WPT Industrial REIT – Opportunity in Volatility

Christian Anthony, CFA | Portfolio Manager & Michael Rudd, CFA | President, CEO and Portfolio Manager

This week, we comment on portfolio holding WPT Industrial REIT (TSX:WIR-U), a company that owns and operates a portfolio of industrial properties used for the warehousing and distribution of e-commerce products. It was just announced that Blackstone is proposing to acquire WPT for US$22.00/share, likely caping off our >5-year investment in the company. While the acquisition is obviously significant, it is not why we wanted to highlight WPT. We thought our history with WPT provides a good example of the importance of knowing what you own, how volatility can provide opportunity, and how gems can be found in spaces you generally don’t think are attractive. 

  • In early 2016, WPT concluded a strategic review, announcing a few transactions with Alberta Investment Management Corporation (AIMco). The initial market reaction was negative with shares of WPT falling >20% on suspicion the transactions were unethical. This piqued our interest, and we conducted our bottom-up research process. This included a deep dive on the business and its assets, a deep review of the AIMco relationship, and two meetings with management. Based on the knowledge we gained through this process, we concluded that this was a good company anchored by attractively positioned real estate, the AIIMco transactions were in good faith, and that this volatility provided a good buying opportunity.
  • In the early stages of the pandemic, shares of WPT fell >40% alongside most other assets. Based on our knowledge of the company, we concluded that this was irrational because WPT actually benefited from the pandemic: its warehouses are used for the storage and distribution of e-commerce products which actually saw an uptick in demand due to increased digital shopping. We thought this was another opportunity from volatility and added to our positions in both our North American High Income Portfolio and Pathfinder International Fund mandates.
  • Generally, we don’t view the REIT space as attractive for multiple reasons. However, WPT highlights how we shouldn’t write off entire sections of the market because of generalizations, gems can still be found in the rough.

“This means that” when market volatility ultimately hits, knowing what we own is extremely important and helps us make the correct decision (buy, sell or hold). We believe our history with WPT is a good example of that. Four of our mandates participated at various points along the evolution of our investment thesis. Upon completion of the acquisition, we will realize a cumulative 94.3% total return in the International Fund (69% in capital gains plus 25% in dividends) and 170% return in the North American High Income Portfolio (118% gains and 52% dividends).

Pathfinder Asset Management Ltd. | Equally Invested™
1450-1066 W. Hastings Street, Vancouver, BC V6E 3X1
E info@paml.ca | T 604 682 7312 | www.paml.ca
Sources: Pathfinder Asset Management Limited

National Instrument 31-103 requires registered firms to disclose information that a reasonable investor would expect to know, including any material conflicts with the firm or its representatives. Doug Johnson and/or Pathfinder Asset Management Limited are an insider of companies periodically mentioned in this report. Please visit www.paml.ca for full disclosures.

*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder Core: Equity Portfolio (January 2011), Pathfinder Core: High Income Portfolio (October 2012) Partners’ Fund (April 2011), Partners’ Real Return Plus Fund (April, 2013), and Partners’ Core Plus Fund (November 2014).

Pathfinder Asset Management Limited (PAML) and its affiliates may collectively beneficially own in excess of 10% of one or more classes of the issued and outstanding equity securities mentioned in this newsletter. This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor PAML can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your portfolio manager, who can assess all relevant particulars of any proposed investment or transaction. PAML and the author accept no liability of any kind whatsoever or any damages or losses incurred by you as a result of reliance upon or use of this publication.