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Third-quarter operating results improved: Rental revenue rose to $30.5 million from $24.4 million, while AFFO increased 15.8% and diluted AFFO per unit climbed to $0.26 from $0.252.
The REIT sold half of its Vaughan dealership property for CAD 16 million, recording a CAD 6.5 million gain, and later acquired a Tesla-leased property in North Carolina for about $30 million.
Management said it has roughly CAD 50 million to CAD 75 million of current acquisition capacity and will pursue selective deals that diversify tenants and markets while supporting per-unit AFFO growth.
Automotive Properties Real Est Invt TR (TSE:APR.UN) reported higher third-quarter rental revenue and adjusted funds from operations, as acquisitions and contractual rent increases supported growth. Management also outlined plans to expand in Canada and the United States while remaining selective about purchases.
President and CEO Milton Lamb said property acquisitions completed over the past year, along with fixed and inflation-adjusted rent increases, contributed to the quarter’s performance. Diluted adjusted funds from operations, or AFFO, rose to $0.26 per unit from $0.252 a year earlier.
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The REIT’s AFFO payout ratio fell to 80% from 81%, even after two distribution increases since the previous September and a CAD 57 million equity offering in October 2025, Lamb said.
Rental revenue and cash flow rise
Property rental revenue increased to $30.5 million from $24.4 million in the year-earlier quarter, CFO Andrew Kalra said. Total cash net operating income rose 18.6% to $24.9 million, while same-property cash net operating income increased 2.3% to $21.3 million.
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Funds from operations, or FFO, increased 16.8%, and AFFO rose 15.8%. Diluted FFO per unit increased to $0.266 from $0.255. Quarterly distributions totaled $0.208 per unit, compared with $0.204 a year earlier.
Interest expense and other financing charges rose by $1.8 million to $8.3 million, reflecting additional debt used to fund acquisitions. General and administrative expenses were $1.8 million, up approximately $90,000.
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Net income and other comprehensive income increased to $35 million from $10.4 million. Kalra attributed the increase primarily to higher net operating income and fair value adjustments on investment properties and interest rate swaps, partly offset by higher interest costs.
Vaughan sale and North Carolina acquisition
During the quarter, the REIT sold a 50% interest in its dealership property on Jane Street in Vaughan to a member of the Dilawri Group for CAD 16 million, recording a CAD 6.5 million gain. The REIT retained the other half.
The property is now leased to a Dilawri affiliate as a full-service Kia dealership under a 16-year triple-net lease, with a landlord redevelopment option. Lamb said the new lease and recent renewals mean the REIT has no material lease expirations until 2028.
In response to an analyst’s question, Lamb said the lease included three months of free rent from closing. The landlords split a CAD 3 million tenant inducement, with the REIT responsible for CAD 1.5 million. Kalra said the reported gain incorporates those amounts.
After quarter-end, the REIT acquired a Tesla-tenanted property in the greater Greensboro area of North Carolina for approximately $30 million. The roughly 50,000-square-foot sales, service and delivery center sits on about six acres and is subject to a long-term net lease with fixed annual rent increases and renewal options. Lamb said the purchase, funded primarily through revolving credit facilities, was the REIT’s eighth Tesla-tenanted property.
Financing and acquisition outlook
At quarter-end, 76% of the REIT’s debt was fixed, with a weighted average interest rate of 4.49%, Kalra said. During the quarter, it entered into $30 million of floating-to-fixed interest rate swaps and extended the maturity of one credit facility to March 2030 from March 2028. After quarter-end, it entered into a further CAD 20 million of swaps.
As of Nov. 12, the REIT had a debt-to-gross-book-value ratio of approximately 47.1%, CAD 43.5 million of undrawn revolving credit capacity and 12 unencumbered properties valued at CAD 197 million, Kalra said.
Asked about funding U.S. acquisitions, Kalra said the REIT had sufficient capacity under its Canadian credit facilities and could include U.S. properties in the financing pool. He said a move to U.S. credit facilities would come as the property base grows. A U.S. facility would currently carry an interest rate at least 100 basis points higher than a Canadian one, he estimated.
Lamb said acquisition yields appeared broadly consistent across Canada and the U.S., but the U.S. offered more markets and activity. He said some capitalization rates on new deals could be about 25 basis points higher than two or three months earlier, depending on sellers’ responses to changing interest costs.
Lamb declined to provide an acquisition target for 2027, saying the REIT probably had CAD 50 million to CAD 75 million of capacity at present. He said management would remain selective, seeking properties that add tenant and geographic diversification while supporting AFFO per-unit 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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The article “Automotive Properties Real Est Invt TR Q3 Earnings Call Highlights” was originally published by MarketBeat.
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