Q2 2018 Investor Presentation ForwardLooking Statements This - - PowerPoint PPT Presentation

q2 2018 investor presentation forward looking
SMART_READER_LITE
LIVE PREVIEW

Q2 2018 Investor Presentation ForwardLooking Statements This - - PowerPoint PPT Presentation

Q2 2018 Investor Presentation ForwardLooking Statements This presentation contains "forward-looking information" as defined under Canadian securities laws which reflect managements expectations regarding objectives, plans,


slide-1
SLIDE 1

Q2 – 2018 Investor Presentation

slide-2
SLIDE 2

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"), including statements concerning the Transaction (as defined herein) providing access to additional capital resources and enhanced and diversified cash flows, achievement of the targeted US$1.0 B in equity for the venture with Canada Pension Plan Investment Board and Alberta Investment Management Corporation (the “Venture”), achievement of increased property acquisition through the Venture pipeline, expected private capital management and incentive fees, expected availability of WPT Capital Advisors, LLC-managed properties for acquisition and the length of employment for the internalized employees. 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 of 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

  • r 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. The term debt-to-gross book value (“GBV”) included in this presentation is used by management to measure, compare and explain the operating results and financial performance of the REIT and is not recognized terms under IFRS. Management believes this term is a relevant measures in comparing the REIT’s performance to industry data, the REIT’s ability to earn and distribute cash returns to holders of the REIT’s trust units, and the REIT’s ability to meet its ongoing obligations. This term does not have a standardized meaning prescribed by IFRS and may not be comparable to a similarly titled measure presented by other issuers.

Forward–Looking

Statements

2

slide-3
SLIDE 3

Overview

WPT Industrial Real Estate Investment Trust is the only Canadian-listed REIT focused exclusively on the U.S. Industrial Sector

slide-4
SLIDE 4

4

U.S. Exposure Through Fully-Integrated Platform

Seasoned management team with extensive knowledge of the U.S. industrial sector Access to high-barrier U.S. markets through off-market private capital acquisition pipeline Unit price and annual distribution of $0.76/unit in U.S. Dollars

slide-5
SLIDE 5

5

Proven Growth Strategies

OFF-MARKET INVESTMENT PIPELINE FEE REVENUE FROM THIRD- PARTY CAPITAL

EXTERNAL GROWTH

EXTENSIVE INDUSTRY RELATIONSHIPS

PARTNERSHIPS WITH PREMIER GLOBAL INVESTORS

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

slide-6
SLIDE 6

6

  • AVG. CEILING HEIGHT2

31’

………………………………

  • AVG. BLDG. SIZE (SQ. FT.)2

332,000

…………………………………

  • AVG. TENANT SIZE (SQ. FT.)2

150,000

……………………………………….

  • AVG. ASSET AGE (YEARS)2

14

INVESTMENT PROPERTIES

55

………………………………

TOTAL SQUARE FEET OF GLA

18,089,827

…………………………………

FAIR VALUE OF INVESTMENT PROPERTIES

$1.0B

1. As at June 30, 2018 2. Industrial assets only

slide-7
SLIDE 7

Expanding U.S. Footprint

1

7

1. As at June 30, 2018

/ Washington D.C

slide-8
SLIDE 8

Tenant

Industry % of Total Annualized Base Rent1 GLA Occupied (‘000s sq. ft.)1 (%) of Total Portfolio GLA1

General Mills Operations, LLC Consumer Products 5.6% 1,512.6 8.4% Continental Tire the Americas Consumer Products 5.0% 740.9 4.1% Unilever Home & Personal Care Consumer Products 4.9% 1,262.6 7.0% Zulily, LLC E-Commerce 3.7% 737.5 4.1% Keystone Automotive2 Consumer Products 3.6% 633.6 3.5% Fullbeauty Brands, Inc. E-Commerce 3.0% 741.1 4.1% Radial, Inc. E-Commerce 2.8% 543.5 3.0% CEVA Logistics U.S. Inc. Third Party Logistics 2.8% 648.8 3.6% Amazon.com E-Commerce 2.7% 572.0 3.2% Honeywell International Inc. Consumer Products 2.7% 754.0 4.2% Total 36.8% 8,146.6 45.2%

