NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

TORONTO, Feb. 18, 2020 (GLOBE NEWSWIRE) -- WPT Industrial REIT (”WPT” or the “REIT”) (TSX: WIR.U; WIR.UN – OTCQX: WPTIF) announced today that it will acquire a portfolio of 26 U.S. distribution and logistics properties totaling approximately nine million square feet of gross leasable area (“GLA”) and one 85-acre land parcel for a purchase price of US$730 million (collectively, the "Acquisition").  

Key Highlights

  • Immediately Accretive Transaction – The Acquisition is expected to be immediately accretive to the REIT’s funds from operations (“FFO”) and adjusted funds from operations (“AFFO”) on a per unit basis.(1)
  • Increased Portfolio Scale and Leverage on Fixed Costs – The Acquisition significantly increases the size and scale of WPT’s portfolio to approximately US$2.3 billion, with a 39% increase in total GLA to approximately 32 million square feet, enhancing the REIT’s ability to leverage its fully internalized management platform.
  • Institutional Quality Assets – The Acquisition portfolio consists of institutional quality assets with an average age of approximately 14 years and average clear height of 31 feet.
  • Strong and Diverse In-place Tenant Roster – Approximately 67% of base rent is derived from investment grade tenants, with limited overlap to the REIT’s existing tenant roster. The portfolio has a weighted average lease term (“WALT”) of 4.6 years as of March 1, 2020.
  • Increased High-Barrier Market Exposure and Geographic Diversification – Expands WPT’s presence and operating platform in the high-barrier coastal markets of New Jersey, California and Florida and strengthens the REIT’s presence in other key U.S. distribution markets.
  • Future Value Creation Opportunities – Portfolio net operating income (“NOI”) can be increased over time through vacancy lease up, future development of land parcels and building expansion potential at existing sites.(1)
  • Capital Recycling Optionality – Increased size and scale from the Acquisition enhances the REIT’s ability to reassess portfolio composition and recycle capital over the near term.               

“This is a compelling transaction for the REIT – we add meaningful scale, high-barrier market concentration, functional assets, quality tenancies and future value enhancement opportunities – all while delivering immediate accretion to the REIT’s FFO and AFFO per unit.  Our ability to source a large, accretive off-market transaction in the highly-competitive U.S. industrial market underscores the depth of experience, market relationships and reputation for execution and follow-through of our team,” commented Scott Frederiksen, Chief Executive Officer of the REIT. 

“We expect the Acquisition and related equity offerings, coupled with the recent Canadian-dollar listing of the REIT’s units, will also meaningfully improve our public float and trading liquidity, moving the REIT closer to inclusion in relevant market indices” further commented Scott Frederiksen.

1 See Non-IFRS Measures.

The Acquisition

The REIT has agreed to acquire the portfolio from an affiliate of Pure Industrial Real Estate Trust for a purchase price of US$730 million, representing a going-in capitalization rate of approximately 5.5% and a stabilized capitalization rate of approximately 5.9%.(1)

The Acquisition will be financed with the proceeds from the issuance of approximately US$240 million of subscription receipts of the REIT (“Subscription Receipts”)  by way of a US$203 million public bought deal offering as well as a concurrent US$37 million private placement of Subscription Receipts to Alberta Investment Management Corporation as nominee, and bare trustees (“AIMCo”), the REIT’s largest unitholder. The balance of the financing will come from the assumption of approximately US$59 million of in-place mortgage debt and new debt financing proceeds in connection with the Acquisition. Upon closing of the Acquisition, which is expected to occur on about March 31, 2020, the REIT’s debt-to-gross book value is expected to increase to approximately 51% in the short term.

The Acquisition portfolio contains a mix of single-tenant and multi-tenant properties located in eight U.S. states, expands WPT’s presence in the high-barrier coastal markets of New Jersey, California and Florida, and strengthens the REIT’s presence in other key U.S. distribution markets. The portfolio also contains a mix of globally and nationally recognized tenants, supporting the overall credit quality of the REIT’s tenant base.

