WPT Industrial REIT Announces Third Quarter Results
TORONTO, Nov. 06, 2018 (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, 2018. All dollar amounts are stated in US funds.
Highlights for the three months ended September 30, 2018, including events subsequent to the end of the quarter:
- Fully internalized REIT management functions and acquired the private capital business of WPT Capital Advisors, LLC
- Formed new U.S. industrial venture with Canada Pension Plan Investment Board and Alberta Investment Management Corporation and affiliates (“AIMCo”) targeting to invest an aggregate $1.0 billion in equity to pursue value-add and development investments, creating a proprietary off-market acquisition pipeline for the REIT
- Completed two acquisitions totaling 760,800 square feet for approximately $44.7 million (exclusive of closing and transaction costs)
- Recognized approximately $1.1 million in asset and property management fee revenue from the acquired private capital business in the three months ended September 30, 2018
- Investment property revenue and net operating income (“NOI”) were up 11.4% and 13.6%, respectively, over the same period last year
- Funds from operations (“FFO”) and adjusted funds from operations (“AFFO”) were up 12.5% and 14.9%, respectively, over the same period last year
- Same Property NOI (“SPNOI”) was up 2.9% over the same period last year
- Adjusted cash flow from operations (“ACFO”) payout ratio decreased to 85.7% for the quarter
- 99.4% of occupied space with leases set to expire in 2018 (totaling approximately 2.6 million square feet) were renewed or leased to new tenants to date, and
- Renewed approximately 1.0 million square feet of leased space scheduled to expire in 2019
“For the quarter, the REIT generated strong operating and financial results with growth to AFFO, a lower ACFO payout ratio and solid leasing activity as well as adding, through acquisitions, an additional 760,800 square feet to the portfolio,” commented Scott Frederiksen, Chief Executive Officer. “In addition, we are beginning to see the benefits from management internalization and the REIT’s new private capital business and look forward to continuing to grow these revenues as the platform scales.”
|FINANCIAL AND OPERATIONAL HIGHLIGHTS|
|(all figures in thousands of US dollars, except per Unit amounts, ratios, percentages, number of investment properties, amounts related to remaining lease term and GLA)|
|Three months ended
|Nine months ended
|Investment properties revenue||$||23,078||$||20,709||$||67,960||$||59,377|
|Net income and comprehensive income||$||14,972||$||6,973||$||35,384||$||44,447|
|Net income and comprehensive income per Unit (basic) (3) (4)||$||0.308||$||0.149||$||0.732||$||1.055|
|Net income and comprehensive income per Unit (diluted) (3) (5)||$||0.299||$||0.146||$||0.715||$||1.035|
|FFO (1) (2)||$||11,379||$||10,468||$||33,447||$||29,731|
|FFO per Unit (diluted) (1) (2) (3) (5)||$||0.227||$||0.220||$||0.677||$||0.677|
|AFFO (1) (2) (6)||$||9,902||$||8,774||$||28,780||$||25,052|
|AFFO per Unit (diluted) (1) (2) (3) (5)||$||0.198||$||0.184||$||0.583||$||0.570|
|Cash flows from operations||$||7,820||$||13,557||$||40,119||$||40,802|
|ACFO (1) (2)||$||10,941||$||9,503||$||30,763||$||27,026|
|Distributions per Unit (3) (6)||$||0.190||$||0.190||$||0.570||$||0.570|
|Distributions declared (4) (6)||$||9,372||$||9,145||$||27,662||$||24,865|
|ACFO payout ratio (1) (2) (6)||85.7%||96.2%||89.9%||92.0%|
|Weighted average number of Units (basic) (3) (4)||48,648||46,840||48,323||43,223|
|Weighted average number of Units (diluted) (3) (5)||50,092||47,668||49,390||44,004|
|As at||September 30, 2018||December 31, 2017|
|Number of investment properties||56||53|
|Average remaining lease term (years)||3.9||4.0|
|Fair value of investment properties||$||1,075,872||$||1,009,582|
|Weighted average effective interest rate (7)||3.7%||3.7%|
|Variable interest rate debt as percentage of total debt (8)||20.1%||18.2%|
|Debt-to-gross book value (1)||45.4%||42.1%|
|Interest coverage ratio (1)||3.6x||3.8x|
|Fixed charge coverage ratio (1)||3.0x||3.2x|
|Debt to Adjusted EBITDA (1)||7.4x||7.1x|
|(1) NOI, FFO, AFFO, ACFO, FFO per Unit (diluted), AFFO per Unit (diluted), ACFO payout ratio, Adjusted EBITDA, debt-to-gross book value, interest coverage ratio, fixed charge coverage ratio and debt to Adjusted EBITDA are key measures of performance used by real estate operating companies, however, they are not defined by 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) Excludes the transaction costs related to internalization of $8.5 million.|
|(3) 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“).|
|(4) Excludes all options, Deferred Trust Units (“DTUs”) and Deferred Partnership Units (“DPUs”) outstanding under the REIT’s equity compensation plans.|
|(5) Includes all options, DTUs and DPUs outstanding under the REIT’s equity compensation plans.|
|(6) Includes distributions on Units and DPUs.|
|(7) Includes mortgages payable, Term Loan I, the unsecured revolving credit facility, the Secured Revolving Facility, derivative instrument, mark-to-market adjustments and financing costs.|
|(8) Includes amounts outstanding under the unsecured revolving credit facility and a mortgage payable in 2018 and the Secured Revolving Facility as at December 31, 2017.|
SOLID OPERATING PERFORMANCE
For the three and nine months ended September 30, 2018, investment properties revenue was $23.1 million and $68.0 million, respectively, compared to $20.7 million and $59.4 million, respectively, in the same periods last year. The increase in revenue is primarily due to the contribution from 2018 and 2017 acquisitions, an increase in base rent in existing properties and higher recoveries of operating expenses, partially offset by the sale of a non-core property in July 2017. Net income and comprehensive income for the three and nine months ended September 30, 2018 was $15.0 million ($0.299 per Unit (diluted)) and $35.4 million ($0.715 per Unit (diluted)), respectively, compared to $7.0 million ($0.146 per Unit (diluted)) and $44.4 million ($1.035 per Unit (diluted)) in the same period last year. Excluding all fair value adjustments and transaction costs related to internalization of $8.5 million, net income and comprehensive income for the three and nine months ended September 30, 2018 was $9.4 million and $30.1 million, respectively, compared to $9.4 million and $25.6 million, in the same periods last year.
