Good morning. Welcome to the Automotive Properties REIT 2021 first quarter financial results conference call and webcast. My name is Chris and I'll be your conference operator today. 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 risks, uncertainties, and assumptions that could 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 SEDAR. 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. Again, please refer to the REIT's latest MD&A for additional information regarding non-IFRS financial measures. This call is being recorded on Thursday, May 13th, 2021. I would now like to turn the conference over to Milton Lamb. Please go ahead. Great. Thank you, Chris. Good morning, everyone. Thank you for joining us today. With me on the call is Andrew Kalra, our Chief Financial Officer. We generated growth across all of our key performance measures in the quarter in comparison to Q1 of last year. Our property rental revenue grew by 4.3%, cash NOI increased by 7.8%, same-property cash NOI was up 1.3%, and AFFO per unit diluted increased to CAD 0.227 from CAD 0.208. Our financial flexibility has also improved. At quarter end, our debt-to-GBV ratio was 41.7%, down from 43.2% at 2020 year-end, and 44.9% at the end of Q1 of last year The automotive dealership industry in Canada has faced unprecedented challenges since the onset of the pandemic. Dealership operators, including our tenant groups, responded rapidly and effectively to the pandemic with enhanced e-commerce solutions and streamlined operations, demonstrating strong resiliency. While our tenants continued to operate on a limited basis during the quarter due to pandemic relief related business restrictions, we received 100% of our contractual rent due under their leases, plus continued repayments on previous deferrals. No further deferrals were requested. This is a testament to the success of their businesses and resiliency. As a result, the capitalization rate applicable to our entire portfolio was reduced to 6.6% at quarter end, a reduction of approximately 10 basis points from 6.7 at 2020 year-end. The capitalization rate is now equal to the rate used at the end of 2019, prior to the onset of the pandemic. During the quarter, on March 1st, we completed the acquisition of the Lexus Laval dealership property in Laval, Quebec, from the Dilawri Group, further increasing our presence in Canada's second largest metropolitan market. We satisfied the purchase price by issuing the equivalent of CAD 14.8 million in REIT units, increasing Dilawri's effective interest in the REIT to approximately 28.1%. As COVID restrictions ease, macroeconomic conditions will improve, driving further recovery of our dealerships' businesses. This should result in increased opportunities to continue advancing our acquisitions program. With our low debt-to-GBV rate and strong liquidity position, we're well positioned to capitalize on this. I'd now like to turn it over to Andrew Kalra, who will review our financial results and position in more detail. Andrew? Thanks, Milton. Good morning, everyone. Our property rental revenue for the quarter totaled CAD 19.4 million. The 4.3% increase from Q1 2020 reflects growth from properties acquired during and subsequent to Q1 last year, contractual annual rent increases, and a lease termination fee paid by a former tenant during the quarter. Total cash NOI and same-property cash NOI for the quarter increased to CAD 16.1 million and CAD 14.8 million, respectively, reflecting increases of 7.8% and 1.3%, respectively, compared to Q1 a year ago. Growth in cash NOI was primarily attributable to acquisitions, contractual rent increases, and the lease termination fee, while growth in same-property cash NOI primarily reflects contractual rent increases. G&A expenses for the quarter were approximately 7% of cash NOI compared to 6.5% in Q1 last year. Higher G&A expense in Q1 this year is primarily due to the vesting of previously issued deferred units. Net income for the quarter was CAD 26.3 million compared to net income of CAD 15.7 million in Q1 last year, an increase of 67.2%. The increase was primarily due to higher NOI fair value adjustments for interest rate swaps and investment properties, partially offset by fair value adjustments for Class B units and unit-based compensation. FFO and AFFO for the quarter increased by 8.3% and 11.0%, respectively, compared to Q1 last year. FFO per unit diluted was CAD 0.239 in the quarter compared to CAD 0.224 in Q1 last year. As Milton noted, AFFO per unit diluted was CAD 0.227, up from CAD 0.208 in Q1 a year ago. The growth was primarily due to properties acquired during and subsequent to Q1 last year, contractual rent increases, a lease termination fee that was offset by the reduction of the straight-line rent adjustment due to the termination of the lease. The REIT paid total distributions of CAD 9.6 million, or CAD 0.201 per quarter in the quarter, representing an AFFO payout ratio of 88.5%. This compares to total distributions paid of CAD 9.6 million or CAD 0.201 per unit in Q1 last year, representing an AFFO payout ratio of 96.6%. As at March 31st, we had a strong financial liquidity position with CAD 56.9 million of undrawn credit facilities, 10 unencumbered properties with a value of approximately CAD 166.8 million, providing us with additional financial flexibility and a