Automotive Properties REIT Announces Acquisition of Two Dealership Properties from AutoCanada and $55 Million Equity Offering

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Automotive Properties REIT Announces Acquisition of Two Dealership Properties from AutoCanada and $55 Million Equity Offering

Canada NewsWire

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TORONTO, Sept. 25, 2018 /CNW/ - Automotive Properties Real Estate Investment Trust (TSX: APR.UN) (the "REIT") announced today that is has entered into an agreement to purchase two automotive dealership properties from AutoCanada Inc. (TSX: ACQ) ("AutoCanada") for a total purchase price of approximately $55.5 million (the "Transaction").

Automotive Properties REIT (CNW Group/Automotive Properties Real Estate Investment Trust)

The REIT also announced that it has entered into an agreement to sell 5,100,000 units of the REIT (the "Units") on a bought deal basis at a price of $10.80 per Unit (the "Offering Price") to a syndicate of underwriters bookrun by TD Securities Inc. and Scotiabank and co-led by BMO Capital Markets for gross proceeds of approximately $55.1 million (the "Offering").

In addition, the REIT has granted the syndicate of underwriters an over-allotment option, exercisable in whole or in part at any one time up to 30 days following closing of the Offering, to purchase up to an additional 765,000 Units at the Offering Price which, if exercised in full, would increase the gross proceeds of the Offering to approximately $63.3 million. 893353 Alberta Inc. (Dilawri) has waived its pre-emptive right in connection with the Offering.

The two dealership properties included in the Transaction are the BMW Laval automotive dealership property (the "BMW Laval Property") located in Laval, Québec, part of the Montreal metropolitan area; and the Sherwood Park Volkswagen automotive dealership property (the "Sherwood Park VW Property") located in Sherwood Park, Alberta, part of the Edmonton metropolitan area. The additions of the BMW Laval Property and the Sherwood Park VW Property are expected to be moderately accretive to the REIT's run-rate Adjusted Funds from Operations ("AFFO")¹ per unit on a leverage-neutral basis.

"We are pleased to enter into our first acquisition agreement with AutoCanada, one of Canada's largest automotive retailers. This transaction highlights our focus on partnering with leading automotive dealership operators that are active in consolidating the industry," said Milton Lamb, President and CEO of the REIT. "The addition of these two best-in-class dealership properties to our portfolio will further build our presence in both the greater Montreal area, Canada's second largest urban market, and the greater Edmonton area, providing more exposure to the rebounding Alberta economy."

The BMW Laval Property was built in 2000 and substantially renovated in 2011 / 2012 and includes a 111,187 square foot full-service BMW dealership facility and a 16,428 square foot MINI dealership. The BMW Laval Property is located on approximately 8.4 acres of land located at 2440 and 2450 Boulevard Chomedey with convenient access to the Trans-Canada Highway in an area of substantial commercial development. Upon closing of the Transaction, an affiliate of AutoCanada will be the operating tenant of the property and will enter into an 18-year, triple-net lease with the REIT. The lease will include a contractual annual rent increase after the third year of the lease term that will be based on the Consumer Price Index. AutoCanada Holdings Inc. will provide an indemnity to the REIT in respect of the lease obligations.  

The Sherwood Park VW Property includes a 48,921 square foot, full-service Volkswagen dealership facility built in 2015. The Sherwood Park VW Property is located on approximately 4.5 acres of land located at 2365 Broadmoor Boulevard with convenient access from the Yellowhead Highway in an area of substantial commercial development. Upon closing of the Transaction, an affiliate of AutoCanada will be the operating tenant of the property and will enter into an 18-year, triple-net lease with the REIT. The lease will include a contractual annual rent increase after the third year of the lease term that will be based on the Consumer Price Index. AutoCanada Holdings Inc. will provide an indemnity to the REIT in respect of the lease obligations.  

The REIT expects to finance the Transaction initially through draws on one of its existing revolving credit facilities and draws on an expanded revolving credit facility to be put in place in conjunction with the Transaction. The Transaction is expected to close later this month, subject to customary closing conditions.

The REIT intends to use the net proceeds from the Offering to repay the debt incurred to fund the Transaction and for general trust purposes. Closing of the Offering is expected to occur on or about October 16, 2018, and is subject to customary conditions, including approval of the Toronto Stock Exchange. The Offering is not conditional on closing of the Transaction.

Pro forma the Transaction, the Offering and the intended use of proceeds, the REIT's leverage will decline to approximately 45% of gross book value as at June 30, 2018. "The Offering is expected to further strengthen the REIT's balance sheet and allow the REIT to create greater capacity to pursue new acquisition opportunities," said Milton Lamb, President and CEO of the REIT.

The Units will be offered by way of a short form prospectus to be filed on or about October 1, 2018 with the securities commissions and other similar regulatory authorities in each of the provinces of Canada.

The securities offered have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

About Automotive Properties REIT
Automotive Properties REIT is an unincorporated, open-ended real estate investment trust focused on owning and acquiring primarily income-producing automotive dealership properties located in Canada. The REIT's portfolio currently consists of 40 income-producing commercial properties, representing approximately 1.5 million square feet of gross leasable area, and one development property, in metropolitan markets across Ontario, Saskatchewan, Alberta, British Columbia and Québec. Automotive Properties REIT is the only public vehicle in Canada focused on consolidating automotive dealership real estate properties. For more information, please visit: www.automotivepropertiesreit.ca.

Forward-Looking Information
This news release contains forward-looking information within the meaning of applicable securities legislation, which reflects the REIT's current expectations regarding future events and in some cases can be identified by such terms as "will", "intends", "anticipates" and "expected". Forward-looking information includes statements regarding the Transaction and Offering. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT's control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to, the failure to successfully close the Transaction on the terms described, or at all, the failure of the Transaction to be accretive to the REIT's AFFO, the failure of the REIT to close the Offering and the factors discussed under "Risks and Uncertainties" in the REIT's management's discussion and analysis ("MD&A") most recently filed on SEDAR (www.sedar.com) and in the REIT's current annual information form, which is available on SEDAR. The REIT does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law. This forward-looking information speaks as of the date of this news release.

(1) Non-IFRS Financial Measure
This news release contains a financial measure which is not defined under IFRS and may not be comparable to similar measures presented by other real estate investment trusts or enterprises. AFFO is a key measure of earnings performance used by real estate businesses. This measure is not defined by IFRS and does not have a standardized meaning prescribed by IFRS, and therefore should not be construed as an alternative to net income or cash flow from operating activities calculated in accordance with IFRS. The REIT believes that AFFO is an important measure of economic earnings performance and is indicative of the REIT's ability to pay distributions from earnings. The IFRS measurement most directly comparable to AFFO is net income. Please refer to the REIT's MD&A most recently filed on SEDAR for further discussion of this non-IFRS financial measure. 

SOURCE Automotive Properties Real Estate Investment Trust

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