Subject: EARNINGS
Nexus REIT Announces Q1 2020 Results, Annual Meeting Voting Results and June Distribution
TORONTO and MONTREAL, May 14, 2020 (GLOBE NEWSWIRE) -- Nexus Real Estate Investment Trust (the "REIT") (TSXV: NXR.UN) announced today its results for the quarter ended March 31, 2020 the voting results from its annual meeting, and the declaration of the June 2020 distribution.
Highlights
- Completed a $17,400,000 accretive acquisition of 3 industrial properties in Saskatchewan at a blended cap rate of 7.6% on February 3, 2020.
- Q1 2020 net operating income of $9,773,635 was up $836,814 or 9.4% compared to $8,936,821 for Q1 2019.
- Q1 2020 normalized AFFO per unit of $0.049 increased by 0.6% as compared to Q1 2019 normalized AFFO per unit of $0.049; normalized AFFO payout ratio for Q1 2020 of 81.3% is down from 81.6% for Q1 2019.
- Q1 2020 normalized AFFO per unit of $0.049 decreased $0.0026 per unit or 5% as compared to Q4 2019 normalized AFFO per unit of $0.052; normalized AFFO payout ratio increased from 77.0% to 81.3%, primarily driven by the timing of general and administrative expenses, the early termination of a lease to pursue value-add opportunities, the acquisition completed in the quarter which was financed 100% through equity issuance with no debt placed on the properties in the quarter, and seasonality.
- Conservative debt to total assets ratio of 47.6%.
- Management of the REIT will host a conference call on Friday May 15th at 1PM EST to review results and operations.
COVID-19 Update
While the REIT's first quarter results have not been materially affected, COVID-19 has had a significant impact on the Canadian and global economies, and measures taken to contain the spread of Coronavirus, including mandatory closures of businesses, have impacted the REIT and its tenants, resulting in several of the REIT's tenants not paying rents in full or seeking rental arrangements with the REIT in respect of April and May rents. While the duration and impact of COVID-19 on the REIT's business cannot be fully determined at this time, the REIT believes it has sufficient liquidity available to see its way through these difficult times. As of today, the REIT has a $5 million credit facility which is undrawn and has approximately $25 million of properties which are unencumbered and may be mortgaged to generate additional liquidity. 84% of April rents and 80% of May rents have been collected to date with the balance subject to deferral agreements or ongoing discussions with tenants. The asset class break down of collections is as follows:
| April 2020 | May 2020 | |
| Industrial | 87% | 86% |
| Mixed Use | 96% | 80% |
| Office | 97% | 87% |
| Retail | 66% | 61% |
"Over the past several years, we have managed to grow the REIT significantly by completing accretive acquisitions. We have achieved an approximately 80% payout ratio while keeping our debt to gross book value at a conservative 47.6%. With COVID-19 affecting most businesses across Canada, our prudent capital structure has put us in a position to weather the storm" said Kelly Hanczyk CEO of the REIT. "We have decided to defer our planned graduation to the TSX until capital market turbulence subsides. We are working with our tenants on a one by one basis and we're providing support where we can, and we're diligently tracking rent collections. We expect to be able to maintain our distribution policy."
Summary of Results
Included in the tables that follow and elsewhere in this news release are non-IFRS measures that should not be construed as an alternative to net income / loss, cash from operating activities or other measures of financial performance calculated in accordance with IFRS and may not be comparable to similar measures as reported by other issuers. Readers are encouraged to refer to the REIT's MD&A for further discussion of the non-IFRS measures presented.
