Automotive Properties Real Estate Investment Trust
Management's Discussion and Analysis
March 31, 2026
Table of ContentsSECTION 1 - GENERAL INFORMATION AND CAUTIONARY STATEMENTS 3
Basis of Presentation 3
The REIT 3
Investing Activities 3
Financing Activities 4
Forward-Looking Statements 4
Non-IFRS Financial Measures 6
SECTION 2 - STRATEGY AND OBJECTIVES 8
Strategy and Objectives 8
Overview of Automobile Retail Industry 10
SECTION 3 - PROPERTY PORTFOLIO 10
Portfolio Overview 10
Income Producing Property Portfolio Summary 11
GLA by Major Metropolitan Area Across Canada and in the United States 11
Profile of Overall Lease Maturity as at March 31, 2026 12
Property Use and Brand Diversification 12
Description of the REIT's Key Tenant 13
Dilawri Additional and Non-ASPE Measures 14
SECTION 4 - KEY PERFORMANCE INDICATORS AND SELECTED FINANCIAL INFORMATION 15
SECTION 5 - RESULTS OF OPERATIONS 16
Net Income and Comprehensive Income 16
Rental Revenue and Property Costs 17
General and Administrative Expenses 17
Interest Expense and Other Financing Charges 17
Changes in Fair Values of Investment Properties 18
Other Changes in Fair Values 18
SECTION 6 - NON-IFRS FINANCIAL MEASURES 19
Reconciliation of NOI, Cash NOI, FFO and AFFO to Net Income 19
FFO, AFFO and Cash NOI 20
Same Property Cash Net Operating Income 20
SECTION 7 - LIQUIDITY AND CAPITAL RESOURCES 20
Capital Structure 20
Debt Financing 22
Unitholders' Equity (including Class B LP Units and Unit-based compensation) 23
Financing Metrics and Debt Covenants 26
SECTION 8 - RELATED PARTY TRANSACTIONS 27
Strategic Alliance Agreement 27
SECTION 9 − OUTLOOK 28
SECTION 10 - OTHER DISCLOSURES 28
Environmental and Corporate Social Responsibility 28
Commitments and Contingencies 29
Disclosure Controls and Internal Controls over Financial Reporting 29
SECTION 11 - QUARTERLY RESULTS OF OPERATIONS 30
SECTION 12 - RISKS & UNCERTAINTIES, CRITICAL JUDGMENTS & ESTIMATES 30
SECTION 1 - GENERAL INFORMATION AND CAUTIONARY STATEMENTS Basis of PresentationThe following Management's Discussion and Analysis ("MD&A") of the financial position and results of operations of Automotive Properties Real Estate Investment Trust (the "REIT") is intended to provide readers with an assessment of the performance of the REIT for the three-month period ended March 31, 2026. This MD&A also outlines the REIT's capital structure, operating strategies and business outlook. All dollar amounts in this MD&A are presented in thousands of Canadian dollars, except unit and per unit amounts, unless otherwise noted. All comparisons of results for the three months ended March 31, 2026 ("Q1 2026") are against results for the three months ended March 31, 2025 ("Q1 2025"), unless otherwise noted.
This MD&A should be read in conjunction with the unaudited condensed consolidated interim financial statements of the REIT and accompanying notes for the three months ended March 31, 2026. Further information about the REIT can be found in the REIT's annual information form dated March 4, 2026 (the "AIF"). The AIF, along with other continuous disclosure documents required by the Canadian securities regulators, can be found on the REIT's SEDAR+ profile at www.sedarplus.ca and on the REIT's website at www.automotivepropertiesreit.ca. This MD&A is dated May 13, 2026.
All information regarding Dilawri (as defined below) contained in this MD&A (the "Dilawri Information") has been provided by and is solely the responsibility of Dilawri and not of the REIT, the REIT's management nor the trustees of the REIT (the "Trustees"). Although the REIT has no reason to believe that the Dilawri Information contains a misrepresentation, Dilawri is a private company that is independent of, and operates entirely independently from, the REIT and, consequently, neither the REIT, its management nor its Trustees (in their capacities as such) have been involved in the preparation of the Dilawri Information, nor has the REIT approved such information. Readers are cautioned, therefore, not to place undue reliance on the Dilawri Information.
The REITThe REIT is an unincorporated, open-ended real estate investment trust that was formed to own primarily income-producing automotive properties, including retail dealership and original equipment manufacturer properties, in Canada and the United States. The REIT commenced operations on July 22, 2015 following completion of its initial public offering of trust units (the "IPO"). As at the date of this MD&A, the REIT owns a portfolio of 95 income-producing commercial properties. The properties are located in metropolitan areas across Canada in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Québec and in the United States in the states of Florida, Ohio and California, totaling approximately 3.5 million square feet of gross leasable area ("GLA") on approximately 322 acres of land. The REIT has been internally managed since January 1, 2020.
893353 Alberta Inc. ("Dilawri") is a privately held corporation which, together with certain of its affiliates, held an approximate 30.7% effective interest in the REIT on a fully diluted basis as at March 31, 2026 (December 31, 2025 -30.7%) through the ownership, direction or control of 17,390,998 trust units of the REIT ("REIT Units"). Dilawri and its affiliates, other than its shareholders and controlling persons, are referred to herein as the "Dilawri Group".
As at March 31, 2026, the total number of issued and outstanding REIT Units and Class B limited partnership units ("Class B LP Units") of Automotive Properties Limited Partnership, the REIT's operating subsidiary (the "Partnership"), was 54,311,229 and 833,333, respectively. The REIT Units are listed and posted for trading on the Toronto Stock Exchange under the symbol "APR.UN". REIT Units and Class B LP Units are collectively referred to in this MD&A as "Units". See Section 7 "Liquidity and Capital Resources".
Investing ActivitiesOn January 1, 2026, the REIT acquired an automotive dealership property located at 300 Boulevard Louis-XIV in Québec City, Québec (the "Québec City Hyundai Property") for a purchase price of $13,250, plus acquisition cost of $355. The Québec City Hyundai Property consists of 39,044 square feet of GLA situated on approximately 6.0 acres of land. The REIT funded the acquisition of the Québec City Hyundai Property by drawing on its revolving credit facilities.
On March 26, 2026, the REIT acquired an automotive and service property located in Vista, San Diego County, California (the "Vista Rivian Property") for a purchase price of US$16,000 plus acquisition costs of US$191, translated to a total of C$22,416. The Vista Rivian Property is tenanted by Rivian LLC under a mid-term, net lease that includes contractual fixed annual rent increases with renewal options. The Vista Rivian property consists of an approximately 59,828 square-foot Rivian sales, delivery and service facility that is situated on approximately 3.75 acres of land. The REIT funded the purchase price of the Vista Rivian Property primarily by drawing on its revolving credit facilities.
On April 7, 2026, the REIT acquired two automotive dealership properties located in Santa Ana, Orange County, California (the "Orange County Properties") from a third party for a purchase price of US$30,150, plus acquisitions costs of US$350, translated to a total of approximately C$42,500. The Orange County Properties are tenanted by Penske Automotive Group, Inc., under mid-term, triple-net leases, with renewal options based on the California Consumer Price Index, subject to a cap. The Orange County Properties include Audi South Coast, an approximately 31,900 square-foot full-service Audi dealership facility, and South Coast Volkswagen, an approximately 29,300 square-foot full-service Volkswagen dealership facility. The Orange County Properties are situated on parcels of land totaling 5.95 acres. The REIT funded the acquisition of the Orange County Properties by drawing on its revolving credit facilities.
Financing ActivitiesOn February 12, 2026, the REIT entered into a floating-to-fixed interest rate swap within Facility 3 in the amount of
$10,000 for a term of five years at an interest rate of 4.59%.
On February 17, 2026, the REIT entered into a floating-to-fixed interest rate swap within Facility 3 in the amount of
$15,000 for a term of five years at an interest rate of 4.48%.
On February 25, 2026, the REIT entered into floating-to-fixed interest rate swaps within Facility 3 in the amount of
$10,000 for a term of seven years at an interest rate of 4.59% and $10,000 for a term of five years at an interest rate of 4.45%.
On February 27, 2026, the REIT increased the amount of the revolving portion of Facility 1 by $25,000 and extended the maturity date from June 2027 to June 2029 with the same credit spread.
The REIT announced monthly cash distributions of $0.0685 per Unit, resulting in total distributions declared and paid of
$11,325 and $11,322, respectively, for Q1 2026 (Q1 2025 - $9,867 declared and paid excluding the Special Distribution (as defined below)).
As at March 31, 2026, the REIT had a Debt to GBV (as defined below) ratio of 46.3%, $69,000 of undrawn capacity under its Credit Facilities (as defined below), cash on hand of $960 and 11 unencumbered properties with an aggregate value of approximately $152,900. As at the date of this MD&A, the REIT had a Debt to GBV ratio of 47.8%, approximately
$32,500 of undrawn capacity under its Credit Facilities and 13 unencumbered properties with an aggregate value of approximately $195,400. See Section 7 "Liquidity and Capital Resources" for additional details. See also Section 1 "General Information and Cautionary Statements - Non-IFRS Financial Measures" below.
As at March 31, 2026, the REIT had a Debt to EBITDA Ratio (as defined below) of 7.92, compared to 8.05 as at December 31, 2025. The REIT's Debt to EBITDA Ratio is expected to decrease in future quarters due to the fact that EBITDA does not include the full trailing 12 months of rental revenue generated from acquisitions completed by the REIT in 2025 or during and subsequent to Q1 2026 (assuming: (i) no material changes to the REIT's level of indebtedness, (ii) tenants continue to pay rent when due, and (iii) no property dispositions by the REIT). See Section 1 "General Information and Cautionary Statements - Non-IFRS Financial Measures" and "General Information and Cautionary Statements - Forward-Looking Statements" below.
Forward-Looking StatementsCertain statements contained in this MD&A constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to the REIT's future outlook and anticipated events or results and may include statements regarding the financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the REIT. Particularly, statements regarding future results,
performance, achievements, prospects or opportunities for the REIT or the real estate or automotive dealership industry are forward-looking statements. In some cases, forward-looking information can be identified by terms such as "may", "might", "will", "could", "should", "would", "occur", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue", "likely", "schedule", "objectives", or the negative thereof or other similar expressions concerning matters that are not historical facts. Some of the specific forward-looking statements in this MD&A include, but are not limited to, statements with respect to the following:
the impact of changes in economic conditions, including changes in interest rates, currency fluctuation and the rate of inflation, or the impact of tariffs or other trade restrictions;
the impact of the REIT's acquisitions completed in 2025 and Q1 2026 on the REIT's EBITDA and Debt to
EBITDA Ratio;
the REIT's relationship with the Dilawri Group, Dilawri's shareholders and certain other related persons and entities (collectively, the "Dilawri Organization"), including in respect of (i) the Dilawri Organization's retained interest in the REIT and its current intention with respect thereto, and (ii) expected transactions to be entered into between Dilawri and the REIT (including pursuant to the Strategic Alliance Agreement);
the REIT's intention with respect to, and ability to execute, its external and internal growth strategies;
the maintenance by the REIT of a strong balance sheet and prudent financial management and associated minimization of financial risk;
the REIT's expectations with respect to the proportion of leases containing CPI-related adjustments in 2026 and
the impact of rent escalators on the REIT's Same Property Cash NOI (as defined below);
the REIT representing a unique alternative for automotive, original equipment manufacturers ("OEMs"),
dealership and service centre operators considering a sale or recapitalization of their business;
the REIT's capital expenditure requirements and capital expenditures to be made by the REIT and the REIT's
tenants;
the REIT's distribution policy and the distributions to be paid to Unitholders (as defined below);
the REIT's debt strategy;
the REIT's access to available sources of debt and/or equity financing;
the expected tax treatment of the REIT and its distributions to Unitholders;
the REIT's ability to meet its stated objectives;
the REIT's ability to expand its asset base and make accretive acquisitions;
the ability of the REIT to qualify as a "mutual fund trust" as defined in the Income Tax Act (Canada) (the "Tax Act"), and as a "Real Estate Investment Trust" as defined in the rules in the Tax Act applicable to "SIFT trusts" and "SIFT partnerships" (the "SIFT Rules"); and
the REIT's ability to acquire automotive dealership, OEM dealership and service centre properties.
