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Q1 – 2020 Investor Presentation
This presentation contains "forward-looking information" as defined under Canadian securities laws (collectively, “forward-looking statements”) which reflect management’s expectations regarding objectives, plans, goals, strategies, futuregrowth, 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”, “be achieved”, or “continue” and similar expressions identify forward-looking statements. Some of thespecific forward-looking statements in this presentation include, but are not limited to statements regarding the objectives and strategic focus of the REIT; future distributions by the REIT; predictability and certainty of cash flow; investmentopportunities in the U.S. industrial real estate market; U.S. vacancy rate trends; tenant demand in the distribution sub-segment; including demand for state-of-the-art distribution and logistics space; development in distribution markets; vacancyrates in the state-of-the-art distribution market and absorption of vacancy in distribution investment properties in major distribution markets in the U.S. over the past years; re-tenanting costs; key trends and continued and increased demandwithin the industrial real estate market; the effect of the experience of the asset and property manager of the REIT; in the U.S. industrial real estate market on tenant retention and future acquisitions by the REIT; the expected accretion to theREIT’s funds from operations (“FFO”) per Unit and adjusted funds from operations (“AFFO”) per Unit from completed acquisitions; the sources of organic growth; including initiatives aimed at optimizing the performance; value and long-termcash flow of the REIT’s investment property portfolio; the REIT’s external growth strategy; including diversification; the REIT’s cost of capital; borrowing costs and opportunities to increase the cash flow and value of the existing portfolio ofinvestment properties through initiatives designed to enhance operations; future maintenance expenditures; future project costs related to the development of investment properties; the attractiveness of newer investment properties to prospectivetenants; the quality and future valuations of the REIT’s portfolio of investment properties; lease terms; termination and future maintenance and leasing expenditures; the REIT’s ability to meet all of its ongoing obligations with current cashgenerated from operations; draws on its Credit Facility and new equity and debt issuances; the fair values of the REIT’s investment properties; the REIT’s debt strategy, including the REIT’s intention to maintain staggered mortgages payablematurities; and anticipated and potential adverse impacts resulting from the coronavirus disease (COVID-19) pandemic.
Forward-looking statements are necessarily based on a number of estimates, beliefs and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies which could cause actual resultsto differ materially from those that are disclosed in such forward-looking statements. While considered reasonable by management of the REIT as at the date of this presentation, any of these estimates, beliefs or assumptions could prove to beinaccurate, and as a result, the forward-looking statements based on those estimates, beliefs or assumptions could be incorrect. Such estimates, beliefs and assumptions include the various estimates, beliefs and assumptions set forth herein, andinclude but are not limited to, the desirability of investment properties in the distribution subsector of the U.S. industrial real estate market to investors, including the industrial investment properties in the REIT’s portfolio; key trends andcontinued and increased demand within the industrial investment property real estate market; the effect of management’s experience in the U.S. industrial real estate market on tenant retention and future acquisitions by the REIT; the futuregrowth potential of the REIT and its properties; anticipated amounts of expenses; results of operations; future prospects and opportunities; the demographic and industry trends remaining unchanged; no change in legislative orregulatory matters; future levels of indebtedness; the tax laws in both Canada and the U.S. as currently in effect remaining unchanged; current levels of volatility in the demand for space in the distribution sub-segment have increased as a resultof COVID-19; the continued availability of capital; the current economic conditions have become increasingly unstable due to COVID-19 and lower tenant demand for industrial investment properties and flat vacancy rates in the markets inwhich the REIT’s investment properties are located; and the scope and duration of the COVID-19 pandemic and its impact on the REIT.
This presentation does not constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe for any securities nor shall it or any part of it form the basis of or be relied on in connection with, or act as any inducement toenter into, any contract or commitment whatsoever. The information contained in this presentation concerning the REIT and its affiliates does not purport to be all-inclusive or to contain all the information that a prospective purchaser orinvestor may desire to have in evaluating whether or not to make an investment in the REIT. The information is qualified entirely by reference to the REIT’s MD&A and the AIF.
