TORONTO, Aug. 05, 2020 (GLOBE NEWSWIRE) -- WPT Industrial Real Estate Investment Trust (the "REIT") (TSX: WIR.U; WIR.UN; OTCQX: WPTIF) announced today its results for the three and six months ended June 30, 2020. All dollar amounts are stated in U.S. funds.
Highlights for the three months ended June 30, 2020:
"Revenue, NOI and FFO all grew meaningfully during the quarter as a result of the REIT's recent portfolio acquisition. Operationally, we saw positive momentum on the leasing front, increasing occupancy to 97.4%, while adding lease term and generating favorable leasing spreads on renewals. And our rent collection rate of nearly 100% during the quarter continues to underscore the quality of the REIT's tenant base," commented Scott Frederiksen, Chief Executive Officer.
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 June 30,||Six months ended June 30,|
|Investment properties revenue||$||44,836||$||28,714||$||77,317||$||53,912|
|Management fee revenue||$||96||$||358||$||369||$||849|
|Net income and comprehensive income||$||11,078||$||40,670||$||97,452||$||50,277|
|Net income and comprehensive income per Unit (basic) (2)(3)||$||0.130||$||0.690||$||1.147||$||0.899|
|Net income and comprehensive income per Unit (diluted) (2)(4)||$||0.127||$||0.670||$||1.119||$||0.872|
|FFO per Unit (diluted) (1)(2)(4)||$||0.200||$||0.213||$||0.384||$||0.392|
|AFFO (1) (5)||$||13,327||$||9,759||$||23,611||$||16,457|
|AFFO per Unit (diluted) (1)(2)(4)||$||0.153||$||0.161||$||0.291||$||0.285|
|Cash flows from operations||$||34,008||$||18,326||$||50,398||$||33,032|
|Adjusted Cash Flow from Operations ("ACFO") (1)||$||15,398||$||11,471||$||29,416||$||20,956|
|Book value per Unit (1)||$||12.99||$||12.88||$||12.99||$||12.88|
|Distributions per Unit (2)(5)||$||0.190||$||0.190||$||0.380||$||0.380|
|Distributions declared (3)(5)||$||16,305||$||11,344||$||31,392||$||22,032|
|ACFO payout ratio (1)(5)||105.9||%||98.9||%||106.7||%||105.1||%|
|Weighted average number of Units (basic) (2)(3)||84,978||58,977||79,060||55,907|
|Weighted average number of Units (diluted) (2)(4)||87,078||60,729||81,017||57,663|
|As at||June 30, 2020||December 31, 2019|
|Number of investment properties||100||74|
|Average remaining lease term (years)||4.6||4.9|
|Fair value of investment properties||$||2,329,795||$||1,573,077|
|Weighted average effective interest rate (6)||3.0||%||3.8||%|
|Variable interest rate debt as percentage of total debt (7)||13.7||%||24.7||%|
|Debt-to-gross book value (1)||50.7||%||43.7||%|
|Interest coverage ratio (1)||3.0||x||3.1||x|
|Fixed charge coverage ratio (1)||2.6||x||2.7||x|
|Debt to Adjusted EBITDA (1)||8.8||x||8.2||x|
|(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, capitalization rate 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 and Subscription Receipts (defined herein).|
|(6) Includes mortgages payable, 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 six months ended June 30, 2020, investment properties revenue increased $16.1 million or 56.1% and $23.4 million or 43.4%, respectively, compared to the same period last year. The increase was primarily due to the contribution from 2019 and 2020 acquisitions and an increase in base rent in existing properties. Net income and comprehensive income for the six months ended June 30, 2020 was $97.5 million compared to $50.3 million in the same period last year. Net income and comprehensive income for the three months ended June 30, 2020 was $11.1 million compared to $40.7 million in the same period last year. The decrease in net income for the quarter compared to last year was primarily due to lower fair value adjustments to investment properties and non-cash fair value adjustments to Class B Units. The increase in net income for the six months ended June 30, 2020 was primarily due to a non-cash fair value adjustment of $103.3 million in the first quarter related to the exchange of Subscription Receipts for REIT Units, partially offset by lower fair value adjustments of $37.4 million compared to the same period last year.
NOI for the three and six months ended June 30, 2020 was up 51.2% and 40.9%, respectively, compared to the same period last year. Same properties NOI increased 0.1% and 0.8% for the three and six months ended June 30, 2020, respectively, primarily due to increases in contractual base rent partially offset by reductions in occupancy in properties held in both periods.