The REIT has based these forward-looking statements on factors and assumptions about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs, including that inflation will remain stable in the near term, that interest rates will remain stable in the near term, that tax laws remain unchanged, that tariffs and other trade restrictions will remain relatively stable in the near term, that conditions within the automotive dealership, OEM dealership and service centre operators real estate industry and the automotive dealership, OEM dealership and service centre operators industry generally, including competition for acquisitions, will be consistent with the current climate, that the Canadian capital markets will provide the REIT with access to equity and/or debt at reasonable rates when required and that the Dilawri Organization will continue its involvement with the REIT.
Although the forward-looking statements contained in this MD&A are based upon assumptions that management believes are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond the REIT's control, that may cause the REIT's or the industry's actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the factors contained in the REIT's filings with securities regulators, including the factors discussed under Section 12 "Risks & Uncertainties, Critical Judgments & Estimates" in this MD&A.
When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not, and at which times, such performance or results will be achieved. The forward-looking statements made in this MD&A relate only to events or information as of the date on which the statements are made in this MD&A. Except as required by law, the REIT undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
The information in this MD&A is current to March 31, 2026, unless otherwise noted.
Non-IFRS Financial MeasuresThe REIT prepares its consolidated financial statements according to IFRS Accounting Standards ("IFRS") as issued by the International Accounting Standards Board. This MD&A contains certain financial measures and ratios which are not defined under IFRS and may not be comparable to similar measures presented by other real estate investment trusts or enterprises.
Funds from operations ("FFO"), adjusted funds from operations ("AFFO"), FFO payout ratio, AFFO payout ratio, net operating income ("NOI"), cash net operating income ("Cash NOI"), same property cash net operating income ("Same Property Cash NOI"), and earnings before interest expense, income tax, depreciation, and amortization ("EBITDA") are key measures of performance used by the REIT's management and real estate businesses.
Gross book value ("GBV"), indebtedness ("Indebtedness"), net asset value ("Net Asset Value"), debt to gross book value ("Debt to GBV"), debt service coverage ratio ("Debt Service Coverage Ratio"), interest coverage ratio ("Interest Coverage Ratio"), debt to EBITDA ratio ("Debt to EBITDA Ratio") and tangible net worth are measures of financial position defined by agreements to which the REIT is a party. These measures and ratios, as well as any associated "per Unit" amounts, are not defined by IFRS and do not have standardized meanings prescribed by IFRS, and therefore should not be construed as alternatives to net income or cash flow from operating activities calculated in accordance with IFRS.
The REIT believes that AFFO is an important measure of economic earnings performance and is indicative of the REIT's ability to pay distributions from earnings, while FFO, NOI, Cash NOI, Same Property Cash NOI and EBITDA are important measures of operating performance of real estate businesses and properties. The IFRS measurement most directly comparable to FFO, AFFO, NOI, Cash NOI, Same Property Cash NOI and EBITDA is net income.
"FFO" is a non-IFRS measure of operating performance widely used by the real estate industry, particularly by those publicly traded entities that own and operate income-producing properties. FFO should not be considered as an alternative to net income or cash flows provided by operating activities determined in accordance with IFRS. The REIT calculates FFO in accordance with the Real Property Association of Canada's White Paper on Funds from Operations & Adjusted Funds from Operations for IFRS issued in January 2022. FFO is calculated as net income in accordance with IFRS, adjusted by removing the impact of: (i) fair value adjustments on investment properties; (ii) other fair value adjustments including fair value adjustments on redeemable or exchangeable units; (iii) gains and losses on the sale of investment properties; (iv) amortization of tenant incentives; (v) distributions on redeemable or exchangeable units treated as interest expense; (vi) operational revenue and expenses from the right-of-use assets (referred to as "ROU" assets); and (vii) foreign exchange translation adjustment.
"AFFO" is a non-IFRS measure of economic earnings operating performance widely used in the real estate industry to assess an entity's distribution capacity from earnings. The REIT calculates AFFO in accordance with the Real Property Association of Canada's White Paper on Funds from Operations & Adjusted Funds from Operations for IFRS issued in January 2022. AFFO is calculated as FFO subject to certain adjustments, to remove the impact of: (i) any adjustments resulting from recognizing property rental revenues or expenses (including ground lease rental payments) on a straight-line basis; and (ii) capital expenditures. The REIT includes a capital expenditure reserve of 0.5% of base rent in the AFFO calculation. To date, the REIT has not incurred capital expenditure costs. The capital expenditure reserve is based on management's best estimate of costs that the REIT may incur related to the sustaining/maintaining of the existing leased area.
"NOI" is a non-IFRS measure that means rental revenue from properties less property operating expenses as presented in the statement of income prepared in accordance with IFRS. Accordingly, NOI excludes certain expenses included in the determination of net income such as interest, general and administrative expenses, fair value adjustments and amortization.
"Cash NOI" is a non-IFRS measure that means NOI prior to the effects of straight-line adjustments and deducts land lease payments.
"Same Property Cash NOI" is a non-IFRS measure which reports the period-over-period performance of the same asset base having consistent GLA during both periods of Cash NOI. The REIT uses this measure to assess financial returns and changes in property value.
Non-IFRS Ratios:
"FFO payout ratio" is calculated as distributions paid per Unit (excluding the Special Distribution) divided by the FFO per Unit diluted.
"AFFO payout ratio" is a non-IFRS measure of the sustainability of the REIT's distribution payout capacity from earnings. The REIT uses this metric to provide clarity of the performance of earnings and the overall management of the current portfolio of assets. Management considers AFFO payout ratio as the key measure of the REIT's distribution capacity from earnings. AFFO payout ratio is calculated as distributions declared per Unit (excluding the Special Distribution) divided by AFFO per Unit diluted.
Supplementary Financial Measures:
"EBITDA" is defined as earnings (net income) before income tax, interest expense, depreciation, and amortization.
FFO, AFFO, FFO payout ratio, AFFO payout ratio, NOI, Cash NOI and Same Property Cash NOI should not be construed as alternatives to net income or cash flow from operating activities determined in accordance with IFRS as indicators of the REIT's performance. The REIT's method of calculating FFO, AFFO, FFO payout ratio, AFFO payout ratio, NOI, Cash NOI and Same Property Cash NOI may differ from other issuers' methods and, accordingly, may not be comparable to measures used by other issuers. See Section 6 "Non-IFRS Financial Measures" in this MD&A for a reconciliation of these measures to net income or cash flow from operating activities, as applicable.
"GBV" means, at any time, the greater of: (A) the book value of the assets of the REIT and its consolidated subsidiaries, as shown on its then most recent consolidated balance sheet, less the amount of any receivable reflecting interest rate subsidies on any debt assumed by the REIT; and (B) the historical cost of the investment properties, plus (i) the carrying value of cash and cash equivalents, (ii) the carrying value of mortgages receivable, and (iii) the historical cost of other assets and investments used in operations.
"Indebtedness" of the REIT means (without duplication): (i) any obligation for borrowed money (including, for greater certainty, the full principal amount of convertible debt, notwithstanding its presentation under IFRS), (ii) any obligation incurred in connection with the acquisition of property, assets or businesses, (iii) any obligation issued or assumed as the deferred purchase price of property, (iv) any capital lease obligation (as defined under IFRS and in the REIT's declaration of trust (the "Declaration of Trust")), and (v) any obligations of the type referred to in clauses (i) through (iv) of another entity, the payment of which the REIT has guaranteed or for which the REIT is responsible or liable; provided that, (A) for the purpose of clauses (i) through (v) (except in respect of convertible debt, as described above), an
obligation will constitute Indebtedness of the REIT only to the extent that it would appear as a liability on the consolidated balance sheet of the REIT in accordance with IFRS, (B) obligations referred to in clauses (i) through (iii) exclude trade accounts payable, distributions payable to Unitholders or holders of other securities excluded from the definition of Indebtedness pursuant to clause (C) below, accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith, deferred revenues, intangible liabilities, deferred income taxes, deferred financing costs, tenant deposits and indebtedness with respect to the unpaid balance of installment receipts where such indebtedness has a term not in excess of 12 months, and (C) REIT Units, Class A LP Units, and Class B LP Units, exchangeable securities and other equity securities that constitute debt under IFRS do not constitute Indebtedness.
"Net Asset Value" means total assets less Indebtedness, accounts payable, accrued liabilities, credit facilities,
mortgages and interest rate swaps.
"Debt to EBITDA Ratio" means the ratio of total debt divided by 12 months of trailing EBITDA. Debt may increase as a result of acquisitions; however, EBITDA will not include the full trailing 12 months of rental revenue associated with recent acquisitions.
"Debt to GBV" means the ratio of Indebtedness to GBV at a particular time. "Debt Service" means the total payments of principal and interest on debt.
"Debt Service Coverage Ratio" means the ratio of EBITDA divided by Debt Service at a particular time.
"Interest Coverage Ratio" means the ratio of Cash NOI less general and administrative expenses divided by the total of
the interest expense and other financing charges.
SECTION 2 - STRATEGY AND OBJECTIVES Strategy and ObjectivesThe primary strategy of the REIT is to create Unitholder value over the long-term by generating sustainable tax-efficient cash flow and capital appreciation through the REIT's ability to execute on external and internal growth strategies.
The primary objectives of the REIT are to:
provide Unitholders with stable, predictable and growing monthly cash distributions on a tax-efficient basis;
enhance the value of the REIT's assets in order to maximize long-term Unitholder value; and
expand the REIT's asset base while also increasing the REIT's AFFO per Unit, including through accretive acquisitions.
Management intends to grow the value of the REIT's real estate portfolio while also increasing AFFO per Unit through accretive acquisitions and steady growth in rental rates. The REIT expects to be well-positioned to capitalize on acquisition opportunities presented by third parties due to the fragmented nature of the automotive dealership industry. The REIT also expects to leverage its strategic arrangement with the Dilawri Group to acquire properties from the Dilawri Group that meet the REIT's investment criteria. Management intends to focus on obtaining new properties which have the potential to contribute to the REIT's ability to generate stable and predictable monthly cash distributions to Unitholders. The REIT continually reviews its investment property portfolio and may consider, from time to time, potential strategic dispositions of investment properties in order to unlock value which is in line with the best interests of the REIT's long-term growth strategy. The REIT also plans to continue to grow its portfolio of properties leased to OEMs, OEM dealers and other automotive related tenants in Canada and the United States.
Overall, the REIT has a well-defined, long-term growth strategy which includes both external and internal elements.
Internal Growth
Management believes the REIT is well-positioned to organically increase cash flow and, as a result, increase the value of its properties over time. These increases are expected to come from the following sources:
Contractual fixed rent escalators or Consumer Price Index ("CPI") adjustments are expected, wherever possible, to be negotiated into new leases entered into by the REIT.
Leases containing CPI-related adjustments and capped CPI-related adjustments currently represent
approximately 42% of the REIT's portfolio by full year base rent in 2026; and
The existing leases with a member of the Dilawri Group (each, a "Dilawri Lease") contains annual contractual basic rent escalators in the amount of 1.5% per annum during the initial lease term and any renewal term, except for the leases related to a portfolio of three automotive dealership properties (Subaru Des Sources, Honda Des Sources and Volkswagen Des Sources) located in Dorval, Québec (the "Des Sources Leases").
