Operator: Good morning, ladies and gentlemen, and welcome to Automotive Properties REIT's 2026 Second Quarter Results Conference Call and Webcast. [Operator Instructions]. Please be aware that certain information discussed today may be forward-looking in nature. Such forward-looking information reflects the REIT's current views with respect to future events. Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward-looking information. For more information on the risks, uncertainties and assumptions relating to forward-looking information, please refer to the REIT's latest MD&A and annual information form, which are available on SEDAR+. Management may also refer to certain non-IFRS financial measures. Although the REIT believes these measures provide useful supplemental information about financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please refer to the REIT's latest MD&A for additional information regarding non-IFRS financial measures. This call is being recorded on August 14, 2026. I would now like to turn the conference over to Milton Lamb, President and CEO. Please go ahead, Mr. Lamb.
Milton Lamb: CEO. Please go ahead, Mr. Lamb. Thank you, Morgan, and good morning, everyone. With me on our call is Andrew Kalra, our Chief Financial Officer. Our strong second quarter performance reflects the positive impact of the property acquisitions we completed during 2025 and Q1 of this year, plus partial contributions to three properties we acquired in Greater San Diego and Santa Ana, California, in early Q2. Compared to Q2 of last year, our property rental revenue has increased by 22.8%, cash NOI is up 20%, AFFO has increased by 18%, and AFFO per unit diluted increased to $0.263 from $0.249. This represents a record quarterly FFO per unit amount for APR, up from our prior record of Q1 this year, demonstrating the positive impact of our acquisitions and embedded growth for contractual fixed or CPI-adjusted rent increases in our net lease structure. This is further reflected in our reduced AFFO payout ratio of 78.3% in the corner compared to 80.7% in Q2 of last year, despite our distribution increase last year in issuance of REIT units to the completion of our $57 million equity offering last October. With our strong financial performance, the REITs trustees have approved an increase of approximately 2% to our annual cash distribution from $0.822 to $0.839 per unit. Our monthly distribution will be $0.0699 per unit, up from $0.0685. This increase will be effective for this month's distribution to be paid on or about September 15, 2026, to unit holders of record on August 31, 2026. This marks the second consecutive year we have implemented a distribution increase, which highlights our confidence in the stability of our cash flow. Further, the underlying stability of our cash flow. We were active in Q2 renewing several of our leases, including one of our dealership properties in Vancouver, one of our dealership properties in Regina, which were extended by an average of 7.5 years, with base rent increases of approximately 4.8%, with subsequent annual fixed rent increases. Our VW Des Source dealership property in Montreal was extended beyond its current lease maturity of 2027 for a further 6 years, subject to a CPI adjustment in 2027. One of our dealership properties in Calgary was also extended by 5 years at rents to be agreed upon as that renewal commences. We also announced yesterday that subsequent to quarter end, we entered into a new lease and joint arrangement with a member of the Dilawri Group, pursuant to which we've agreed to lease our 69,000 square foot automotive dealership property located at 9088 Jane Street in Vaughan under a 16-year triple net lease whereby the landlord has a redevelopment option after a redevelopment option. We expect rent payments to commence on December -- sorry, December 1, 2026. Concurrently, we've agreed to sell 50% interest in the property for a cash purchase price of $16 million, reflecting a premium to IFRS value with the expected closing in September of 2026. We expect to retain the remaining 50% interest of the property and all parties have waived conditions. It should be noted that the demand for automotive facilities has allowed us to maintain 100% leased portfolio even though some of the properties have experienced changes in the OEM franchises. With the new lease at 9088 Jane Street, combined with the recent lease renewal activity, we'll have no material lease expirations until 2028. I'd now like to turn it over to Andrew Kalra to review our financial results in more detail. Andrew?
