 8.4x 8.5x 8.0x 8.4x 7.1x 7.4x 7.1x 3.6% 5.7% -7.8% 11.3% 2.7x Sonic Automotive SAH-US 27.03 0.9% 1,169 2,081 12.9x 14.9x 12.0x 11.5x 6.7x 7.8x 6.9x 6.8x 1.9% -0.3% 4.0% 96.4% 3.0x Peer Average 1.3% 2,583 4,090 10.9x 11.2x 10.1x 9.6x 7.7x 7.9x 7.5x 7.3x 3.2% 1.5% 3.4% 51.0% 2.8x AutoCanada ACQ-CA 8.60 4.7% 177 400 4.1x 215.0x 17.8x 6.1x 4.7x 9.0x 5.6x 4.3x 4.0% 2.9% -12.7% -24.2% 2.9x Source: RBC Capital Markets as at July 7, 2019 US PUBLIC DEALERSHIP COMPANIES UP 51% YTD AS PROFITS REMAIN RESILIENT 7
Growth
2018-19 Summary • Seven completed acquisitions, comprising 19 automotive dealerships, and one expansion, adding ~ 800,000 sq. ft of GLA, for a combined purchase price of approximately $262 million • Geographic diversification with expansion into Ottawa, Kingston, Winnipeg and Kitchener-Waterloo / Guelph • Added four new multi-dealership tenants to portfolio and representation of new automotive brands – Subaru, Lexus and Tesla • Completed $55 million equity offering (Oct. 2018) • Completed $84 million equity offering (June 2019) • Extended and increased credit facilities (Q4 2018 / Q1 2019) CONTINUED GEOGRAPHIC, BRAND AND TENANT DIVERSIFICATION 7
Acquisition Growth (July 2015 IPO to Present) 65 2,300,000 • 34 properties and one expansion 60 • $430 million combined purchase price 2,100,000 Gross Leasable Area (square feet) • Added ~1.3 million square feet of GLA to 55 1,900,000 portfolio Number of Properties 50 • Acquisitions indirectly funded by four 1,700,000 45 fully-subscribed equity offerings totaling 1,500,000 ~$225.5 million 40 • Increased brand, geographic and tenant 1,300,000 35 diversification 1,100,000 • Enhanced capital market liquidity 30 • Accretive to AFFO per Unit 25 900,000 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 2018 2019 Properties Gross Leasable Area 8
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