The Acquisition also includes 85 acres of developable land in Dallas, Texas, providing the REIT with the opportunity to construct up to 1.4 million additional square feet of GLA.

Additional property information regarding the Acquisition portfolio is set out below:

StateNo. of PropertiesAvg. AgeRentable Area% of TotalAvg. Occupancy(1)WALT
 (#)(years)(000s sf)(%)(%)(years)
Texas763,11735%94.1 %4.8
Georgia6182,53628%88.2 %4.9
North Carolina6202,06123%100.0 %4.2
New Jersey2144245%100.0 %5.4
Illinois2193374%100.0 %4.6
California1132112%100.0 %2.3
Louisiana161752%100.0 %5.2
Florida1131191%100.0 %4.4
Inv. Properties26148,981100%  94.6 %4.6
Land1 (85 acres)     
Total Portfolio27     

           1. Committed occupancy as of March 1, 2020.
             

Additional property information for the pro forma REIT portfolio is set out below:

 UnitCurrent(1)Acquisition PortfolioREIT Pro Forma(1)
Investment Properties(#)74
26100
GLA(mm sf)22.89.031.8
Age(years)15.913.715.3
Occupancy(%)98.7%94.6%97.6%
WALT(years)4.84.64.7

                   
           1. Pro forma as of March 1, 2020 for activity since September 30, 2019. Excludes joint venture investment properties.

The Financing

Concurrent with the announcement of the Acquisition, the REIT also entered into an agreement to sell to a syndicate of underwriters co-led by Desjardins Capital Markets, BMO Capital Markets and RBC Capital Markets (collectively, the "Underwriters"), on a bought deal basis, 14,150,000 Subscription Receipts at a price of US$14.35 per Subscription Receipt (“Offering Price”) for gross proceeds of approximately US$203 million (“Offering”). In addition, the REIT has granted the Underwriters an over-allotment option to purchase up to an additional 2,122,500 Subscription Receipts on the same terms and conditions, exercisable at any time, in whole or in part, up to the earlier of (i) 30 days after the closing of the Offering; and (ii) the date of a Termination Event (as defined below).

In addition to and concurrently with the Offering, AIMCo has agreed to purchase from the REIT on a non-brokered private placement basis 2,578,400 Subscription Receipts at the Offering Price, for gross proceeds of approximately US$37 million (the “Private Placement”, and together with the Public Offering, the “Financing”).  Following closing of the Financing, AIMCo’s ownership in the REIT will be approximately 17.0% (assuming the Over-Allotment Option is not exercised) and approximately 16.6% (assuming the Over-Allotment Option is exercised in full).

The aggregate proceeds from the Financing (less 50% of the Underwriters’ fee payable in respect of the Offering) (the “Escrowed Funds”) will be deposited in escrow pending satisfaction of the Escrow Release Conditions (as defined below). Upon satisfaction of the Escrow Release Conditions: (i) one unit of the REIT (each, a "Unit") will be automatically issued in exchange for each Subscription Receipt (subject to customary anti-dilution protection), without payment of additional consideration or further action by the holder thereof; (ii) an amount per Subscription Receipt equal to the amount per Unit of any cash distributions made by the REIT for which record dates have occurred during the period that the Subscription Receipts are outstanding, net of any applicable withholding taxes, will become payable in respect of each Subscription Receipt (the “Subscription Receipt Adjustment Payment”); and (iii) the Escrowed Funds (less the remaining 50% of the Underwriters’ fee and the Subscription Receipt Adjustment Payment) will be released from escrow to the REIT.

The Escrowed Funds will be held by an escrow agent pending the satisfaction or waiver of all conditions precedent to the Acquisition in accordance with the terms of the material agreements relating to the Acquisition, without amendment or waiver in a manner that would be materially adverse to the terms and conditions upon which the REIT is effecting the Acquisition, unless the consent of the co-lead underwriters and AIMCo is given to such amendment or waiver, other than (i) the payment of the consideration to be paid for the Acquisition for which the Escrowed Funds are required; and (ii) such conditions precedent that by their nature are to be satisfied at the time of the closing of the Acquisition (the “Escrow Release Conditions”). There can be no assurance that the requisite approvals will be obtained, closing conditions will be met or that the Acquisition will be consummated on the terms described herein, if at all.

