On Thursday, WPT Industrial REIT delivered in-line second quarter with fund from operation of $0.239 per unit versus our forecast and Street’s consensus at $0.239. From commentary, we learned that occupancy remained 97.0% at second quarter, increased from 96.1% at first quarter and 96.3% at same quarter, a year ago, and enhanced to 98.2% following second quarter because of 160,000 square feet of incremental leasing. Firm acquired four wholly-leased assets in second quarter (which is at rate of $40 per square feet, 6.6% weighted avg. cap rate, increasing to 7.0% comprising short-run rent growth), raising portfolio gross leasable area by 29% from first quarter.
We anticipate firm will maintain its acquisition actions in second half too. We noticed that neither firm’s major leases expire nor firm ‘debt matures by end of 2016 that gives enough room to continue acquisition activities as it is focusing as of now. The firm is classifying a bunch of likely acquisition prospects while it owns $30.9 million of acquisition capacity exclusive of need to issue equity.
Our net asset value forecast has been grew to $10.75 per unit from $10.15 per unit to indicate a moderately privileged cash net operating income estimate (having increased occupancy anticipation) and a drop in our applied capitalization rate to 7.00% from 7.10%. We have grew our 2014 fund from operation and adjusted fund from operation estimates by $0.02 per unit (to $1.01) and $0.01 per unit ($0.79).
We noticed that currently firm is trading at 12.5 times of 2014 estimated adjusted fund from operation, almost an 8% discount to net asset value, and yields of 7.1%. We are increasing our target price to $11.00 from $10.50 derived from our increased net asset value forecast, which equals 14 times of 2014 estimated adjusted fund from operation. We also reiterate our “Outperform” rating on WPT driven by eye-catching yield, its discounted valuation compared to its group of competitors, well-positioned approach in distribution and warehouse market in United States, in addition to strong growth anticipation from new leasing, rent contracts, and growth in acquiring activities.