Classified in: Business
Subjects: EARNINGS, CALENDAR OF EVENTS, v, Conference Calls/ Webcasts

Nexus Industrial REIT Announces Q3 2022 Results and December Distribution

TORONTO, Nov. 14, 2022 (GLOBE NEWSWIRE) -- Nexus Industrial REIT (the "REIT") (TSX: NXR.UN) announced today its results for the quarter ended September 30, 2022.

Highlights

On November 1, 2022, the REIT acquired a 435,871 square foot portfolio of four industrial properties occupied by a single tenant for $38.2 million ($28.5 USD million). Three of the properties are located in Windsor, Ontario and one is located in Tilbury, Ontario.
On October 4, 2022, the REIT sold a retail property located in Longueuil, Quebec for $11.9 million.
On September 30, 2022, the REIT acquired an industrial property located in Cornwall, Ontario for $4.9 million. The property is occupied by one of the REIT's existing tenants.
On September 8, 2022, the REIT acquired a single-tenant 74,681 square foot industrial property located in the Montreal area for $17.8 million.
On August 31, 2022, the REIT increased its existing revolving credit facility from $40 million to $140 million.
On August 3, 2022, the REIT sold a retail property located in Châteauguay, Quebec for $8.3 million.
On July 18, the REIT acquired an 80% interest in land located in Hamilton, Ontario for $4.8 million. The REIT anticipates being able to develop an approximately 115,000 square foot class A industrial building on the site, with construction completion anticipated for early 2024.
On July 11, 2022, the REIT acquired a single-tenant 94,000 square foot industrial property located in the Quebec City area for $18.9 million.
Occupancy of 97% at September 30, 2022 was consistent with June 30, 2022 and increased from 95% at September 30, 2021.
Q3 2022 net operating income of $24.9 million increased by $10.8 million or 76.6% as compared to $14.1 million for Q3 2021 and by $0.9 million or 3.8% as compared to $24.0 million for Q2 2022.
Q3 2022 Same Property NOI⁽¹⁾of $12.9 million increased by $0.3 million or 2.1% as compared to Q3 2021. The increase is primarily driven by rental steps and CPI increases at certain of the REIT's industrial properties as well as lease renewal lift, offsetting vacancy at one of the REIT's industrial properties and an office property.
Q3 2022 results included a $0.5 million unrealized foreign exchange loss which impacted per unit measures by $0.006 per unit.
Q3 2022 Normalized FFO⁽¹⁾ per unit was $0.209, as compared to $0.203 for Q2 2022 and $0.191 for Q3 2021.
Q3 2022 Normalized AFFO⁽¹⁾ per unit was $0.179, as compared to $0.177 for Q2 2022 and $0.174 for Q3 2021.
Q3 2022 Normalized AFFO payout ratio⁽¹⁾ was 88.9%, as compared to 90.3% for Q2 2022 and 95.9% for Q3 2021.
NAV⁽¹⁾ per unit increased to $12.45 at September 30, 2022 as compared to $12.41 at June 30, 2022 and $11.55 at September 30, 2021.
Debt to Total Assets of 47.2% at September 30, 2022. $60.0 million of availability on the REIT's lines of credit and $59.4 million of unencumbered properties.

(1)

Non-IFRS Financial Measure

"In the third quarter, we began to see the positive impact of rental rate growth in our industrial portfolio with approximately 150,000 square feet of renewals and new leases commencing in the quarter with rents on average $1.35 per square foot higher than expiring rents. In the fourth quarter, we have approximately 250,000 square feet of renewals and new leases commencing with rents on average $2.50 per square foot higher than expiring rents" commented Kelly Hanczyk, the REIT's Chief Executive Officer. "On the development front we are in negotiation with a tenant for a new build to suit industrial building at a REIT property in Regina, Saskatchewan where we have 23 acres of excess land on which we plan to build 300,000 square feet of gross leasable area. In London, Ontario we are awaiting permits for a planned 100,000 square feet addition to one of our properties, which we are currently in negotiation with a tenant to lease upon completion. We continue to soft market several of our retail and office properties and have an offer in play for one of our Quebec retail properties. We have also received an unsolicited offer to purchase a small portfolio of industrial properties in Saskatchewan. We will continue to pursue capital recycling opportunities where they make sense, with proceeds used to fund development projects that are expected to generate higher yields and to acquire class A industrial properties in Ontario and Quebec that will further elevate the quality of our portfolio."

