Topic: How To Invest

Q: Hi Pat: Could you please provide your opinion on Automotive Properties REIT? Thank you.

A: Automotive Properties REIT, $11.00, symbol APR.UN on Toronto (Units outstanding: 21.9 million; Market cap: $240.9 million;, is a real estate investment trust that owns 32 commercial properties across cities in Ontario, Saskatchewan, Alberta, B.C. and Quebec. The properties offer 1.3 million square feet of space for car dealerships, selling a wide variety of vehicles. Those automotive brands include Chrysler, Ford, General Motors, Kia, Nissan, Honda, Hyundai, Mazda, Mitsubishi, Toyota, Volkswagen, Acura, Audi, BMW, Infiniti and Mercedes-Benz.

The REIT first sold units to the public on July 22, 2015, at $10.00 a unit.

The Dilawri Group, which owns 61 dealerships, is Automotive Properties’ largest tenant; it accounts for about 91% of the company’s rental income. As well, Dilawri owns 45% of the REIT.

Since that initial public offering in 2015, Automotive Properties has purchased six properties for a total of $93.0 million. These acquisitions have expanded its presence in Toronto, Montreal and Edmonton. They have also added several luxury car brands such as Jaguar and Range Rover.

Thanks to the new properties, the REIT’s revenue in the three months ended September 30, 2016, rose 47.2%, to $8.5 million from $5.8 million a year earlier. Because the REIT went public in July 2015, that year-earlier period was only 71 days rather than 90. Cash flow per unit also improved to $0.24 from $0.17.

Automotive Properties pays monthly distributions of $0.067 a unit; the annual rate of $0.80 yields 7.3%.

The units trade at 11.3 times the REIT’s forecast 2017 cash flow of $0.97 a unit. However, the trust’s exposure to cyclical automotive sales and its rapid growth by acquisition add risk. Its reliance on the Dilawri Group as a tenant also increases that risk.

We don’t recommend Automotive Properties REIT.


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