External Growth
Accretive AcquisitionsManagement believes that the REIT is well-positioned to capitalize on opportunities for accretive acquisitions of automotive and OEM dealership and service centre properties due to certain features of the automotive dealership industry in Canada and the United States:
Fragmented ownership - Management estimates that the top 10 automotive dealership groups in Canada and the United Sates own less than 20% of the approximately 3,500 automotive dealerships in Canada and approximately 18,000 automotive dealerships in the United States that are currently in operation;
Capital redeployment needs - Monetizing the real estate underlying automotive and OEM dealership and service centre properties allows owner operators to retain control of their enterprise while redeploying capital into other areas of their business; and
Succession planning issues - Management believes that for the majority of independent automotive and OEM dealership and service centre owners, the dealership / service centre and its underlying real estate together represent the single largest proportion of their wealth. Selling the underlying real estate to the REIT can help such owners address succession, estate and other planning issues, particularly if the transaction can be effected on a tax efficient basis.
Management believes that the REIT will represent a unique alternative for automotive dealership operators considering a sale or recapitalization of their business, as the REIT is currently the only public vehicle in Canada focused on consolidating automotive dealership, OEM dealership and service centre real estate properties also, in addition allows OEM to create sales service network platform.
The REIT seeks to acquire properties that meet its investment criteria in order to diversify its tenant base, while continuing to focus on tenant quality, stability of cash flow and brand and geographical diversification in strategic markets. The REIT will evaluate potential acquisition opportunities based on a number of factors, including valuation, expected financial performance, stability of cash flows, physical features, existing leases, functionality of design, geographic market, location, automotive brand representation and opportunity for future value enhancement. In addition, the REIT will continue to assess acquisitions of heavy equipment, trucking and other OEM dealership or service properties as opportunities arise.
Right of First Offer to Acquire REIT-Suitable Properties from the Dilawri GroupManagement believes that its relationship with the Dilawri Group provides the REIT with additional opportunities to add quality automotive dealership properties to its portfolio in an accretive manner.
Pursuant to the Strategic Alliance Agreement, Dilawri is required to offer to sell to the REIT any REIT suitable property that is acquired, developed, redeveloped, refurbished, or repositioned by a member of the Dilawri Group. This agreement is described under Section 8 "Related Party Transactions" in this MD&A.
Since completion of the IPO, the REIT has acquired 13 automotive dealership properties from the Dilawri Group under the Strategic Alliance Agreement as of the date of this MD&A.
Overview of Automobile Retail IndustryHistorically, Canada's automotive retail industry has been characterized by strong industry fundamentals. According to Statistics Canada, automotive retail industry sales totaled approximately $230 billion in 2025 (up 5.1% from approximately $219 billion in 2024), representing approximately 30% of Canada's overall retail sales of products and merchandise. Over the last 20 years, retail automotive sales grew at a compound annual rate of 5.0%.
According to DesRosiers Automotive Consultants Inc., based on OEM submissions, Canadian new, light vehicle unit sales for Q1 2026 decreased by approximately 4.4% compared to Q1 2025. According to Bank of Nova Scotia, US new light vehicle unit sales for Q1 2026 decreased by approximately 5.3% compared to Q1 2025.
New vehicle sales represent a portion of overall automotive dealership profitability, as significant profit contributions are also generated from used vehicle sales, service and parts, finance and insurance. The REIT's portfolio of diverse dealership, service and OEM properties, strong industry fundamentals and an attractive leasing profile support the stability of distributions to holders of REIT Units and Class B LP Units (collectively, "Unitholders").
SECTION 3 - PROPERTY PORTFOLIO Portfolio OverviewAs at March 31, 2026, the REIT's portfolio consisted of 93 income-producing commercial properties (95 properties as of the date of this MD&A), representing approximately 3.5 million square feet of GLA on approximately 316 acres of land (approximately 3.5 million square feet of GLA on approximately 322 acres of land as of the date of this MD&A), in metropolitan markets across Canada in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Québec and in the states of Florida, Ohio and California in the United States.
As of the date of this MD&A, the Dilawri Group occupies 39 of the REIT's properties for use as automotive dealerships or, in one case, an automotive repair facility. The Dilawri Group jointly occupies one of the REIT's properties (for use as an automotive dealership) with one or more third parties (for use as automotive dealerships or complementary uses, including restaurants). The remaining 55 properties are exclusively occupied by other dealership groups or OEMs for use as automotive dealerships, automotive service centres or for automotive ancillary services, such as a vehicle service compound facility or a repair facility. Taschereau JLR is jointly owned by the REIT and StorageVault Canada Inc. ("StorageVault") pursuant to the 50/50 joint arrangement with StorageVault (the "Joint Arrangement").
The Dilawri Group is the REIT's most significant tenant and accounted for approximately 46.0% of the REIT's Q1 2026 base rent, including rent from properties subleased to third parties (51.7% for Q1 2025). The REIT's overall portfolio continues to be 100% leased.
For the 12-month period commencing March 31, 2026, the REIT's properties have a weighted average rental rate of
$27.94 per square foot ($28.16 as at March 31, 2025). The year-over-year decline reflects the September 1, 2026 maturity date of the lease on the REIT's dealership property located at 9088 Jane Street in Vaughan, Ontario, tenanted by Pfaff Audi. The REIT is currently evaluating strategic alternatives for this property.
Except where otherwise expressly indicated, the information that follows as at and for the three months ended March 31, 2026 does not give effect to the acquisition of the Orange County Properties, as the acquisition of these properties had not closed by March 31, 2026.
Income Producing Property Portfolio SummaryNumber of | Average rental rate | Weighted Average Lease | ||
As at March 31, 2026 | Properties | GLA (sq. ft.) | (per sq. ft.)(1) | Term (yrs) |
British Columbia(2) | 8 | 199,244 | $43.04 | 8.4 |
Alberta | 13 | 467,508 | $30.25 | 6.9 |
Saskatchewan | 9 | 203,560 | $25.01 | 5.8 |
Manitoba | 2 | 109,816 | $26.41 | 15.2 |
Ontario | 26 | 986,879 | $29.28 | 7.5 |
Quebec | 31 | 1,282,749 | $24.09 | 10.4 |
USA | 4 | 213,766 | $29.32 | 5.2 |
Total Portfolio | 93 | 3,463,522 | $27.94 | 8.5 |
Average | Weighted | |||
As at March 31, 2025 | Number of Properties | GLA (sq. ft.) | rental rate (per sq. ft.)(1) | Average Lease Term (yrs) |
British Columbia(2) | 8 | 199,244 | $42.40 | 8.9 |
Alberta | 13 | 467,508 | $29.88 | 7.9 |
Saskatchewan | 9 | 203,560 | $24.64 | 5.8 |
Manitoba | 2 | 109,816 | $25.80 | 16.2 |
Ontario | 26 | 986,879 | $29.84 | 8.5 |
Quebec | 20 | 906,410 | $23.39 | 9.4 |
Ohio, USA | 1 | 94,000 | - | - |
Total Portfolio | 79 | 2,967,417 | $28.16 | 8.8 |
Based on 12-month period contractual rental revenue commencing March 31, 2026.
Excludes land leases, where expenses are passed on to the tenant.
GLA by Major Metropolitan Area Across Canada and in the United StatesA significant majority of the REIT's properties are located within major metropolitan areas across Canada and in the United States.
As at March 31, 2026
Edmonton 5.0%
Greater Vancouver Area
5.8%
USA 6.2%
Greater Montreal Area 31.1%
As at March 31, 2025
Edmonton 5.9%
Greater Vancouver Area
6.7%
Calgary 9.9%
USA 3.2%
Greater Toronto Area 19.4%
Calgary 8.5%
Ottawa 7.6%
Greater Toronto Area 16.6%
Remaining Portfolio 19.2%
Ottawa 8.9%
Greater Montreal Area 25.0%
Remaining Portfolio 21.0%
Profile of Overall Lease Maturity as at March 31, 2026The REIT's lease portfolio matures between 2026 and 2045 as set out in the chart below:
Lease Maturity Profile (*)4.7%
4.4%
3.7%
1.0%(**)
2.7%
2.5%
1.8%
2.2%
0.7%
1.4% 0.3%
% of Base Rent
5.3% 7.1% 9.1% 7.7% 8.6% 8.2%
12.7% 7.0% 8.9%
'25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40 '41 '42 '43 '44 '45
(*) Based on 12-month period contractual rental revenue commencing March 31, 2026.
(**) All 2026 maturities have been extended except for Pfaff Audi. Pfaff Audi (Vaughan property) tenant has notified that they will vacate the premises at the end of the lease term on or about September 1, 2026.
Property Use and Brand DiversificationSales for an individual automotive dealership and OEM property are heavily influenced by the popularity of the automotive brands being marketed, and these, in turn, are often cyclical for each brand as new models are introduced, and existing models are updated and refreshed. In addition, prospects for both mass market and luxury brands can vary with economic cycles. Management believes that the portfolio's broad automotive and OEM brand diversification contributes to the quality and stability of the REIT's cash flows. The following table sets out the breakdown of automotive brands that are marketed, retailed and serviced at the REIT's properties as of March 31, 2026:
Manufacturer / Brand
REIT Auto Property GLA (Sq. Feet)
% of REIT Auto Property GLA
% of REIT Base Rent(1)
No. of REIT Locations
Honda (2)
522,382
15.2%
16.0%
14
Tesla
332,879
9.7%
6.5%
7
BMW (3)
320,824
9.3%
8.1%
7
Volkswagen
317,122
9.2%
9.0%
8
Toyota
264,324
7.7%
8.1%
7
Audi
196,462
5.7%
6.0%
4
Acura (2)
162,081
4.7%
5.8%
6
Hyundai
139,428
4.0%
4.5%
5
Mazda
139,254
4.0%
5.1%
2
Rivian
119,766
3.5%
4.7%
3
General Motors
113,532
3.3%
3.0%
6
Stellantis (4)
81,750
2.4%
1.4%
2
Mercedes Benz
60,850
1.8%
1.6%
1
Nissan
57,233
1.7%
1.6%
2
Kia
53,819
1.6%
1.7%
3
Subaru
40,776
1.2%
1.6%
3
Porsche
39,790
1.2%
3.5%
1
Lexus
30,015
0.9%
1.1%
1
Mitsubishi
14,750
0.4%
0.5%
2
Infiniti
14,592
0.4%
0.7%
2
Other (5)
421,118
12.1%
9.5%
21
Total
3,442,747
100.0%
100.0%
107
Notes:
(1) Based on 12-month period contractual base rent commencing April 1, 2026.
(2) Includes Honda Used Car and Regina Collision Centre. Regina Honda/Acura split 75% and 25% of 30,863 square feet, respectively.
(3) Includes MINI.
(4) Includes Dodge, FIAT, Jeep and RAM.
(5) The Dilawri Group subleased a property in Calgary to Grand Touring Automobile which operates Aston Martin and Bentley. Also includes the former Dilawri Acura and BMW property in Regina at 1921 1st Avenue which is being used for ancillary dealership purposes by both the Dilawri Pre Owned and the Triple 7 Chrysler dealerships. Also includes: a Harley Davidson dealership, VinFast dealership and Ineos Grenadier dealership, located in the Dixie Auto Mall. Includes three vehicle compound facilities. The former Southtown Hyundai is operating as Go Auto service centre and Jaguar Land Rover ("JLR") Centre in Edmonton is operating as JLR Edmonton. Includes JLR (formerly Audi Services), Taschereau JLR (formerly Taschereau Volvo and JLR) and two heavy construction equipment dealership properties located in the Greater Montreal Area. The former North Vancouver Nissan Infiniti is expected to be replaced by another branded OEM in the future. Includes Rivian Tampa and Orlando Rivian in Florida. Also includes Ford Île-Perrot and Body Shop CCIP.