debt-to-GBV ratio of 41.7%. We had CAD 394 million of outstanding debt at the quarter end with an effective weighted average interest rate of 3.73%. We have a well-balanced level of annual maturities and our weighted average interest rate swap and mortgage term is 5.7 years. I'd like to turn the call back to Milton for closing remarks. Thank you. Great. Thanks, Andrew. The automotive dealership industry is an essential business that has demonstrated strong resiliency through a difficult period. We have collected 100% of our April and May 2021 contractual base rent, plus rent that is due under the deferral agreements. We have not received any additional deferral requests. We believe that the overall fundamentals of the automotive dealership businesses are strong and that the industry has demonstrated its resiliency. As the pandemic is brought under control, we expect the pace of the industry consolidation to rebound. Given our strong balance sheet position, we can pursue acquisitions on a strategic basis through debt financing and available liquidity. This now concludes our remarks, and we'd like to open it up for questions. Chris, please go ahead. Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your touch-tone phone. You will hear three tone to acknowledging your request and your question will be polled in. If you wish to decline from polling process please press star followed by two. If you are using speaker phone please lift the handset before pressing any keys. Your first question comes from Mark Rothschild, Canaccord. first question comes from Mark Rothschild, Canaccord. Mark, please go ahead. Thanks. Good morning, guys. Good, sir. Maybe just following up on the last comment you made, Milton. It seemed like you were saying that you expect there to be more properties available for sale. Clearly, the business has picked up of late. They're doing well. Is this something you're seeing already in the market, more availability? Maybe just a second part of that question, if you could talk about has the values changed in what you're seeing price expectations compared to where we were maybe this time last year? I would say talking to the bankers that provide the credit facilities to the dealership groups, talking to the brokers who sell dealerships, they're all saying they're hearing a lot of murmurs, and there's a lot of people preparing for the consolidation that is going to occur. They're not seeing the type of product during a lockdown that they would anticipate. It seems like everyone's kind of getting into a bit of a queue as opposed to acting on it right now. Short answer is expecting. It's loud murmurs, we're not seeing the same sort of activity we would if there wasn't a lockdown. I don't think that changes the underlying consolidation theme. It just delays it a little bit. On the price availability, good question. Certainly, interest rates are dramatically lower than they were a year ago, which means the cost of capital for vendors or dealerships is lower, and the cost of capital for us is lower. It'll be interesting to see how that plays out and what their expectations are, but that's too early to say at this point. Okay, great. Thanks. Maybe just one more maybe for Andrew. Yeah. It seems like you're saying that the lease termination income is offset by the impact of straight-line rent. Can you just walk me through exactly how that worked and if there really was? Sure, Mark. if it balanced out? Sure, Mark. It's not completely offset. If you look at the straight-line rent adjustment difference from 2021 Q1 to 2020, it's about CAD 200,000, and a significant amount of that was a result of the lease termination. It's not a pure offset, but I can leave you to the math on that one then. Okay, great. Thanks so much. No problem. Thank you. Your next question comes from Jonathan Kelcher, TD Securities. Jonathan, please go ahead. Thanks. Good morning. Just to follow up on that last little bit on lease termination income, could you maybe give us your expectations for the balance of this year? What's a good run rate? I would take that the CAD 518 that we had and add the CAD 200. CAD 700 would be a decent run rate. Okay, thanks. [Mark], it will fluctuate as things move accordingly with acquisitions. Obviously we're not expecting further lease termination payments. That was an anomaly, and even then that was more accounting because as we've mentioned before, it was an offset whereby we collected a lease termination fee that was equal to what we provided to Tesla for improvements. Yeah. It was a net zero. Yeah, Jonathan, from a pure cash, it would be net zero, but the accounting is going to have to dictate accordingly. Yep. Okay, fair enough. When we look at your leases, can you remind us what percent of the leases are CPI related, and generally, how do those work? Is it an annual reset, or what are the mechanics there? I don't have the percentage in front of me on that number, so we can circle back on that. As far as how it works, most of them are going to be provincial by nature with a base year, and then obviously an inflator above that based on the CPI index. That'll get adjusted annually on the anniversary. Okay. That is it for me. I'll turn it back. Thanks. Thank you. Your next question comes from Kyle Stanley, Desjardins. Kyle, please go ahead. Thanks. Morning, guys. Good. Yeah. Morning. As