TORONTO, Nov. 13, 2019 (GLOBE NEWSWIRE) -- WPT Industrial Real Estate Investment Trust (the “REIT”) (TSX: WIR.U - OTCQX: WPTIF) announced today its results for the three and nine months ended September 30, 2019. All dollar amounts are stated in U.S. funds.
Highlights for the three months ended September 30, 2019, including events subsequent to the end of the quarter:
- Investment properties revenue and net operating income (“NOI”)(1) were up 27.1% and 26.8%, respectively, over the same period last year
- Funds from operations (“FFO”)(1) and adjusted funds from operations (“AFFO”)(1) were up 30.1% and 21.0%, respectively, over the same period last year
- Same properties NOI(1) was up 4.5% over the same period last year
- Occupancy increased to 99.5% and average remaining lease term rose to 5.1 years at September 30, 2019
- Acquired four 100% occupied properties totaling approximately 1.5 million square feet of gross leasable area (“GLA”) for $109.3 million (exclusive of credits, closing and transaction costs) from the REIT’s private capital pipeline
- Generated approximately $2.2 million in private capital fee revenue from recurring management and performance fees
- Acquired a 100% occupied property in Nashville totaling approximately 0.5 million square feet of GLA on an off-market basis for $33.0 million (exclusive of credits, closing and transaction costs)
- Amended the REIT’s senior unsecured credit facility (“Credit Facility”) in September 2019, increasing capacity from $450 million to $575 million
- Completed an equity offering in October 2019, raising $85.0 million in gross proceeds
“So far this year, the REIT has added meaningful scale – approximately four million square feet in acquisitions – while increasing the portfolio’s geographic diversification and concentration in high-barrier and coastal markets. Our acquisitions this year have also laid the foundation for future growth by adding a number of leases with below market base rents and in-place contractual rent bumps averaging 2.5%,” commented Scott Frederiksen, Chief Executive Officer. “During the quarter, the REIT also increased the capacity of our Credit Facility by $125 million and completed an $85 million equity offering, which will allow the REIT to continue our disciplined growth strategy and capitalize on off-market investment opportunities sourced through the REIT’s value-add and development platform.”
FINANCIAL AND OPERATIONAL HIGHLIGHTS
(all figures in thousands of US dollars, except per Unit amounts, ratios, percentages, number of investment properties, amounts related to remaining lease term and GLA)
| | Three months ended September 30, | Nine months ended September 30, |
| | | 2019 | | | 2018 | | | 2019 | | | 2018 | |
| Operating Results: | | | | |
| | Investment properties revenue | $ | 29,335 | | $ | 23,078 | | $ | 83,247 | | $ | 67,960 | |
| | Management fee revenue | $ | 2,237 | | $ | 1,087 | | $ | 3,086 | | $ | 1,087 | |
| | NOI (1) | $ | 21,788 | | $ | 17,182 | | $ | 61,093 | | $ | 50,175 | |
| | Net income and comprehensive income | $ | 21,342 | | $ | 14,972 | | $ | 71,619 | | $ | 35,384 | |
| | Net income and comprehensive income per Unit (basic) (2) (3) | $ | 0.362 | | $ | 0.308 | | $ | 1.257 | | $ | 0.732 | |
| | Net income and comprehensive income per Unit (diluted) (2)(4) | $ | 0.351 | | $ | 0.299 | | $ | 1.218 | | $ | 0.715 | |
| | FFO (1) | $ | 14,807 | | $ | 11,379 | | $ | 37,382 | | $ | 33,447 | |
| | FFO per Unit (diluted) (1) (2) (4) | $ | 0.243 | | $ | 0.227 | | $ | 0.636 | | $ | 0.677 | |
| | AFFO (1) (5) | $ | 11,980 | | $ | 9,902 | | $ | 28,437 | | $ | 27,780 | |
| | AFFO per Unit (diluted) (1) (2) (4) | $ | 0.197 | | $ | 0.198 | | $ | 0.484 | | $ | 0.583 | |
| | Cash flows from operations | $ | 20,246 | | $ | 8,388 | | $ | 53,278 | | $ | 40,688 | |