Certain terms includes in this presentation such as debt-to-gross book value (“GBV”), FFO, AFFO, net operating income (“NOI”), book value per Unit, same property net operating income (“Same property NOI”), capitalization rate, cash re-leasing spread, and straight-line rent re-leasing spread are used by management to measure, compare and explain the operating results and financial performance of the REIT and are not recognized terms under IFRS, and therefore should not beconstrued as alternatives to net income (loss) and comprehensive income (loss) or cash flow from operating activities calculated in accordance with IFRS. Management believes these terms are relevant measures in comparing the REIT’sperformance to industry data, the REIT’s ability to earn and distribute cash returns to holders of the REIT’s trust units, and the REIT’s ability to meet its ongoing obligations. These terms are defined and reconciled to the most directlycomparable measure specified in the REIT’s MD&A. Such terms do not have a standardized meaning prescribed by IFRS and may not be comparable to a similarly titled measure presented by other issuers.
Forward–Looking Statements
2
Overview
WPT Industrial Real Estate Investment Trust is an internally managed and publicly traded REIT focused exclusively on the U.S. industrial sector
4
U.S. Exposure Through Fully-Integrated Platform
Seasoned management team with extensive knowledge of the U.S. industrial sector
Access to high-barrier U.S. markets through off-market private capital acquisition pipeline
Unit price and annual distribution of $0.76/unit in U.S. Dollars
5
Proven Growth Strategies
OFF-MARKET INVESTMENT
PIPELINE
FEE REVENUE FROM PRIVATE
CAPITAL
EXTERNAL GROWTH
EXTENSIVE INDUSTRY
RELATIONSHIPS
PARTNERSHIPS WITH PREMIER
GLOBAL INVESTORS
ENTRY INTO NEW U.S. MARKETS
STRATEGIC FINANCING
CONTRACTUAL RENT
INCREASES
MAINTAININGCONSISTENTLY
HIGH OCCUPANCY
INTERNAL GROWTH
ROLLING RENTS TO
MARKET AT RENEWAL
PROPERTY EXPANSION
AND DEVELOPMENT
WPT MANAGEMENT
PLATFORM
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Location
Basis
Building Functionality
We underwrite investments focusing on asset basis
relative to current replacement costs and
competitive future speculative development
We target Tier 1 and 2 distribution markets with
proximity to major population centers, significant
transportation infrastructure, access to cost-effective labor, and favorable long-term rent
growth prospects
We focus on acquisition of assets with in-place rents that compare favorably to market rents to drive long
term NOI growth
We analyze submarket and tenant-specific demand
drivers to determine desired building attributes
Investment Criteria
Rents Relative to Market
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AVG. CEILING HEIGHT
31’………………………………
AVG. BLDG. SIZE (SQ. FT.)
318,000…………………………………
AVG. TENANT SIZE (SQ. FT.)
172,000……………………………………….
