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New Canadian Venture Hunting for $1 Billion in U.S. Industrial Real Estate

CPPIB and AIMCo Teaming With WPT REIT on Venture
July 31, 2018
Toronto-based WPT Industrial Real Estate Investment Trust is teaming up with two major Canadian pension funds to create an investment vehicle to pump up to US$1 billion of equity into the U.S. industrial market.

The Canada Pension Plan Investment Board, which has about $356.1 billion under management and invests funds not currently needed for CPP benefits, is joining with Alberta Investment Corp., which has $107.1 billion under management and invests on behalf of pension, endowment and government funds in Alberta.

Each of the pension funds will have a 45 per cent interest in the joint venture with WPT holding the remaining 10 per cent stake. The REIT will manage the properties acquired by the new venture.

"The expansion of the relationship with AIMCo and introduction of CPPIB as a new partner should better equip management to grow the business and drive value creation in a maturing U.S. industrial real estate cycle," said Desjardins analyst Michael Markidis, commenting on the transaction.

As part of the announcement, WPT said it would be internalizing its management and acquiring WPT Capital Advisors LLC, a strategic joint venture between senior management of the firm and affiliates of AIMCo. That entity had served as the external manager of the REIT and as manager for private capital investments on behalf of select institutional investors.

The REIT will pay US$6.8 million for the termination of management agreements; pay US$20 million to acquire the private capital business of WPTCA; and will grant US$9.8 million in deferred equity grants to 20 individuals who will now be direct employees of the REIT.

‘’An internalization objective has been communicated by management for some time; however, given the duration of the process, we believe some investors were starting to doubt that an agreement with WPTCA could be reached,’’ said Markidis, in saying the deal will be positive. ‘’Moreover, the expansion of the relationship with AIMCo and introduction of CPPIB as a new partner should better equip management to grow the business and drive value creation in a maturing U.S. industrial real estate cycle.’’

AIMCo, the REIT’s largest unitholder, applauded the move to internalize management and the expansion with a new pension fund partner.

‘’The venture capitalizes on the scale and synergies of our respective investment programs and creates a long-term investment platform,’’ said Micheal Dal Bello, senior vice president of AIMCo., in announcing the new venture.

Hilary Spann, managing director, head of Americas, real estate investments for CPPIB, said her group is looking to the venture to expand its presence in the industrial sector.

‘’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,’’ she said.

The new venture will invest in a diversified mix of strategic U.S. logistics markets with favourable fundamentals 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.

Properties acquired through the group are expected to be held for two distinct periods: a value-add or development period and a stabilized or long-term hold period.

The initial value-add period is expected to be two to three years. After stabilization, ownership may be rebalanced for a long-term hold, with the REIT having a right of the first opportunity to acquire additional interests at that time.

Garry Marr, Toronto Market Reporter  CoStar Group   
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