| Three months ended March 31, | ||
| 2020 | 2019 | |
| Financial Results | $ | $ |
| Property revenue | 15,592,759 | 14,386,438 |
| Net operating income | 9,773,635 | 8,936,821 |
| Net income | 13,671,000 | 4,600,977 |
| Three months ended March 31, | ||
| 2020 | 2019 | |
| Financial highlights | $ | $ |
| Funds from operations (FFO) (1) | 6,283,632 | 8,087,087 |
| Normalized FFO (1) (4) | 6,893,562 | 6,193,532 |
| Adjusted funds from operations (AFFO) (1) | 5,590,259 | 7,410,404 |
| Normalized AFFO (1) (4) | 6,200,189 | 5,516,849 |
| Distributions declared (2) | 5,040,412 | 4,494,971 |
| Weighted average units outstanding ? basic (3) | 125,743,611 | 112,532,148 |
| Weighted average units outstanding ? diluted (3) | 125,861,519 | 112,557,675 |
| Distributions per unit, basic and diluted (2) (3) | 0.040 | 0.040 |
| FFO per unit, basic (1) (3) | 0.050 | 0.072 |
| Normalized FFO per unit, basic (1) (3) (4) | 0.055 | 0.055 |
| AFFO per unit, basic (1) (3) | 0.044 | 0.066 |
| Normalized AFFO per unit, basic (1) (3) (4) | 0.049 | 0.049 |
| Normalized AFFO payout ratio, basic, adjusted (1) (2) (4) | 81.3% | 81.5% |
| Debt to total assets ratio | 47.6% | 51.8% |
| (1) | Non-IFRS Measure |
| (2) | Includes distributions payable to holders of Class B LP Units which are accounted for as interest expense in the consolidated financial statements. |
| (3) | Weighted average number of units includes the Class B LP Units. |
| (4) | Normalized FFO and Normalized AFFO include a vendor rent obligation amount related to the REIT's Richmond, BC property which is payable from the vendor of the property until the buildout of the property is complete and all tenants are occupying and paying rent. The vendor rent obligation amount is not included in NOI for IFRS accounting purposes. Normalized FFO and Normalized AFFO exclude amounts recorded in other income related to estimated future vendor rent obligation amounts. |
Revenues and Results from Operations
Net operating income for Q1 2020 of $9,773,635 was $836,814 higher than net operating income of $8,936,821 for Q1 2019. Properties acquired in 2019 and in 2020 contributed approximately $961,000 in incremental net operating income in Q1 2020 as compared to Q1 2019. Annual CPI lease adjustments increased net operating income by approximately $60,000 for Q1 2020 as compared to Q1 2019. Partially offsetting are a lease that was early terminated to pursue value-add opportunities, which reduced net operating income by approximately $200,000 as compared to the same quarter of last year, and a disposition completed in late 2019 which had the impact of reducing net operating income by approximately $50,000 in Q1 2020 as compared to Q1 2019.
Q1 2020 net operating income is up by $116,361 as compared to Q4 2019 net operating income of $9,657,274, primarily due to the properties acquired in 2020, which contributed approximately $215,000 in incremental net operating income, and due to annual CPI adjustments, which increased net operating income by approximately $60,000, partially offset by a lease that was early terminated to pursue value-add opportunities, reducing net operating income by approximately $165,000. Q1 2020 percentage rents decreased by approximately $120,000 compared to Q4 2019. Occupancy at quarter end remained strong at 94% along with a 5-year average remaining lease term.
General and administrative expense of $992,662 for the quarter was up $281,765 as compared to Q1 2019 and $250,233 as compared to Q4 2019. General and administrative expenses increased as compared to Q4 2019 primarily due to the timing of professional fees and public company costs totaling approximately $100,000, timing of expenses related to the REIT's equity-settled RSU plan of approximately $145,000 and the impact of annual salary reviews.
Net income for the quarter included positive fair value adjustments totaling $8,858,592. Positive fair value adjustments of Class B LP Units, unit options, warrants and restricted share units totaled $15,678,069 in aggregate and negative fair value adjustments to investment properties and interest rate swaps totaled $6,819,477. Negative fair value adjustments of investment properties were related primarily to acquisition accounting for the properties acquired in February 2020. The acquired properties were initially valued at $18,311,428 based on the trading price of the units issued as purchase consideration on the date of issuance of $2.21, and the carrying value of the properties was subsequently adjusted to the $17,400,000 contractual purchase price.
