Good morning. Welcome to the Automotive Properties REIT 2022 third quarter financial results conference call and webcast. My name is Colin. I'll be your conference operator today. At this time, all lines are in listen-only mode. Following management's remarks, we'll 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 related to the 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 Friday, November 11, 2022. I would now like to turn the conference over to Milton Lamb. Please go ahead, Mr. Lamb. Great. Thank you, Colin. Good morning, everyone, and thank you for joining us today. With me for today's call is Andrew Kalra, our Chief Financial Officer. We delivered solid year-over-year growth in our key financial metrics in the third quarter, supported by our acquisition program and contractual annual rent increases. Compared to Q3 of last year, property rental revenue grew 6.3%, cash NOI increased by 7.7%, same property cash NOI increased by 2.2%, and AFFO per unit diluted increased to CAD 0.227 from CAD 0.221. During the quarter, we entered an agreement to sell the Kingston property consisting of two dealership buildings to a third party at a capitalization rate of approximately 6.1%, resulting in a sale price of approximately CAD 18 million and a gain of approximately CAD 1.7 million over our Q2 IFRS fair value. The sale is expected to be completed by the end of November. Our valuation of investment properties declined slightly from the prior quarter to reflect the current market conditions, resulting in a fair value loss of CAD 5.8 million net of the IFRS gain for the Kingston property sale. The capitalization rate applicable to our portfolio increased to 6.37% at quarter end, a nominal adjustment from 6.30 at both the end of Q2 2022 and December 2021. Our liquidity remains strong, and at quarter end, we had CAD 70 million of undrawn credit facilities and 10 unencumbered properties with an aggregate value of approximately CAD 121 million. As of today, we have approximately CAD 75.5 million of undrawn credit facilities, plus the anticipated future proceeds from the Kingston property sale. Our debt-to-GBV ratio at quarter end was 41.2%. With our solid balance sheet and annual contractual rent increases across our portfolio, we're well-positioned to continue delivering growth in revenue, Cash NOI, and AFFO per unit while pursuing attractive acquisition opportunities. According to DesRosiers Automotive Consultants, new light vehicle unit sales in Canada were down 11.8% for the first nine months of 2022 compared to the same period of last year, which was primarily due to the supply chain constraints experienced within the retail automotive industry. We have previously noted, we believe the supply chain constraints will continue into the foreseeable future, not have a significant impact on our tenants' ability to pay rent as new car margins, used car sales, and overall service levels remain strong. I'd now like to turn it over to Andrew Kalra to review our financial results and position in more detail. Andrew? Thanks, Milton, and good morning, everyone. Our property rental revenue for the third quarter totaled CAD 20.7 million, a 6.3% increase from Q3 a year ago, reflecting growth from properties acquired subsequent to Q3 last year and contractual annual rent increases. Total Cash NOI and Same Property Cash NOI for the quarter totaled CAD 17.2 million and CAD 16.2 million respectively, representing increases of 7.7% and 2.2% compared to Q3 a year ago. Growth in Cash NOI was primarily attributable to acquisitions and contractual rent increases. Growth in Same Property Cash NOI primarily reflects contractual rent increases across our portfolio. Our G&A expenses in the quarter were in line with our expectations and growth. Net income for the quarter was CAD 8.9 million compared to CAD 30.8 million in Q3 last year. The variance was primarily due to non-cash fair value adjustments on investment properties, partially offset by higher NOI and non-cash fair value adjustments on interest rate swaps and unit-based compensation. FFO and AFFO for the quarter increased by 1.4% and 2.5% compared to Q3 last year. FFO per unit diluted was CAD 0.237 in the quarter, up from CAD 0.234 in Q3 a year ago, and AFFO per unit diluted increased to CAD 0.227 from CAD 0.221 in Q3 last year. This growth was primarily due to properties acquired subsequent to Q3 last year and contractual rent increases. The REIT paid total distributions of CAD 9.86 million or CAD 0.201 per unit in the quarter, representing an AFFO payout ratio of 88.5%. This compares to total distributions paid of CAD 9.85 million or CAD 0.201 per unit in Q3, representing an AFFO payout ratio of 91%. The AFFO payout ratio was lower this quarter, primarily due to properties acquired subsequent to Q3 a year ago and contractual rent increases. We had CAD 453 million of outstanding debt as of September 30, 2022, with an effective weighted average interest rate of 3.8%. We have well balanced level of annual maturity, and our weighted average interest rate swap and mortgage term is four point nine- years with a weighted average term maturity of three point nine- years. Currently, 90% of our debt is