Andrew Kalra: Thanks, Milton, and good morning, everyone. Our property rental revenue for the quarter increased to $30.2 million from $24.6 million in Q2 a year ago, reflecting growth from properties we acquired during and subsequent to Q2 last year and contractual annual rent increases. Total cash NOI, same-property cash NOI for the quarter totaled $24.8 million and $21.1 million, respectively, representing increases of 20% and 2.2% compared to Q2 last year. Interest expense and other financing charges for the quarter were $8.1 million, an increase of $1.7 million from Q2 last year, reflecting additional debt incurred to fund the acquisitions. Our G&A expenses were $1.6 million for the quarter, an increase of about $80,000 from Q2 last year and in line with the REIT's expectations. Net income and other comprehensive income was $18.1 million compared to $11.2 million in Q2 last year. The increase was primarily due to higher NOI, changes in noncash fair value adjustments for investment properties and foreign exchange gain, partially offset by higher interest costs and a change in noncash fair value adjustments for interest rate swaps. FFO and AFFO increased by 19.4% and 18.6%, respectively, compared to Q2 last year, reflecting higher rental revenue from the acquisitions and contractual rent increases. On a per unit basis, FFO increased to $0.270 diluted, up from $0.244 in Q2 last year, and AFFO per unit increased to $0.263 diluted, up from $0.249. We paid unitholder distribution totaling $0.206 per unit in the quarter, representing an AFFO payout ratio of 78.3%. This compares with a total distribution of $0.201 per unit in Q2 last year for a payout ratio of 80.7%. The cap rate applicable to our portfolio was 6.7% at quarter end, which is flat compared to 2025 year-end. We continue to be proactive with our debt strategy to enhance our financial flexibility. During the quarter, we increased the amount of the nonrevolving portion of Facility 2 by $35 million and extended the maturity date to June 2030 with the same credit spread. At quarter end, 74% of our debt was fixed with a weighted average interest rate of 4.49%, a weighted average interest rate swap term and mortgages remaining of 3.9 years and a weighted average term of maturity of debt of 2.9 years as we continue to increase and extend our credit facilities. As at August 13, we had a debt-to-GBV ratio of 47.5% with approximately $64 million of undrawn capacity under our credit facilities and 11 unencumbered properties valued at $166.7 million. I'd like to turn the call back to Milton for closing remarks. Thank you very much.
Milton Lamb: Thanks, Andrew. Following our entry into the U.S. market last year, we're pleased with the progress we've made in expanding our portfolio, including the U.S. portfolio of properties. We now own properties in Ohio, Florida and California, representing leading automotive brands, including Tesla, Rivian and Penske Automotive Group with their Audi and VW properties. This increased geographic and tenant diversity enhances the underlying strength of our portfolio and provides a broader array of acquisition opportunities for us. We continue to position APR as an attractive partner to major automotive dealership groups and OEMs in Canada and the United States. We are successfully executing our key objectives, including expanding our geographic market presence and diversifying our tenant base through property acquisitions, optimizing our portfolio and capital position with our Vaughan property transaction and recent value-enhancing lease renewals, driving AFFO per unit growth and increasing our cash distributions. Looking ahead, we look forward to building on our positive momentum, supported by a growing property portfolio, featuring high-quality tenants providing essential retail and services, locations in prime metropolitan markets in Canada and the U.S. with GDP and population growth, an attractive net lease structure and embedded fixed or CPI adjusted rental growth. That concludes our remarks. I'd now like to open the line for questions. Morgan, please go ahead.
Operator: [Operator Instructions]. Your first question comes from Jonathan Kelcher with TD Cowen.
Jonathan Kelcher: First on this deal with Dilawri, can you maybe give a little bit of color on like why you're selling a 50% interest, what the landlord redevelopment option, how that would work?.
Milton Lamb: Yes, sure. The thought process is -- it follows on what we've been saying for a while. We love the underlying dirt. It's an automotive zone property that has good demand. And it was trying to balance our ability in the future to potentially do mixed-use redevelopment, plus the desire, obviously, to get strong income and have a strong tenant. So it's a bit of a trade-off for flexibility. If you do a flash back almost 10 years, we bought this property for just over $17 million, have certainly had a nice 10 years with it, including some good rental growth and now being able to take $16 million, which for 50%, which is almost equal to what we bought it for originally, get some good income and maintain some of that flexibility in the future. It worked very well to get that balance. Certainly, now is not the right time to be leaning into redevelopment. So this allows us to straddle both worlds of good income and good underlying value.