we emerge from the pandemic, are you expecting capital commitments to ramp up at all, maybe as dealers or OEMs catch up on any deferred spending from the pandemic? I would probably say yes. I don't think that means it's the next day. I think as much as they can, they're pushing it off into 2022 and 2023. I do believe that the OEMs are a lot more flexible now. Everyone's talking about the strong profitability. I think the OEMs, as soon as the microchip supply chain and COVID has dissipated, are going to push them back to their capital imaging improvements, et cetera. I would see that having a slight delay, and then, yes, absolutely, it's going to come back to the forefront. Okay. Just following up on kind of the deal market right now. Are you seeing much out there yourselves, or do you expect the bulk of what you'll be able to complete in the next, say, 12 to 18 months being driven by Dilawri's growth? I don't know if it's going to be Dilawri. I don't know if it's going to be other dealership groups. Certainly, we do expect, call it the 18 months, that there is going to be, with all the murmurs, lot of discussions we're having, the consolidation is going to recommence. A lot of our tenants, and certainly other ones out there, are going to be the significant players. As mentioned before, I think the larger groups are going to continue to get larger. Okay. Just the last one, and then kind of following up on Mark's prior question. Your cap rate has come back down to pre-pandemic levels. Yeah. Given interest rates and what they've done, like you just mentioned, I'm just wondering, with regards to market pricing that you're seeing, do you think there's more room for cap rate compression within your portfolio? I'll do two parts on that. The first one is going back to 6.6. At previous calls, I had mentioned that because of my experience prior to APR, that any time you're giving any sort of tenant assistance, I was of the belief, and the board was of the belief, that if you're giving tenant assistance, a new purchaser is going to discount or increase the cap rate that they require. We're no longer giving tenant assistance. As mentioned, starting January 1st, everyone's paying their lease rates as per their lease, and then actually paying back any deferrals. That's normalized. With 100% rent collection, we felt good about going back to where we were before. The second part of the question is now interest rates are lower. The market, as it gets back to activity, it'll be interesting to see what's demonstrated on what cap rates are going to be. In other sectors, you've seen them drift lower. We haven't seen that evidence yet because we haven't seen the activity. When the activity comes back, certainly it's always an equation which is part initial return, part after leverage return. We're watching that closely. Okay, perfect. Thanks for the color. I will turn it back. Thank you. Your next question comes from Joanne Chen, BMO Capital. Joanne, please go ahead. Hi. Good morning, guys. Good morning. Maybe just a broader question. Of course, there's a lot of pent-up demand, and obviously auto sales have come back pretty strong through 2021. With the opening, it'll likely only pick up. We're hearing a lot on a broader scale in terms of chip shortages that might get now extended beyond 2021. Of course, some of that is disproportionately skewed towards the auto industry. Are you hearing anything from your dealership with respect to some of that supply that's able to come to the dealers right now to service that demand? Yeah. It's certainly a discussion that everyone's talking about, is the inventory supply chain. Everyone's talking about, that's going to affect 2021 models, probably very much less so in the 2022 models. It is important when we look at this, two things. One is new car sales may be a higher percentage of revenue, but it's certainly a far lower percentage. We've talked about ±20% of the profits. At this point, it's kind of inverse in the fact that it's tough to get discounts on cars. Gross margins are up for new car sales because inventory is down. I think it affects the OEMs more than it affects the dealer groups, or the dealerships because their gross profits on new car sales are pretty healthy. Right. There's less volume, higher profits. That hasn't changed at all on that front, even as more of the gets discussed, but it doesn't seem like that's changed, so that's good. No. Supply, demand is supply, demand. When supply gets constricted because what we're talking about, then that's going to have an effect less on demand. I'd say demand as we get back, if you look to the U.S. where they've opened up earlier than we have, that demand has bounced back. I would expect the same thing to happen in Canada. Right. Maybe just shifting gears back on the acquisition side of things. Is there any markets where you're particularly focused right now, or just kind of across your portfolio? We always focus on metropolitan markets, underlying demographic growth, positioning, et cetera. We've talked about that before. We still certainly like that triangle of Toronto, Ottawa, Montreal. Vancouver, we, as long as everyone else, love it, but it's at a different cap rate level, so we'd only do so much of it. The Alberta, Edmonton, and Calgary is showing signs of recovery, which we like. We will