Automotive Properties Real Estate Investment Trust

Good morning, ladies and gentlemen, and welcome to Automotive Property REITs' 2026 First Quarter Results Conference Call and Webcast. At this time, all lines are in listen-only mode. Following management's remarks, we will conduct a question-and-answer session. Please be aware that certain information discussed today may be forward-looking in nature. Such forward-looking information reflects the REIT's current views with respect to future events. Any such information is subject to risk uncertainties, and assumptions that cause actual results to differ materially from those projected in the forward-looking information. For more information on the risks, uncertainties, and assumptions relating to forward-looking information, please refer to the REIT's latest MD&A and annual information form, which are available on CDAR+. Management may also refer to certain non-IFRS financial measures. Although the REIT believes These measures provide useful supplemental information about financial performance. They are not recognized measures and do not have standardized meanings under IFRS. Please refer to the latest MD&A for additional information regarding non-IFRS financial measures. This call is being recorded on May 14th, 2026. I would now like to turn the conference over to Milton Lamb, President and CEO. Please go ahead, Mr. Lamb.

That's great. Thank you, John. And good morning, everyone. Thank you for joining us today. With me is Andrew Calra, our Chief Financial Officer. Our strong first quarter performance reflects the positive impact of the 13 property acquisitions we completed in 2025 for an aggregate purchase price of approximately $200 million and the partial contributions of the two additional property acquisitions completed during the quarter. Compared to Q1 of last year, our property rental revenue has increased by 21.7%, cash NOI was up 19%, and AFFO per unit diluted increased to 26.2 cents from 24.7 cents. This represents a record quarterly AFFO per unit amount for APR, demonstrating the positive impact over acquisitions and the embedded growth from contractual, fixed, or CPI-adjusted annual rent increases in our net lease structure. This is further reflected in a reduced AFFO payout ratio of 78.6% in the quarter, even after our 2025 distribution increase. The two acquisitions we completed during the quarter, a full-service Hyundai dealership located in Quebec City, and a Rivian-tenanted sales, delivery, and service facility in Vista, San Diego County, California. Subsequent quarter end on April 7th, we completed our second property acquisition in Southern California consisting of two Penske Automotive dealership properties in Santa Ana in Orange County. The dealerships are situated on parcels of land totaling approximately six acres within the Santa Ana Auto Mall, one of the area's premier dealership corridors. The dealerships include Audi South Coast, a 32,000-square-foot full-service heavy dealership, and South Coast Volkswagen, a 29,000-square-foot full-service VW dealership, both operated by Penske Automotive Group. We expect our acquisitions from last year and to date in 2026 to drive continued growth in our AFFO per unit going forward. At this point, I'd now like to turn it over to Andrew Calra to review our financial results in greater detail.

Andrew. Thanks, Milton, and good morning, everyone. Our property rental revenue for the quarter increased to $29.1 million from $23.9 million in Q1 a year ago, reflecting growth from the properties required during and subsequent to Q1 last year and contractual annual rent increases. Total cash NOI and same property cash NOI for the quarter total $23.8 million and $20.4 million, respectively, representing increases of 19 and 2.1% compared to Q1 last year. Interest expense and other financing charges for the quarter were $7.3 million, an increase of $1.3 million from Q1 last year, reflecting additional debt incurred to fund our acquisitions. Our G&A expenses were $1.6 million for the quarter, an increase of $0.1 million from Q1 last year, and in line with our expectations. Net income and other comprehensive income was $25.3 million, compared to $7.6 million in Q1 last year. The increase is primarily due to higher NOI changes in non-cash fair value adjustments for folks poor investment properties, and interest rate swaps, partially offset by higher interest costs and the change in non-cash fair value adjustments for Class B units and unit-based compensation. AFFO increased by 20.4% and 19.1% respectively compared to Q1 last year, reflecting higher rental revenue from the acquisitions and contractual rent increases. On a per-unit basis, FFO increased to 26.8 cents, diluted up from 25.1 cents in Q1 last year, and AFFO increased to 26.2 cents, up from 24.7 cents. We paid unit holder distribution totaling 20.6 cents per unit in the quarter, representing an AFFO payout ratio of 78.6%. This compares with total distributions of 20.1 cents per unit in Q1 last year for a payout ratio of 81.4%. The decline in our payout ratio despite the increase in our monthly cash distributions effective last year, 2025, demonstrates the positive impact of the properties we acquired and subsequent to Q1 last year and contractual rent increases. The cap rate applicable to our portfolio at 6.75% at quarter end, which was flat compared to 2025 year end, up slightly from 6.7% at the end of Q1 last year. We continue to be proactive with our debt strategy, limit with our exposure to interest rate fluctuation, and enhance our financial flexibility. During the quarter, we entered into floating to fix interest rate swaps within Q1, Facility 3 totaling $45 million for terms of five to seven years at rates between 4.45 and 4.59%. We also increased the amount of the revolving portion of Facility 1 by $25 million, extended the maturity to June 2029 with the same credit spread. At quarter end, we had a debt-to-GVV ratio of 46.3, providing further growth. acquisition capacity. As at March 31st, 2026, 77% of our debt was fixed with a weighted average interest rate of 4.48%, a weighted average interest rate and mortgages remaining of 4.2 years, and a weighted average term maturity of debt of 2.8 years as we continue to increase and extend our credit facilities. As at May 13th, we had approximately $32.5 million of undrawn capacity under our credit facilities. Thirteen unencumbered properties valued at approximately $195.4 million. I'd like to turn the call back to Milton for closing remarks. Thank you very much.