Summary of Results

(In thousands of Canadian dollars, except per unit amounts)	Three months ended September 30,			Nine months ended September 30,
	2022	2021		2022	2021
Financial Results	$	$		$	$

Property revenues	34,424	20,719		100,265	56,022
Net operating income (NOI)	24,873	14,095		70,859	36,881
Net income (loss)	40,055	(12,075	)	137,759	48,779

Financial Highlights

Funds from operations (FFO) ⁽¹⁾	16,661	9,979	47,085	25,579
Normalized FFO ^{(1) (2)}	16,548	10,393	47,454	26,666
Adjusted funds from operations (AFFO) ⁽¹⁾	14,302	9,074	40,601	23,027
Normalized AFFO ^{(1) (2)}	14,189	9,488	40,970	24,114
Same Property NOI ⁽¹⁾	12,935	12,666	30,182	30,388
Distributions declared ⁽³⁾	12,609	9,098	37,619	22,606

Weighted average units outstanding (000s) - basic ⁽⁴⁾	79,208	54,428	78,543	46,322
Weighted average units outstanding (000s) - diluted ⁽⁴⁾	79,336	54,600	78,696	46,530

Per unit amounts:
Distributions per unit - basic ^{(3) (4)}	0.159	0.167	0.479	0.488
FFO per unit - basic ^{(1) (4)}	0.210	0.183	0.599	0.552
Normalized FFO per unit - basic ^{(1) (2) (4)}	0.209	0.191	0.604	0.576
AFFO per unit - basic ^{(1) (4)}	0.181	0.167	0.517	0.497
Normalized AFFO per unit - basic ^{(1) (2) (4)}	0.179	0.174	0.522	0.521

NAV per unit ⁽¹⁾	12.45	11.21	12.45	11.21

Normalized AFFO payout ratio - basic ^{(1) (2) (3)}	88.9%	95.9%	91.8%	93.7%
Debt to total assets ratio	47.2%	36.6%	47.2%	36.6%

	(1)	Non-IFRS Financial Measure
	(2)	See Appendix A ? Non-IFRS Financial Measures
	(3)	Includes distributions payable to holders of Class B LP Units which are accounted for as interest expense in the condensed consolidated interim financial statements.
	(4)	Weighted average number of units includes the Class B LP Units.

Included in the table above and elsewhere in this news release are non-IFRS financial 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. Certain additional disclosures for these non-IFRS financial measures have been incorporated by reference and can be found on page 3 in the REIT's Management's Discussion and Analysis for the three and nine months ended September 30, 2022, available on SEDAR at www.sedar.com and on the REIT's website under Investor Relations. See Appendix A of this earnings release for a reconciliation of the non-IFRS financial measures to the primary financial statement measures.

Q3 2022 NOI of $24.9 million was $10.8 million higher than Q3 2021 NOI of $14.1 million. Acquisitions since June 30, 2021 generated $9.7 million of incremental NOI in Q3 2022 as compared to Q3 2021. Incremental rental income from the completion of an expansion at the REIT's Ajax property increased Q3 2022 NOI by $0.1 million as compared to Q3 2021. Q3 2022 Same Property NOI increased $0.3 million as compared to Q3 2021, primarily driven by rental steps and CPI increases at certain of the REIT's industrial properties as well as lease renewal lift, offsetting vacancy at one of the REIT's industrial properties and an office property. The disposal of a retail property in 2021 and another during Q3 2022 reduced NOI by $0.2 million. Straight-line rents also contributed $0.9 million to the increase over Q3 2021, driven primarily by newly acquired properties with steps in rent. Amortization of tenant incentives and leasing costs and termination fees were consistent for Q3 2022 and Q3 2021.

