Q1 2018 Investor Presentation ForwardLooking Statements This - - PowerPoint PPT Presentation
Q1 2018 Investor Presentation ForwardLooking Statements This - - PowerPoint PPT Presentation
Q1 2018 Investor Presentation ForwardLooking Statements This presentation contains "forward-looking information" as defined under Canadian securities laws which reflect managements expectations regarding objectives, plans,
This presentation contains "forward-looking information" as defined under Canadian securities laws which reflect management’s expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance, business prospects and opportunities of WPT Industrial Real Estate Investment Trust (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”, “be achieved”, or “continue” and similar expressions identify forward-looking statements. These statements reflect the REIT's current expectations regarding future events and operating performance, the REIT’s future growth potential and other prospects and opportunities, results
- f operations, demographic and industry trends and future legislative and regulatory approaches with respect to matters affecting the REIT and speak only as of the date of this
- presentation. Forward looking statements are necessarily based on a number of estimates, beliefs and assumptions that are inherently subject to significant business, economic and
competitive uncertainties and contingencies which could cause actual results to differ materially from those that are disclosed in such forward-looking statements. While considered reasonable by management of the REIT as of the date of this presentation, any of these estimates, beliefs or assumptions could prove to be inaccurate, and as a result, the forward- looking statements based on those estimates, beliefs or assumptions could be incorrect. 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 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 those factors discussed or referenced under the “Risk Factors” section of the REIT’s MD&A and the REIT’s annual information form (the “AIF”) for the year ended December 31, 2017. This presentation does not constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe for any securities nor shall it or any part of it form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. The information contained in this presentation concerning the REIT and its affiliates does not purport to be all-inclusive or to contain all the information that a prospective purchaser or investor may desire to have in evaluating whether or not to make an investment in the REIT. The information is qualified entirely by reference to the REIT’s MD&A and the AIF. Certain terms included in this presentation such as funds from operations (“FFO”), adjusted funds from operations (“AFFO”), adjusted cash flow from operations (“ACFO”) and net
- perating income (“NOI”) are used by management to measure, compare and explain the operating results and financial performance of the REIT and are not recognized terms under
IFRS, and therefore should not be construed as alternatives to net income (loss) and comprehensive income (loss) or cash flow from operating activities calculated in accordance with
- IFRS. Management believes these terms are relevant measures in comparing the REIT’s performance to industry data, the REIT’s ability to earn and distribute cash returns to holders
- f the REIT’s trust units, and the REIT’s ability to meet its ongoing obligations. These terms are defined and reconciled to the most directly comparable measure specified in the
REIT’s MD&A. Such terms do not have a standardized meaning prescribed by IFRS and may not be comparable to similarly titled measures presented by other issuers.
Forward–Looking Statements
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U.S. Exposure Through Experienced Platform
Veteran management team with extensive knowledge of the U.S. industrial real estate sector ONLY Canadian REIT focused exclusively on U.S. industrial real estate Unit price and annual distribution of $0.76/unit in U.S. Dollars
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Proven Growth Strategies
ACTIVE INVESTMENT PIPELINE EXPERIENCED INVESTMENT TEAM
EXTERNAL GROWTH
EXTENSIVE INDUSTRY RELATIONSHIPS
JOINT VENTURE AND DEVELOPMENT OPPORTUNITIES WITH ESTABLISHED INSTITUTIONAL PARTNERS
ENTRY INTO NEW U.S. MARKETS STRATEGIC FINANCING CONTRACTUAL RENT INCREASES MAINTAINING CONSISTENTLY HIGH OCCUPANCY
INTERNAL GROWTH
ROLLING RENTS TO MARKET AT RENEWAL PROPERTY EXPANSION AND DEVELOPMENT
WPT MANAGEMENT PLATFORM
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- AVG. CEILING HEIGHT2
31’
………………………………
- AVG. BLDG. SIZE (SQ. FT.)2
336,000
…………………………………
- AVG. TENANT SIZE (SQ. FT.)2
150,000
……………………………………….
- AVG. ASSET AGE (YEARS)2
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INVESTMENT PROPERTIES
53
………………………………
TOTAL SQUARE FEET OF GLA
17,629,627
…………………………………
FAIR VALUE OF INVESTMENT PROPERTIES
$1.0B
……………………………………….
