ICM Property Partners Trust - Q3 2020 Quarterly Bulletin - Liahona Capital
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ICM Property
Partners Trust
Q3 2020 Quarterly Bulletin
Q3 2020 Quarterly Bulletin
1
A trusted partner and leading provider of
alternative investment solutions.
ICM Asset Management was founded in 2003 to preserve and grow the wealth of retail,
private client and institutional investors looking to diversify their portfolios through the use of
alternative asset classes.
Today, we manage more than $1 billion of assets on behalf of our investors in an array of
investment opportunities focused on real estate, private equity and alternative income
strategies.
Contents
Letter from the Portfolio Manager 3
Quarterly Highlights 5
Portfolio Allocation 7
Real Estate Categories 9
Development Investments 10
Income & Growth Investments 12
High-Yield Lending Investments 15
Investment Restrictions 16
2 ICM Property Partners Trust
Quarterly
Bulletin
November 30, 2020
The second quarter of 2020 required strong required within our existing portfolio. It was not,
conviction that the present was not the future, that and we began to once again move forward with new
the global economic system was not at the precipice, acquisitions in Q3.
that shuttered stores and closed offices would
again reopen, and, while this remains a position of During the quarter we acquired a 270,000 SF
conviction for now, urban environments and all of industrial development project in the Phoenix
the culture that they inspire are not artifacts of the metropolitan area in partnership with a developer
last few centuries. By contrast, the third quarter can that principals of ICM have known for two decades.
broadly be characterized as a sigh of relief. We anticipate beginning construction on the first
of two buildings in the fourth quarter for delivery to
The high degree of uncertainty and associated market in early 2022 with the second to follow in
volatility of the second quarter largely gave way in 2023.
the third quarter to expectations that the world would
muddle through a challenging but manageable We acquired an iconic apartment building at an
period. Countries began re-opening and business exceptional location in La Roma district in Mexico
leaders began considering the future beyond the City with one of our existing development partners.
immediate crisis. While any return to normalcy still We will undertake an 18 to 24-month rezoning
feels some time away and dependent on a massive process before we begin construction with the
global vaccination effort, the world has again begun intent of adding two to three stories to the existing
behaving as though there is a future to look forward building. Our intent is to develop the project into a
to. hotel with ground floor retail, though the property
will also function as an apartment building should
As the rest of the world paused, so did we. We put the hospitality sector not appear poised to recover
on hold all of our acquisition pipeline at the end of in 3 to 4 years as we currently expect.
Q1 and focused on reassessing every asset within
our portfolio. This did not mean however that we Finally, we identified four additional locations
ceased all acquisition activities. We continued to as part of our programmatic for-sale apartment
develop and grow relationships, nurture deals that development program with an existing partner in
we felt presented the best risk-adjusted return Mexico City. All located within upper middle-class
available to us. We prepared to move forward as we neighbourhoods in Mexico City, these new locations
became comfortable that the strong cash position will complement three existing projects we currently
that we carried into COVID was not going to be have under construction.
Q3 2020 Quarterly Bulletin
3
Having begun focusing predominantly on pursuing industrial and residential investment opportunities in 2019,
our investment pipeline remains robust. We are excited by the overwhelming opportunity that is emerging
in the U.S. and Mexican industrial markets as companies relocate manufacturing and distribution capacity
closer to U.S. end buyers. Many of our current opportunities originate from relationships and discussions
dating back to 2019. As a result of the work that has been done over the last 18 months, it is conceivable that
ICM PPT’s portfolio will be comprised of greater than 40% industrial by this time next year, assuming that we
have sufficient equity to close on the opportunities within our pipeline.
The existing PPT projects and properties continued to perform well during Q3. Of particular note, we received
final development permits to begin construction of our 2.0 million SF industrial development project in
Guadalajara, Mexico. Despite not being in the ground yet, we are already responding to expressions of interest
from large-scale tenants. We anticipate beginning construction on the first 1.1 million SF of buildings in the
fourth quarter.
At Spartan Ridge, we are nearing construction completion of a 285,000 SF distribution facility and anticipate
successfully leasing the building up by mid-2021. We currently anticipate this investment to outperform our
underwriting and will make a decision on whether to refinance and hold the asset or sell the property during
2021.
Rent collection across our U.S. office portfolio was robust. Suburban low-rise and single-story flex office
buildings have proved to be easier to manage, than their larger downtown comparisons, from an operational
perspective during the last six months. Relatively speaking, we believe that these types of office assets will
outperform in coming quarters. We began to see leasing activity pick up in Q3 after a slow second quarter
and encouragingly, lease rates have remained relatively unchanged from early Q1. Paired with our portfolio
weighting to markets such as Atlanta, Dallas and Charlotte that appear poised to recover more strongly, we
remain of the view that these investments will generate attractive risk-adjusted returns into the future.