Great. Thanks, Andrew. Following our entry into the U.S. market last year, we're pleased with the increased geographic and tenant diversity we've established through our latest acquisition set for the border. We now own properties in Ohio, Florida, and California representing leading automotive brands including Tesla, Rivian, and Penske Automotive with their Audi and VW properties. We continue to position APR as an attractive partner to major automotive dealerships, groups, and OEMs in Canada and the United States. Following a highly active year of acquisitions in 2025, And a solid start to 2026, we're now approaching just under 100 properties in total of our portfolio, with tenant leases, with leading automotive groups and OEMs contributing to our cash flows in support of unit holder distributions. We are successfully executing on our key objectives, including driving AFFO per unit and to build value for unit holders. We look forward to building our positive momentum in the year ahead, supported by growing property portfolio featuring high quality tenants providing essential retail and services, 100% occupancy and rent collection, locations in prime metropolitan markets featuring GDP and population growth, with attractive net lease structures and embedded fixed or CPI adjusted rental growth. That now concludes our remarks. I'd like to open up the line for questions. Jillian, please go ahead.

Thank you. If you'd like to ask a question, please press star followed by the number one on your telephone keypad. In the interest of time, we ask that you please limit yourselves to one question and one follow-up. Thank you. Our first question comes from Jonathan Kelcher from TD Cowan. Please go ahead. Your line is open.

Thanks. Good morning. Good morning. The question's just on the on what sort of drives the activity in the U.S.? I guess in Canada, a lot of your deals are sort of driven by dealer M&A. How does that compare to the U.S.?

A, the U.S. just has more metropolitan markets that have GDP and population growth. But B, whether it's the underlying 1031s, tax structure, big beautiful bill, There just tends to be a higher velocity of trading. People are more willing to take profits and losses, where in Canada people tend to buy assets and hold on to them for significant amounts of time, if not perpetuity. That's a lot of the reason why we end up being more active when it is a transaction related to M&A, where we stand beside dealers as they do the operations acquisitions.

Okay. And then do you see that opportunity with some of the groups you're talking to in the U.S.?

I think that M&A side will be in common on both sides of the border. But there's just a lot more velocity in the states and there's just larger markets. But the M&A theme that we've been active in growing and built a good portfolio working with dealers, that I think will occur on both sides of the border.

Okay, thanks. I'll turn it back.

Our next question comes from Sairam Srinivas from ACP Cormark. Please go ahead. Your line is open.

Thank you, Abrela. Okay, so it's the question on the U.S. acquisitions. When you kind of put that in line with OEM requirements and capital requirements in the business, Do you find the dealerships in the U.S. being a lot more intense in terms of, you know, owning capital coverants and actually investing a lot of capital into their assets versus in Canada, it's probably not as much. Is that something to see?

No, I'd actually say it's flipped a bit. Canada has a bit of a higher cost component to both the underlying land, depending on the market, but it's certainly in the markets we're looking at on the Toronto, Vancouver's, Montreal's, Calgary's. And the construction costs are greater in Canada. So the OEM requirements are pretty similar, but the cost to complete those requirements, I would say, often are higher in Canada.

Our next question comes from Brad Sturgis from Raymond James. Please go ahead. Your line is open.

