WPT Industrial REIT Announces First Quarter Results
WPT Industrial Real Estate Investment Trust (the "REIT") (TSX: WIR.U - OTCQX: WPTIF) announced today its results for the three months ended March 31, 2019. All dollar amounts are stated in US funds.
Highlights for the three months ended March 31, 2019, including events subsequent to the end of the quarter:
"It has been a productive start to the year with the completion of a successful equity raise, expansion of our credit facility and acquisition of the Infill Logistics Portfolio. We also continue to see consistent NOI growth from our 2018 acquisitions and solid same properties NOI growth," commented Scott Frederiksen, Chief Executive Officer. "Putting aside the short-term earnings impact from non-recurring items and the lag between the timing of our recent equity raise and capital deployment, the portfolio continues to perform well, and we believe the REIT is positioned to continue growing in 2019 and beyond."
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)
As at and for the quarter ended March 31, 2019 2018 Operating Results: Investment properties revenue $ 25,198 $ 22,538 Management fee revenue $ 419 $ - NOI (1) $ 18,141 $ 16,402 Net income and comprehensive income $ 9,607 $ 7,758 Net income and comprehensive income per Unit (basic) (2) (3) $ 0.182 $ 0.161 Net income and comprehensive income per Unit (diluted) (2) (4) $ 0.176 $ 0.158 FFO (1) $ 9,614 $ 11,128 FFO per Unit (diluted) (1) (2) (4) $ 0.176 $ 0.227 AFFO (1) (5) $ 6,698 $ 9,481 AFFO per Unit (diluted) (1) (2) (4) $ 0.123 $ 0.193 Cash flows from operations $ 14,796 $ 15,498 ACFO (1) $ 9,486 $ 10,037 Book value per Unit (1) $ 12.40 $ 11.89 Distributions: Distributions per Unit (2) (5) $ 0.190 $ 0.190 Distributions declared (3) (5) $ 10,688 $ 9,145 ACFO payout ratio (1) (5) 112.7% 91.1% Weighted average number of Units (basic) (2) (3) 52,803 48,158 Weighted average number of Units (diluted) (2) (4) 54,589 49,021
As at March 31, 2019 December 31, 2018 Operational Information: Number of investment properties 57 57 GLA 18,850,627 18,850,627 Occupancy 99.1% 99.3% Average remaining lease term (years) 4.5 4.7 Fair value of investment properties $ 1,126,697 $ 1,117,672 Ratios: Weighted average effective interest rate (6) 3.9% 3.9% Variable interest rate debt as percentage of total debt (7) 0.0% 9.8% Debt-to-gross book value (1) 37.1% 46.5% Interest coverage ratio (1) 2.9x 3.5x Fixed charge coverage ratio (1) 2.5x 2.9x Debt to Adjusted EBITDA (1) 7.5x 7.6x (1) NOI, FFO, AFFO, ACFO, FFO per Unit (diluted), AFFO per Unit (diluted), Book value per Unit and ACFO payout ratio are key measures of performance used by real estate operating companies, however, they are not defined by 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, DTUs, and 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 REIT Units and Class B Units. (6) Includes mortgages payable, the construction loan, the Revolving Facility, mark-to-market adjustments and financing costs. (7) Includes amounts outstanding under the Credit Facility.
SOLID OPERATING PERFORMANCE
For the three months ended March 31, 2019, investment properties revenue was $25.2 million compared to $22.5 million in the same period last year. The increase in revenue is primarily due to the contribution from 2018 acquisitions, an increase in base rent in existing properties and higher recoveries of operating expenses. Net income and comprehensive income for the three months ended March 31, 2019 was $9.6 million ($0.176 per Unit) compared to $7.8 million ($0.158 per Unit) in the same period last year. The increase in net income is mainly due to fair value adjustments.
NOI for the three months ended March 31, 2019 was $18.1 million compared to $16.4 million in the same period last year. Same properties NOI increased 3.4% for the three months ended March 31, 2019 compared to the same period last year, primarily due to increases in contractual base rent, higher recoveries of operating expenses, and a slight increase in occupancy.
Adjusted Funds from Operations ("AFFO") for the three months ended March 31, 2019 was $6.7 million ($0.123 per Unit) compared to $9.5 million ($0.193 per Unit) in the same period last year. AFFO was mainly impacted by one-time severance costs of $1.5 million ($0.027 per Unit), free rent of $1.3 million ($0.024 per Unit) incurred during the three months ended March 31, 2019 and from an 11.4% increase in the weighted average number of Units outstanding.