fixed through interest rate swaps and mortgages, leaving only approximately CAD 30 million of floating non-revolving debt. We continue to have strong support from our lenders and remain well positioned to deploy capital on growth opportunities. I'd like to turn the call back to Milton for closing remarks. Thank you very much. Thanks, Andrew. In response to rising inflation, the Bank of Canada has raised the overnight rate by 350 basis points so far in 2022. This has resulted in the 10 years Bank of Canada bond yield moving up approximately 150 basis points this year. We've consistently completed longer-term swaps or mortgages to insulate our debt from future rate increases. In addition, the contractual annual rent increases across our portfolio partially insulate us from rising inflation. These increases consist of CPI adjustments or set annual rent increases. We're further insulated from inflation due to our triple net lease structure, as property-level operating and energy costs are the responsibility of our tenants. Our same-property Cash NOI growth of 2.2% in the quarter was attributable to our contractual rent increases and triple net lease structure. We believe the increase in short-term interest rates to levels at or above long-term rates may provide us with acquisition opportunities, as dealers often compare our cap rates to their short-term cost of financing. Given our strong balance sheet and the strength of our existing portfolio, we'll continue to pursue acquisitions on a strategic basis. This concludes our remarks. We'd now like to open the lines for questions. Colin, please go ahead. Thank you. Ladies and gentlemen, we'll now conduct a question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you'd like to withdraw your question, please press star followed by two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment for your first question. Okay, your first question comes from Mark Rothschild from Canaccord Genuity. Mark, please go ahead. Thanks. Morning, guys. Good morning, Mark. Hey, maybe just on the last point you mentioned that you think that it might lead to more acquisition opportunities. Is this something that you're seeing already or just something that you think makes sense to happen? Connected to that, maybe you could just let us know what the cost of debt would be now in the current market, meaning the all-in, including the spread, to finance to get a mortgage on one of your properties? Okay. Three-part question. Yeah. The short answer is A, it makes sense, and B, we're certainly having more discussions and more inquiries and deeper conversations. When it comes down to the short-term versus the long-term, you know, one of the reasons why we're not as active in 2021 as we might have anticipated is because the rates were so low and dealers were, you know, extremely profitable. Cost and availability of bank financing was plentiful. You know, now they're still healthy. They can certainly probably get the money. But at the same time, short-term rates, you know, the BAs, your prime rates, you're looking at close to 6%. Where on the longer-term money, when we're looking at all-in rates, you know, seven to 10-year money swaps, mortgages, BA plus, the whole combination all in, you're probably looking in the mid- to high-5s. Whereas last year it would've been a 2.5 to, you know, cap rates that we like of, you know, 6.25%-7.25%, that was a big gap. Today, it's not. Okay, great. On the IFRS cap rate that you're using, is that, in your view, realistic considering that you said the debt would be I think you said mid to high fives? Mid to high fives? Yeah. I mean, we're, you know. We did not move our cap rates down tremendously to reflect the lower interest rate costs in 2020 and 2021. We've been very consistent, and that tends to be where the market's been in that cap rate range over the last, you know, five, 10 years. We've been very strong on sticking to our financial modeling on what we want to see because we're, you know, 10-, 15-, 20-year leases. We can't just go in it for the moment and hope that we can roll these leases over and double them in six months. We've stuck to our stringent underwriting, and it's coming back to where we think we'll be able to play nicely. Okay, great. Maybe just one more question in regards to asset sales. Is there something unique about this property, or should we expect to see maybe you, culling some other assets that maybe are non-core? I mean, we can't be afraid to you know do some capital recycling. At the same time, this was opportunistic. If you look at the cap rate, it's very similar to short-term cost of capital right now. We look at it as what may be coming down the pipeline, and we also look at it as being opportunistic to take a profit on, you know a Kingston property. Okay, great. Thanks. Your next question comes from Jonathan Kelcher from TD Securities. Jonathan, please go ahead. Thanks. Just to continue on Mark's question there. For the Kingston asset, was that you said it was opportunistic. Did they approach you on the deal? Yes. Okay. Go ahead. What type of buyer was it? It's the user. Okay. Is there any development potential on the property? I mean, it's