TORONTO and MONTREAL, May 12, 2023 (GLOBE NEWSWIRE) -- Nexus Industrial REIT (the "REIT") (TSX: NXR.UN) announced today its results for the quarter ended March 31, 2023.
Highlights
- On April 26, 2023, the REIT sold a retail property located in Victoriaville, Quebec for $40.3 million.
- On April 21, 2023, the REIT acquired a 264,600 square foot industrial property located in London, Ontario for $36.0 million.
- On March 7, 2023, the REIT acquired a newly constructed 532,000 square foot distribution centre located in Casselman, Ontario for $116.8 million.
- On March 1, 2023, the REIT entered into senior unsecured credit facilities totalling $375 million with three-year terms (the "Unsecured Facilities"). The Unsecured Facilities are comprised of a $190 million revolving credit facility, a $175 million term loan facility and a $10 million swingline facility.
- Occupancy of 97% at March 31, 2023 was consistent with 97% at December 31, 2022 and at March 31, 2022
- Q1 2023 net operating income of $25.7 million increased by $3.7 million or 16.8% as compared to Q1 2022 net operating income of $22.0 million and by $0.8 million or 3.1% as compared to Q4 2022 net operating income of $24.9 million.
- Q1 2023 Same Property NOI(1) of $20.4 million increased by $0.9 million or 4.4% as compared to Q1 2022. The increase is primarily driven by rental steps, CPI increases and new and renewal lease lift at certain of the REIT's industrial properties.
- Q1 2023 general and administrative expense was approximately $0.4 million higher than Q1 2022 and $0.9 million higher than Q4 2022. Q1 2023 general and administrative expense was higher than Q4 2022 primarily due to the timing of vesting of restricted share unit grants and severance costs and higher than Q1 2022 primarily due to severance costs.
- Q1 2023 Normalized FFO(1) per unit of $0.187 as compared to $0.203 for Q4 2022 and $0.192 for Q1 2022.
- Q1 2023 Normalized AFFO(1) per unit of $0.159 as compared to $0.177 for Q4 2022 and $0.165 for Q1 2022.
- Q1 2023 Normalized AFFO payout ratio(1) of 100.7%, as compared to 91.3% for Q4 2022 and 96.7% for Q1 2022.
- NAV(1) per unit of $12.13 at March 31, 2023 as compared to $12.19 at December 31, 2022 and $12.35 at March 31, 2022.
- Debt to Total Assets of 47.3% at March 31, 2023. $200.2 million undrawn on the REIT's lines of credit and a $455.1 million unencumbered asset pool.
- Management of the REIT will host a conference call on Monday May 15th at 11AM EST to review results and operations.
(1) Non-IFRS Financial Measure
"As anticipated, leasing activity in our Southwestern Ontario portfolio has been extremely favourable." commented Kelly Hanczyk, the REIT's Chief Executive Officer. "We completed 3 lease renewals in this market in the first quarter for a total of 158,000 square feet of GLA, with a nearly 100% rental rate increase. Our Q1 same store NOI increased 4.4% or $0.9 million as compared to Q1 2022. In the second quarter, we have an additional 140,000 square feet expiring in Southwestern Ontario where we anticipate modest rental rate growth. Partially offsetting will be a lease in Western Canada which expired at the end of April, where we will experience some turnover vacancy and rental rate reduction. Subsequent to the end of the quarter, we completed the sale of our Victoriaville, Quebec retail property, pushing our industrial weighting by NOI to 90%. We are progressing with several high yielding development projects and have entered into contracts and begun work to build out two intensification projects where we will add approximately 312,000 square feet of GLA to a Regina property and approximately 100,000 square feet of GLA to a London, Ontario property. These projects are expected to deliver very attractive yields and to generate sizeable NAV increases."