FFO for the three and six months ended June 30, 2020 was up 34.2% and 37.9%, respectively, compared to the same period last year. AFFO for the three and six months ended June 30, 2020 was up 36.6% and 43.5%, respectively, compared to the same period last year. Both FFO and AFFO were mainly impacted by increased properties revenue due to acquisitions, increases in base rent, and a reduction in general and administrative expenses compared to the prior period. FFO per Unit for the three and six months ended June 30, 2020 was down ($0.013) per Unit or (6.1%) and ($0.008) per Unit or (2.0%), respectively. AFFO per Unit for the three and six months ended June 30, 2020 was down ($0.008) per Unit or (5.0%) and up $0.006 or 2.1%, respectively, compared to the same period last year. FFO per Unit and AFFO per Unit were also impacted by a 43.4% and 40.5% increase in the weighted average number of Units outstanding compared to the same three and six month period last year. Excluding a $0.031 per Unit impact from $2.7 million in costs incurred in connection with debt prepayment during the quarter, FFO and AFFO per Unit were $0.231 (up 8.5% from the same period last year) and $0.184 (up 14.3% from the same period last year), respectively, for the three months ended June 30, 2020.
Cash flow from operations and ACFO were up 86.5% and 34.2%, respectively, for the quarter and 52.6% and 40.4%, respectively, year-to-date compared to the same periods last year. The REIT's ACFO payout ratio for the three and six months ended June 30, 2020 was 105.9% and 106.7%. The ACFO payout ratio for the six months was directly affected by the timing of equity financings in October 2019 and February 2020 relative to the timing of deployment of such proceeds. Cash flow from operations and ACFO, though both negatively impacted in the quarter by debt prepayment costs, were still higher compared to the same period last year, primarily due to increased NOI from 2019 and 2020 acquisition activity and a decrease in free rent. Excluding the $2.7 million in debt prepayment costs, the ACFO payout ratio for the three and six months ended June 30, 2020 was 89.9% and 97.6%, respectively.
The REIT had 539,000 square feet of new leases and 1,122,000 square feet of lease renewals commence in the second quarter. Lease renewals commencing in the quarter had a weighted average cash re-leasing spread and straight-line rent re-leasing spread of 8.3% and 8.2%, respectively. New lease renewals signed in the second quarter had a weighted average cash re-leasing spread and straight-line rent re-leasing spread of 11.3% and 6.6%, respectively.
As at June 30, 2020, the REIT's occupancy had increased to 97.4%.
STRONG FINANCIAL & LIQUIDITY POSITION
As at June 30, 2020, the REIT's debt-to-gross-book-value ratio was 50.7% with interest and fixed charge coverage ratios of 3.0 and 2.6 times, respectively, and a debt-to-Adjusted EBITDA ratio of 8.8 times. The weighted average effective interest rate on outstanding debt was 3.0% at June 30, 2020 with a weighted average term to maturity on the REIT's mortgages payable and total debt of 3.7 years and 3.9 years, respectively. Weighted average remaining lease term was 4.6 years.
As at June 30, 2020, the REIT had approximately $200.7 million available to be drawn on the Credit Facility and cash on hand of $20.2 million, for total liquidity of approximately $220.9 million. The REIT has no mortgages maturing in 2020 and only one mortgage loan, with a balance of $6.4 million, maturing in 2021.
The REIT continues to review all planned discretionary capital expenditures and, where prudent, defer such expenditures to the second half of 2020 or 2021. As the U.S. industrial investment sales market regains momentum, the REIT expects to ramp-up capital recycling in the remainder of 2020 and throughout 2021 in an effort to further strengthen the REIT's balance sheet and create additional flexibility to invest in the REIT's growing private capital development pipeline.
The REIT generated $0.1 and $0.4 million of management fee revenue during the three and six months ended June 30, 2020, consisting of recurring management fees.
The REIT has eight development projects currently underway in its private capital platform, comprised of approximately 3.9 million square feet of modern distribution and logistics real estate at various stages of construction and lease-up. The REIT expects these eight projects to include approximately $164 million of total contributed equity, with $152 million funded by third-party partners. In addition, the REIT has approximately two million square feet of development projects in its private capital pipeline in various stages of due diligence.
During the quarter, the REIT also entered into a new partnership with the Investment Management Corporation of Ontario (IMCO) to provide additional joint venture capital for the REIT's growing industrial value-add and development pipeline. The REIT expects to invest alongside IMCO and other private capital partners in future value-add and development investments in select U.S. distribution and logistics markets.