AVG. ASSET AGE (YEARS)
15
INVESTMENT PROPERTIES2
102………………………………
TOTAL SQUARE FEET OF GLA2
32,152,917…………………………………
FAIR VALUE OF INVESTMENT PROPERTIES
$2.3B
1. As at March 31, 20202. Includes two assets held in joint venture
(all figures in ‘000s, except per Unit amounts and gross leasable area (“GLA”)) Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019
Investment properties revenue $ 32,481 $ 31,882 $ 29,335 $ 28,714 $ 25,198
Management fee revenue 273 501 2,237 358 491
NOI 23,381 23,145 21,788 21,164 18,141
FFO 13,749 14,176 14,807 12,961 9,614
FFO per Unit (diluted) 0.184 0.216 0.243 0.213 0.176
AFFO 10,284 11,069 11,980 9,759 6,698
AFFO per Unit (diluted) 0.137 0.169 0.197 0.161 0.123
Book value per Unit 12.98 13.31 13.09 12.88 12.40
GLA 1 32,152,917 22,870,482 22,765,482 20,767,799 18,850,627
Occupancy 1,2 95.7% 99.0% 99.5% 99.4% 99.1%
Same property NOI %3 1.4% 3.1% 4.5% 4.1% 3.4%
Weighted average remaining lease term (years) 1 4.7 4.9 5.1 4.9 4.5
Quarterly Performance
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1. Excludes properties owned by the equity accounted joint venture2. Exclusive of leases commencing after quarter end. Totaled leased GLA at 3/31/2020 was 97.3%, inclusive of leases commencing in Q2 20203. Quarterly same property NOI vs. comparable period for the prior year
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Expanding U.S. Footprint1
1. As at March 31, 2020
Tenant Industry % of Total Annualized Base Rent1
GLA Occupied(‘000s sq. ft.)1
(%) of Total Portfolio GLA1
FedEx Ground Package System, Inc. Third Party Logistics 13.7% 1,874.1 5.9%
IKEA Distribution Services, Inc. Consumer Products 3.5% 996.5 3.1%
General Mills Operations, LLC Consumer Products 3.0% 1,512.6 4.8%
Continental Tire the Americas Consumer Products 2.8% 740.9 2.3%
Unilever Home & Personal Care Consumer Products 2.8% 1,262.5 4.0%
Amazon.com E-Commerce 2.6% 936.0 2.9%
Keystone Automotive2 Consumer Products 2.3% 754.8 2.4%
Zulily LLC E-Commerce 2.1% 737.5 2.3%
Exel, Inc Third Party Logistics 1.7% 800.0 2.5%
FullBeauty Brands, Inc. E-Commerce 1.7% 741.1 2.3%
Total 36.2% 10,356.0 32.5%
High-Quality Tenant Base
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1. As at March 31, 20202. Comprised of two leases with Keystone Automotive Operations, Inc. and Keystone Automotive Industries, Inc.; both wholly-owned subsidiaries of LKQ Corporation.
Well-Positioned Balance Sheet1
3.1 years Weighted average mortgage term to maturity
6.8% Variable interest rate debt as a percent of total debt
3.3% Weighted average effective interest rate of total debt
2.9x Fixed charge coverage ratio
52.1% Total debt to GBV
$112.3mm Unsecured credit facility availability
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1. As at March 31, 2020
3.9 years Weighted average unsecured credit facility term to maturity
8.5x Debt to adjusted EBITDA
$50.4mm Cash on hand
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Staggered Debt Maturity1
1. As at March 31, 2020
3.4% 4.6% 3.8% 3.8% 1.2% 1.0%Weighted average interest rate of maturities
3.3%Weighted average
interest rate
35.7
74.9
27.7
84.5
42.4 53.0 - - -
200.0
331.7 350.0
0
50
100
150
200
250
300
350
2020 2021 2022 2023 2024 2025
Mat
uriti
es ($
in M
illio
ns)
Debt Maturities by Year
Mortgages Credit Facility
4.7 yearsWeighted average
remaining lease term
Staggered Lease Expiration Schedule
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1. As at March 31, 2020
6 27 33 21 31 13 48Number of Leases Expiring
1.2%
9.4%
21.5%
11.0%
15.2%
11.1%
30.6%
2020 2021 2022 2023 2024 2025 2026+
Lease Expiration (% of GLA) by Year ¹
Leasing Update1
2018
As at 6/30/2017, the REIT had 4 leases totaling 2.1% of the portfolio remaining to be renewed.
141. As at March 31, 2020
Highlights
For the three months ended March 31, 2020, the REIT entered into approximately 30,500 and 355,200 sq. ft. of new and renewal leases, respectively. Renewals commencing in 2020 had a weighted average cash re-leasing spread and straight-line rent re-leasing spread of 4.5% and 17.1%, respectively.
During the quarter, the REIT renewed approximately 753,200 sq. ft. of leases commencing after March 31, 2020 with a weighted average cash re-leasing spread and straight-line rent re-leasing spread of 10.4% and 16.1%, respectively.
Occupancy stabilized at 97.3%, including two leases with an weighted average remaining lease term of 4.7 years, signed in the quarter that commence in the second quarter.