Kingston. It's the two dealerships, two different brands, obviously. There was an outlying, excess land as well that goes with it. You could argue for the right use there could be. We didn't have an immediate use for it. It's not the type of development that, you know, if you're asking is it going to be a different use, higher density, etc., the answer is no, not in the short term. Not in the short to midterm. Okay. I'm just sort of looking at that at a 6.1%, and you raised your overall cap rate to 6.4%, and I can't imagine that the Kingston property would be among your best or your lowest cap rate. I'm just trying to reconcile the two. Yes is the short answer. That's why we took a hard look at it and decided that it was a good move to make. Okay. Secondly, it sounds like your pipeline is heating up, and you guys are obviously reliant on dealer M&A for a lot of your pipeline. Do you think that picks up as we kind of look at a recession over the next year or so, some dealers just wanting to get out of the business? It tends to ebb and flow and not always in a purely linear, logical way. Certainly they're coming off of two very strong years, so sometimes that can create a buy-sell gap. But at the same time, as that, some of the dealers that are looking at potentially retiring are seeing how long will this run go where we're at kind of white-hot margins and, you know, record profits. You know, it'll be a combination of where they kind of feel that they're getting highest value, but at the same time, the buyers are not willing to just buy based on record profits. They've got to make sure that they're buying on sustainable profitability going forward. I think, you're gonna see an active back half of 2023, and that could even get moved forward beyond that. Certainly we've always seen end-of-year deals, so I wouldn't be surprised if there's more deals announced in the M&A world over the next, you know, six-10 weeks. Okay. That's helpful. I'll turn it back. Thanks. Your next question comes from Brad Sturges from Raymond James. Brad, please go ahead. Hi. Good morning. Good morning. I guess from the proceeds from the sale at this point, the use would be to repay debt initially, or do you have maybe an opportunity to redeploy that capital in the short term? We certainly believe that will get capital recycled, but as we're waiting, it is kind of nice that cap rate is very similar to what the cost of our short-term capital. You know, it's nice when rent equals interest savings. It certainly allows us to be a bit more patient, but we certainly believe at a 6.1% for Kingston that there will be opportunities out there where we can get a higher cap rate. Yeah. Things are heating up, and historically we've seen more deal flow or activity at the end of the years, you know, even in the sort of early in the new year. I mean, how should we think about that sort of pace of maybe acquisition activity at the moment? I guess you're being a little bit more cautious or strategic with your capital, so just trying to, you know, consider or understand maybe of how to think of the pace of maybe capital deployment from here. Part of it can be outside of our control, and the M&A world right now is going a bit slower because OEM approvals are taking a bit longer than normal. In the M&A world, you've got to wait, A, to get your deal in place, but as importantly or more importantly, you need to get the OEM approval or the operator has to before that transaction goes through. Yeah, we've been at this for over seven years. A lot of our life is hurry up and wait. I think that's probably fair to say as we go forward. At the same time, a lot of the conversations with dealers tend to be slow-moving until they suddenly say, "Yes, we've had this under contract for two to three months, we're ready to close. Can you hurry up and join us?" It's really hard to pinpoint the pace. Okay. Thanks, Milton. I'll turn it back. Thanks. Your next question comes from Johann Rodrigues from Industrial Alliance. Please go ahead. Hi, guys. I was just curious as to, you know, what was the buyer of the Kingston? You said it was a user. You know, what was their rationale? What was their thinking for wanting to purchase the property? Yeah. I always find when they're sitting on the other side of the table, they don't give me that answer. It was more in our view, what's the price? Where do we think we can use that capital in the future? What's our short-term cost of debt now? We looked it up more from how it affects APR as opposed to how it affects them. I also don't like to put words in other people's mouths. Fair enough. Fair enough. Okay. You know, are you getting inbounds on other properties from users, or was this kind of a one-time thing? I mean, we often get, you know, "Would you consider?" But at the same time, for us, this was an opportunistic capital recycling. What do we wanna do? You never wanna say no, but this is not a situation that we expect to be programmatic. Okay, thanks. I'll turn back. Ladies and gentlemen, as a reminder, should you have a question, please press star followed by one. Your next question comes from Himanshu Gupta from Scotiabank. Please go ahead. Thank you and good