High-Quality Tenant Base

8

1. As at June 30, 2018 2. Comprised of two leases with Keystone Automotive Operations, Inc. and Keystone Automotive Industries, Inc.; both wholly-owned subsidiaries of LKQ Corporation.

slide-9
SLIDE 9

Well-Positioned Balance Sheet

1

3.1 years Weighted average mortgage term to maturity

2

3.8% Weighted average effective interest rate

2

43.4% Total debt to GBV 3.1x Fixed charge coverage ratio 7.1x Debt to adjusted EBITDA $76mm Credit facility availability

9

1. As at June 30, 2018 2. Excludes the REIT’s credit facility

slide-10
SLIDE 10

10

Staggered Debt Maturity

1

1. As at June 30, 2018 and excludes the REIT’s 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

32.1 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

slide-11
SLIDE 11

3.8 years

Weighted average remaining lease term

Staggered Lease Maturity Schedule

11

1. As at June 30, 2018 2. Includes one month-to-month lease

92 20 14 27 23 14 6 13 Number of Leases Expiring

6.0% 11.9% 16.5% 16.9% 19.7% 12.8% 4.9% 11.3%

2018 2019 2020 2021 2022 2023 2024 2025+

Lease Expiration (% of GLA) by Year ¹

slide-12
SLIDE 12

Upcoming Lease Renewals

1

2018 2018

As at 6/30/2017, the REIT had 4 leases totaling 2.1% of the portfolio remaining to be renewed.

12

1. As at June 30, 2018 2. Includes one month-to-month lease

2018

9 leases

2 totaling 6.0% of the portfolio expiring in 2018, including:

  • The Clorox Company: 364,000 sq. ft.
  • KGP Logistics: 311,100 sq. ft.
  • UPS: 300,000 sq. ft.

2019

20 leases totaling 11.9% of the portfolio expiring in 2019, including:

  • CEVA Logistics U.S. Inc: 648,750 sq. ft.
  • Amazon.com: 572,000 sq. ft.

Significant lease renewals completed as at June 30, 2018:

  • Honeywell: 754,000 sq. ft.
  • 3-year renewal with initial base rent increase of 8.0% and annual base rent increases of 2% thereafter
  • XPO Logistics: 194,660 sq. ft.
  • 3.8-year renewed with initial base rent increase of 10.5% and annual base rent increases of 2% thereafter
slide-13
SLIDE 13

Track Record of Growing Unitholder Value

1

13

  • 1. Unit price growth from IPO – June 30, 2018

195.5 252.5 154.0 129.6 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 Jun-18 WIR (US $) WIR (CAD$) S &P/ TS X Composite Index (CAD$) S &P/ TS X Capped REIT Index (CAD$)

slide-14
SLIDE 14

│ 14

Recently announced transactions include:

  • Full internalization of REIT management (the “Internalization”);
  • Acquisition of the private capital business of WPT Capital Advisors, LLC (the “Acquisition”, collectively with the Internalization, the

(“Transaction”)); and

  • New U.S. industrial venture with the Canada Pension Plan Investment Board (“CPPIB”) and Alberta Investment Management Corporation

(“AIMCo”)

Additional capital resources through a private capital business with established AUM/institutional partnerships

Immediate access to a pipeline of 4.0M sq. ft. of modern industrial assets across the U.S., including high-barrier markets

Fully-internalized management platform brought into the REIT under a single, transparent and simplified structure

Transaction Highlights New venture with CPPIB/AIMCo targeting up to US$1.0B of combined equity, creating a proprietary acquisition pipeline

Enhanced and diversified cash flows through management and incentive fees on third-party capital

Increased long-term alignment between REIT management, public unitholders, and private capital partners

Management Internalization and Private Capital Business

slide-15
SLIDE 15

Expanded Pipeline and Footprint

  • Long-term, strategic partnership with premier global

investors CPPIB and AIMCo

  • Access to proprietary acquisition pipeline of high-quality

properties in strategic markets, including high-barrier coastal markets

  • Accelerates scale and geographic diversification of the

REIT’s portfolio Increased Alignment of Interests

  • A significant portion of the consideration for the Acquisition

paid in equity (with long-term transfer restrictions) increasing management’s effective ownership in the REIT