Across our portfolio, we have benefitted in the last two quarters from having no mortgages that needed
to be refinanced. While lenders are returning to market, loan terms continue to reflect their caution. With
approximately 12% of our existing principal balance maturing prior to the end of 2022, this does not pose any
meaningful risk for PPT.
Heading into the fourth quarter, we remain optimistic about the prospects for
PPT. We believe that the combination of economic recovery and stimulative
fiscal and monetary policy will benefit property and other real asset investments.
We look forward to sharing more news on PPT’s activities during the fourth
quarter.
Sincerely,
John Courtliff, CFA
John Courtliff Partner, Managing Director &
Portfolio Manager
Partner, Managing Director & Portfolio Manager
4 ICM Property Partners Trust
Quarterly Highlights1
Quarterly distribution to investors $2.5 million
Investable equity $17.4 million
Fund Assets $350.0 million
Expected pipeline commitments2 $138.4 million
Number of portfolio holdings 43
PORTFOLIO BREAKDOWN
(By NAV)
Development Income & Growth High-Yield Lending
Portfolio Portfolio Portfolio
57.0% 34.3% 8.7%
DEVELOPMENT PROPERTY HIGHLIGHTS
Invested/Committed to 3 New Total $30.2 million over the next 12 to 24 months with weighted
Deals average IRR > 18%3
Opened Phase 1 after obtaining occupancy permit, with the first
Star Metals Residences
tenants occupying units in August 2020
Substantial completion during the quarter, tracking on time on
Spartan Ridge Building 2
budget for delivery in December 2020
Q3 2020 Quarterly Bulletin
5
NEW INVESTMENTS / COMMITMENTS
Glendale Industrial Francia Cobra Multifamily
Development projects
Property Type Property Type Property Type
Industrial Mixed-Use Residential
Commitment Commitment Commitment
$14.1 $11.0 $5.1
million million million
Glendale, AZ Mexico City, Mexico Mexico City, Mexico
INCOME & GROWTH PROPERTY HIGHLIGHTS
Weighted Average Lease Expiration (years)4 3.77
Debt Service Coverage Ratio5 1.87
Occupancy (%)6 79.9
Top occupancy movers One Glen Lakes Lake Ridge Technology Center
(6.9% of NAV) (2.9% of NAV)
Q2: 54.9% Q2: 63.7%
Q3: 64.0% Q3: 72.7%
(+9.1%) (+9.0%)
TOP HOLDINGS7
Asset Asset Type Strategy % of NAV
Cobra Multifamily Projects Residential Development 9.3
Parque Alameda Tribute Hotel Mixed-Use/Hospitality Development 9.3
Glendale Industrial Development Industrial Development 9.2
Star Metals Residences Residential Development 7.3
One Glen Lakes Office Income & Growth 7.2
Star Metals Offices Mixed-use Development 6.7
Jones Bridge Square Retail Income & Growth 4.9
Edina 100 Office Income & Growth 4.8
Carnegie Point Office Income & Growth 3.8
Santa Rosa Industrial Park Phase 1 Industrial Development 3.7
Top 10 65.3
6 ICM Property Partners Trust
Portfolio Allocation8
ICM PPT holds interests in over 40 property related investments broadly diversified by market,
investment strategy and property type. The properties in which ICM PPT is invested range from
medium-sized, high quality projects to large-scale, institutional quality assets.
Increased allocation Decreased allocation
Diversification by Geography Diversification by Strategy
Current Allocation Current Allocation
Geography Geography
Allocation (%) Outlook9 (%) Allocation (%) Outlook9 (%)
United States 55.4 61.9 Development 57.0 53.7
Mexico 29.8 29.1 Income & Growth 34.3 41.8
Canada 14.8 9.0 High-Yield Lending 8.7 4.5
The U.S. is the largest The allocation
and most liquid real to Development
estate investment strategy is expected
market in the world. to decrease in the
ICM PPT anticipates upcoming 2 quarters
that the largest despite a $88.3
portion of ICM PPT million Development
will always be held in pipeline as $22.2
the U.S. million of the current
NAV will be delivered
as Income & Growth
products where we
will lease up the
properties.