Track Record of Growing Unitholder Value1
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1. Unit price growth from IPO – March 31, 2020
91.0
125.9
108.5
80.3
70
90
110
130
150
170
190
210
Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20
WIR (US$) WIR (CAD$) S&P/TSX Composite Index (CAD$) S&P/TSX Capped REIT Index (CAD$)
Investment Activity
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February 2020 Equity Raise
• Gross proceeds of approximately $271mm
• The REIT used the proceeds to fund a portion of the PIRET portfolio acquisition, comprised of 26 industrial buildings and one land parcel for a purchase price of $730mm. The acquisition closed on March 26, 2020.
• Participation from both existing and new investors
• Full exercise of over-allotment option
PIRET Portfolio Acquisition
The acquisition is immediately accretive to the REIT’s FFO and AFFO on a per unit basis
The acquisition significantly increased the size and scale of the REIT’s portfolio to approximately $2.3 billion, with a 39% increase in total GLA to approximately 32 million square feet, enhancing the REIT’s ability to leverage its fully internalized management platform
The acquisition portfolio consists of institutional quality assets with an average age of approximately 14 years, average clear height of 31 feet
Approximately 60% of base rent is derived from investment grade tenants, with limited overlap to the REIT’s existing tenant roster. The portfolio has a weighted average lease term of 4.6 years
Expands WPT’s presence and operating platform in the high-barrier coastal markets of New Jersey, California and Florida and strengthens the REIT’s presence in other key U.S. distribution markets
Portfolio NOI can be increased over time through vacancy lease up, future development of land parcels and building expansion potential at existing sites
Increased size and scale from the acquisition enhances the REIT’s ability to reassess portfolio composition and recycle capital over the near term
IMMEDIATELY ACCRETIVE
TRANSACTION
INCREASED PORTFOLIO SCALE AND LEVERAGE ON
FIXED COSTS
INSTITUTIONAL QUALITY ASSETS
STRONG AND DIVERSE IN-PLACE
TENANT ROSTER
INCREASED HIGH-BARRIER
MARKET EXPOSURE AND GEOGRAPHIC DIVERSIFICATION
FUTURE VALUE CREATION
OPPORTUNITIES
CAPITAL RECYCLING
OPTIONALITY
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Portland Acquisition
19
Acquired: Jan 2020
Purchase Price: $16.2mm
Square Feet: 126,303
Capitalization Rate: 5.6%
Clear Height: 24’
Occupancy: 100.0%
Lease Term: 3 Years
Dock Doors: 18
Industrial Market Update
Increased E-Commerce PenetrationE-commerce continues to grow with sales increasing dramatically in response to COVID-19
Measured SupplyNew Supply levels are increasingly muted as new developments are put on hold or cancelled.
Fragmented MarketVery few experienced operators relative to other asset classes
Rising Inventory LevelsInventory levels are expanding in response to disruptions caused by COVID-19
21
Current Market Trends
ReshoringMany companies have begun to reevaluate their supply chains in response to COVID-19
COVID-19 Developments
22
“The global pandemic’s effect on the industrial market sector remains in flux,as the length and severity of its impact on the economy have yet to bedetermined. However, the industrial property sector entered the first quarter ofthe new year with strong fundamentals and we expect trends to follow suitgoing forward. We continue to see growth in the e-commerce and groceryindustries along with suppliers for critical products including medical devicesand pharmaceuticals. As we move forward, we believe many companies willbe reevaluating their supply and stocking operations as well as redesigningtheir distribution networks in response to the supply chain shock fromCOVID-19, driving demand for manufacturing and last-mile facilities.”