1. As at March 31, 2018 2. Industrial assets only
Expanding U.S. Footprint
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1. As at March 31, 2018
Tenant
Industry % of Total Annualized Base Rent1 GLA Occupied (‘000s sq. ft.)1 (%) of Total Portfolio GLA1
General Mills Operations, LLC Consumer Products 5.8% 1,512.6 8.6% Unilever Home & Personal Care Consumer Products 5.1% 1,262.6 7.2% Continental Tire the Americas Consumer Products 5.0% 740.9 4.2% Zulily, LLC E-Commerce 3.8% 737.5 4.2% Keystone Automotive2 Consumer Products 3.7% 633.6 3.6% Fullbeauty Brands, Inc. E-Commerce 3.1% 741.1 4.2% Radial, Inc. E-Commerce 2.9% 543.5 3.1% CEVA Logistics U.S. Inc. Third Party Logistics 2.9% 648.8 3.7% Amazon.com E-Commerce 2.8% 572.0 3.2% Honeywell International Inc. Consumer Products 2.8% 754.0 4.3% Total 37.9% 8,146.6 46.3%
High-Quality Tenant Base
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1. As at March 31, 2018 2. Comprised of two leases with Keystone Automotive Operations, Inc. and Keystone Automotive Industries, Inc.; both wholly-owned subsidiaries of LKQ Corporation.
Prudent Use of Leverage
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3.4 years Weighted average mortgage term to maturity
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3.8% Weighted average effective interest rate
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42.1% Total debt to GBV 3.2x Fixed charge coverage ratio 7.1x Debt to adjusted EBITDA $60.8mm Revolving credit facility availability
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1. As at March 31, 2018 2. Excludes the REIT’s revolving credit facility
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Staggered Debt Maturity
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1. As at March 31, 2018 and excludes the REIT’s revolving credit facility
4.5% 3.4% 3.1% 4.6% 3.8% 3.7% 3.5% Weighted Average Interest Rate of Maturities
3.8%
Weighted average interest rate
33.1 32.1 87.7 73.7 26.4 53.2 41.0
- 10.0
20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 2018 2019 2020 2021 2022 2023 2024
Maturities ($ in Millions)
Debt Maturities by Year
3.9 years
Weighted average remaining lease term
Staggered Lease Maturity Schedule
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1. As at March 31, 2018 2. Includes one month-to-month lease
92 21 16 27 21 12 6 11 Number of Leases Expiring
6.2% 13.4% 17.4% 17.5% 18.8% 12.7% 5.0% 9.0%
2018 2019 2020 2021 2022 2023 2024 2025+
Lease Expiration (% of GLA) by Year ¹
Upcoming Lease Renewals
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2018 2018
As at 6/30/2017, the REIT had 4 leases totaling 2.1% of the portfolio remaining to be renewed.
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1. As at March 31, 2018 2. Includes one month-to-month lease
2018
9 leases
2 totaling 6.2% of the portfolio expiring in 2018, including:
- Honeywell: 754,000 sq. ft.
- Renewed for 3 years with initial base increase of 8.0% and annual base rent increase of 2% thereafter
- The Clorox Company: 364,000 sq. ft.
- KGP Logistics: 311,100 sq. ft.
- UPS: 300,000 sq. ft.
2019
21 leases totaling 13.4% of the portfolio expiring in 2019, including:
- CEVA Logistics U.S. Inc: 648,750 sq. ft.
- Amazon.com: 572,000 sq. ft.
Track Record of Growing Unitholder Value
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- 1. Unit price growth from IPO – March 31, 2018
179.9 228.0 144.2 123.9 70 90 110 130 150 170 190 210 230 250
Mar-13 Jun-13 S ep-13 Dec-13 Mar-14 Jun-14 S ep-14 Dec-14 Mar-15 Jun-15 S ep-15 Dec-15 Mar-16 Jun-16 S ep-16 Dec-16 Mar-17 Jun-17 S ep-17 Dec-17 Mar-18
WIR (US $) WIR (CAD$) S &P/ TS X Composite Index (CAD$) S &P/ TS X Capped REIT Index (CAD$)
Compelling U.S. Industrial Market Fundamentals
Source: Cushman & Wakefield Research – Q4 2017
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Source: CBRE Q4 2017 US Industrial & Logistics Figures
U.S. Industrial New Construction Deliveries
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Industrial Development Building Momentum
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If 100% of the development activity currently in the pipeline goes unleased; the worst case scenario is the vacancy rate would increase to 6.3%, which is still 15% below the 10-year average.
(Source: CBRE Western US Industrial and Office Conference)
The construction pipeline is at its highest level this cycle. Despite the increase, supply and demand remain in relative equilibrium in most markets. Speculative projects account for 161.6 msf (or 66.4%)
- f year-to-date deliveries, and given the tight market, developers continue to break ground given the
strong underlying fundamentals.
(Source: Cushman Wakefield US Industrial MarketBeat, Q4 2017)
Nearly 81% of the U.S. development pipeline is dominated by smaller to mid-sized industrial buildings ranging from 50,000 – 500,000 s.f. This is a response to an increased leasing demand of smaller to mid- sized spaces and a lack of available land for mega-box warehouses (over 1 m.s.f).
