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WPT to buy $730M industrial portfolio from PIRET affiliate

WPT Industrial REIT (WIR-U-T) says it will spend US$730 million to acquire a portfolio of 26 U.S....

LOGO: WPT Industrial REIT.WPT Industrial REIT (WIR-U-T) says it will spend US$730 million to acquire a portfolio of 26 U.S. distribution and logistics properties totaling approximately nine million square feet of gross leasable area, as well as an 85-acre parcel of land.

The portfolio is currently owned by an affiliate of Pure Industrial Real Estate Trust (PIRET).

It contains a mix of single- and multi-tenant properties in eight U.S. states and expands WPT’s presence in the high-barrier coastal markets of New Jersey, California and Florida, and other key U.S. distribution markets.

The 85 acres of developable land is in Dallas and could accommodate up to 1.4 million additional square feet of additional GLA.

“This is a compelling transaction for the REIT – we add meaningful scale, high-barrier market concentration, functional assets, quality tenancies and future value enhancement opportunities – all while delivering immediate accretion to the REIT’s FFO and AFFO per unit,” said WPT’s CEO Scott Frederiksen in a release.

“Our ability to source a large, accretive off-market transaction in the highly competitive U.S. industrial market underscores the depth of experience, market relationships and reputation for execution and follow-through of our team.”

Expand WPT’s assets by about 40 per cent

The acquisition, upon closing, would increase WPT’s portfolio by about 40 per cent in both asset value (to about US$2.3 billion) and in gross leasable area (to 32 million square feet).

In its release announcing the transaction, WPT says the acquisition increases its ability to leverage its fully internalized management platform.

The portfolio consists of “institutional quality assets” with an average age of approximately 14 years and average clear height of 31 feet.

Approximately 67 per cent of the base rent of the facilities is derived from investment-grade tenants, with limited overlap to the REIT’s existing tenant roster. The portfolio will have a weighted average lease term of 4.6 years as of March 1, 2020.

Several of the sites have the potential for future building expansions.

“We expect the acquisition and related equity offerings, coupled with the recent Canadian-dollar listing of the REIT’s units, will also meaningfully improve our public float and trading liquidity, moving the REIT closer to inclusion in relevant market indices” Frederiksen said in the release.

The price represents a going-in capitalization rate of approximately 5.5 per cent and a stabilized capitalization rate of approximately 5.9 per cent.

The acquisition will be financed with the proceeds from the issuance of approximately US$240 million of WPT subscription receipts  by way of a US$203 million bought-deal, offering as well as a US$37 million private placement of subscription receipts to Alberta Investment Management Corporation (AIMCo), the REIT’s largest unitholder.

The balance of the financing will come from the assumption of approximately US$59 million of mortgage debt and new debt financing.

Upon closing of the acquisition, which is expected to occur on about March 31, 2020, the REIT’s debt-to-gross book value is expected to increase to approximately 51 per cent in the short term.

The portfolio includes properties in the following states:

State No. of Properties Avg. Age Rentable Area % of Total Avg. Occupancy(1) WALT
(#) (years) (000s sf) (%) (%) (years)
Texas 7 6 3,117 35% 94.1 % 4.8
Georgia 6 18 2,536 28% 88.2 % 4.9
North Carolina 6 20 2,061 23% 100.0 % 4.2
New Jersey 2 14 424 5% 100.0 % 5.4
Illinois 2 19 337 4% 100.0 % 4.6
California 1 13 211 2% 100.0 % 2.3
Louisiana 1 6 175 2% 100.0 % 5.2
Florida 1 13 119 1% 100.0 % 4.4
Inv. Properties 26 14 8,981 100%   94.6 % 4.6
Land 1 (85 acres)
Total Portfolio 27

About WPT Industrial REIT

WPT Industrial Real Estate Investment Trust is an unincorporated, open-ended REIT established under the laws of the Province of Ontario.

It acquires, develops, manages and owns industrial properties located in the United States, with a particular focus on warehouse and distribution industrial real estate.

As at Jan. 31, 2020, WPT Industrial, LP indirectly owned a portfolio of properties across 18 states in the United States consisting of approximately 23.1 million square feet of gross leasable area, comprised of 76 industrial properties.

The REIT pays monthly cash distributions, currently at US$0.0633 per unit, or approximately US$0.76 per unit on an annualized basis.

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