  • Go-forward compensation arrangements designed to

promote long-term alignment between management, public unitholders and private capital partners Creates Value Through Growing Private Capital Business

  • Among a select group of public industrial REITs with a

substantial embedded private capital business

  • Diversifies equity funding sources allowing the REIT to

deploy financial resources more efficiently and pursue larger portfolio transactions with varied risk/return profiles

Benefits of the Transaction

The Transaction creates a fully-integrated and aligned platform with enhanced capital resources, primed for growth

Reflects Investor Preference for Internalized REIT Structures

  • Access to a deeper universe of global institutional investors
  • Mitigates potential conflicts of interest
  • Lays foundation for earnings multiple expansion

Fully-Internalized Management Platform Under a Single, Transparent and Simplified Structure

  • 20 professionals with expertise in all facets of industrial

real estate

  • Management has an average of 20 years of industry

experience and an average firm tenure of 12 years

  • Internal capabilities to invest multiple sources of capital

across the entire risk/return spectrum

  • Management team committed to five-year employment and

non-compete agreements providing continuity of

  • perations and minimizing business interruption
  • REIT retains a seasoned and aligned management team in

a competitive market for industrial executives

Benefits of the Acquisition Benefits of the Internalization ✔ ✔ ✔ ✔ ✔

slide-16
SLIDE 16

Private Capital AUM/Pipeline

16

slide-17
SLIDE 17

17

Recent Acquisitions

270 Bridgepoint Drive 13201 Wilfred Lane

slide-18
SLIDE 18

18

270 Bridgepoint Drive

Location:

  • St. Paul, MN

MSA: Minneapolis/St. Paul Acquired: June 2018 Purchase Price: $8.3mm Square Feet: 124,800 Land Size(Acres): 10.72 Expandable Area: 75,000sf Clear Height: 24’ Occupancy: 100%

slide-19
SLIDE 19

19

13201 Wilfred Lane

Location: Rogers, MN MSA: Minneapolis/St. Paul Acquired: June 2018 Purchase Price: $20.4mm Square Feet: 335,400 Land Size(Acres): 24.34 Expandable Area: 141,000sf Clear Height: 32’ Occupancy: 100%

slide-20
SLIDE 20

Industrial Market Update

slide-21
SLIDE 21

Compelling U.S. Industrial Market Fundamentals

Source: Cushman & Wakefield Research – Q2 2018

21

slide-22
SLIDE 22

Source: CBRE Q2 2018 US Industrial & Logistics Figures

U.S. Industrial New Construction Deliveries

22

slide-23
SLIDE 23

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 Q2 2018 U.S. Industrial Marketbeat report

Overall Vacancy 5.3% 5.0% Net Absorption 61.2mm 64.1mm Under Construction 232.9mm 267.2mm Weighted Asking Rent (NNN) $5.70 $6.11

Vacancy Drops to Record Low Despite Robust Development

U.S. Research Report | Q1 2018 | Industrial Market Outlook | Colliers International

Tenant Demand Continues to Drive Rent Growth

23

“The national industrial vacancy remained at an all-time low at 5.1% for the second consecutive quarter despite nearly 53 million square feet of new supply completing in the first quarter of 2018.”

Source: JLL Q2 2018 Industrial First Look Source: CBRE 2018 U.S. Real Estate Market Outlook

Q2 17 Q2 18

slide-24
SLIDE 24

E-Commerce Growth Potential

24 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

  • The continued surge in online sales and the need to

get products to consumers quickly while minimizing supply chain costs are forcing retailers and wholesalers into more facilities and rapidly changing supply chain strategy. These changes will be a major contributor to industrial real estate demand for the foreseeable future.

  • Fourth quarter e-commerce sales increased ~16.4%

from the same period in 2017 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, Q1 2018) (Source: Q1 2018 US Census Bureau’s ‘Quarterly Retail E-Commerce Sales)

slide-25
SLIDE 25

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

25

slide-26
SLIDE 26

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, Former CEO of WPT Capital Advisors, LLC & Welsh Property

Trust, LLC

  • 30 Years of Industrial Experience

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

26

slide-27
SLIDE 27

Scott Frederiksen

Chief Executive Officer P: 612-800-8501 E: stf@wptreit.com