"We are pleased to have the opportunity to partner with another premier global real estate investor and further diversify the REIT's private capital resources," said Matt Cimino, Chief Operating Officer of the REIT. "This new partnership will allow us to expand our deal pipeline and further capitalize on growth and momentum in the U.S. industrial sector."
On May 21, 2020, the REIT acquired a land parcel located in Nashville, Tennessee, for a purchase price of $6.5 million (exclusive of closing and transaction costs). The REIT is in the process of contributing the Nashville property into a development joint venture with one or more private capital partners to build approximately 726,000 square feet of modern distribution and logistics space on the site.
On June 26, 2020, the REIT repaid six mortgages payable with an aggregate remaining principal balance of $97.6 million using funds from the unsecured revolving credit facility and cash on hand. The loans repaid had maturities in 2020 and 2021 and carried fixed interest rates ranging from 3.62% to 5.80% with a weighted average of 4.1%. As a result of the repayment of these mortgages, the REIT incurred prepayment costs of $2.7 million which are included in finance costs for the three and six months ended June 30, 2020. In conjunction with the repayments, the REIT added the $250.0 million of properties, previously encumbered by the secured mortgages, to the REIT's unencumbered asset pool. These latest additions to the REIT's unencumbered asset pool increased Credit Facility availability by approximately $50 million and reduced the REIT's borrowing costs to 1.8% on the prepaid principal balance.
On July 31, 2020, the REIT acquired a land parcel located in Mansfield, New Jersey through a development joint venture for a purchase price of $39.0 million (exclusive of closing and transaction costs). The REIT intends to develop approximately 772,000 square feet of modern distribution and logistics space on the site and commit 10% of the required equity for the project, with the remaining 90% of required project equity funded by the REIT's private capital partners.
As at August 5, 2020, the REIT has received approximately 99% and 83% of contractual rents for July and August, respectively. Collections in July and August are generally in-line with collections during the second quarter at similar points in time. While the REIT did not agree to any rent deferral arrangements during the second quarter, the REIT currently expects to agree to a short-term deferral arrangement for previously uncollected rent from one tenant totaling approximately $70,000, which represents approximately 0.04% of annualized portfolio gross rent. All deferred rent is expected to be collected by January 1, 2021. Pending further clarity on the full effect of the COVID-19 pandemic on certain portions of the REIT's tenant base, including the duration or re-implementation of government stay-at-home orders, the timing and quantum of any future rent deferrals remains uncertain.
Further disclosure surrounding the impact of COVID-19 are included in the REIT's management discussion and analysis for the three and six months ended June 30, 2020 under the REIT's profile on SEDAR at www.sedar.com.
INVESTOR CONFERENCE CALL
A conference call will be hosted by the REIT's management team on Thursday, August 6, 2020 at 9:30 am Eastern Time. 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 10142466#. 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, manages and owns industrial properties located in the United States, with a particular focus on warehouse and distribution properties. WPT Industrial, LP (the REIT's operating subsidiary) indirectly owns a portfolio of properties across 20 states in the United States consisting of approximately 31.8 million square feet of GLA, comprised of 100 industrial properties. 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 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 (i) expected growth opportunities and the availability of acquisition opportunities from its private capital pipeline, (ii) expectations regarding debt refinancing, capital recycling and associated impacts on the REIT's liquidity position and (iii) the impact on the REIT of the occurrence of and response to the coronavirus disease 2019 (COVID-2019) pandemic. 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 complete due diligence and entitlements on private capital development pipeline opportunities, the REIT's ability to complete development and investment transactions, the REIT's ability to undertake capital recycling through asset sales, 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, continued positive net absorption and declining vacancy rates in the markets in which the REIT's properties are located, and anticipated and potential adverse impacts resulting from the COVID-19 pandemic.
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 most recently filed annual information form and management's discussion and analysis, each of which are 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.
The COVID-19 pandemic has cast additional uncertainty on the REIT's prior expectations, future outlook, anticipated events and projections. There can be no assurance that they will continue to be valid. Given the rapid pace of change with respect to the impact of the COVID-19 pandemic, it is premature to make further assumptions about these matters. The duration, extent and severity of the impact the COVID-19 pandemic, including measures to prevent its spread, will have on the REIT's business is highly uncertain and impossible to accurately predict at this time.
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