Diversification by Major Markets
30%
25%
20%
15%
10%
5%
Mexico City Atlanta Phoenix Dallas Calgary Edmonton Minneapolis Other markets*
Current 26.6 25.7 8.9 8.0 7.5 6.5 5.3 11.5
Forecast 26.3 19.1 8.3 12.9 3.9 3.4 4.8 21.3
*Includes markets with current exposure of >5.0%: Charlotte 3.8%, Guadalajara: 3.7%, Spartanburg: 2.9%, Toronto: 0.5%, Ft Lauderdale: 0.5%, Washington: 0.2%, and Miami:Diversification by Asset Type
ICM has been most keenly focused on the benefits of industrial property investments since early
2019. ICM PPT’s allocation to industrial will continue to increase materially in the coming quarters.10
5% 10% 15% 20% 25% 30% 35% 40%
Current 16.9%
Industrial
Forecast 37.3%
Current 34.0%
Office
Forecast 32.8%
Current 21.4%
Residential
Forecast 14.8%
Current 9.1%
Retail
Forecast 5.5%
Current 6.6%
Hospitality
Forecast 3.4%
Current 3.2%
Mixed-Use
Forecast 1.7%
Current 8.7%
High-Yield
Lending Forecast 4.5%
Increased allocation Decreased allocation No Change
8 ICM Property Partners TrustReal Estate Categories
Real Estate Categories provide one of the most valuable perspectives to understand a portfolio’s
underlying risk composition. Investors use Real Estate Categories to evaluate underlying portfolio
expected returns relative to the level of risk required to execute on each category’s business plan. A
property’s Real Estate Category profile reflects our Team’s long-term expectation on the risk-adjusted
performance of the property.
Currently, we defined Real Estate Categories as Core, Core Plus, Value Add, and Development11 for
property investments.
Relative Expected Risk Expected Investment
NAV (%)
Level Return12
Core Low 5-7% 0.0
Core Plus Low to Moderate 8-10% 11.1
Value Add Moderate 10-14% 23.2
Development Moderate to High ≥15% 57.0
Lending-Based Investments14
Relative Expected Risk Expected Investment
NAV (%)
Level Return13
High-Yield Lending Low to Moderate 8-12% 8.7
Low-Yield Lending Low 2-6% 0.0
Q3 2020 Quarterly Bulletin
9Development
Investments
Anticipated Overall Delivery Timeline
ICM PPT is invested in a material number of projects that are slated to be delivered in 2021. As
construction is completed, these investments will transition from being Development projects to
Income & Growth assets.
Construction Stabilization Current Status
Q2 2018
Q4 2018
Q2 2019
Q4 2019
Q2 2020
Q4 2020
Q2 2021
Q4 2021
Q2 2022
Q4 2022
Q2 2023
Q4 2023
Q2 2024
Q4 2024
Q2 2025
Q4 2025
Q2 2026
Q4 2026
Q2 2027
Building 1
North District Building 2
Building 3
Phase 1
Mayland Yards Phase 2
Phase 3
Phase 1
Star Metals Residences Phase 2
Star Metals Offices
Spartan Ridge Building 2
Glendale
Parque Alameda
Selina La Roma
Santa Rosa Phase 1
Francia
Escandon
Cobra Multi-Family Project 1
Cobra Multi-Family Project 2
Anticipated Near-Term Delivery Timeline
Property Construction Completion
Spartan Ridge Building 2 Q4 2020
Star Metals Residences Q1 2021
Star Metals Offices Q2 2021
10 ICM Property Partners TrustOver 2021, we anticipate beginning to lease the assets, typically with a view of reaching stabilization
within one to two years. Upon stabilization, we will evaluate opportunities to either hold the asset for
cash-flow or sell the asset. The current low interest rates reduce lease up schedule risk and broadens
our delivery timeline to manage market risk.