| | Adjusted Cash Flow from Operations (“ACFO”) (1) | $ | 12,578 | | $ | 10,862 | | $ | 33,534 | | $ | 30,708 | |
| | Book value per Unit (1) | $ | 13.09 | | $ | 12.14 | | $ | 13.09 | | $ | 12.14 | |
| Distributions: | | | | |
| | Distributions per Unit (2) (5) | $ | 0.190 | | $ | 0.190 | | $ | 0.570 | | $ | 0.570 | |
| | Distributions declared (3) (5) | $ | 11,353 | | $ | 9,372 | | $ | 33,385 | | $ | 30,708 | |
| | ACFO payout ratio (1) (5) | | 90.3 | % | | 86.3 | % | | 99.6 | % | | 90.1 | % |
| | Weighted average number of Units (basic) (2) (3) | | 59,014 | | | 48,648 | | | 56,954 | | | 48,323 | |
| | Weighted average number of Units (diluted) (2) (4) | | 60,875 | | | 50,092 | | | 58,789 | | | 49,396 | |
| As at | | September 30, 2019 | | December 31, 2018 |
| Operational Information: | | | | |
| | Number of investment properties | | 74 | | | 57 | |
| | GLA | | 22,765,482 | | | 18,850,627 | |
| | Occupancy | | 99.5 | % | | 99.3 | % |
| | Average remaining lease term (years) | | 5.1 | | | 4.7 | |
| | Fair value of investment properties | $ | 1,549,438 | | $ | 1,117,672 | |
| Ratios: | | | | |
| | Weighted average effective interest rate (6) | | 3.8 | % | | 3.9 | % |
| | Variable interest rate debt as percentage of total debt (7) | | 32.6 | % | | 9.8 | % |
| | Debt-to-gross book value (1) | | 49.6 | % | | 46.5 | % |
| | Interest coverage ratio (1) | | 3.1x | | | 3.5x | |
| | Fixed charge coverage ratio (1) | | 2.7x | | | 2.9x | |
| | Debt to Adjusted EBITDA (1) | | 8.1x | | | 7.6x | |
| (1) NOI, same properties NOI, FFO, FFO per Unit (diluted), AFFO, AFFO per Unit (diluted), ACFO, Book value per Unit, ACFO payout ratio, cash re-leasing spread, straight-line rent re-leasing spread, debt-to-gross book value, interest coverage ratio, fixed charge coverage ratio and debt to Adjusted EBITDA (“Adjusted EBITDA” is defined as earnings before fair value adjustments to investment properties, interest (inclusive of finance costs), taxes, depreciation and amortization) are key measures of operating results and financial performance used by real estate operating companies, however, they are not defined by International Financial Reporting Standards (“IFRS”), do not have standard meanings and may not be comparable with other industries or issuers. This data should be read in conjunction with the “Non-IFRS Measures” section of the REIT’s MD&A. |
| (2) Includes trust units of the REIT (“REIT Units” and class B partnership units of WPT Industrial, LP (the “Partnership”) (“Class B Units”) (collectively, the "Units"). |
| (3) Excludes all options, deferred trust units (“DTUs”), and deferred limited partnership units (“DPUs”) outstanding under the REIT’s deferred compensation plans. |
| (4) Includes all options, DTUs, and DPUs outstanding under the REIT’s deferred compensation plans. |
| (5) Includes distributions on the Units. |
| (6) Includes mortgages payable, the construction loan, the Credit Facility, mark-to-market adjustments and financing costs. |
| (7) Includes amounts outstanding under the Credit Facility. |
SOLID OPERATING PERFORMANCE
For the three and nine months ended September 30, 2019, investment properties revenue increased 27.1% and 22.5%, respectively, compared to the same periods last year. The increase was primarily due to the contribution from 2018 and 2019 acquisitions, an increase in base rent in existing properties and higher recoveries of operating expenses. Net income and comprehensive income for the three and nine months ended September 30, 2019 increased 42.5% and 202.4%, respectively, compared to the same periods last year. The increase in net income is mainly due to fair value adjustments to investment properties of $12.2 million and $51.5 million in the three and nine months ended September 30, 2019, respectively.