morning. Good morning. Staying on our favorite subject today, the Kingston property sale. Did you look at the CAD per square feet pricing as well? I mean, CAD 6.1 is great. I'm looking at CAD 7.20 per sq ft. Is that the right way of looking at this? Yeah, I'm not sure you got the 720. The two buildings combined are just over 41,000 sq ft. Okay. You've got some excess land. You know, in the same way when we buy, we look at price per square feet, we look at, you know, is there another use? What do we think of the land? And what do we think of the cap rate? It's the same underwriting we do, we just do as an underwriting on is it something we wanna opportunistically sell or is it something we wanna opportunistically buy? In a lot of cases, you know, do we wanna hold the property? In this case, you know, different metrics, what we're seeing in the hedge, what our cost of capital is right now in short-term debt, it made sense. That will be something like CAD 450 per foot. In terms of the in-place rents, let's call it around CAD 27. I mean, based on the 6.1, was it below market or above market? I mean, was that in consideration for the user to take the property in terms of the in-place rents? Again, I can't really speak for the investor. You know, we don't like having properties that are above market rent. I would've said that they were, you know, somewhat in line with market, plus or minus, but certainly in line with market. This is a long-term lease with renewal options. Got it. Okay. More open-ended question on your entire portfolio in terms of market rents versus in-place rents. I mean, clearly, we have seen a lot, you know, on the industrial side of things. Replacement costs have gone up as well, and yours is into like 10, 20-year leases. Are you tracking where your in-place is versus your market rents are today, like in previous provinces? We certainly looked at it. I guess two comments there would be getting access to it, A. Then B, you know, same with industrial, but cost of land has escalated dramatically over the last five years. Cost of construction has escalated dramatically over the last few years. I would think in-place rents within our portfolio compared to replacement rents now to go out, build, develop, and then put a economic rent and yield in place, I think, you know, certainly there is. Today's rents are higher than they were when we started creating this REIT and the acquisitions we've done in the meantime. Fair enough. Yeah. And then, just final question on the balance sheet. I think, Andrew, you mentioned CAD 30 million dollars of floating non-revolving debt. I think that's still variable. Any thoughts to fix that up? Yeah. We follow our strategy of laddering three-10 years, and we're gonna continue to follow that over the foreseeable future. I mean, we're at 90% right now. We're watching the market. It is volatile, and we see some ups and downs, but we're gonna continue to follow our strategy and execute accordingly. We need a few more days like yesterday of minus 25 on the 10 years. That'd be nice. For sure. Yeah. Thank you. We are all waiting for those days. Thank you, and I'll turn it back. Yeah. Thank you. Your next question comes from Tal Woolley from National Bank Financial. Please go ahead. Hey, good morning, Milton and Andrew. How you doing? Good. Good. That's good. Yeah, I just wanted to talk a little bit about the credit facility, just to understand a little bit more how we should think about. I think your average cost right now across the facility is about 3.8%. I know some of it, you know, you've got the hedging in place. Should we expect that number to stay steady for the next few quarters? How would sort of that blended rate, how should we expect that blended rate to move, you know, as we move through 2023? Yeah, I mean, we know where rates are now. I mean, the swap rates from 5-10, I mean, pretty much in the bandwidth of 5.5%-6%. The expectation is as we continue to follow the strategy of fixing three-10-year laddering as some of these swaps mature, we'll see a higher blended rate over the period as we continue to mature based on current market conditions. I can't tell you exactly where it's gonna be, but you can see that we've got CAD 30 million that we talked about that's on swaps, and also we've got another CAD 40 million coming due within a year. We'll continue to assess on those maturities. Part of this was, I don't wanna say anticipated, but the rates that we've looked at over the last three to five- years were at record low levels, and that's why we've always been proactive on going longer for, you know, most of them were tens, but most, you know, all of them were 7-10s so that we could be insulated. I mean, it's not a long-term thing being at 2%-2.5% that we saw last year. Right. Even just a reminder, in April, we executed on swaps for eight-year terms, way below five. Okay. If I'm thinking like, you know, assuming nothing dramatic happens with the asset base, like, probably by the end of 2023, I would. You know, you're somewhere in below mid-fours. Does that sound about right? I was just trying to do the math last night. Yeah. I mean, I That was sort of where I was penciling out. Sure. No, I