Anticipated Construction Completion Schedule by Current NAV
For Significant Portfolio Holdings
30.0
25.0
20.0
Millions (CAD)
15.0
10.0
5.0
0.0
2020 2021 2022 2023 2024 2025 2026
2020
2023
Spartan Ridge Building 2
Selina La Roma
2021
Santa Rosa Industrial Park (Ph 1)
North District
2024
Star Metals Residences
Escandon
Star Metals Offices
Cobra Multi-Family Project 2
Cobra Multi-Family Project 1
2025
2022
Mayland Yards
2026
Parque Alameda Tribute Hotel
Francia
Glendale Industrial
Q3 2020 Quarterly Bulletin
11Income & Growth
Investments
Investment Summary15
Market No. of Annual Annual Rent Current WALE17
Properties Revenue PSF Occupancy16 (years)
(CA$) (CA$) (%)
Dallas 2 3,637,733 32.65 65.4 4.32
Atlanta 4 3,745,410 17.74 83.9 3.63
Minneapolis 3 2,144,015 22.84 78.8 3.02
Charlotte 1 2,010,039 41.54 89.3 2.58
Other18 11 859,005 21.92 78.8 6.75
Total Income & Growth Portfolio 21 12,396,203 23.96 79.7 3.77
Top Holdings Occupancy
Top 5 Property NAV (%)19 Q2 Occupancy (%) Q3 Occupancy (%) Change (%)
One Glen Lakes 6.9 54.9 64.0 9.1
Edina 100 4.8 78.7 78.7 -
Jones Bridge Square 4.8 96.2 96.2 -
Carnegie Point 3.8 96.4 89.3 -7.1
Lake Ridge Technology 2.9 63.7 72.7 9.0
Total Top 5 23.6 76.1 78.8 +2.7
Top Occupancy Movers 20
Property Net Change in Occupancy (%) NAV (%)
One Glen Lakes 9.1 6.9
Lake Ridge Technology Center 9.0 2.9
Carnegie Point -7.1 3.8
12 ICM Property Partners TrustTenant Diversification
PPT’s broadly diversified tenant base lowers the exposure to any one tenant or industry, therefore
lowering risk to the portfolio. In addition to the diversification by industry, PPT’s tenant base is
diversified across 10 different markets, adding another layer of protection for the income generation
of the portfolio.
Financial, Insurance & Related Services 19%
Business Consulting Services 18%
Manufacturing & Related Services 16%
Retail (Non-Discretionary) 15%
Healthcare 14%
Retail (Discretionary) 4%
Telecom. & Information Technology 3%
Multifamily Tenants 3%
Construction & Related Services 2%
Education 2%
Tourism, Recreation & Entertainment 2%
Energy, Utilities, Transportation & Infrastructure 1%
Real Estate & Related Services 1%
Government >1%
Q3 2020 Quarterly Bulletin
13Mortgages Outstanding
Outstanding mortgages weighted average interest rate (%) 3.55
Portfolio Debt Service Coverage Ratio 1.87
Floating-rate-linked mortgages21,22 (%) 65.0
Staggered Mortgage Maturities
$80,000,000
$70,000,000
$60,000,000
$50,000,000 Interest Rate
2.97%
$40,000,000
$30,000,000
$20,000,000 Interest Rate Interest Rate Interest Rate Interest Rate Interest Rate Interest Rate Interest Rate
3.87% 4.28% 4.65% 4.23% 4.08% 4.75% 2.56%
$10,000,000
$0
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Debt Expiry Total Mortgage Principal Outstanding
14 ICM Property Partners TrustHigh-Yield Lending
Investments
Investment Summary
Loan Investment Summary as of Q3 2020
Mortgage portfolio CA$14.0 million
Total number of mortgage investments 8
Average mortgage investment CA$1.7 million
Weighted average interest rate 11.2%
Weighted average loan to value 71.4%
Maximum loan to value 72.1%
Loan Investment Summary as of Q3 2020
(in million Canadian Dollars, except counts and percentages)
By Security Number CA$ Amount % of Portfolio
First 1 0.2 1.2%
Second 6 13.3 95.0%
Third 1 0.5 3.8%
Total 8 14.0 100.0%
Loan Investment Summary as of Q3 2020
By Maturity Number CA$ Amount % of Portfolio
Past due 0 0.0 0.0%
2020 1 5.4 38.6%
2021 7 8.6 61.4%
2022 and beyond 0 0.0 0.0%
Total 8 14.0 100.0%
Q3 2020 Quarterly Bulletin
15Investment
Restrictions
Investment Strategies
Status Constraint
55.4% invested in U.S. Not greater than 80% shall be invested in any single country
91.3% in real property investments Not less than 50% shall be invested in real property investments, defined as
equity ownership interests in real property
29.8% in Mexico Not greater than 30% shall be invested outside of the U.S. and Canada
26.7% in Mexico City Not greater than 30% shall be invested in any individual market, defined by
metropolitan statistical area or equivalent
28.1% to Mexico Development Not greater than 50% shall be invested in any single investment strategy.
Mexico 29.8% Canada 14.8%
Core 0.0% Core 0.0%
Core Plus 1.7% Core Plus 2.6%
Value Add 0.0% Value Add 1.0%
Opportunistic 28.1% Opportunistic 2.4%
High-Yield Lending 0.0% High-Yield Lending 8.7%
United States 55.4%
Core 0.0%
Core Plus 6.8%
Value Add 22.2%
Opportunistic 26.4%
High-Yield Lending 0.0%
Status Constraint
0.0% allocated to Core or Low- Not greater than 15% shall be invested in investments that would not
Yield Lending. be characterized as Core Plus, Value Add, Opportunistic Real Property
Investments, and High Yield Generating Investments
0.0% Not greater than 10% shall be invested in publicly traded Securities of real
estate issuers or other passive investments intended to provide for liquidity
for the Trust.