look at that as kind of a stable growth as we grow the portfolio, as opposed to going long on Alberta. Okay. Got it. Maybe just one last one from me. It looks like the weighted average rental rate for the overall portfolio did tick down a little bit because of the Lexus Laval service. Was that primarily because the lease term was extended by 2.5 Years, that's why it was a little bit lower? Were there some other mechanics in there? No, I think it would've drifted lower. No, the Tesla Edmonton was actually same levels, so that wouldn't have adjusted. I think it's the Tesla Laval, which because it's a 120-odd thousand ft location that is a bit more service and distribution as opposed to pure retail in a normal dealership footprint. You'll see that in the Montreal stats. That would've lowered our average. Andrew, is that? Yes, that's correct. It's the square footage on that Montreal property that's just lowering the average. Got it. Okay. No, that's helpful. That's it for me. I'll turn it back. Thanks, guys. Thanks. Thank you, ladies and gentlemen. As a reminder, should you have a question, please press star one on your touch-tone phone. Your next question comes from Himanshu Gupta, Scotiabank. Himanshu, please go ahead. Thank you and good morning. Good afternoon. On Dilawri exposure, 62% now. Do you have a target where you want this number to be? Coming out of the crisis, will you look for more diversification in the portfolio? No, I think that remains pretty consistent. It's a balance between what we certainly like and have a strategic alliance with Dilawri. Adding strength of covenant never hurts, but the bottom line is we own most of Dilawri's real estate, whereby the rest of the dealership universe is far greater. We expect, as we continue to grow, that there should be a higher proportion that is other dealership groups. That's naturally going to dilute Dilawri at the same time. We like the fact that we're looking to increase diversification. No, we haven't set a specific target. We don't really look at it that we want to sacrifice a deal with a good tenant just for diversification. Naturally, there's a far greater universe out there from other dealership groups than there would be just with Dilawri. Got it. A follow-up. You mentioned auto dealerships' cost of capital have improved quite a bit. How does that impact your acquisition pipeline? Are the dealerships in a better position now to own the underlying real estate as well? I guess the good news is we've mostly wanted to focus on groups that. Well, we have focused on groups that have access to capital. It's about leverage, liquidity, all those good things as they continue to expand. It always comes down to what's their cost of capital and where do they want to use it, and what are the profit margins, return on investment on owning the real estate versus acquiring another dealership. Certainly part of the equation is what interest rates are they paying to their banks? I would say when it's free money, that they're going to take advantage of it. The last time we saw significant activity, there was actually a small uptick in interest rates, and that was reminding dealers that there is a cost of leverage Got it. That's fair enough. Just turning to your IFRS cap rate, obviously back to pre-pandemic levels. Yeah How do you incorporate the land values in your IFRS valuation? If land values in Toronto, Vancouver have gone up in the last two, three years, will that flow through in your portfolio valuation as well? We certainly look at individual markets. As an example, this time last year, we had moved up Alberta more than the rest of the portfolio, and prior to that, we've talked about reducing our cap rates in Toronto and Vancouver versus the rest of the portfolio. That certainly comes into it. Overall, prior to the pandemic, we'd been pretty consistent around that 6.5%, 6.6%. We don't love playing the game about moving cap rates up or down too dramatically on a regular basis. Certainly, the interest rate environment has a place within that kind of mental calculation on where cap rates should go, but we certainly want to see more of the trades to occur to demonstrate that. Certainly, as you said, the Toronto, Ottawa, Montreal, I would say that the cap rates have gone down on most product categories. Got it. My final question is on the CapEx reserve. I know I think you do 0.5% of the base rent. Have you spent any of that CapEx reserve you had in the last year, or are you planning to spend anything this year? We have not spent anything at this point in time, but we will be spending it based on the acquisitions that we've done. There are some commitments that have been made, but nothing has been spent as of today. Okay. Thank you. Thank you, Andrew, and thank you, Milton. I'll turn it back. Great. Thank you. Thank you. Your next question comes from Tal Woolley, National Bank. Tal, please go ahead. Hi, good morning. Good day. Morning. Just wanted to go back to the dealership profitability discussion you were having with Joanne. Can you remind me how to think about the profitability of the service side of the business versus the used and the new auto sales? Yeah. If you look at whether it's AutoCanada or Penske Automotive, Group 1 Automotive, some of the other U.S. public dealership groups, they kind of break it down nicely. A lot