Description of the REIT's Key TenantIn connection with the IPO, the REIT indirectly acquired a portfolio of 26 commercial properties from certain members of the Dilawri Group (as defined below) (the "Initial Properties") and leased the Initial Properties to the applicable member of the Dilawri Group (collectively, and including members of the Dilawri Group that became tenants of a property owned by the REIT subsequent to the IPO, the "Dilawri Tenants").
At the time of the IPO, Dilawri agreed to provide certain financial information to the REIT pursuant to a financial information and confidentiality agreement for so long as the annual basic rent payable by the applicable members of the Dilawri Group, collectively, under their respective Dilawri Leases represented, in the aggregate, 60% or more of the REIT's Cash NOI during any rolling period of 12 consecutive calendar months, determined quarterly. Since December 31, 2022, the Dilawri Group's basic rent payable has been below the 60% threshold; however, Dilawri has agreed to continue to provide its Combined Revenues, EBITDA and Pro Forma Adjusted Rent Coverage Ratio on a trailing 12-month basis (with a comparative period for the prior 12-month period). That agreement remains in place for one quarter following the quarter in which notice of termination is provided to the REIT by Dilawri.
The following chart summarizes certain relevant financial information of the Dilawri Group for the 12 months ended March 31, 2026 with comparative figures for the 12 months ended March 31, 2025 as provided to the REIT by Dilawri:
Dilawri Group's Financial Information
(all figures are approximations, not in thousands)
March 31, 2026 LTM(1)
March 31, 2025 LTM(1)
Combined Revenues (not audited or reviewed)
$5.3 billion
$5.2 billion
EBITDA (not audited or reviewed)
$273.2 million
$241.4 million
Pro Forma Adjusted Rent Coverage Ratio (not audited or reviewed)
5.7(2)
5.2(3)
Notes:
"LTM" means the last twelve months.
As at March 31, 2026.
As at March 31, 2025.
Although the REIT has no reason to believe that the above financial information of the Dilawri Group contains a misrepresentation, Dilawri is a private company that is independent of, and operates entirely independently from, the REIT and, consequently, neither the REIT, its management nor its Trustees in their capacities as such have been involved in the preparation of this financial information. Readers are cautioned, therefore, not to place undue reliance on this financial information.
Pursuant to an undertaking provided by Dilawri to the Canadian securities regulatory authorities in connection with the IPO, Dilawri provides to the REIT carve-out interim financial statements and the related management's discussion and analysis in respect of the members of the Dilawri Group subject to leases pertaining to the Initial Properties for the three-month period ended March 31, 2026 and 2025. These documents, once provided by Dilawri to the REIT, will be available on the REIT's SEDAR+ profile at https://www.sedarplus.ca.
Dilawri Additional and Non-ASPE MeasuresDilawri uses "EBITDA" in its financial statements which is an additional ASPE (as defined below) measure. "EBITDA" is defined as the earnings of the Dilawri Group before interest, taxes, depreciation and amortization, all as reflected in the non-consolidated combined financial statements of the Dilawri Group prepared in accordance with the recognition, measurement and disclosure principles under Canadian accounting standards for private enterprises ("ASPE"). Dilawri believes that EBITDA is an important measure of operating performance as it shows Dilawri's earnings before interest, taxes, depreciation and amortization. Dilawri's method of calculating EBITDA may differ from other issuers' calculations and, accordingly, may not be comparable to measures used by other issuers.
References to "Pro Forma Adjusted Rent Coverage Ratio", which is a key measure of performance used by automotive dealership businesses, refers to the Pro Forma Adjusted Rent Coverage Ratio of the Dilawri Group on a non-consolidated combined basis. Pro Forma Adjusted Rent Coverage Ratio is a non-ASPE financial ratio and is not defined by ASPE or IFRS and does not have a standardized meaning prescribed by ASPE or IFRS.
Non-ASPE financial ratio:
"Pro Forma Adjusted Rent Coverage Ratio" is calculated by Dilawri as EBITDA for the LTM plus rent paid by the Dilawri Group for the LTM to third parties and the REIT, less rent received from third parties. The resultant figure is divided by rent paid by the Dilawri Group for the LTM to third parties and the REIT, less rent received from third parties.
SECTION 4 - KEY PERFORMANCE INDICATORS AND SELECTED FINANCIAL INFORMATION Key Performance IndicatorsThe REIT's performance is measured by management's selection of certain key indicators including those set out in the table below. For further information on the REIT's operating measures and non-IFRS measures, please refer to Sections 5 and 6 of this MD&A. Except where otherwise expressly indicated, the information that follows as at and for the three months ended March 31, 2026 does not give effect to the acquisition of the Orange County Properties, as the acquisition of these properties had not closed by March 31, 2026.
Operating Results
For the three months ended March 31,
2026
2025
Base Revenue
$23,929
$20,117
Rental Revenue
29,096
23,902
NOI (1)
24,200
20,211
Cash NOI (1)
23,830
20,018
Same Property Cash NOI (1)
20,438
20,024
Net Income and other comprehensive income
25,266
7,641
FFO (1)
15,195
12,622
AFFO (1)
14,804
12,427
Fair value adjustment on investment properties
7,869
(1,037)
Distributions per Unit (2)
0.206
0.201
Net Income per Unit - basic (3)
0.443
0.156
Net Income per Unit - diluted (4)
0.432
0.152
FFO per Unit - basic (1) (5)
0.276
0.257
FFO per Unit - diluted (1) (6)
0.268
0.251
AFFO per Unit - basic (1) (5)
0.269
0.253
AFFO per Unit - diluted (1) (6)
0.262
0.247
Weighted average Units - basic (7)
55,100,799
49,094,337
Weighted average Units - diluted (8)
Payout ratio (%)
56,591,756
50,333,328
FFO (1)
76.5%
80.1%
AFFO (1)
78.6%
81.4%
Balance Sheet and Other Metrics
As at March 31,
2026
As at December 31,
2025
As at March 31,
2025
Total assets
$1,431,541
$1,396,351
$1,215,487
Credit Facilities and Mortgages Payables
$656,914
$635,210
$554,030
Number of Units outstanding (includes Class B LP Units)
55,144,562
55,092,737
49,117,113
Market price per REIT Unit - close (end of period)
$11.21
$11.01
$10.22
Market capitalization (includes Class B LP Units)
$618,171
$606,571
$501,977
Overall capitalization rate
6.75%
6.75%
6.70%
(9)
4.48%
4.47%
4.35%
77%
80%
93%
Fixed weighted average effective interest rate on debt (excludes revolving Credit Facilities)
Proportion of total debt at fixed interest rates through swaps and Mortgages
Weighted average interest rate swap term and Mortgage remaining (years) (10)
4.2 4.1 4.2
Weighted average term to maturity of debt
2.8
2.3
2.4
Interest Coverage Ratio (11)
3.0X
3.0X
3.1X
Debt Service Coverage Ratio (11)
1.57X
1.56X
1.57X
Debt to GBV (1)
46.3%
45.9%
43.8%
Debt to EBITDA (1)
7.92
8.05
7.21
NOI, Cash NOI, Same Property Cash NOI, FFO, AFFO, FFO per Unit, AFFO per Unit, FFO payout ratio, AFFO payout ratio, Debt to GBV and Debt to EBITDA are non-IFRS measures or non-IFRS ratios, as applicable. See Section 1 "General Information and Cautionary Statements - Non-IFRS Financial Measures" and Section 6 "Non-IFRS Financial Measures" of this MD&A.
The REIT paid monthly cash distributions of $0.067 per Unit from January to August 2025, and $0.0685 per Unit from September 2025 to March 2026. Figures exclude the Special Distribution.
Net Income per Unit - basic is calculated in accordance with IFRS by dividing Net Income by the amount of the weighted average number of outstanding REIT Units and Class B LP Units.
Net Income per Unit - diluted is calculated in accordance with IFRS by dividing Net Income by the amount of the weighted average number of outstanding REIT Units, Class B LP Units, DUs, IDUs, RDUs and PDUs (each as defined below) granted to certain Trustees and management of the REIT.
FFO per Unit and AFFO per Unit - basic is calculated by dividing the total FFO and AFFO by the amount of the total weighted average number of outstanding REIT Units and Class B LP Units.
FFO per Unit and AFFO per Unit - diluted is calculated by dividing the total FFO and AFFO by the amount of the total weighted average number of outstanding REIT Units, Class B LP Units, DUs, IDUs, RDUs and PDUs granted to certain Trustees and management of the REIT.
The weighted average number of outstanding Units - basic includes the Class B LP Units.
The weighted average number of outstanding Units - diluted includes the Class B LP Units, DUs, IDUs, RDUs and PDUs granted to certain Trustees and management of the REIT.
The fixed weighted average effective interest rate on debt is calculated on an annualized basis.
Includes the following floating-to-fixed interest rate swaps entered into by the REIT during Q1 2026:
On February 12, 2026, the REIT entered into a floating-to-fixed interest rate swap within Facility 3 in the amount of $10,000 for a term of five years at an interest rate of 4.59%.
On February 17, 2026, the REIT entered a floating-to-fixed interest rate swap within Facility 3 in the amount of $15,000 for a term of five years at an interest rate of 4.48%
On February 25, 2026, the REIT entered into floating-to-fixed interest rate swaps within Facility 3 in the amount of $10,000 for a term of seven years at an interest rate of 4.59% and $10,000 for a term of five years at an interest rate of 4.45%.
For 2026 ratios, see Section 7 "Liquidity and Capital Resources - Financing Metrics and Debt Covenants".
Three Months Ended March 31,
2026
2025
Variance
Net Property Income
Base rent
$23,929
$20,117
$3,812
Property tax recoveries
4,896
3,691
1,205
Straight-line rent adjustment
271
94
177
Rental Revenue
29,096
23,902
5,194
Property tax expense
(4,896)
(3,691)
(1,205)
Property Costs
(4,896)
(3,691)
(1,205)
NOI(1)
24,200
20,211
3,989
Other Income (Expenses)
General and administrative expenses
(1,649)
(1,556)
(93)
Interest expense and other financing charges
(7,286)
(5,958)
(1,328)
Fair value adjustment on interest rate swaps and foreign exchange forward contracts
1,999
(4,728)
6,727
Distribution expense on Class B LP Units
(171)
-
(171)
Fair value adjustment on Unit-based compensation and Class B LP Units
(539)
763
(1,302)
Fair value adjustment on investment properties
7,869
(1,037)
8,906
Net Income
$24,423
$7,695
$16,728
Exchange gain (loss) arising on translation of foreign operations
843
(54)
897
Net Income and Other Comprehensive Income
$25,266
$7,641
$17,625
NOI is a non-IFRS measure. See Section 1 "General Information and Cautionary Statements - Non-IFRS Financial Measures" and Section 6 "Non-IFRS Financial
Measures" of this MD&A.
For Q1 2026, net income and other comprehensive income was $25,266, as compared to $7,641 in Q1 2025. The increase was primarily driven by higher NOI and the fair value adjustment on investment properties and interest rate swaps, partially offset by higher interest costs and Unit-based compensation (which consists of Deferred Units ("DUs"), Income Deferred Units ("IDUs"), Performance Deferred Units ("PDUs") and Restricted Deferred Units ("RDUs")). NOI was $24,200 in Q1 2026, an increase of 19.7% as compared to $20,211 in Q1 2025. The increase in NOI was primarily attributable to the properties acquired during and subsequent to Q1 2025 and contractual rent increases.
Rental Revenue and Property CostsRental revenue is primarily based on triple-net leases with tenants. As such, rental revenue also includes recoverable realty taxes and straight-line adjustments. For Q1 2026 rental revenue totaled $29,096, an increase of $5,194, or 21.7%, as compared to Q1 2025, reflecting the properties acquired during and subsequent to Q1 2025 and contractual rent increases.