Jonathan Kelcher: Okay. And I'm guessing your ability to get that redevelopment, so like if in 4 years or something you want to do it, you'd be just able to do so?
Milton Lamb: Yes, it's not 4 years. There's a minimum term. And then at that point, with appropriate notice, which certainly, if you're going through planning, it's easy to give a significant notice, we can go ahead and look at doing a redevelopment.
Jonathan Kelcher: Okay, I guess just in order to get Dilawri to agree to that, that was the quick proposal on the half interest in the property?
Milton Lamb: I don't know if I love that word because of good old Trump. But yes, I mean, it was the balance between having flexibility. Obviously, there's investment that has to go into the property as they kind of put the new OEM in place. So it worked very well that if there is that underlying -- or I'd really like to think when there is that underlying higher and better use that we can do it together, both when and then hopefully be a relocation of any new tenant or potentially have that tenant stay within the new redevelopment complex.
Operator: Your next question comes from Sairam Srinivas with ATB Cormark Capital Markets.
Sairam Srinivas: Following up online of questioning on the Vaughan leasing. Milton, just to clarify, the $16 million odd you paid for the property, that's for the 100%?
Milton Lamb: Sorry, with $17 million, we bought it for just over $17 million in 2016 for 100% and yes, now we're selling 50% for $16 million or the equivalent of $32 million for 100%.
Sairam Srinivas: That is amazing math. And just kind of looking at the acquisition pipeline now, obviously, you guys have been active in the U.S. and Canada as well. How would you characterize the pipeline in terms of your geographic dispersion?
Milton Lamb: Sorry, can you repeat that?
Sairam Srinivas: So just looking at your pipeline of acquisitions and the spread between the U.S. and Canada.
Milton Lamb: Yes. Last quarter, $1.42 was not looking that attractive. We love getting the income at $1.42. We think we're watching that dollar resettle back into the high $1.30s, $1.39 and change now. There's a bit of a balance there. And I've always found the summer I say this with a bit of a smile. Most dealers enjoy their summer. So we look forward to the back half of the year when often there's more M&A and more deals that do occur. The balance between the 2, we like some of the GDP and population growth markets in the state, especially in that Southeast kind of through the Southwest. It will be interesting. There's a balance on where we want to see growth. There's certainly more opportunities when we're looking at both sides of the border. So we're looking forward to the back half of the year.
Operator: Your next question comes from Brad Sturges with Raymond James.
Bradley Sturges: Just circling back to the Vaughan property in terms of the new lease with the Dilawri affiliate. Wondering if you could give a bit of color just on the new rent versus prior rents.
Milton Lamb: There's -- we talked about the rent starting in December 1, so that's already public. There's some money that has to go into it. The rents are nicely above when we acquired this property, and they continue to grow. They grew nicely over the last 10 years. Not a significant difference. Again, there's probably a bit more -- sorry, a bit of flexibility in there because of the redevelopment clause, but it's not materially different than what we would have looked at previously.
Bradley Sturges: Okay. And then it would be similar to other Dilawri leases with like a 1.5 percentage?
Milton Lamb: Yes. It's very much -- outside of the one clause that we talked about, it's very much a standard Dilawri lease.
Bradley Sturges: Okay. And then just looking at the other lease extensions, could you give a bit more color in terms of when those extensions would be effective?
Milton Lamb: The 2 that we have talked about the increase that was announced, those were effective. I mean we announced them before. It was just coming up with the formula. So those are already in place. The other ones are early to mid next year on when they would actually kick in. We've received the renewal notices, but the actual increases and new lease rates would be, call it, mid next year.
Bradley Sturges: The ones that are already effective, would we've seen much of an impact in the quarter? Or was that at sort of the end of the quarter?
Milton Lamb: No. These were rollovers from the original IPO. So that was done in July of 2015. So most of the rent increases with regards to the original portfolio are in July or August, so they'd be in Q3.
Operator: Your next question comes from Zemin Liu with Desjardins.