of them tend to be new car sales approximately 50%, and profits are approximately 20%. Within the F&I and used car has certainly kind of popped up nicely right now. We always look at it as ±20% is the new, and then 80% is the other buckets. I think that's probably similar now, except you've seen actually the profits from new car sales go up a bit as profit margins, even though the revenues are down, the profit margins for those new car sales have gone up. Okay. have you heard anything from just chatter about when the supply chain issues might be resolved? What are the dealers saying? The dealers or the industry overall is just talking about that they expect it to continue for the 2021 models, but then start resolving itself for the 2022 models. I don't know if that means January 2022 or as you see the new models coming out in October, November, December, because often the 2022 models or the next year's models kind of leak out a bit before the calendar date. Got it. Yeah. The estimates range by various analysts as to how long this will go, but they're pretty much down for the next couple of months for sure, but they do range in timing. Okay. Just to go back to on your discussion around geographies. Have you guys ever given consideration to maybe looking at some of the more regional dealerships outside of the urban markets? I know, obviously the land value and stuff like that is not as high, but I wonder if there's ever been thought, given that you might be able to find some decent risk-adjusted returns in those markets too. We certainly have thought about it, but we keep on coming back to, both on the plus side and on the defensive side, that if you're in metropolitan markets, you have intensification, you have lack of supply to relocate. You have the advantage of the dealership model that includes radius clauses, so it's very tough to move, to find that 2-3 acres in that 8-km r adius. If you move 2 or 3 km with that 8-km radius, you trip over another dealer group or another dealership, I should say. That's one of the baseline that we really enjoy. Having said that doesn't mean it's just back of beyond. As an example, do I like Halifax? Yes, it has a lot of those characteristics. Do I like Kelowna? Do I like Victoria? Do I like Kitchener-Waterloo? Kitchener-Waterloo, Guelph, we've done some acquisitions there. The answer is yes, but those all have the same sort of underlying fundamentals that I just talked on. Going into an area that is very rural, that makes us a lot more nervous on retaining the tenant at the end of term. Certainly, we do underwriting as well, and most of the time we get indemnification on the dealership groups. We feel good about the lease in the meantime, but there is something nice about the underlying radius clauses and the supply-demand on land. Okay. Any thoughts at all, ever, about maybe looking at some U.S. markets too? That kind of goes to the second half of the equation is, in the U.S., there's certainly markets that have those fundamentals that a tertiary market in Canada would not. I wouldn't say we're blind or deaf to those ideas. If we do it's going to be on a strategic basis. We like what we're seeing in Canada. We expect that market on the M&A to open back up. That doesn't mean we're blind to other opportunities or that we can only do Canada. Okay, that's perfect. Thanks, Milton. Thanks, Andrew. Cheers. Thank you. Thank you. Your next question comes from Brad Sturges, Raymond James. Brad, please go ahead. Hi, good morning. In terms of, I guess, your commentary there on discussions are starting to pick up a bit on the transactional side, given that we've been in a more muted environment with lockdowns- Yeah do you see it possible being a little bit of pent-up demand from a transactional point of view once consolidation does really start to resume? I don't know. Are you itching to get on a patio? I think it's the same sort of thing. Everyone right now is kind of looking at what they want to do as soon as things open back up and getting prepared to do that. I just think overall, whether you're talking about M&A within the dealership, yes. When you're talking about activity overall and getting back to normal, the answer's going to be yes. That goes down to consumer behavior as well. Everyone's getting a bit of an itch to get this lockdown over with and kind of getting back to business, so I think there will be a noticeably mental rebound. To answer your question, yes, I am. Once that transaction activity starts to occur again, do you believe it's going to be still following similar historical patterns in terms of deal flow being more back-end weighted, let's say, this year? You know what? We've always been back half of the year weighted, especially the black quarter, the last Q4 of the year weighted, as far as transaction activity. I keep on talking about the next 18 months. It's hard to pin it exactly. I was wrong for the last six weeks. I didn't expect this lockdown to continue. I don't think anyone did. Certainly when we're talking about 18 months, it's really hard to pin exactly when it's going to occur. Great. Thank you. I'll turn it back. Thank you. There are no further questions at this time. Please proceed. That's great, everyone. Take care, and we will talk to you after Q2. All the best. Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.