Property costs of $4,896 for Q1 2026 were $1,205 higher than Q1 2025. The increase is attributable to the properties acquired during and subsequent to Q1 2025.
Straight-line adjustments increased in Q1 2026 primarily due to the addition of leases in the REIT's property portfolio that contain fixed rate escalators.
General and Administrative ExpensesThe table below illustrates the breakdown of general and administrative expenses incurred in Q1 2026 as compared to Q1 2025:
Q1 2026
Q1 2025
Variance
Human resource costs
$1,076
$1,059
$17
Public entity and other costs
389
328
61
Independent Trustee fees
184
169
15
General and administrative expenses
$1,649
$1,556
$93
Human resource costs reflect the expenses related to the management, operating and administrative support of the REIT. Human resource costs also include accruals for short-term incentive awards for management, accruals for IDUs and the vesting of long-term DUs, PDUs and RDUs.
Public entity and other costs reflect the expenses related to ongoing operations of the REIT, including professional fees for legal and audit services, depreciation expense for ROU assets and transaction costs associated with transactions not completed. Public entity costs will fluctuate from quarter-to-quarter depending on when such expenses are incurred. There was an increase in public entity costs of $61 in Q1 2026 as compared to Q1 2025, primarily as a result of timing differences.
As at March 31, 2026, all independent Trustees of the REIT ("Independent Trustees") elected to receive board and committee fees in the form of DUs. The non-cash Unit-based compensation expense relates to DUs and IDUs granted in accordance with the REIT's Equity Incentive Plan (the "Plan"). The fair value of each DU granted is measured based on the volume-weighted average trading price of the REIT Units for the five trading days immediately preceding the grant date. For Q1 2026, the REIT paid the Independent Trustees $184 related to the granting of DUs and IDUs, representing an increase of $15 as compared to Q1 2025.
Interest Expense and Other Financing ChargesInterest expense includes amounts payable to lenders under the REIT's Credit Facilities and Mortgages (each as defined in Section 7 "Liquidity and Capital Resources" below), as well as amortization of upfront costs and costs to hedge the applicable Credit Facilities and Mortgages at fixed rates. For Q1 2026, interest expense and other financing charges were $7,286, representing an increase of $1,328 as compared to Q1 2025. The increase is primarily due to the additional debt incurred to fund acquisitions in Q1 2026.
Changes in Fair Values of Investment PropertiesThe REIT valued the investment properties using a discounted cash flow approach whereby a current discount rate was applied to the projected net operating income and residual value that a property can reasonably be expected to produce in the future. Property under development is measured using both a comparable sales method and a discounted cash flow method, net of costs to complete. For Q1 2026, the fair value adjustment to investment properties was $7,869, as compared to $(1,037) for Q1 2025.
The weighted average discount rate applicable to the entire portfolio as at March 31, 2026 was 7.59% (December 31, 2025 - 7.57%). The weighted average terminal capitalization rate applicable to the entire portfolio as at March 31, 2026 was 7.29% (December 31, 2025 - 7.25%).
The fair value adjustments for Q1 2026 were a result of:
NOI increases from investment properties resulting in a fair value increase for Q1 2026;
The REIT adjusting valuation inputs for Q1 2026 as a result of market conditions; and
The write-off of transaction costs relating to property acquisitions completed during Q1 2026.
The overall capitalization rate applicable to the REIT's entire investment property portfolio was flat at 6.75% as at March 31, 2026 (December 31, 2025 - 6.75%). The REIT's valuation inputs are supported by quarterly industry market reports. The historical book value of the investment properties owned by the REIT as at March 31, 2026 was $1,325,024 (December 31, 2025 - $1,289,624).
In accordance with the REIT's valuation policy, an independent appraiser is engaged to prepare valuations on a portion of the portfolio annually, such that the entire portfolio is appraised at least once every three years. In addition, any investment property which represents greater than 15% of the overall portfolio value will be appraised annually.
A 25 basis point decrease or increase in capitalization rates or discount rates would result in an increase or decrease in the fair value of investment properties of approximately $54,700 or $(50,800), respectively, as of March 31, 2026.
A 50 basis point decrease or increase in capitalization rates or discount rates would result in an increase or decrease in the fair value of the investment properties of approximately $113,900 or $(98,200), respectively, as of March 31, 2026.
Other Changes in Fair ValuesThe Class B LP Units, Unit-based compensation, interest rate hedges and foreign exchange forward contracts (see Section 7 "Liquidity and Capital Resources" in this MD&A) are required to be presented under relevant accounting standards at fair value on the balance sheet. The resulting changes in these items are recorded in net income and comprehensive income.
Under IFRS, the Class B LP Units and Unit-based compensation are classified as financial liabilities and measured at fair value through profit and loss (FVTPL). The fair value of the Class B LP Units and Unit-based compensation will be measured every period by reference to the traded value of the REIT Units, with changes in measurement recorded in net income and comprehensive income. Distributions on the Class B LP Units will be recorded in interest expense and other financing charges in the period in which they become payable.
On September 25, 2025, in connection with the acquisition of the Île-Perrot Properties, the REIT, through the Partnership, issued 833,333 Class B LP Units to the vendor at a deemed price per Class B LP Unit equal to $12.00 for aggregate consideration equal to $10,000.
As a result of the impact of the movement in the traded value of the REIT Units, the fair value adjustment on Unit-based compensation and Class B LP Units resulted in a loss of $(539) in Q1 2026 (Q1 2025 - $763).
The REIT enters into interest rate swaps to limit its exposure to fluctuations in the interest rates on variable rate financings for certain of its Credit Facilities. Gains or losses arising from the change in the fair value of the interest rate derivative contracts are recognized in the consolidated statements of income and comprehensive income. See Section 7 "Liquidity and Capital Resources" in this MD&A for further details.
The fair value adjustment of the interest rate swaps represented a gain of $1,999 in Q1 2026 (Q1 2025 - loss of $(4,728). This was primarily the result of a decrease in interest rates in the derivative market as at March 31, 2026.
SECTION 6 - NON-IFRS FINANCIAL MEASURES Reconciliation of NOI, Cash NOI, FFO and AFFO to Net IncomeThe REIT uses the following non-IFRS key performance indicators and ratios: NOI, Cash NOI, FFO, AFFO, FFO payout ratio and AFFO payout ratio. The REIT believes these non-IFRS measures and ratios provide useful supplemental information to both management and investors in measuring the financial performance and financial condition of the REIT. These measures and ratios do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures and ratios presented by other publicly traded real estate investment trusts and should not be construed as an alternative to other financial measures determined in accordance with IFRS (see Section 1 "General Information and Cautionary Statements - Non-IFRS Financial Measures"). The calculations of these measures and the reconciliation to net income are set out in the following table:
Three months ended March 31,
($000s, except per Unit amounts)
Q1 2026
Q1 2025
Variance
Calculation of NOI
Property revenue
$29,096
$23,902
$5,194
Property costs
(4,896)
(3,691)
(1,205)
NOI (including straight-line adjustments)
$24,200
$20,211
$3,989
Adjustments:
Land lease payments
(99)
(99)
-
Straight-line adjustment
(271)
(94)
(177)
Cash NOI
23,830
20,018
3,812
Reconciliation of net income to FFO and AFFO
Net income
$24,423
$7,695
$16,728
Adjustments:
Change in fair value - Interest rate swaps and foreign exchange translation adjustment
(1,999)
4,728
(6,727)
Distributions on Class B LP Units
171
-
171
Change in fair value - Class B LP Units and Unit-based compensation
539
(763)
1,302
Change in fair value - investment properties
(7,869)
1,037
(8,906)
ROU asset net balance of depreciation/interest and lease payments
(70)
(75)
5
FFO
$15,195
$12,622
$2,573
Adjustments:
Straight-line adjustment
$(271)
$(94)
$(177)
Capital expenditure reserve
(120)
(101)
(19)
AFFO
$14,804
$12,427
$2,377
Number of Units outstanding (including Class B LP Units)
55,144,562
49,117,113
6,027,449
Weighted average Units Outstanding - basic
55,100,799
49,094,337
6,006,462
Weighted average Units Outstanding - diluted
56,591,756
50,333,328
6,258,428
FFO per Unit - basic(1)
$0.276
$0.257
$0.019
FFO per Unit - diluted(2)
$0.268
$0.251
$0.017
AFFO per Unit - basic(1)
$0.269
$0.253
$0.016
AFFO per Unit - diluted(2)
$0.262
$0.247
$0.015
Distributions per Unit(3)
$0.206
$0.201
0.005
FFO payout ratio(3)
76.5%
80.1%
3.6%
AFFO payout ratio(3)
78.6%
81.4%
2.8%
FFO and AFFO per Unit - basic is calculated by dividing total FFO and AFFO by the amount of the total weighted-average number of outstanding REIT Units and Class B LP Units.
FFO and AFFO per Unit - diluted is calculated by dividing total FFO and AFFO by the amount of the total weighted-average number of outstanding REIT Units, Class B LP Units and Unit-based compensation granted to Independent Trustees and management of the REIT.
Distributions per Unit, FFO payout ratio and AFFO payout ratio excludes the cash portion of the Special Distribution.
In Q1 2026, FFO increased by 20.4% to $15,195, or $0.268 per Unit (diluted), as compared to $12,622, or $0.251 per Unit (diluted), in Q1 2025. The increase was primarily attributable to higher rental revenue from properties acquired during and subsequent to Q1 2025 and contractual rent increases.
In Q1 2026, AFFO increased by 19.1% to $14,804, or $0.262 per Unit (diluted), as compared to $12,427, or $0.247 per Unit (diluted), in Q1 2025. Cash NOI in Q1 2026 was $23,830 on revenue of $29,096, compared to Cash NOI of $20,018 on revenue of $23,902 in Q1 2025. The increases were primarily due to the properties acquired during and subsequent to Q1 2025 and contractual rent increases.
In Q1 2026, the REIT declared $11,325 and paid $11,322 of distributions to Unitholders, or $0.206 per Unit (Q1 2025 -declared and paid $9,867 excluding the Special Distribution). This resulted in an AFFO payout ratio of 78.6% in Q1 2026 (Q1 2025 - 81.4%). The AFFO payout ratio was lower in Q1 2026 primarily due to the properties acquired during and subsequent to Q1 2025 and contractual rent increases, partially offset by the increase to the REIT's Unitholders distributions that was effective for the cash distribution declared in August 2025 and paid in September 2025.
Same Property Cash Net Operating IncomeThree months ended March 31,
2026
2025
Variance
Same property base rental revenue
$20,537
$20,123
$414
Land lease payments
(99)
(99)
-
Same Property Cash NOI
$20,438
$20,024
$414
Same Property Cash NOI increased by 2.1% to $20,438 in Q1 2026, compared to $20,024 in Q1 2025. The increase was primarily a result of contractual rent increases.