Q3 2022 fair value adjustment of investment properties of $1.9 million reflects $34.8 million of fair value write-downs primarily related to capitalization rate expansion for certain industrial properties ($31.4 million), retail properties ($1.9 million) and office properties ($1.5 million) and $1.1 million of transaction costs. In addition, the REIT's assets held for sale were written down by $1.3 million due to capitalization rate expansion. These amounts were partially offset by a $23.9 million fair value gain related to NOI improvements, driven by leasing, at certain industrial properties and a $11.2 million gain related primarily to a recently acquired industrial property with development potential, the carrying value of which was adjusted to appraised value.

Q3 net income, AFFO and FFO included unrealized foreign exchange losses of $0.5 million on the revaluation of a US dollar denominated liability.

Earnings Call

Management of the REIT will host a conference call at 1:00 PM Eastern Standard Time on Tuesday November 15, 2022 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 Industrial REIT conference call.

A recording of the conference call will be available until December 15, 2022. 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 9580.

December 2022 Distribution

The REIT will make a cash distribution in the amount of $0.05333 per unit, representing $0.64 per unit on an annualized basis, payable January 16, 2023 to unitholders of record as of December 30, 2022.

The REIT's distribution reinvestment plan ("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 Industrial REIT

Nexus is a growth-oriented real estate investment trust focused on increasing unitholder value through the acquisition of industrial properties located in primary and secondary markets in Canada and potentially including the United States, and the ownership and management of its portfolio of properties. The REIT currently owns a portfolio of 113 properties (including two properties held for development in which the REIT has an 80% interest) comprising approximately 11.1 million square feet of gross leasable area. The REIT has approximately 58,799,000 Units issued and outstanding. Additionally, there are Class B LP Units of subsidiary limited partnerships of Nexus issued and outstanding, which are convertible into approximately 20,535,000 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.

For further information please contact:

Kelly C. Hanczyk, CEO at (416) 906-2379 or
Rob Chiasson, CFO at (416) 613-1262.

APPENDIX A ? NON-IFRS FINANCIAL MEASURES

(In thousands of Canadian dollars, except per unit amounts)	Three months ended September 30,						Nine months ended September 30,
	2022		2021		Change		2022		2021		Change
FFO	$		$		$		$		$		$

Net income	40,055		(12,075	)	52,130		137,759		48,779		88,980
Adjustments:
Loss on disposal of investment properties	255		-		255		255		95		160
Fair value adjustment of investment properties	1,890		(26,287	)	28,177		4,513		(100,370	)	104,883
Fair value adjustment of Class B LP Units	(27,558	)	45,204		(72,762	)	(88,212	)	73,104		(161,316	)
Fair value adjustment of unit options	(200	)	897		(1,097	)	(608	)	1,798		(2,406	)
Fair value adjustment of restricted share units	(124	)	170		(294	)	(369	)	318		(687	)
Fair value adjustment of derivative financial instruments	(1,499	)	(704	)	(795	)	(17,365	)	(4,386	)	(12,979	)
Adjustments for equity accounted joint venture ⁽¹⁾	374		(44	)	418		618		(302	)	920
Distributions on Class B LP Units expensed	3,251		2,624		627		9,779		5,974		3,805
Amortization of tenant incentives and leasing costs	204		188		16		680		509		171
Lease principal payments	(10	)	(17	)	7		(34	)	(50		16
Amortization of right-of-use assets	23		23		-		69		70		(1	)
Deferred income taxes	-		-		-		-		40		(40	)
Funds from operations (FFO)	16,661		9,979		6,682		47,085		25,579		21,506
Weighted average units outstanding (000s) - basic⁽⁵⁾	79,208		54,428		24,780		78,543		46,322		32,221
FFO per unit ? basic	0.210		0.183		0.027		0.599		0.552		0.047

FFO	16,661		9,979		6,682		47,085		25,579		21,506
Add: Vendor rent obligation⁽²⁾	688		615		73		1,971		1,862		109
Less: Other income⁽²⁾	(801	)	(201	)	(600	)	(1,602	)	(982	)	(620	)
Add: TSX graduation listing fees⁽³⁾	-		-		-		-		207		(207	)
Normalized FFO	16,548		10,393		6,155		47,454		26,666		20,788
Weighted average units outstanding (000s) Basic⁽⁵⁾	79,208		54,428		24,780		78,543		46,322		32,221
Normalized FFO per unit - basic	0.209		0.191		0.018		0.604		0.576		0.028