Source: JLL Q1 2020 Industrial Outlook Source: CBRE Q1 2020 U.S. Industrial & Logistics Figures
U.S. Industrial Market Fundamentals
23
U.S. Industrial New Construction Deliveries
24
Market Indicators
“Despite a potential slowdown in leasing activity as the market adjusts tothe global pandemic, top logistics markets continue to operate at a sub3.0 percent vacancy rate, and although leasing activity will drop in thecoming quarters, we expect continued competition for quality spaceadding pressure on rents through 2020. “
Market Indicators
Source: Cushman & Wakefield Q1 2020 U.S. Industrial MarketBeat report
Overall Vacancy 4.9% 4.9%Net Absorption 42.3mm 45.4mmWeighted Asking Rent (NNN) $6.49 $6.40
Reverse Logistics Driving Demand
U.S. Research Report | Q4 2019 | Industrial Market Outlook | Colliers International
Tenant Demand Continues to Drive Rent Growth
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“The U.S. industrial vacancy rate closed out 2019 at 5.1% — oneof the lowest rates on record, but an uptick of nine basis points(BPS) over the prior quarter and 14 BPS higher than year-end2018. ”
Source: JLL Q3 2019 Industrial Outlook Source: CBRE Q1 2020 U.S. Industrial & Logistics Figures
Q1 20 Q1 19
E-Commerce Growth Potential
26
• The industrial tenant sectors that dominated the market going into 2020 included e-commerce, Retail, and Logistics & Distribution. E-commerce nearly doubled its leasing volume compared to the previous quarter from 10.7 million square feet to 24.9 million square feet. Inland Empire, Dallas-Fort Worth, Eastern and Central Pennsylvania, and Houston continue to produce the highest deliveries and leasing volume in the industrial market. Moving forward we expect this trend to continue as the adoption of e-commerce and technology by consumers evolves resulting in a focus on Urban Logistics and demand for last mile spaces
• Although leasing activity may slow in the coming quarters, industrial demand will be bolstered by greater inventory controls, supply chain diversification and e-commerce growth.
• Fourth quarter 2019 e-commerce sales increased ~16.4% from the same period in 2018 compared to a total retail sales increase of 4.0%.
(Source: JLL– Q1 2020 United States Industrial Outlook)
(Source: CBRE Research,, Q1 2020)
(Source: Q4 2019 US Census Bureau’s ‘Quarterly Retail E-Commerce Sales)
Research Analyst Coverage
Name Firm Email Phone
Troy MacLean, CFA BMO Capital Markets [email protected] (416) 359-8366
Mark Rothschild Canaccord Genuity Corp [email protected] (416) 869-7280
Chris Couprie, CFA CIBC [email protected] (416) 594-7194
Michael Markidis, CFA Desjardins Capital Markets [email protected] (416) 607-3028
Brad Sturges, CFA iA Securities [email protected] (416) 203-5827
Matt Kornack National Bank Financial [email protected] (416) 507-8104
Neil Downey, CFA, CA, CPA RBC Capital Markets [email protected] (416) 842-7835
Himanshu Gupta, CPA, CA, CFA Scotia Capital [email protected] (416) 863-7218
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Trustee Real Estate/Board ExperienceIndependent
TrusteeAudit
CommitteeInvestment Committee
CG&N1
Committee
Milo Arkema • Independent Consultant• Former Accountant, Baker Tilly Virchow Krause, LLP
Louie DiNunzio • Senior Vice President of Investments, Cadillac Fairview• Chartered Accountant
Scott FrederiksenChair of the Board
• CEO • 30+ Years of industrial experience
Sarah Kavanagh • Former Commissioner, Ontario Securities Commission• Former Vice Chair, Co-Head, Diversified Industry Group, Scotia Capital
Stuart H.B. Smith • Former Chairman and Founder, EPIC Realty Partners Inc.• Former President and CEO of Oxford Properties Group
Pamela Spackman• Former President and CEO, Column Canada Financial Corp• Former Vice-President of Mortgage Investments, Ministry of Finance,
Province of British Columbia
Robert WolfLead Trustee
• Principal, RTW Capital Corporation• Former CFO, RioCan REIT
(CHAIR)
(CHAIR)
(CHAIR)
1. Compensation, Governance and Nominating
Board of Trustees
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Scott FrederiksenChief Executive OfficerP: 612-800-8501E: [email protected]