SECTION 7 - LIQUIDITY AND CAPITAL RESOURCES Capital StructureKey Terms
Hedged Term
Interest
Payments &
Effective Interest Rate
Outstanding as at
Outstanding as at December 31,
Debt Term (yrs)
(yrs)
Rate
Interest/Amortization
(fixed)
March 31, 2026
2025
7.9
Facility 1 3.3(1) 2.3 to
5.5
Facility 2 3.0(2) 0.3 to
6.9
Facility 3 2.0(3) 1.8 to
ACORRA(9)
+ 150 bps,
Prime +25
ACORRA(9)
+ 150 bps,
Prime +25 bps ACORRA(9)
+ 150 bps,
Prime +25 bps
(1)
4.66%
$267,792
$241,437
4.22%
112,182
113,362
4.42%
216,738
219,713
4.26%
63,729
64,068
(2)
to 5.73 %
Mortgages 1.0 to 5.1 n/a Fixed 2.21%
P&I, 20 yrs and 25 yrs
$660,441 $638,580
Financing fees (3,527) (3,370)
Weighted Average
/Total
4.3 4.48% $656,914 $635,210
Class B LP Units and Unit-based
compensation $24,275 $23,708
Cash Balance $960 $657
Key Financing Metrics and Debt
Debt
Declaration of Trust
As at March 31,
As at December
Covenants (4) Covenant(4) (6) 2026
31, 2025
Interest Coverage Ratio
-
-
3.0
3.0
Debt to GBV
<60% (6)
<60% (6)
46.3%(8)
45.9%(8)
Unitholders' Equity (including
Class B LP Units and Unit-based
>$425,000
-
$759,772
$744,492
compensation)
Debt Service Coverage Ratio >1.35(1) (2 (3) -
1.57
1.56
AFFO payout ratio (7) (8) -
78.6%
81.5%
On February 27, 2026, the REIT increased the amount of the revolving portion of Facility 1 by $25,000, the maturity date was extended from June 2027 to June
2029 and the REIT's Debt Service Coverage Ratio was reduced to 1.30.
In September 2025, the REIT increased the amount of the non-revolving portion of Facility 2 by $40,000 and, the maturity date was extended from January 2028 to March 2029 at the same credit spread. Debt service coverage ratio at 1.35.
On March 31, 2025 the maturity date of Facility 3 was extended from June 2026 to March 2028 and the REIT's Debt Service Coverage Ratio was reduced to
1.30. On June 30, 2025, the REIT increased the amount of the non-revolving portion of Facility 3 by $35,000. On October 17, 2025, the REIT increased the amount of the non-revolving portion of Facility 3 by $40,000.
The debt agreements for Facility 1, Facility 2 and Facility 3 have other covenants that do not directly relate to the REIT's consolidated financial position. Management believes that the REIT is in compliance with all such covenants and with the debt agreement covenants for Facility 1, Facility 2, Facility 3 and the Mortgages. The debt service coverage ratio represents rolling four quarters.
The Declaration of Trust contains other operating covenants that do not relate to leverage or debt service/coverage. The Declaration of Trust is available on SEDAR+ at https://www.sedarplus.ca and is described in the AIF. Management believes that the REIT is in compliance with these operating covenants.
Including convertible debentures, the maximum ratio is 65%.
The AFFO payout ratio in respect of Facility 1 may exceed 100% so long as (i) the REIT's Debt to GBV ratio is less than 55% or (ii) the REIT's 12 month
retrospective rolling AFFO payout ratio is less than 100%.
The AFFO payout ratio in respect of Facility 3 may exceed 100% (four quarter rolling) so long as (i) the REIT's Debt to GBV ratio is less than 55% and (ii) the
REIT's cash on hand plus the cumulative amount available to be drawn under the revolving Credit Facilities exceeds $17,000.
Effective July 1, 2024, Facility 1, 2 and 3 bearing interest at BA have been converted to Canadian Overnight Repo Rate Average plus a credit adjustment
("ACORRA").
Facility 1, Facility 2 and Facility 3 described above are collectively referred to as the "Credit Facilities" and the mortgages described above are referred to as the "Mortgages".
The AFFO payout ratio debt covenant is based on the rolling average of the last four fiscal quarters. For the trailing four quarters ended March 31, 2026, the AFFO payout ratio was approximately 80.6%.
In order to maintain or adjust its capital structure, the REIT may increase or decrease the amount of distributions paid to Unitholders, issue new REIT Units and debt, or repay debt. Factors affecting such decisions include:
complying with the guidelines set out in the REIT's Declaration of Trust;
complying with debt covenants;
ensuring sufficient liquidity is available to support the REIT's financial obligations and to execute its operating
and strategic plans;
maintaining financial capacity and flexibility through access to capital to support future development; and
minimizing the REIT's cost of capital while taking into consideration current and future industry, market and
economic risks and conditions.
As at March 31, 2026, principal repayments on the Credit Facilities and Mortgages are as follows: Remainder of 2026................................................................................................................ 21,787
2027 ...................................................................................................................................... 39,556
2028 ...................................................................................................................................... 224,694
2029 ...................................................................................................................................... 335,477
Thereafter.............................................................................................................................. 38,927
Total ...................................................................................................................................... $660,441
The REIT's liquidity position as at March 31, 2026 included approximately $69,000 of undrawn capacity under its revolving Credit Facilities, which management believes is sufficient to carry out its obligations, discharge liabilities as they come due and fund distributions to Unitholders. Capital requirements in the next two years are low and capital expenditure requirements are expected to be insignificant. Nonetheless, the current economic, operating and capital market environment, including an uncertain inflationary and interest rate environment has led to an increased emphasis on liquidity. While the REIT has not changed its objectives in managing its capital structure, the current focus has been on ensuring that the REIT retains sufficient liquidity.
As at the date of this MD&A, the REIT has approximately $32,500 undrawn capacity under its Credit Facilities and 13 unencumbered properties with an aggregate value of approximately $195,400. Capital required for investing activities will be addressed through additional borrowings or issuances of equity as acquisition and development opportunities arise.
Debt FinancingThe REIT's overall borrowing policy is to obtain secured credit facilities, principally on a fixed rate or effectively fixed rate basis, which will allow the REIT to: (i) achieve and maintain staggered maturities to lessen exposure to re-financing risk in any particular period; (ii) achieve and maintain fixed rates to lessen exposure to interest rate fluctuations; and
(iii) extend loan terms and fixed rate periods as long as possible when borrowing conditions are favourable. Subject to market conditions and the growth of the REIT, management currently intends to target Indebtedness of approximately 50%-53% of GBV. As at March 31, 2026, the REIT's Debt to GBV ratio was 46.3% (December 31, 2025 - 45.9%; March 31, 2025 - 43.8%). The increase as compared to March 31, 2025 is primarily attributable to property acquisitions completed subsequent to Q1 2025.
Management expects that the ratio of Debt to GBV may increase, at least temporarily, following an acquisition by the REIT of additional properties. Interest rates and loan maturities will be reviewed on a regular basis to ensure appropriate debt management strategies are implemented.
Pursuant to the Declaration of Trust, the REIT may not incur or assume any Indebtedness, if after giving effect to the incurring or assumption of such Indebtedness, the total Indebtedness of the REIT would exceed 60% of GBV (or 65% of GBV including convertible debentures).
Secured Credit Facilities, Mortgages and Interest Rate Swap ArrangementsAll of the REIT's Credit Facilities and Mortgages are with Canadian Schedule 1 banks and one life insurance company and are secured by all but 11 of the REIT's investment properties as of March 31, 2026 (all but 13 as of the date of this MD&A).
As at March 31, 2026, the REIT had total revolving Credit Facilities of $115,000 ($55,000 in Facility 1, $20,000 in Facility 2, and $40,000 in Facility 3), of which $69,000 was undrawn. As at the date of this MD&A, the REIT had total revolving Credit Facilities of $115,000 ($55,000 in Facility 1, $20,000 in Facility 2, and $40,000 in Facility 3) of which $32,500 was undrawn.
Financing FeesDuring Q1 2026, the REIT incurred financing fees of $510 (2025 - $2,039). The amounts are accounted for using the effective interest method. As at March 31, 2026, $3,527 remains unamortized (December 31, 2025 - $3,370).
Interest Rate SwapsThe REIT enters into interest rate derivative contracts to limit its exposure to fluctuations in the interest rates payable on its variable rate financings under Facility 1, Facility 2 and Facility 3. Gains or losses arising from changes in the fair value of the interest rate derivative contracts are recognized in the consolidated statements of income and comprehensive income.
The REIT's weighted average interest rate swap term as of March 31, 2026 was 4.3 years.
The following table sets out the combined borrowings under Facility 1, Facility 2 and Facility 3 and the remaining expected term to maturity of the related interest rate swaps as at March 31, 2026:
Remaining Term | Amount | Total Swapped Fixed Rate Debt |
Range (yrs) | ($000s) | (%) |
Less than 1 Year | 7,841 | 1.8 |
1-2 Years | 19,744 | 4.4 |
2-5 Years | 308,100 | 68.9 |
5-7 Years | 92,868 | 20.8 |
Greater than 7 Years | 18,873 | 4.1 |
4.3 | 447,426 | 100.0 |
As at March 31, 2026, the notional principal amount of the interest rate swaps was $447,426 (December 31, 2025 -
$443,534) and the fair value adjustment of the interest rate swaps gain was $1,999 (December 31, 2025 - interest rate swaps loss was $(1,218)). As at March 31, 2026, the net asset balance of interest rate swaps was $2,525 (December 31, 2025 - $469).
The weighted average interest rate swap term and Mortgage term remaining was 4.2 years as at March 31, 2026.
Unitholders' Equity (including Class B LP Units and Unit-based compensation)Unitholders' equity consists of the Units described below:
REIT UnitsThe REIT is authorized to issue an unlimited number of REIT Units.
Each REIT Unit is transferable and represents an equal, undivided beneficial interest in the REIT and any distributions from the REIT. All REIT Units rank equally among themselves without discrimination, preference or priority and entitle the holder thereof to receive notice of, to attend and to one vote at all meetings of holders of REIT Units and holders of Special Voting Units (as defined below) or in respect of any written resolution thereof.
Holders of REIT Units are entitled to receive distributions from the REIT if, as and when declared by the board of trustees of the REIT (the "Board"). Upon the termination or winding-up of the REIT, holders of REIT Units will participate equally with respect to the distribution of the remaining assets of the REIT after payment of all liabilities. Such distribution may be made in cash, as a distribution in kind, or both, all as the Board in its sole discretion may determine. REIT Units have no associated conversion or retraction rights. No person is entitled, as a matter of right, to any pre-emptive right to subscribe for or acquire any REIT Units.
On March 13, 2026, 106,460 DUs and IDUs were exchanged for REIT Units, of which 54,635 REIT Units were subsequently surrendered and cancelled in order to fulfill tax payment obligations in accordance with applicable tax regulations.
On March 17, 2025, 55,750 DUs and IDUs were exchanged for REIT Units, of which 28,779 REIT Units were subsequently surrendered and cancelled in order to fulfill tax payment obligations in accordance with applicable tax regulations.
On October 23, 2025, the REIT completed a bought deal public offering of 3,070,000 REIT Units at a price of $11.11 per REIT Unit (the "Offering Price") to a syndicate of underwriters (the "Underwriters") for gross proceeds of $34,108 (the "Public Offering"). Concurrently with the Public Offering, the REIT completed a private placement of 1,442,844 REIT Units at the Offering Price to a member of the Dilawri Group (the "Dilawri Subscriber") for gross proceeds of $16,030 (the "Concurrent Private Placement" and, together with the Public Offering, the "Offering"). On October 28, 2025, the REIT issued and sold an additional 428,200 REIT Units at the Offering Price to the Underwriters for gross proceeds of
$4,757 pursuant to the partial exercise of the over-allotment option granted to the Underwriters in connection with the Public Offering (the "Over-Allotment Option"). Concurrently, the REIT completed the issue and sale of an additional 201,247 REIT Units at the Offering Price to the Dilawri Subscriber for gross proceeds of $2,236 pursuant to the exercise of an option granted to the Dilawri Subscriber in connection with the Concurrent Private Placement (the "Dilawri Option"). The completion of the Over-Allotment Option and the Dilawri Option increased the total gross proceeds of the Offering to $57,131.
As at March 31, 2026 the total number of issued and outstanding REIT Units was 54,311,229. The increase in Units outstanding as compared to 2025 was primarily the result of the Offering.
As at March 31, 2026, the total number of Units issued and outstanding was 55,144,562.