NOI for the three and nine months ended September 30, 2019 was up 26.8% and 21.8%, respectively, compared to the same periods last year. Same properties NOI increased 4.5% and 4.1% for the three and nine months ended September 30, 2019, respectively, primarily due to increases in contractual base rent, higher recoveries of operating expenses, and an increase in occupancy.
FFO for the three and nine months ended September 30, 2019 was up 30.1% and 11.7%, respectively, compared to the same periods last year. AFFO for the three and nine months ended September 30, 2019 was up 21.0% and 2.4%, respectively, compared to the same periods last year. FFO per Unit for the three and nine months ended September 30, 2019 was up $0.016 per Unit (7.0%) and down $0.041 per Unit (6.1%), respectively. AFFO per Unit for the three and nine months ended was down $0.001 per Unit (0.05%) and $0.099 per Unit (17.0%), respectively. AFFO for the three and nine months was mainly impacted by free rent of approximately $0.6 million and $2.9 million, or $0.009 and $0.049 per Unit (diluted), respectively, and for the nine-month period both FFO and AFFO were impacted by one-time severance costs of $1.5 million ($0.026 per Unit) in the first quarter. FFO per Unit and AFFO per Unit were also impacted by a 20.7% and 19.0% increase in the weighted average number of Units outstanding for the three and nine months ended September 30, 2019, respectively.
Cash flow from operations and ACFO were up 241.3% and 15.8%, respectively, for the quarter and 30.9% and 9.2%, respectively, year to date. The REIT’s ACFO payout ratio for the three and nine months ended September 30, 2019 was 90.3% and 99.6%, an increase of 4.0% and 9.5%, respectively, compared to last year. Cash flow from operations was mainly up due to costs incurred in 2018 related to the internalization of management. Cash flow from operations and ACFO were both up mainly due to 2018 and 2019 acquisition activity but were offset by free rent. ACFO Payout ratio was up due to the increased free rent and the timing difference between the additional distributions from the REIT’s February equity raise and the closing of the Infill Logistics Portfolio.
ACQUISITION ACTIVITY
On August 28, 2019, the REIT acquired four investment properties from the REIT’s private capital pipeline which were owned by certain affiliates of AIMCo and a nominal interest (<1%) by the former principals of WPT Capital Advisors, LLC (which includes certain members of the REIT’s management team). The properties were 100% occupied, modern, highly-functional distribution properties totaling 1,492,688 square feet of GLA for a purchase price of $109.3 million (exclusive of credits, closing and transaction costs). The purchase price was satisfied with funds from the Credit Facility.
On September 30, 2019, the REIT acquired a 100% occupied investment property located in La Vergne (Nashville), Tennessee for a purchase price of $33.0 million (exclusive of closing and transaction costs), representing a capitalization rate of 5.9%. The purchase price was satisfied with funds from the Credit Facility and cash on hand.
LEASING ACTIVITY
For the three months ended September 30, 2019, the REIT renewed 100% of the approximately 641,000 square feet of lease expirations. Lease renewals commencing in the quarter had a weighted average cash re-leasing spread and straight-line rent re-leasing spread of 1.2% and 16.4%, respectively. Excluding the lease renewal and expansion at the REIT’s 100 West Thomas P. Echols Lane property in Louisville announced last year, renewals commencing in the quarter totaled approximately 69,000 square feet and had a weighted average cash re-leasing spread and straight-line rent re-leasing spread of 8.7% and 22.4%, respectively.
During the three months ended September 30, 2019, the REIT renewed approximately 281,000 square feet of leases with renewal terms set to commence in the fourth quarter of 2019 and throughout 2020. These lease renewals had a weighted average cash re-leasing spread and straight-line rent re-leasing spread of 8.4% and 15.4%, respectively.
During the three months ended September 30, 2019, the REIT also signed two new leases for previously vacant space totaling approximately 30,000 square feet and with scheduled commencement dates in fourth quarter of 2019.