16 ICM Property Partners TrustLeverage Restrictions for Property Investments
Status Constraint
45.0% The portfolio of property investments shall not exceed a loan-to-value (“LTV”)
of 65%
Satisfied with 68.0% maximum at Individual property investments other than as outlined below shall not exceed
time of investment 70% loan-to-cost (“LTC”)
Maximum of 80.6%, Individual property investments in development/re-development projects and
certain multi-family assets shall not exceed an LTC of 85%.
Leverage Restrictions for Property Based Lending Investments
Status Constraint
71.8% The portfolio of debt investments shall not exceed an LTC/LTV of 75%
Satisfied Individual debt investments shall not exceed an LTC of 85%, or an LTV of 75%
Satisfied, maximum of 70.0% LTC Debts senior to the Trust’s position shall not exceed an LTC of 75%, or an LTV
of 70%
Leverage Restrictions for Trust Debt
Status Constraint
4.1% If the portfolio of property investments or the portfolio of debt investments
are collectively below the maximum thresholds noted above, the Trust may
leverage its equity interests, with any such portfolio debt not to exceed 10%
of the total Net Asset Value of the Trust
Q3 2020 Quarterly Bulletin
17Active Markets
Endnotes
1 Dollar values in this report, unless otherwise specified, are reported in Canadian Dollars (CAD). FX conversion to CAD is determined by a 90-day rolling average
FX rate in accordance with the ICM Valuation Policy. In this report, FX rates applied are: CAD/USD 1.3222 and MXN/CAD 16.4023.
2 Pipeline includes unfunded commitments of committed projects, and full equity commitments of other projects PPT expected to begin funding over the next
2 quarters. As deals continue to be negotiated, details related to the funding requirement may change and will reflect as a change in the expected pipeline
commitments value reported.
3 Based on underwriting
4 Weighted average lease expiration, weighted based on NAV of portfolio holdings.
5 Debt service coverage ratio =(Net operating Income)/(Principal Paydown+Interest Expense), adjusted for PPT’s equity ownership interest.
6 Weighted based on weighted based on NAV of portfolio holdings.
7 % of NAV represents the Fund’s exposure based on the currency value of equity contributions and is adjusted for working capital allocated to each project.
8 Based on NAV of portfolio holdings, working capital, and capital commitments to pipeline projects.
9 Assuming pipelines are fully committed in the within next 2 quarters.
10 An information circular and proxy was sent out on November 26, 2020, to investors of a non-arms-length fund managed by ICM proposing the amalgamation of
that fund into PPT, the forward-looking asset mix assumes that the proposed transaction is successful
11 “Development” is also known as “Opportunistic” by other practitioners in the industry. In this report, we use “Development” to refer to “Opportunistic” as they
refer to the same underlying group of properties.
12 Represented as annualized expected leveraged return on investments upon execution of the business plan and/or project completion.
13 2 multifamily residential properties (1.8% of NAV) are excluded from the calculation of the WALE as leases are signed on a rolling basis usually for approxi-
mately one year.
14 Lending-based Investments are not typically included as real estate categories by other practitioners in the industry. Lending-Based Investments are included
here for a holistic perspective of the portfolio
15 2 multifamily residential properties (1.8% of NAV) are excluded from the calculation of the WALE as leases are signed on a rolling basis usually for approxi-
mately one year.
16 Stabilized in place occupancy for income producing assets is typically considered to be 87-97% depending on asset type and market. The current in-place
occupancy of 79.9% demonstrates that PPT has material additional income growth and value creation opportunities across this segment of the portfolio.
17 Total weighted by expected annual revenue.
18 The other category includes Edmonton, AB, Calgary, AB, Washington, DC, Toronto, ON, Fort Lauderdale, FL and Mexico City, Mexico; in descending order.
19 Q3 allocation used to determine Q2 and Q3 weighted occupancy.
20 We only consider a property a mover should its occupancy has a material impact, i.e. Above >0.5% NAV and the occupancy change must be >2%
21 Based on mortgage balance outstanding at the end of Q3, relative to the total mortgage balance outstanding. This ratio was 50.1% at YE 2019..
22 LIBOR has fallen ~20 bps from Q2: 0.56% to Q3: 0.36%, which favors a floating rate mortgage.
18 ICM Property Partners Trustinvestments@icmgroup.ca www.icmassetmanagement.com +1 (403) 256-5350
Q3 2020 Quarterly Bulletin
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