If the Escrow Release Conditions are not satisfied or deemed to be satisfied by June 30, 2020, or the Acquisition is terminated at an earlier time, or the REIT announces by press release that it will not proceed with the Acquisition (each, a “Termination Event”), the gross proceeds of the Financing and pro rata entitlement to interest earned on the Escrowed Funds and interest that would otherwise have been earned had the 50% of the Underwriters’ fee been deposited into escrow upon closing of the Offering and not paid to the Underwriters, net of any applicable withholding taxes, will be paid to holders of the Subscription Receipts and the Subscription Receipts will be cancelled.

The Subscription Receipts will be offered under the Offering by way of a prospectus supplement to the REIT's short form base shelf prospectus dated December 5, 2019, which prospectus supplement is expected to be filed with the securities commissions and other similar regulatory authorities in each of the provinces of Canada on or about February 20, 2020. Further information regarding the Financing and the Acquisition, including related risk factors, will be set out in the prospectus supplement. The Financing is subject to the receipt of all necessary approvals, including the approval of the Toronto Stock Exchange. Closing of the Financing is expected to take place on or about February 27, 2020.

The Subscription Receipts have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the "1933 Act") and may not be offered, sold or delivered, directly or indirectly, in the United States, or to, or for the account or benefit of, "U.S. persons" (as defined in Regulation S under the 1933 Act), except pursuant to an exemption from the registration requirements of the 1933 Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any Subscription Receipts in the United States or to, or for the account or benefit of, U.S. persons.

About WPT Industrial Real Estate Investment Trust

WPT Industrial Real Estate Investment Trust is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. The REIT acquires, develops, manages and owns industrial properties located in the United States, with a particular focus on warehouse and distribution industrial real estate. As at January 31, 2020, WPT Industrial, LP (the REIT’s operating subsidiary) indirectly owned a portfolio of properties across 18 states in the United States consisting of approximately 23.1 million square feet of gross leasable area, comprised of 76 industrial properties. The REIT pays monthly cash distributions, currently at US$0.0633 per Unit, or approximately US$0.76 per Unit on an annualized basis.

Caution Regarding Forward Looking Information

This press release contains “forward-looking information” as defined under applicable Canadian securities law (“forward-looking information” or “forward-looking statements”), including with respect to the expected acquisition of the Acquisition Portfolio, the cost, timing and composition thereof and funding therefor, the REIT’s excepted debt-to-Gross Book Value following closing of the Acquisition, the expected impact of the Acquisition on the REIT’s adjusted funds from operations and timing of such impact, the proposed closing dates for the Acquisition and the Financing, the proposed filing date for the prospectus supplement, and AIMCo’s ownership of the REIT following closing of the Financing.  Such statements reflect management’s expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance, business prospects and opportunities of the REIT. The words “plans”, “expects”, “scheduled”, “estimates”, “intends”, “anticipates”, “projects”, “believes” or variations of such words and phrases (including negative variations) or statements to the effect that certain actions, events or results “may”, “will”, “could”, “would”, “might”, “occur”, “be achieved” or “continue” and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable by management of the REIT as of the date of this press release, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Such estimates, beliefs and assumptions include that the conditions to closing of the acquisition of the Acquisition Portfolio will be met or waived in a timely manner, that the acquisition of the Acquisition Portfolio will be completed on the current agreed upon terms,  that the Acquisition Portfolio’s projected operating expenses and recoveries align with  historical financial results, that projected capital expenditure reserves are in-line with estimates from third-party reports, as well as with respect to rent growth potential, occupancy levels, anticipated amounts of expenses, anticipated amounts of base rent, tenant creditworthiness, results of operations, future prospects and opportunities, the demographic and industry trends remaining unchanged, no change in legislative or regulatory matters, future levels of indebtedness, the tax laws as currently in effect remaining unchanged, the continual availability of capital, the current economic conditions remaining unchanged, and continued positive net absorption and declining vacancy rates in the markets in which the REIT’s properties are located.