Hey, good morning. Good morning, Brad. Just on the Orange County acquisition, I think the rent growth, the contractual rent growth is based on California CPI, but there's a cap. I'm just curious if you could give us a little more color of how the cap would work.

We can't and don't get into specifics, but it's similar to other caps where you've got a maximum. And that is, you know, that CPI kicks in on the renewal rate. So it's a roll-up formula at that point. You know, similar to what we have with the base source, the one we recently did as well. So it's not that uncommon in the market where you get a bit of a floor and a cap.

Okay. I guess my other question is, is there any update at this point on bonds, whether strategically you're looking at releasing or a potential asset sale?

Yeah, you know, we talked about it. It's not that long ago when we did the end-of-year call. It's amazing how quickly this Q1 creeps up on us. But the short answer is we're trying to balance the fact that three acres of land there has got great high-density potential, but it's also got great retail value. So it's where, how much do we want to invest for a long-term tenancy? Can we get a termination option? to allow us to potentially access that density sooner, or do we do a shorter-term deal that has immediate access to that when we want it? As you can imagine, it's a bit of a balancing act. The good news is it's a great property, so we're doing some head scratching in a good way.

Okay. Turn it back. Thank you.

Our next question comes from Jimmy Sean from RBC Capital Markets. Please go ahead. Your line is open.

Thanks. So we saw last quarter the WP Carey deal with GoAuto. Obviously, they have a little bit lower cost of capital. Do you see them or any new items sort of changing the competitive landscape in getting deals? Do you see change in pricing on deals? Any thoughts there?

Yeah. It's interesting. I mean, that was a very large deal. And certainly where we're trading right now at a discount to NAB has some implications. Go Auto is an existing tenant of ours, so obviously we know them. The lower cost of capital on access to bonds for a few groups, they have to be larger transactions or often would be larger transactions. But There is also drainage because of Canada's tax system when you're bringing that money into the States. That's the first deal in a while that we've seen someone come up and play in our sandbox. Is there going to be competition? Sure. It's something that makes us worry. We've been very active on our pipeline. So, you know, in some ways it's conformational. In other ways, it just shows that we continue to have discipline and continue to have access to markets to place money in interactive real estate.

Okay. And sorry, my follow-up would be just a different question, basic question, maybe for Andrew. Sequentially, the interest expense declined from Q4 to Q1. That balance went up. I'm just curious what's the dynamic there.

The dynamic there is there's more floating in Q1, and the floating rate's considerably lower. So when we did buy the acquisitions, we bought them on revolving, and that's basically the difference there.

Okay. And so we should expect that to keep it floating?

Yeah. The strategy has always been to use the revolver for the acquisitions and then to play swaps. We did that at the beginning of the year. And we're probably averaging, let's say, between four and a half to five-year to six-year money. And since the conflict, we've seen the five to seven-year go up about 50 basis points. The anticipation is that we'll hope to taper off by the end of the year, and we'll see the long-term swap rates come down to where we're averaging. The opportunity with our credit facility is that we can react relatively very quickly and place swaps and move that floating to fixed. So it provides us with considerable amount of flexibility.

Okay. Makes sense. Thanks. Okay.

For any additional questions, please press star followed by one. Our next question comes from Ziman Liu from JLB. Please go ahead. Your line is open.

Hi, good morning. So I just want to turn to Canada. How does the DeLaurie acquisition pipeline look like?

They continue to be, we continue to have a strategic alliance with them. As they continue to grow, we anticipate and hope that we'll do more deals with them. But again, they are the largest group and we certainly have a good relationship with them. But unlike grocery and other industries within Canada, we have to work with a large number of dealership groups. So the very nature of the largest being 3% market share and we already own the vast majority of the real estate, we anticipate there's going to be as many or probably a lot more outside of the Dilawri group that we'll continue to be active with.

Okay, that's very helpful. So another question is that I'm just wondering whether there's any other leases early in 2026? And also, can you remind us of the NOI impact of the staff lease expiry?

I don't think we've been specific on the NOI impact, but a little scratching, and I'm sure everyone around this call can figure it out approximately. That is the only outstanding 2026 lease expiration date. and we have very little that has in 27 as well.

Okay, that's good. Yeah, I'll turn it back. Thank you. Thank you.

And we have no further questions. I'd like to turn the call back over to Milton Lamb for the closing remarks.

That's great. Thank you, everyone. We look forward to getting back on a call for Q2. Enjoy the long weekend.

This concludes today's conference call. Thank you for your participation. You may now disconnect.