Class B LP UnitsOn September 25, 2025, in connection with the purchase of the Île-Perrot Properties, the REIT, through the Partnership, issued 833,333 Class B LP Units to the seller. In the event that the five day volume-weighted average trading price of the REIT Units on the Toronto Stock Exchange (the "VWAP") is less than $12.00 per REIT Unit on the date that is two years following September 25, 2025, the REIT has agreed to make a cash payment to the holder in an amount equal to the difference between (i) $12.00 and (ii) the VWAP as of the date that is two years following the closing date subject to a maximum cash payment of $1,250. Each Class B LP Unit is exchangeable at the option of the holder for one Unit (as per securities law, subject to four month hold-period), is accompanied by a Special Voting Unit (which provides the holder with that number of votes at any meeting of Unitholders to which a holder of the number of Units that may be obtained upon the exchange of the Class B LP Unit to which such Special Voting Unit is attached would be entitled), and will receive distributions of cash from the Partnership equal to the distributions to which a holder of the number of Units that may be obtained upon the exchange of the Class B LP Unit to which such Special Voting Unit is attached would be entitled.
Under IFRS, the Class B LP Units are classified as financial liabilities and measured at fair value through profit and loss (FVTPL). The fair value of the Class B LP Units will be measured every period by reference to the traded value of the REIT Units, with changes in measurement recorded in net income and comprehensive income. Distributions on the Class B LP Units will be recorded in interest expense and other financing charges in the period in which they become payable.
As at March 31, 2026, there are 833,333 Class B LP Units issued and outstanding
Unit-based compensationThe REIT offers the Plan whereby DUs, PDUs and RDUs may be granted to Trustees, officers and employees of the REIT and other eligible persons (collectively, "Participants") on a discretionary basis by the Governance, Compensation and Nominating Committee of the Board. The maximum number of REIT Units approved for issuance under the Plan is 1,750,000. Each DU, PDU and RDU is economically equivalent to one REIT Unit, however, under no circumstances shall they be considered REIT Units nor entitle a Participant to any rights as a Unitholder, including, without limitation,
voting rights or rights on liquidation. Each DU, PDU and RDU shall receive a distribution of additional IDUs equal to the amount of distributions paid per REIT Unit by the REIT on its REIT Units. Upon vesting of the DUs, PDUs, RDUs and IDUs, a Participant may elect, prior to their expiry, to exchange such vested DUs, PDUs, RDUs and IDUs (subject to satisfaction of any applicable withholding taxes) for an equal number of REIT Units. The holder of such DUs, PDUs, RDUs and IDUs cannot settle these instruments in cash. DUs, PDUs, RDUs and IDUs issued to management must be converted to REIT Units no later than seven years from the grant date.
Certain DUs and RDUs awarded under the Plan will vest over time. PDUs awarded under the Plan will vest upon the achievement of applicable performance vesting conditions, which may include but are not limited to, financial or operational performance of the REIT, total unitholder return or individual performance criteria, measured over a performance period.
On March 13, 2026, 106,460 DUs and IDUs were exchanged for REIT Units, of which 54,635 REIT Units were subsequently surrendered and cancelled in order to fulfill tax payment obligations in accordance with applicable tax regulations.
For the period ended March 31, 2026, 195,038 DUs, PDUs, RDUs and IDUs were granted, of which 106,402 DUs, 61,218 PDUs and RDUs and 27,302 IDUs were accounted for in accordance with the vesting schedule. On March 13, 2026, 19,132 DUs and 3,845 IDUs were clawed back in respect of the 2023 performance period due to performance conditions not being achieved. On March 17, 2025, 55,750 DUs and IDUs were exchanged for Units, of which 28,779 Units were subsequently surrendered and cancelled in order to fulfill tax payment obligations in accordance with applicable tax regulations.
DistributionsHolders of REIT Units are entitled to receive distributions from the REIT (whether of net income, net realized capital gains or other amounts) if, as and when declared by the Board. Upon the termination or winding-up of the REIT, holders of REIT Units will participate equally with respect to the distribution of the remaining assets of the REIT after payment of all liabilities. Such distribution may be made in cash, as a distribution in kind, or both, all as the Board in its sole discretion may determine. REIT Units have no associated conversion or retraction rights.
The Board regularly reviews the REIT's rate of distributions to ensure an appropriate level of cash distributions. In determining the amount of the monthly cash distributions paid to holders of REIT Units, the Board applies discretionary judgment to forward-looking information, which includes forecasts, budgets and many other factors including provisions in the Declaration of Trust, the macro-economic and industry-specific environment, debt maturities and covenants, and taxable income.
The REIT is currently paying monthly cash distributions to Unitholders of $0.0685 per Unit, representing $0.822 per Unit on an annualized basis. On August 14, 2025, the Trustees approved a $0.018 per Unit, or 2.2%, increase to the REIT's annual cash distribution, from $0.804 per Unit to $0.822 per Unit. The increase became effective as of the REIT's August 2025 cash distribution, which was paid on September 15, 2025 to Unitholders of record on August 29, 2025. The increase of the distribution reflects management's and the Trustees' confidence in the REIT's stability and cash flow. See Section 1 "General Information and Cautionary Statements - Forward-Looking Statements". The Board regularly reviews the REIT's rate of distributions to ensure an appropriate level of cash distributions.
Principally to distribute to Unitholders a portion of the taxable income generated by the sale of the Kennedy Lands in October 2024, the REIT paid a special distribution to Unitholders of $0.55 per Unit, which was comprised of $0.081 per Unit paid in cash on January 6, 2025 and $0.469 per Unit paid by the issuance of Units, to Unitholders of record as at December 31, 2024 (the "Special Distribution"). Immediately following payment of the Unit portion of the Special Distribution, the outstanding Units of the REIT were consolidated such that each Unitholder held, after the consolidation, the same number of Units as held immediately prior to the Special Distribution. Net income prepared in accordance with IFRS recognizes certain revenues and expenses at time intervals that do not match the receipt or payment of cash. Therefore, in applying judgment, consideration is given to AFFO (which is the product of the earnings performance) and other factors when establishing cash distributions to holders of REIT Units.
Financing Metrics and Debt CovenantsThe calculations of financial metrics and debt covenants are set out in the table below. Except where otherwise expressly indicated, the information that follows as at and for the three-month period ended March 31, 2026 does not give effect to the acquisition of the Orange County Properties, as the acquisition of these properties had not closed by March 31, 2026.
As at March 31, As at December 31, | ||||
2026 | 2025 | |||
Net Asset Value | ||||
Investment properties, IFRS value | $1,425,453 | $1,380,449 | ||
Cash, accounts receivable and other assets | 6,088 | 15,902 | ||
Accounts payable and accrued liabilities | (14,855) | (16,649) | ||
Credit Facilities, Mortgages and interest rate swaps | (656,914) | (635,210) | ||
Total Net Asset Value | $759,772 | $744,492 | ||
Total Net Asset Value excluding interest rate swaps and foreign exchange forward | $757,247 | $744,023 | ||
contracts | ||||
REIT Units and Class B LP Units outstanding | 55,144,562 | 55,092,737 | ||
Debt to GBV | ||||
Indebtedness outstanding: | ||||
Credit Facilities & Mortgages (excludes deferred financing costs) | A | $660,441 | $638,580 | |
Lease Liability | A1 | 2,770 | 2,850 | |
Gross Book Value | ||||
Total assets | B | 1,431,541 | 1,396,351 | |
Debt to GBV (1) (6) | ((A+A1)/B) X 100 | 46.3% | 45.9% | |
Unitholders' Equity & Unit-based compensation | ||||
Unitholders' Equity | $735,497 | $720,784 | ||
Value of Unit-based compensation | 14,933 | 14,533 | ||
Value of Class B LP Units | 9,342 | 9,175 | ||
Total Unitholders' Equity, Class B LP Units & Unit-based compensation | $759,772 | $744,492 | ||
Calculations of financial metrics and debt covenants | ||||
Interest Coverage Ratio | Q1 2026 | Q1 2025 | ||
Cash NOI(2) | $23,830 | $20,018 | ||
General and administrative expenses | (1,649) | (1,556) | ||
Income before interest expense and fair value adjustments | C | 22,181 | 18,462 | |
Interest expense and other financing charges | D | 7,286 | 5,958 | |
Interest Coverage Ratio (3) | C/D | 3.0X | 3.1X | |
Debt Service Coverage Ratio | ||||
Net income | $24,423 | $7,695 | ||
Interest expense and other financing charges | 7,286 | 5,958 | ||
Distribution expense on Class B LP Units | 171 | - | ||
Amortization of other assets | 35 | 20 | ||
Fair value adjustments, net | (9,329) | 5,002 | ||
Calculations of financial metrics and debt covenants
EBITDA(2) | E | 22,586 | 18,621 |
Principal payments on debt | 7,440 | 6,222 | |
Interest payments on debt (excludes other financing charges) | 6,925 | 5,669 | |
Debt Service | F | 14,365 | 11,891 |
Debt Service Coverage Ratio (4) (6) | E/F | 1.57X | 1.57X |
AFFO payout ratio | |||
AFFO per Unit Diluted (2) | 0.262 | 0.246 | |
Distribution per Unit | 0.206 | 0.201 | |
AFFO payout ratio (2)(5) (6) | 78.6% | 81.4% |
Notes:
The Debt to GBV ratio as at March 31, 2026 increased as compared to December 31, 2025, due to the increase in debt as a result of property acquisitions completed during 2025 and the three months ended March 31, 2026.
Cash NOI, EBITDA, AFFO and AFFO payout ratio are non-IFRS measures or non-IFRS ratios, as applicable. See Section 1 "General Information and Cautionary Statements - Non-IFRS
Financial Measures" and Section 6, "Non-IFRS Financial Measures" of this MD&A.
The Interest Coverage Ratio for Q1 2026 has decreased from Q1 2025.
The Debt Service Coverage Ratio for Q1 2026 has remained same as compared to Q1 2025 due to increased Cash NOI from contractual rent increases, property acquisitions completed subsequent to Q1 2025.
The AFFO payout ratio is calculated as distributions per REIT Unit divided (excluding the Special Dividend) by the AFFO per Unit - diluted.
Debt covenant ratios
SECTION 8 - RELATED PARTY TRANSACTIONSThe REIT's largest Unitholder and lead tenant is the Dilawri Group, which as at March 31, 2026 held an approximate 30.7% (March 31, 2025 - 31.2%) effective interest in the REIT, on a fully diluted basis, through its ownership of 17,390,998 REIT Units (March 31, 2025 - 15,748,507 REIT Units).
In the normal course of its operations, the REIT enters into various transactions with related parties and the REIT's policy is to conduct all transactions and settle all balances with related parties on market terms and conditions and in accordance with the Related Party Transaction Policy adopted by the Board and the Declaration of Trust.
In consideration of the applicable Dilawri Tenants leasing the entirety of two of the Initial Properties with third party tenants (and thereby bearing occupancy, rental and other risks associated with the portions of those properties to be subleased to third party tenants for the initial lease terms of 12 and 15 years for those properties), the REIT paid to such Dilawri Tenants an indemnity fee in the aggregate amount of $1,000 at the time of closing of the IPO (amortizable over the term of the leases).
For additional information on related party agreements and arrangements with Dilawri, please refer to the REIT's AIF, which can be found on SEDAR+ at www.sedarplus.ca and on the REIT's website www.automotivepropertiesreit.ca.