NOI for the three and nine months ended September 30, 2018 was $17.2 million and $50.2 million, respectively, compared to $15.1 million and $43.3 million in the same periods last year. SPNOI, was up 2.9% for the three and nine months ended September 30, 2018 compared to the same periods last year.
AFFO for the three and nine months ended September 30, 2018 was $9.9 million ($0.198 per Unit (diluted)) and $28.8 million ($0.583 per Unit (diluted)), respectively, compared to $8.8 million ($0.184 per Unit (diluted)) and $25.1 million ($0.570 per Unit (diluted)) in the same periods last year.
For the three months ended September 30, 2018, cash flow from operations and ACFO were $7.8 million and $10.9 million, respectively, compared to $13.6 million and $9.5 million in the same period last year. For the nine months ended September 30, 2018, cash flow from operations and ACFO were $40.1 million and $30.8 million, respectively, compared to $40.8 million and $27.0 million in the same period last year. The REIT’s ACFO payout ratio for the three and nine months ended September 30, 2018 was 85.7% and 89.9%, respectively, compared to 96.2% and 92.0% in the same periods last year. Cash flow from operations for the three and nine months ended September 30, 2018, was impacted by transaction costs related to management internalization of $8.5 million.
STRONG FINANCIAL & LIQUIDITY POSITION
As at September 30, 2018, the REIT’s debt-to-gross-book-value ratio was 45.4% with an interest coverage ratio of 3.6 times, a debt-to-Adjusted EBITDA ratio of 7.4 times, and a fixed charge coverage ratio of 3.0 times. The weighted average effective interest rate on outstanding debt was 3.7% at September 30, 2018, consistent with the prior year. The weighted average term to maturity on the REIT’s mortgages payable was 3.3 years as at September 30, 2018, with a weighted average remaining lease term of 3.9 years.
As at September 30, 2018, in addition to cash on hand, the REIT had $66.5 million available to be drawn on the Credit Facility.
On August 14, 2018, the REIT entered into an agreement with the tenant at 2440-2450 Midpoint Drive, Edwardsville (Kansas City), Kansas, to expand the building up to 105,000 square feet. The tenant agreed to a new lease term for a period of 122 months commencing on the date construction of the building expansion is complete. The REIT estimates the costs associated with this expansion to be approximately $7.5 million.
On August 20, 2018, the REIT renewed a 300,000 square foot lease with the existing tenant at 1500 Worldwide Boulevard, Hebron (Cincinnati), Kentucky. The original lease, which was set to expire on December 31, 2018, has been extended for 10 years, expiring on December 31, 2028.
On October 22, 2018, the REIT renewed and expanded a lease with the existing tenant, a major online retailer, for the entire 936,000 square feet at 100 West Thomas P. Echols Lane, Shepherdsville (Louisville), Kentucky. The amended lease now expires on December 31, 2028.
On September 28, 2018, the REIT indirectly acquired from AIMCo and certain members of the REIT’s management team, a 100% occupied, newly constructed investment property located in Louisville, Kentucky totaling 224,000 square feet for a purchase price of $17.9 million (exclusive of closing and transaction costs), representing a capitalization rate of approximately 6.2%. The purchase price was satisfied with funds from the Credit Facility and the acquisition was immediately accretive to the REIT’s AFFO per unit.
On November 6, 2018, the REIT acquired a 100% occupied investment property located in Franklin Park, Illinois totaling 536,800 square feet for a purchase price $26.8 million (exclusive of closing and transaction costs), representing a capitalization rate of approximately 7.5%. The purchase price was satisfied with funds from the Credit Facility and the acquisition was immediately accretive to the REIT’s AFFO per unit.
INVESTOR CONFERENCE CALL
A conference call will be hosted by the REIT’s management team on Wednesday, November 7, 2018 at 9:00 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 10124762#. 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 has been formed for the purpose of acquiring, developing, managing and owning primarily industrial investment properties located in the United States, with a particular focus on warehouse and distribution industrial real estate. As of September 30, 2018, WPT Industrial, LP (the REIT’s operating subsidiary) indirectly owns a portfolio of properties consisting of approximately 18.3 million square feet of gross leasable area, comprised of 55 industrial properties and one office property located in 15 states in the United States. 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
This press release contains “forward-looking information” as defined under applicable Canadian securities law (“forward-looking information” or “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. 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 the various assumptions set forth herein, including, but not limited to, the REIT’s and the property’s future growth potential, anticipated amounts of expenses, 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, 2017, 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.