Zemin Liu: So just a follow up on the Vaughan property. So I'm just wondering whether you can disclose the estimated cap rate on the new 16-year lease?.
Milton Lamb: Yes, we don't tend to disclose cap rate and certainly in this case when we already own the property. That's -- I love the back math because that's basically asking us to tell you what the net rent is. So, no it's not disclosed.
Zemin Liu: Okay. So after this sale of the 50% interest, are you contemplating any other dispositions in the near term?
Milton Lamb: This was a special circumstance with a high-quality property and the desire to get income and maintain the redevelopment optionality. Short answer is we like our portfolio. We still remain at 11 years, 100% leased and 100% rent payment. We never say no, but to look at anything. But right now, we have nothing contemplated.
Operator: [Operator Instructions]. The next question comes from Jimmy Shan with RBC Capital Markets.
Khing Shan: On the various extensions and early renewals, I'm just curious if you could provide a bit of background and context within that? Is it more tenant-driven? Is it you being proactive? Just trying to understand that a little bit more.
Milton Lamb: Kind of both. Certainly, some of them, it was option periods. Other ones had demand either if they relocated. If we didn't get the renewal, then we had backup demand. So they stepped up and renewed. It's partly that we're now hitting some of the maturity on the original 11- to 19-year deal. Certainly, on the Des Source the VW, we originally said one of the terms was fairly short, but we have very strong confidence that they would renew. And to no surprise, they renewed. So it's a bit of what was anticipated, and we've been working with them to kind of hit the numbers and get that in place. So it's partly that -- what I kind of like is, a, the backup demand; and b, in a number of cases, the dealer group have used this for other OEMs as opposed to the original one. So even when you're seeing transition within the property, the dealer community likes to hold on to these assets because they can use them to achieve other franchises. It kind of goes to supporting our back story that we've kind of talked about for the last 10, 11 years.
Khing Shan: Yes, that's helpful. Then just a quick follow-up on the Vaughan side. So what is that minimum term before you can contemplate redevelopment?
Milton Lamb: It's not announced and they've asked us not to announce it. But in the near future, I don't see that land value being at a level that I anticipate it will be once this market matures and gets back to having true residential mixed-use value.
Khing Shan: But certainly, a 16-year lease? Yes, 16-year lease.
Milton Lamb: Yes.
Khing Shan: It will be shorter than 16 years.
Milton Lamb: Very much so.
Operator: Your next question comes from Giuliano Thornhill with National Bank.
Giuliano Thornhill: I just want to ask about the Vaughan site as well. I'm wondering, can you give us some more description on who the old tenant was, maybe the OEM there, and the rationale for leaving the site?
Milton Lamb: Yes, it was Pfaff which got acquired by Lithia, so Lithia Pfaff with an Audi. Audi has -- they did extremely well there. It was 60 odd thousand feet, they wanted to expand. And so they've moved their location around the corner and done a new build. I gotta say, it's a beautiful building and that's that left this opportunity available.
Giuliano Thornhill: And are you aware of the -- or can't disclose the new OEM that we be putting in place by Dilawri?
Milton Lamb: We are aware they're asking not to disclose it. As similar to Tesla, they often, dealers like to be able to announce it because it's a bit marketing, a bit promotional when they do announce it. So we don't want to take away that fanfare from them.
Giuliano Thornhill: Yes. Yes, absolutely. And then just on the modeling, I know it closes September. So will you be recognizing straight-line rent for the first bit until the -- and then cash rent on December? Is that how the lease will be working?
Andrew Kalra: Yes, we'll recognize -- it's going to be small. We'll recognize straight-line September and then the cash will be coming in December 1. When we do close it within September.
Milton Lamb: But obviously it's not reflected in the Q2s, that will be reflected in Q3.
Operator: This concludes our Q&A session. I will now turn the conference back over to Milton Lamb for any closing remarks.
Milton Lamb: That's great everyone. Thank you very much and enjoy the rest of the summer.
Operator: This concludes today's call. Thank you for attending. You may now disconnect and have a wonderful rest of your day.