Strategic Alliance AgreementIn connection with the IPO, the REIT and Dilawri entered into a strategic alliance agreement (the "Strategic Alliance Agreement") which establishes a preferential and mutually beneficial business and operating relationship between the REIT and the Dilawri Group. The Strategic Alliance agreement will be in effect so long as the Dilawri Organization and the applicable transferors of the Initial Properties own, control or direct, in the aggregate, an effective interest of at least 10% (on a fully diluted basis) in the REIT. Among other things, the Strategic Alliance Agreement provides the REIT with the first right to purchase REIT-Suitable Properties (as defined in the Strategic Alliance Agreement) in Canada or the
United States acquired or developed by the Dilawri Group. The purchase price in respect of a REIT-Suitable Property will be mutually agreed by the REIT and Dilawri at the applicable time and supported by an independent appraisal report. The REIT did not acquire any investment properties pursuant to the Strategic Alliance Agreement in 2025 or Q1 2026.
SECTION 9 − OUTLOOKThe REIT is subject to risks associated with inflation, interest rates, currency fluctuations and availability of capital. The REIT is actively monitoring the evolving trade tariff environment, other trade restrictions, and their impact on cross-border trade, material costs, and overall economic market conditions in Canada and the United States. The conflict in the Middle East has resulted in increased commodity prices and could lead to further significant market and other disruptions, including continued volatility in commodity prices and supply of energy resources. While the full extent and impact of these trade tariffs, trade restrictions and geopolitical events remains uncertain, the REIT is continuing to assess their potential effect on its business, industry, property valuations and financial condition.
As at March 31, 2026, 77.0% of the REIT's debt was fixed with a weighted average interest rate of 4.48%, a weighted average interest swap term and mortgages remaining of 4.2 years and weighted average term to maturity of debt of 2.8 years. The REIT's overall borrowing policy is to obtain secured credit facilities, principally on a fixed rate or effectively fixed rate basis. This allows the REIT to achieve and maintain staggered maturities to lessen exposure to re-financing risk in any period and achieve and maintain fixed rates to lessen exposure to interest rate increases. The REIT also continues to extend loan terms and fixed-rate periods when borrowing conditions are favourable.
As at the date of this MD&A, the REIT had approximately $32,500 of undrawn capacity under its Credit Facilities and 13 unencumbered properties valued at approximately $195,400.
The financial markets continually fluctuate, and it is therefore difficult for management to quantify the impact that the factors described above will have on the cost and availability of debt and equity capital to the REIT. Management and the Trustees are continuing to closely monitor the impact of inflation and interest rates on the REIT's business and will continue to prudently manage the REIT's available financial resources and strategically move its floating and short-term debt into fixed rate and/or long-term debt in an effort to minimize the impact of any potential future interest rate increases. Management will continue to prudently manage growth of the REIT while also focusing on liquidity and overall capital market and debt financing conditions.
Overall, the REIT believes that the fundamentals of the automotive and other OEM dealership and service businesses remain solid, and that the industry is resilient and essential. The implementation or escalation of trade tariffs or other trade restrictions may lead to fluctuations in interest rates and inflation which may have an adverse effect on consumer demand and the overall economy. Fluctuation in the interest rate environment, inflation and credit environment may impact rental growth and capitalization rates overall in the real estate industry, which, consequently, could provide attractive buying opportunities for the REIT.
As the only publicly traded Canadian real estate entity focused exclusively on owning automotive and other OEM dealership and automotive service properties, the REIT provides a unique opportunity for owners of these operating businesses to monetize their real estate while retaining ownership and control of their core businesses. This provides dealership owner operators with liquidity to advance their individual strategic objectives, whether it be succession planning, directly investing in upgrading their facilities, or pursuing acquisitions. The Canadian and United States automotive and OEM dealership and service industry is highly fragmented, and the REIT expects continued consolidation over the mid-to-long term due to increased industry sophistication and growing capital requirements for owner operators, which encourages them to pursue increased economies of scale. The REIT plans to continue to grow its portfolio of properties leased to OEMs, OEM dealers and other automotive related uses.
SECTION 10 - OTHER DISCLOSURES Environmental and Corporate Social ResponsibilityThe REIT primarily leases its properties using a triple-net lease structure and the REIT adopted a written Environmental and Corporate Social Responsibility Policy in 2023, which was updated by the Board in early 2025 (the "ESG Policy")
to formally recognize the REIT's approach to addressing its environmental and social responsibilities as a good corporate citizen. The ESG Policy acknowledges the nature of the REIT's business as an owner of automotive and other OEM dealership and service properties located principally in Canada and the United States and its efforts to promote a culture of improvement with regards to sustainability and social responsibility for the benefit of all its stakeholders, including employees, tenants, suppliers, Unitholders and local communities. The ESG Policy articulates the REIT's commitment to: (i) protecting its investors by managing sustainability-related risks; (ii) sourcing with integrity; (iii) collaborating on sustainability with industry bodies; (iv) compliance with applicable environmental laws; (v) making, or requiring its tenants to make, the necessary capital and operating expenditures to comply with environmental laws and address any material environmental issues; (vi) requiring its officers and other staff to adhere to the REIT's policies and procedures regarding the environment, sustainability and compliance with environmental legislation, and report any noncompliance with such policies and procedures; and (vii) offering a safe place to work.
Oversight of the ESG Policy is within the mandate of the Governance, Compensation and Nominating Committee (the "GCN Committee"). As part of that oversight, management reports to the GCN Committee at each quarterly meeting of the GCN Committee in respect of, among other things, compliance with the ESG Policy and any environmental and corporate social responsibility ("ESG") initiatives undertaken by management. Furthermore, commencing in 2022, the GCN Committee and the Board made ESG a stand-alone metric in the REIT's short-term incentive plan for named executive officers in recognition of the importance of ESG to the REIT. In 2022, the REIT also retained an outside consultant to assist management with the creation of an ESG and sustainability plan and related updates to the REIT's original ESG Policy, among other things. The REIT's ESG and sustainability plan was approved by the Board in 2023 and updated in early 2025 and is available on the REIT's website at https://www.automotivepropertiesreit.ca. The REIT has also established an ESG committee comprised of REIT management and employees that makes recommendations to management in respect of ESG initiatives and engagement.
Commitments and ContingenciesThe REIT, as lessee, is committed under long term land and other leases that are classified as a liability to make lease payments with minimum annual rental commitments as follows:
Within 1 year................................................................................................................................................. $244
After 1 year, but not more than 5 years........................................................................................................ 1,249
More than 5 years 1,277
Total $2,770
Disclosure Controls and Internal Controls over Financial ReportingThe REIT's certifying officers have designed a system of disclosure controls and procedures ("DC&P") to provide reasonable assurance that (i) material information relating to the REIT, including its consolidated subsidiaries, is made known to them by others; and (ii) information required to be disclosed by the REIT in its annual filings, interim filings and other reports filed or submitted by the REIT under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation. Also, the REIT's certifying officers have designed a system of internal controls over financial reporting ("ICFR") to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS.
There have been no changes to the REIT's ICFR during Q1 2026 that have materially affected, or are reasonably likely to materially affect, the REIT's ICFR.
Management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance and not absolute assurance of achieving the desired control objectives. In the unforeseen event that lapses in the disclosure or internal controls and procedures occur and/or mistakes happen, the REIT intends to take whatever steps are necessary to minimize the consequences thereof.
Consistent with National Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings, the REIT has filed certificates on Form 52-109F2.
SECTION 11 - QUARTERLY RESULTS OF OPERATIONSThe following is a summary of selected consolidated financial information for each of the eight most recently completed quarters:
($ thousands except where otherwise indicated)
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
2026
2025
2025
2025
2025
2024
2024
2024
Number of Properties
93
91
87(i)
80(i)
79(i)
78(i)
77(i)
77(i)
GLA (sq. ft.)
3,463,522
3,364,650
3,205,287(i)
2,992,417(i)
2,967,417(i)
2,873,417
2,872,139(i)
2,872,139(i)
Rental revenue
29,096
27,935
25,397
24,601
23,902
23,415
23,533
23,515
Net Operating Income
24,200
23,674
21,136
20,859
20,211
19,765
19,897
19,824
Net Income (loss)
24,423
14,923
8,958
13,003
7,695
12,046
1,766
37,288
Net Income per Unit - basic(ii)
0.443
0.277
0.182
0.265
0.156
0.245
0.036
0.760
Net Income per Unit - diluted(iii)
0.432
0.270
0.177
0.258
0.152
0.239
0.035
0.742
FFO per Unit - basic(iv)
0.276
0.266
0.262
0.261
0.257
0.242
0.243
0.245
FFO per Unit - diluted(v)
0.268
0.259
0.255
0.254
0.251
0.236
0.237
0.239
AFFO per Unit - basic(iv)
0.269
0.257
0.259
0.256
0.253
0.238
0.238
0.239
AFFO per Unit - diluted(v)
0.262
0.251
0.252
0.249
0.247
0.232
0.233
0.233
AFFO payout ratio
78.6%
82.1%
81.0%
80.7%
81.4%
86.60%
86.3%
86.3%
Distribution declared per Unit
0.206
0.206
0.204
0.201
0.201
0.201
0.201
0.201
Weighted average Units - basic
55,100,799
53,807,165
49,162,403
49,117,113
49,094,337
49,090,142
49,072,488
49,054,833
Weighted average Units - diluted
56,591,756
55,258,531
50,576,101
50,496,712
50,333,328
50,297,193
50,286,264
50,268,740
Market price per REIT Unit - close (end of period)
$11.21
$11.01
$11.34
$11.52
$10.22
$10.89
$12.28
$9.76
Total assets
1,431,541
1,396,351
1,327,647
1,231,857
1,215,487
1,190,733
1,212,514
1,220,323
Debt to GBV
46.3%
45.9%
47.4%
44.4%
43.8%
42.40%
43.7%
43.6%
Debt service coverage ratio
1.57X
1.58X
1.55X
1.55X
1.57X
1.53X
1.50X
1.47X
Notes:
Includes 100% of the GLA of Taschereau JLR.
Net Income per Unit - basic is calculated in accordance with IFRS by dividing Net Income by the amount of the weighted average number of outstanding REIT Units and Class B LP Units.
Net Income per Unit - diluted is calculated in accordance with IFRS by dividing Net Income by the amount of the weighted average number of outstanding REIT Units, Class B LP Units, DUs, PDUs, RDUs and IDUs granted as at March 31, 2026 to certain Trustees and management of the REIT.
The FFO and AFFO per Unit - basic is calculated by using the weighted average number of outstanding REIT Units and Class B LP Units. The FFO and AFFO per Unit basic comparable numbers were adjusted in accordance with the Real Property Association of Canada's White Paper on Funds from Operations & Adjusted Funds from Operations for IFRS issued in January 2022. FFO and AFFO per Unit are non-IFRS ratios. See Section 1 "General Information and Cautionary Statements - Non-IFRS Financial Measures" of this MD&A.
The FFO and AFFO per Unit - diluted is calculated by using the weighted average number of outstanding REIT Units, Class B LP Units, DUs, PDUs, RDUs and IDUs granted as at March 31, 2026 to certain Trustees and management of the REIT. The FFO and AFFO per Unit - diluted comparable numbers were adjusted in accordance with the Real Property Association of Canada's White Paper on Funds from Operations & Adjusted Funds from Operations for IFRS issued in January 2022. FFO and AFFO per Unit are non-IFRS ratios. See Section 1 "General Information and Cautionary Statements - Non-IFRS Financial Measures" of this MD&A.
The increase in rental revenue is primarily attributable to property acquisitions during and subsequent to Q1 2025. Net income is also impacted by fluctuations in fair value adjustments of Unit based compensation, Class B LP Units, investment properties and interest rate swaps.
SECTION 12 - RISKS & UNCERTAINTIES, CRITICAL JUDGMENTS & ESTIMATESThe risks inherent in the REIT's business are identified in the REIT's Management's Discussion and Analysis for the year ended December 31, 2025 and in its AIF dated March 4, 2026, all of which remain unchanged at the date of this MD&A and are available at https://www.sedarplus.ca.
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Automotive Properties REIT published this content on May 13, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 13, 2026 at 22:04 UTC.
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