(Source: JLL Research Report: First Look at Industrial, Q1 2018)
Market Indicators
Source: Cushman & Wakefield Research
As top logistics markets continue to operate at a sub-3.0 percent vacancy rate, we expect continued competition for quality space and added pressure on rents through 2018. Market Indicators
Source: Cushman & Wakefield Q1 2018 U.S. Industrial Marketbeat report
Overall Vacancy 5.3% 5.0% Net Absorption 56.5mm 56.9mm Under Construction 218.4mm 251.3mm Weighted Asking Rent (NNN) $5.68 $5.99
Vacancy Drops to Record Low Despite Robust Development
U.S. Research Report | Q4 2017 | Industrial Market Outlook | Colliers International
Tenant Demand Continues to Drive Rent Growth
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Tightening markets and new, higher-quality Class A industrial space drove up asking rents to $6.29 per square foot per year in Q4 2017, 7.5% higher than the same time last year. With vacancy rates expected to remain low because of continued strong demand, asking rental rates will continue in an upward trajectory this year.
Source: JLL Q1 2018 Industrial First Look Source: CBRE 2018 U.S. Real Estate Market Outlook
Q1 17 Q1 18
E-Commerce Growth Potential
19 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 2015 2016 2017 2018E 2019E 2020E
E-Commerce Sales, Global
($, Trillions)
- Nearly 25% of total U.S. leasing demand came
from e-commerce companies expanding their footprints in markets where they already had a
- presence. In comparison, in 2016 e-commerce
had 14.7% of the total U.S. leasing market share
- E-commerce has the industrial real estate market
firing on all cylinders, creating robust demand for big-box buildings, last-mile distribution centers, industrial flex space and manufacturing facilities.
- Fourth quarter e-commerce sales increased
~16.8% from the same period in 2016 compared to a total retail sales increase of 5.3%.
(Source: JLL Research Report: First Look at Industrial, Q3 2017) (Source: Colliers Research Report: Industrial Market Outlook, Q4 2017) (Source: Q4 2017 US Census Bureau’s ‘Quarterly Retail E-Commerce Sales)
Asset and Property Management
Asset Management
- 0.25% of GBV
Property Management (% of revenue)
- 2% on single-tenant industrial
- 3% on multi-tenant industrial
- 4% on office
No disposition, financing, leasing, development
- r incentive fees.
Construction Management
- 5% on non-maintenance capital projects >100,000
Acquisitions
- 1.0% on first $100mm
- 0.75% on next $100mm
- 0.5% over $200mm
No employees directly billed to REIT Term
- Expires April 2023
Automatic internalization at $750 million equity market capitalization
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Research Analyst Coverage
Name Firm Email Phone
Troy MacLean, CFA BMO Capital Markets troy.maclean@bmo.com (416) 359-8366 Mark Rothschild Canaccord Genuity Corp mrothschild@canaccordgenuity.com (416) 869-7280 Dean Wilkinson, CFA CIBC dean.wilkinson@cibc.com (416) 594-7194 Michael Markidis, CFA Desjardins Capital Markets michael.markidis@desjardins.com (416) 607-3028 Himanshu Gupta, CA, CFA GMP Securities hgupta@gmpsecurities.com (416) 941-6732 Brad Sturges, CFA iA Securities bsturges@iagto.ca (416) 203-5827 Matt Kornack National Bank Financial matt.kornack@nbc.ca (416) 507-8104 Neil Downey, CFA, CA, CPA RBC Capital Markets neil.downey@rbccm.com (416) 842-7835 Pammi Bir, CPA, CA, CFA Scotia Capital pammi.bir@scotiabank.com (416) 863-7218
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Trustee Real Estate/Board Experience Independent Trustee Audit Committee Investment Committee CG&N1 Committee
Milo Arkema
- Independent Consultant
- Former Accountant, Baker Tilly Virchow Krause, LLP
Louie DiNunzio
- Senior Vice President of Investments, Cadillac Fairview
- Chartered Accountant
Scott Frederiksen
Chair of the Board
- CEO, WPT Capital Advisors, LLC & Welsh Property Trust, LLC
- 30 Years with Welsh Organization
Sarah Kavanagh
- Former Commissioner, Ontario Securities Commission
- Former Vice Chair, Co-Head, Diversified Industry Group, Scotia Capital
Stuart H.B. Smith
- Chairman and Founder, EPIC Realty Partners Inc.
- Former President and CEO of Oxford Properties Group
Pamela Spackman
- Former President and CEO, Column Canada Financial Corp
- Former Vice-President of Mortgage Investments, Ministry of Finance,
Province of British Columbia
Robert Wolf
Lead Trustee
- Principal, RTW Capital Corporation
- Former CFO, RioCan REIT
(CHAIR) (CHAIR) (CHAIR) 1.Compensation, Governance and Nominating
Board of Trustees
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Scott Frederiksen
Chief Executive Officer P: 612-800-8501 E: stf@wptreit.com