get your modeling and we don't really provide detailed forward-looking information or forecasting. Based on current rates, you know, the math can be done, and then you can just calculate where the blended would be based on current rates, based on where maturities are as well. Okay. Well, yeah, based on what's opening. I mean, every single time we do a model, it goes up 30 basis points, and then we finish the model, and it goes down 30 basis points. Mm-hmm. It's really interesting to model right now. Yeah. Tell me about it. Okay. Just another couple quick things about the credit facility to you. Like, you know, you've raised a little bit of money here selling this Kingston property. It you know it obviously sounds like you're gonna redeploy, you know fairly quickly. But if you weren't, you've got the flexibility to just park that cash too, right? If you wanted to, against the credit facility. We've got revolving revolvers. As of Q3, we had CAD 14.5 million, and as of yesterday, we had CAD 10 million. We've got the ability to pay down the revolvers immediately. Okay. Just a reminder, those are at high fives at this point in time right now. Okay. Yeah. Got it. If you have more assets to do, you've got like your underlying base facilities that I think you've got one maturing in like 2024, if I remember correctly. Like, you'll have like I would expect then probably like the unswapped rate on that facility probably increases, and then you go in and layer another swap, set of swaps on top of it. That's how this works, right? That 2024 facility would be extended for another five years. The swaps would stay in place as is. Okay. Potentially, we do, you know, at certain points, work with our syndicate lenders to kinda do regular extensions, and they're often kind of refresh of three to five years, mostly five- years. That would be, you know, the BA plus the spread, and then as Andrew said, you've got the swaps on top of that. If when you go to refinance the underlying facility, that rate moves a little bit, we would still expect the swapped rate then to sort of increase to reflect that margin. You get the benefit of the swap, but because. Yeah. Finish your sentence. Go ahead. Finish your sentence. We've been very consistent on the, you know, BA + 150 since we've started, and we've renewed. Okay. A bunch of these, a bunch of times. You know, having said that, the past is not always an expression of the future, but we tend to be strategic on when we do it as well, and we tend to enjoy some good support. Okay. Perfect. Just quick to give you clarity there, Tal, the swap itself is not gonna change, right? Like that's been fixed, that rate. Yeah. Got it. Yeah. Okay. But- Yeah. If for some reason the banks got, you know, touchier. Correct. They were increasing credit spreads. The credit spread is a discussion, correct. That's a variable component on that. Correct. If that went up, then yeah, there would be a little bit of upward pressure on your rate, even though the swap's still in place, if I've got that understanding out. On the overall, correct. That's it. Got it. That's correct. You got it. That's all I was trying to understand. No. No. Okay. That's great. Thanks very much, gentlemen. I appreciate it. Your next question comes from Jimmy Shan from RBC Capital Markets. Jimmy, please go ahead. Yeah, thanks. Just given your comment about dealers' cost of debt, having gone up substantially and they compare with your cap rate on acquisition. Well, not just dealers. Overall, the short-term cost of capital has gone up, and that includes dealers and all other industries. Yes, go ahead. Sure. Yeah. I'm just trying to understand kind of your leverage or pricing power now when you're negotiating these new acquisitions. Are you in a position you feel that you can push deals so that you can get cap rates, say, north of 7%? Are you there yet today in your discussion? It depends on the market, and it depends on the structure of the lease increases, of the annual rent increases. You know, it's always a bit of a balancing act between rental growth and the initial cap rate. What we are seeing is that, you know, last year's euphoria on, you know, we want pricing like industrial pricing, has now dissipated, and we're now getting to levels that are starting to make sense, for, I think for both parties. Okay. Yeah, 'cause I'm just thinking if you were able to do deals in the sixes, when the cost of debt was, you know, materially lower, I'm just trying to think about how that works now, right? I would imagine that you should be able to get acquisition cap rates better than you would have done in the past. Is that a fair way of thinking about it? Certainly in the past two or three years, yes. Yeah. Okay. Okay, thanks, guys. There are no further questions at this time. I'll turn it back to you. That's great. Everyone, thank you very much. You know, before signing off on this Remembrance Day, we thank the proud men and women of the Canadian Armed Forces and remember those that gave their lives to serve our country. Thank you for joining us today. We look forward to speaking to you again soon. All the best. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.