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, should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved, if achieved at all. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed or referenced under “Risk Factors” in the REIT’s annual information form for the year ended December 31, 2018, which is available under the REIT’s profile on SEDAR at www.sedar.com. These forward-looking statements have been approved by management to be made as of the date of this press release and, except as expressly required by applicable law, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Non-IFRS Measures

Funds from operations (“FFO”) is defined as net income, in accordance with International Financial Reporting Standards (“IFRS”), (i) plus or minus fair value adjustment to investment properties; (ii) plus or minus gains or losses from sales of investment properties; (iii) plus or minus other fair value adjustments; (iv) plus amortization of tenant incentives or other intangibles arising from business combinations; (v) plus transaction costs expensed as a result of the purchase of an entity being accounted for as a business combination; (vi) plus distributions on redeemable or exchangeable units treated as interest expense; (vii) plus or minus any negative goodwill or goodwill impairment; (viii) plus deferred income tax expense, after adjustments for equity accounted entities and joint ventures calculated to reflect FFO on the same basis as consolidated investment properties; (ix) plus or minus adjustments for property taxes accounted for under International Financial Reporting Interpretations Committee (“IFRIC”) 21; (x) plus expenses from Right of Use (“ROU”) assets, net of lease principal payments on the ROU assets of those leases; and (xi) plus income from equity-accounted joint ventures. FFO has been prepared consistently with the definition presented in the white paper on funds from operations prepared by the Real Property Association of Canada (“REALPAC”) issued on February 2019 and is intended to be used as a sustainable, economic earnings metric. However, from time to time the REIT may enter into transactions that materially impact the calculation of FFO and are adjusted as determined by the board of trustees of the REIT (the “Board” or the “Board of Trustees”) in their sole discretion. The REIT considers FFO to be a useful measure of operating performance and adjusts for items included in net income (or net loss) that do not arise from operating activities or do not necessarily provide an accurate depiction of the REIT’s past, current or recurring performance.

AFFO is defined as FFO subject to certain adjustments, including: (i) any differences resulting from recognizing investment property rental revenues on a straight-line basis; and (ii) minus a reserve for normalized maintenance capital expenditures, tenant inducements and leasing commissions, as determined by the REIT. AFFO has been prepared consistently with the definition presented in the white paper on adjusted funds from operations prepared by REALPAC issued on February 2019 for all periods presented. However, from time to time the REIT may enter into transactions that materially impact the calculation of AFFO and are adjusted as determined by the Board of Trustees in their sole discretion. The REIT considers AFFO to be a useful measure of operating performance and adjusts for items included in net income (or net loss) that do not arise from operating activities or do not necessarily provide an accurate depiction of the REIT’s past, current or recurring performance.

FFO and AFFO should not be construed as alternatives to net income and comprehensive income determined in accordance with IFRS as indicators of the REIT’s performance. The REIT’s method of calculating FFO and AFFO may differ from other issuers’ methods and accordingly may not be comparable to measures used by other issuers.

Capitalization rate is defined as the overall capitalization rate obtained by dividing the projected net operating income (“NOI”) of an investment property for the first twelve months of ownership by the purchase price. NOI is used by industry analysts, investors and management to measure operating performance of real estate investment trusts. NOI represents investment properties revenue less investment properties operating expenses less fair value adjustment to investment properties in respect of IFRIC 21. Accordingly, NOI excludes certain expenses included in the determination of net income and comprehensive income, such as interest expense.

For More Information, please contact:

Scott Frederiksen, Chief Executive Officer 
WPT Industrial Real Estate Investment Trust
Tel: (612) 800-8501