Cash flow from operations and adjusted cash flow from operations ("ACFO") were $14.8 million and $9.5 million, respectively, compared to $15.5 million and $10.0 million in the same period last year. The REIT's ACFO payout ratio for the three months ended March 31, 2019 was 112.7% compared to 91.1% in the same period last year. Cash flow from operations and ACFO were down and ACFO payout ratio was up mainly due to free rent of $1.3 million. ACFO Payout ratio was further impacted by the timing difference between the additional distributions from the REIT's February equity raise and the closing of the Infill Logistics Portfolio.
STRONG FINANCIAL & LIQUIDITY POSITION
As at March 31, 2019, the REIT's debt-to-gross-book-value ratio was 37.1% with interest and fixed charge coverage ratios of 2.9 and 2.5 times, respectively, and a 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) ratio of 7.5 times. The weighted average effective interest rate on outstanding debt was 3.9% at March 31, 2019 with a weighted average term to maturity on the REIT's mortgages payable and total debt of 2.8 years and 3.1 years, respectively, with a weighted average remaining lease term of 4.5 years.
On March 26, 2019, the REIT amended and restated the Credit Facility, thereby increasing capacity from $300,000 to $450,000 (subject to requisite unencumbered assets). The increase was comprised of a new delayed draw term loan (the "Term Loan II") of $80,000 and an increase to the unsecured revolving credit facility of $70,000. The amended and restated Credit Facility also extended the maturity date of the unsecured revolving facility to March 26, 2023, with the option for two six-month extensions. The Term Loan II has a draw availability period of one year and a maturity date of March 26, 2024. The amended and restated Credit Facility also contains an accordion feature which increases the REIT's capacity to $750,000 (subject to requisite unencumbered assets and lender approval).
As at March 31, 2019, the REIT had approximately $146.3 million available to be drawn on the Credit Facility, in addition to cash on hand of $22.5 million.
On February 25, 2019, the REIT issued 10,000,000 REIT Units at a price of $13.50 per REIT Unit to a syndicate of underwriters on a bought deal basis for net cash proceeds to the REIT of approximately $128,966 (the "February 2019 Offering") (inclusive of underwriters' fees and issuance costs of $6,034). The REIT used a portion of the funds from the February 2019 Offering to repay the outstanding balance on the unsecured revolving credit facility of $105,000.
On April 5, 2019, the REIT indirectly acquired the Infill Logistics Portfolio for a purchase price of $226,000 (exclusive of closing and transaction costs), representing a going-in capitalization rate of 5.1% and a stabilized capitalization rate of approximately 5.3%. The purchase price was satisfied with cash on hand and funds from the Credit Facility.
On April 25, 2019, the REIT repaid a mortgage payable bearing a fixed interest rate of 3.41% with a remaining principal balance of $28,325, with funds from the unsecured revolving credit facility. The property, previously encumbered by the mortgage payable, was subsequently added to the unencumbered asset pool.
On May 2, 2019, the REIT renewed a 648,750 square foot lease with the REIT's tenth largest tenant, located at 5166 Pleasant Hill Road, Memphis, Tennessee. The original lease term, set to expire on May 31, 2019, has been renewed for a period of three years, expiring May 31, 2022, with contractual rent increasing 1.7% per square foot beginning June 1, 2019 and annual escalations of 1.6% thereafter.
INVESTOR CONFERENCE CALL
A conference call will be hosted by the REIT's management team on Thursday, May 9, 2019 at 9:00 am ET. 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 10130149#. A recording of the call will also be archived on the REIT's web site at www.wptreit.com.
ANNUAL UNITHOLDERS' MEETING
The REIT will hold its Annual General Meeting of the REIT's Unitholders on Thursday, May 9, 2019 at 2:00 pm Eastern Time, at 199 Bay Street, Suite 4000, Toronto, Ontario M5L 1A9.
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's objective is to acquire, develop, manage and own industrial properties located in the United States, with a particular focus on warehouse and distribution industrial real estate. WPT Industrial, LP (the REIT's operating subsidiary) indirectly owns a portfolio of properties consisting of approximately 21.1 million square feet of gross leasable area, comprised of 69 industrial properties and one office property located in 16 states in the United States. 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 information" or "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. 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 the various assumptions set forth herein, including, but not limited to, the REIT's and the property's future growth potential, anticipated amounts of expenses (or whether such expenses will be non-recurring), 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, and continued positive net absorption and declining vacancy rates in the markets in which the REIT's properties are located.
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 annual information form for the year ended December 31, 2018, which is 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.