Earnings Call
Management of the REIT will host a conference call at 1:00 PM Eastern Standard Time on Friday May 15, 2020 to review the financial results and operations. To participate in the conference call, please dial 416-915-3239 or 1-800-319-4610 (toll free in Canada and the US) at least five minutes prior to the start time and ask to join the Nexus REIT conference call.
A recording of the conference call will be available until June 15, 2020. To access the recording, please dial 604-674-8052 or 1-855-669-9658 (toll free in Canada and the US) and enter access code 4378.
Annual Meeting Voting Results
Each of the matters set out in the REIT's management information circular dated April 15, 2020 (the "Circular") for the annual meeting of unitholders held on May 14, 2020 (the "Meeting") was approved by the requisite majority of unitholders.
Each of the trustee nominees listed in the Circular was elected as a trustee of the REIT. Voting results for the individual trustees are as follows:
| Name of Nominee | Votes For | Votes Withheld |
| Floriana Cipollone | 41,977,701 (99.97%) | 14,302 (0.03%) |
| Bradley Cutsey | 41,956,062 (99.91%) | 35,941 (0.09%) |
| Kelly C. Hanczyk | 41,965,493 (99.94%) | 26,510 (0.06%) |
| Nick Lagopoulos | 39,087,685 (93.08%) | 2,904,318 (6.92%) |
| Ben Rodney | 41,948,440 (99.90%) | 43,563 (0.10%) |
Final results on all matters considered at the Meeting are reported in the Report of Voting Results as filed on SEDAR (www.sedar.com).
The REIT is very pleased to welcome Ms. Floriana Cipollone as a new member of the Board. Ms. Cipollone brings a wealth of knowledge and experience with her, with almost 30 years of experience in corporate financial management with 19 of those years spent in the real estate industry. The Trustees and Management of the REIT look forward to working with Ms. Cipollone and benefiting from her contributions to the REIT.
June Distribution
The REIT announced today that it will make a cash distribution in the amount of $0.01333 per unit, representing $0.16 per unit on an annualized basis, payable July 15, 2020 to unitholders of record as of June 30, 2020.
The REIT's current distribution per unit continues to be $0.01333 per month. The REIT's distribution reinvestment program ("DRIP") entitles eligible unitholders to elect to receive all, or a portion of the cash distributions of the REIT reinvested in units of the REIT. Eligible unitholders who so elect will receive a bonus distribution of units equal to 4% of each distribution that was reinvested by them under the DRIP.
About Nexus REIT
Nexus is a growth oriented real estate investment trust focused on increasing unitholder value through the acquisition, ownership and management of industrial, office and retail properties located in primary and secondary markets in North America. The REIT currently owns a portfolio of 72 properties comprising approximately 4.0 million square feet of rentable area. The REIT has approximately 107,225,000 units issued and outstanding. Additionally, there are Class B LP units of subsidiary limited partnerships of Nexus REIT issued and outstanding, which are convertible into approximately 24,457,000 REIT units.
Forward Looking Statements
Certain statements contained in this news release constitute forward-looking statements which reflect the REIT's current expectations and projections about future results. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the REIT to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this news release. Such forward-looking statements are based on a number of assumptions that may prove to be incorrect.
While the REIT anticipates that subsequent events and developments may cause its views to change, the REIT specifically disclaims any obligation to update these forward-looking statements except as required by applicable law. These forward-looking statements should not be relied upon as representing the REIT's views as of any date subsequent to the date of this news release. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The factors identified above are not intended to represent a complete list of the factors that could affect the REIT.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
For further information please contact:
Kelly C. Hanczyk, CEO at (416) 906-2379 or
Rob Chiasson, CFO at (416) 613-1262.
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