Blackstone REIT has an agreement to acquire Toronto-based WPT Industrial Real Estate Investment Trust (WIR.U-T) in an all-cash transaction which values WPT at $3.1 billion (all figures US), including the assumption of debt, the companies announced Monday morning.

The proposed acquisition would result in unitholders receiving $22 per WPT unit, a 17 per cent premium to the closing price on August 6. It is also a 19.5 per cent premium to WPT’s 30-day volume-weighted average price on the TSX and a 32.1 per cent premium to the research consensus net asset value per unit estimate for WPT of US$16.66 per unit.

“We are very proud to enter into a transaction that delivers unitholders a compelling premium to net asset value per unit and our all-time high unit price. Blackstone’s interest in acquiring and investing in the WPT platform is a testament to the quality of our portfolio and capabilities of our team,” said Scott Frederiksen, chief executive officer of WPT, in the release.

Logistics attractive to Blackstone

WPT Industrial Real Estate Investment Trust acquires, develops, manages and owns a portfolio of distribution and logistics properties located in the United States. WPT Industrial, LP (WPT’s operating subsidiary) indirectly owns or manages assets across 19 states, consisting of approximately 37.5 million square feet of GLA and 109 properties.

“Blackstone is one of the world’s most active investors in logistics real estate and we are very pleased to enter into a transaction with such a highly reputable counter-party that delivers immediate value for WPT unitholders,” added Louie DiNunzio, chair of the WPT special committee of independent board members which has reviewed the offer.

The special committee members have given the proposal their unanimous support.

The transaction is expected to close in the fourth quarter of 2021, pending the support of shareholders and other required approvals.

“Logistics remains one of our highest conviction themes as the sector continues to benefit from strong tailwinds driven by e-commerce,” said David Levine, senior managing director at Blackstone, in the announcement. “We look forward to expanding our logistics presence across key U.S. markets with the acquisition of this high-quality portfolio that WPT has built.”

WPT is scheduled to release financial results for its Q2 2021 on August 11, 2021. In light of this announcement however, the company will not host a conference call / webcast to discuss financial results and operations.

Transaction details

As part of the transaction, WPT has agreed distributions for August, September, October and the first half of November 2021 will be suspended.  If the transaction has not closed by November 15, 2021, WPT intends to reinstate the distribution.

The arrangement does not preclude WPT’s board from considering a superior proposal from another entity, though it does contain a “right to match” for BREIT, and a $73.8 million termination fee to BREIT should that occur. It also contains a $236.1 million “break fee” payable to WPT if BREIT decides to terminate the arrangement agreement.

WPT expects to hold a special meeting of unitholders to consider the transaction in early October. WPT will mail a management information circular and related documents to its unitholders.

Morgan Stanley & Co. LLC and Desjardins Capital Markets are financial advisors to WPT and Blair Franklin Capital Partners Inc. provided the Special Committee with a fairness opinion.

Blake, Cassels & Graydon LLP and Vinson & Elkins LLP are acting as legal counsel to WPT in connection with the Transaction and Wildeboer Dellece is acting as independent legal counsel to the special committee.

Eastdil Secured is acting as financial advisor to BREIT and Simpson Thacher & Bartlett LLP and Goodmans LLP are acting as legal counsel to BREIT.

Other recent transactions involving WPT, Blackstone

The transaction will repatriate some U.S. real estate which WPT had acquired from Blackstone affiliate Pure Industrial in February of 2020. At that time, WPT said it was paying US$730 million to acquire a portfolio of 26 distribution and logistics properties, totalling approximately nine million square feet of gross leasable area, as well as an 85-acre parcel of land.

The portfolio contained a mix of single- and multi-tenant properties in eight U.S. states and significantly expanded WPT’s presence in the coastal markets of New Jersey, California and Florida and other key U.S. distribution centres. The 85 acres of developable land is in Dallas and could accommodate up to 1.4 million additional square feet of additional GLA.

In yet another interesting twist, that portfolio was acquired from Pure Industrial Real Estate Trust, which has since been renamed Pure Industrial. Pure itself, which is also based in Toronto, had been acquired by Blackstone Property Partners and Canadian investment giant Ivanhoé Cambridge in a $3.8 billion transaction in 2018.

Pure now focuses on the Canadian industrial market, with its current portfolio concentrated mainly in the Toronto, Montreal and Vancouver markets. The entity currently owns and operates over 25 million square feet of GLA.

About Blackstone Real Estate Income Trust

Blackstone REIT is a New York-based, institutional-quality real estate investment platform. BREIT invests primarily in stabilized, income-generating U.S. commercial real estate across key property types and to a lesser extent in real estate debt investments.

BREIT is externally managed by a subsidiary of Blackstone, a global leader in real estate investing. Blackstone’s real estate business was founded in 1991 and has approximately $208 billion in investor capital under management.