Remaining lease expirations in 2019 and 2020 are now 1.0% and 2.7%, respectively, of the portfolio’s GLA.
STRONG FINANCIAL & LIQUIDITY POSITION
As at September 30, 2019, the REIT’s debt-to-gross-book-value ratio was 49.6% with interest and fixed charge coverage ratios of 3.1 and 2.7 times, respectively, and a debt-to-Adjusted EBITDA ratio of 8.1 times. The weighted average effective interest rate on outstanding debt was 3.8% at September 30, 2019 with a weighted average term to maturity on the REIT’s mortgages payable and total debt of 2.5 years and 3.0 years, respectively, with a weighted average remaining lease term of 5.1 years.
On September 26, 2019, the REIT amended and restated the Credit Facility, thereby increasing availability from $450 million to $575 million (subject to requisite unencumbered assets). The increase was comprised of a new delayed draw term loan (the “Term Loan III”) of $125 million. Term Loan III has a draw availability period of one year and maturity date of January 15, 2025. The amended and restated Credit Facility also contains an accordion feature which increases the REIT’s availability to $875 million (subject to requisite unencumbered assets and lender approval). On September 26, 2019, the REIT drew $70 million on Term Loan III, using the proceeds to repay the REIT’s unsecured revolving facility.
As at September 30, 2019, the REIT had approximately $30.6 million available to be drawn on the Credit Facility, in addition to cash on hand of $17.3 million. In addition, the REIT expects to generate additional liquidity through capital recycling and is currently evaluating the potential sale of several assets, including the REIT’s only office property.
PRIVATE CAPITAL
The REIT generated $2.2 million of management fee revenue during the quarter. This was made up of approximately $0.6 million of ongoing management fees and approximately $1.6 million of transaction related fees.
RECENT EVENTS
On October 29, 2019, the REIT issued 6,160,000 REIT Units at a price of $13.80 per REIT Unit to a syndicate of underwriters on a bought deal basis for net cash proceeds to the REIT of approximately $81.6 million (the “October 2019 Offering”) (inclusive of underwriters’ fees of $3.4 million and exclusive of other issuance costs). The REIT used $81.0 million of the funds from the October 2019 Offering to repay a portion of the outstanding balance on the Credit Facility. Following the repayment, the REIT had approximately $111.6 million available to be drawn on the Credit Facility.
INVESTOR CONFERENCE CALL
A conference call will be hosted by the REIT’s management team on Thursday, November 14, 2019 at 9:30 am ET. The telephone numbers to participate in the conference call are Canada Toll Free: (855) 669-9657, U.S. Toll Free (888) 249-8268 and International: (412) 902-4153. The live audio conference call will also be available as a webcast. To access the live audio webcast please access the link on the “Investors” page on our web site at www.wptreit.com. The telephone numbers to listen to the call after it is completed (Instant Replay) are Canada Toll Free (855) 669-9658, U.S. Toll Free (877) 344-7529 and International (412) 317-0088. The Passcode for the Instant Replay is 10135158#. A recording of the call will also be archived on the REIT’s web site at www.wptreit.com.
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 and manages industrial properties located in the United States, with a particular focus on warehouse and distribution properties. As at September 30, 2019, 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 GLA, comprised of 75 industrial properties and one office property. The REIT pays monthly cash distributions, currently at $0.0633 per Unit, or approximately $0.76 per Unit on an annualized basis, in US funds.
For more information, please contact:
Scott Frederiksen, Chief Executive Officer
WPT Industrial Real Estate Investment Trust
Tel: (612) 800-8501
Forward-Looking Statements
This press release contains “forward-looking information” as defined under applicable Canadian securities law (“forward-looking statements”) which reflect management’s expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance, business prospects and opportunities of the REIT, including statements concerning expected growth opportunities and the availability of acquisition opportunities from its private capital pipeline. 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, but are not limited to, the REIT’s ability to generate acquisition opportunities through its private capital pipeline, the REIT’s ability to acquire such properties, 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. 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.