(In thousands of Canadian dollars, except per unit amounts)	Three months ended September 30,					Nine months ended September 30,
	2022		2021		Change		2022		2021		Change
AFFO	$		$		$		$		$		$

FFO	16,661		9,979		6,682		47,085		25,579		21,506
Adjustments:
Straight-line adjustments ground lease and rent	(1,059	)	(155	)	(904	)	(2,684	)	(427	)	(2,257	)
Capital reserve⁽⁴⁾	(1,300	)	(750	)	(550	)	(3,800	)	(2,125	)	(1,675	)
Adjusted funds from operations (AFFO)	14,302		9,074		5,228		40,601		23,027		17,574
Weighted average units outstanding (000s) - basic ⁽⁵⁾	79,208		54,428		24,780		78,543		46,322		32,221
AFFO per unit - basic	0.181		0.167		0.014		0.517		0.497		0.020

AFFO	14,302		9,074		5,228		40,601		23,027		17,574
Add: Vendor rent obligation ⁽²⁾	688		615		73		1,971		1,862		109
Less: Other income ⁽²⁾	(801	)	(201	)	(600	)	(1,602	)	(982	)	(620	)
Add: TSX graduation listing fees ⁽³⁾	-		-		-		-		207		(207	)
Normalized AFFO	14,189		9,488		4,701		40,970		24,114		16,856
Weighted average units outstanding (000s) - basic ⁽⁵⁾	79,208		54,428		24,780		78,543		46,322		32,221
Normalized AFFO per unit - basic	0.179		0.174		0.005		0.522		0.521		0.001

	(1)	Adjustment for equity accounted joint venture relates to a fair value adjustment of swaps in place at the joint venture to swap floating rate bankers' acceptance rates to a fixed rate and fair value adjustment of the joint venture investment property.
	(2)	Normalized FFO and Normalized AFFO include adjustments for vendor rent obligation amounts related to the REIT's Richmond, BC and Ajax properties, which are payable from the vendors of the properties until buildout of the properties is complete and tenants are occupying and paying rent. The vendor rent obligation amount is not included in NOI for accounting, but the estimated total amount of vendor rent obligation is recorded in other income. Normalized FFO and Normalized AFFO exclude estimated future vendor rent obligation amounts included in other income in the condensed consolidated interim statements of income and comprehensive income and include the scheduled quarterly rents receivable in the form of vendor rent obligation.
	(3)	Normalized FFO and Normalized AFFO include adjustments for $0.2 million of one-time TSX listing fees related to graduation to the TSX, which are included in general and administrative expense in the nine-month period ended September 30, 2021.
	(4)	Capital reserve includes maintenance capital expenditures, tenant incentives and leasing costs. Reserve amounts are established with reference to building condition reports, appraisals, and internal estimates of tenant renewal, tenant incentives and leasing costs. The REIT believes that a reserve is more appropriate given the fluctuating nature of these expenditures.
	(5)	Weighted average number of units includes the Class B LP Units.

(In thousands of Canadian dollars)	Three Months ended September 30,						Nine Months ended September 30,
Same Property NOI	2022		2021		Change		2022		2021		Change
	$		$		$		$		$		$

Property revenues	34,424		20,719		13,705		100,265		56,022		44,243
Property expenses	(9,551	)	(6,624	)	(2,927	)	(29,406	)	(19,141	)	(10,265	)
NOI	24,873		12,220		10,778		70,859		36,881		33,978
Add/(Deduct):
Amortization of tenant incentives and leasing costs	204		190		14		680		535		145
Straight-line adjustments of rent	(1,036	)	(134	)	(902	)	(2,619	)	(363	)	(2,256	)
Development	(90	)	-		(90	)	(270	)	-		(270	)
Acquisitions	(10,967	)	(1,224	)	(9,743	)	(38,109	)	(5,877	)	(32,232	)
Disposals	(49	)	(260	)	211		(300	)	(775	)	475
Termination fees and other non-recurring items	-		(1	)	1		(59	)	(13	)	(46	)
Same Property NOI	12,935		12,666		269		30,182		30,388		(206	)

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Nexus Industrial REIT Announces Q3 2022 Results and December Distribution

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