WPT Industrial Real Estate Investment Trust (WIR-U-T), Canada Pension Plan Investment Board and Alberta Investment Management Corporation (AIMC0) have formed a joint venture to acquire up to $1 billion in industrial properties in strategic U.S. logistics markets through a “value-add and development investment strategy”.
“We are thrilled to partner with two premier global real estate investors that share our long-term vision for the industrial sector,” said Scott Frederiksen, the CEO of WPT, in a release announcing the partnership. “We appreciate the continued confidence and support of AIMCo and look forward to building our relationship with CPPIB through the growth and success of the joint venture.”
The move also triggered a reorganization at WPT, which will internalize management and acquire WPT Capital Advisors LLC. WPTCA – a joint venture between senior management of the firm and affiliates of AIMCo – served as the external manager of the REIT and as manager for private capital investments on behalf of select institutional investors.
“As the REIT’s largest unitholder, we are pleased to see the company take the next step in its evolution with a full internalization of management. AIMCo also looks forward to expanding our relationship with WPT through a new U.S. industrial venture alongside CPPIB,” said Micheal Dal Bello, senior vice-president, real estate of AIMCo, in a prepared statement.
“The venture capitalizes on the scale and synergies of our respective investment programs and creates a long-term investment platform to generate the returns required of our clients and stakeholders.”
Internalizing management functions creates a platform with experience in all facets of industrial real estate under a single, transparent and simplified organizational structure, a separate WPT release says. It also provides access to additional capital resources through ownership and control of a private capital business with established assets under management and institutional partnership.
Other benefits include immediate access to a pipeline of four million square feet of industrial assets across the U.S., including high barrier markets, as well as enhanced and diversified cash flows through management and incentive fees on third-party capital.
Details of the joint venture
“The U.S. industrial sector provides an attractive investment opportunity, driven by trends such as growth in e-commerce, as well as the evolution and modernization of global supply-chains,” said Hilary Spann, managing director, head of Americas, real estate investments for CPPIB, in the release.
“We are pleased to be partnering with WPT and AIMCo to expand our presence in this sector.”
CPPIB, AIMCo and WPT will invest in a diversified mix of strategic U.S. logistics markets, primarily in national hubs such as Atlanta, Chicago and Dallas, as well as in global gateway markets such as New Jersey, Los Angeles and Seattle.
WPT provided additional details about the joint venture in its own release, noting acquired properties are expected to be held for two distinct periods: a value-add or development period and a stabilized (long-term hold) period.
The initial value-add period will typically be two to three years under the 45-45-10 per cent joint venture structure. After stabilization, venture property ownerships may be rebalanced for a long-term hold, with the REIT having a right of first opportunity to acquire additional interests at that time.
Beginning in late 2018 or early 2019, approximately two million square feet of properties managed by WPTCA are expected to be available for direct, off-market acquisition by WPT through the exercise of its right of first opportunity.
WPT will manage the properties acquired by the joint venture – enhancing its returns via management and incentive fees from CPPIB and AIMCo.
About WPT Industrial REIT
WPT Industrial REIT is a Toronto-based trust which owns and operate an institutional-quality portfolio of primarily industrial properties located in the United States, with a particular focus on warehouse and distribution properties.
As of March 31, 2018, WPT Industrial, LP (the REIT’s operating subsidiary) indirectly owns a portfolio of properties consisting of approximately 17.6 million square feet of gross leasable area, comprised of 52 industrial properties and one office property located in 15 states within the United States.
CPPIB is an investment management organization that invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 20 million contributors and beneficiaries. In order to build a diversified portfolio of assets, CPPIB invests in public equities, private equities, real estate, infrastructure and fixed income instruments.
Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, São Paulo and Sydney, CPPIB is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At March 31, 2018, the CPP Fund totalled $356.1 billion.
AIMCo is one of Canada’s largest and most diversified institutional investment managers with more than $107.1 billion of assets under management, as at March 31, 2018. AIMCo operates at arms-length from the Government of Alberta and invests globally on behalf of 32 pension, endowment and government funds in the Province of Alberta.
AIMCo’s $13.9-billion real estate portfolio includes long term, direct investments in office, retail, industrial and multi-unit residential properties located in Canada’s major cities, and non-Canadian properties in markets with long-term growth characteristics.