Summary of Results
| (In thousands of Canadian dollars, except per unit amounts) | Three months ended March 31, | ||||
| 2023 | 2022 | ||||
| Financial Results | $ | $ | |||
| Property revenues | 37,476 | 31,699 | |||
| Net operating income (NOI) | 25,728 | 22,024 | |||
| Net income | 3,717 | 18,064 | |||
| Financial Highlights | |||||
| Funds from operations (FFO) (1) | 16,448 | 14,724 | |||
| Normalized FFO (1) (2) | 16,451 | 14,879 | |||
| Adjusted funds from operations (AFFO) (1) | 13,948 | 12,678 | |||
| Normalized AFFO (1) (2) | 13,951 | 12,833 | |||
| Same Property NOI (1) | 20,368 | 19,517 | |||
| Distributions declared (3) | 14,042 | 12,412 | |||
| Weighted average units outstanding (000s) - basic (4) | 87,741 | 77,560 | |||
| Weighted average units outstanding (000s) - diluted (4) | 87,843 | 77,720 | |||
| Per unit amounts: | |||||
| Distributions per unit - basic (3) (4) | 0.160 | 0.160 | |||
| FFO per unit - basic (1) (4) | 0.187 | 0.190 | |||
| Normalized FFO per unit - basic (1) (2) (4) | 0.187 | 0.192 | |||
| AFFO per unit - basic (1) (4) | 0.159 | 0.163 | |||
| Normalized AFFO per unit - basic (1) (2) (4) | 0.159 | 0.165 | |||
| NAV per unit (1) | 12.13 | 12.35 | |||
| Normalized AFFO payout ratio - basic (1) (2) (3) | 100.7 | % | 96.7 | % | |
| Debt to total assets ratio | 47.3 | % | 45.4 | % | |
| Estimated spread between industrial portfolio market and in-place rents as at March 31, 2023 | 21.8 | % | N/A | ||
(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 tables 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-month ended March 31, 2023, 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.
Q1 2023 NOI of $25.7 million was $3.7 million higher than Q1 2022 NOI of $22.0 million. Acquisitions completed subsequent to January 1, 2022 generated $3.1 million of incremental NOI in Q1 2023 as compared to Q1 2022. Q1 2023 Same Property NOI increased $0.9 million as compared to Q1 2022, primarily driven by rental steps and CPI increases at certain of the REIT's industrial properties as well as new and renewal lease lift. Straight-line rents also contributed $0.2 million to the increase over Q1 2022, driven primarily by newly acquired properties with steps in rent. The disposal of three retail properties in 2022 and an early surrender payment made to a tenant of the REIT's Richmond, BC property reduced NOI by $0.5 million.
Q1 2023 general and administrative expenses increased over Q4 2022 primarily due to the timing of RSU grant vesting, with one third of the RSUs granted in quarter vesting immediately. As a result, RSU related expense was approximately $0.45 million higher in Q1 2023 than quarterly RSU expense is expected to be for the balance of the year.
Earnings Call
Management of the REIT will host a conference call at 11:00 AM Eastern Standard Time on Monday, May 15, 2023 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 June 15, 2023. 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 0107.
Annual Meeting Voting Results
Each of the matters set out in the REIT's management information circular dated March 27, 2023 (the "Circular") for the annual meeting of unitholders held on May 12, 2023 (the "Meeting") was approved by the requisite majority of unitholders, and 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:
| Nominee | Number of Votes For | Percentage of Votes For | Number of Votes Withheld | Percentage of Votes Withheld |
| Floriana Cipollone | 48,245,187 | 99.91% | 43,272 | 0.09% |
| Bradley Cutsey | 48,175,567 | 99.77% | 112,892 | 0.23% |
| Justine Delisle | 46,955,082 | 97.24% | 1,333,377 | 2.76% |
| Louie DiNunzio | 44,893,072 | 92.97% | 3,395,387 | 7.03% |
| Kelly C. Hanczyk | 48,251,305 | 99.92% | 37,154 | 0.08% |
| Ben Rodney | 44,973,920 | 93.14% | 3,314,539 | 6.86% |
Final results on all matters considered at the Meeting are reported in the Report of Voting Results as filed on SEDAR (www.sedar.com).
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 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 11.6 million square feet of gross leasable area. The REIT has approximately 68,004,000 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 19,862,000 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 March 31, | ||||
| 2023 | 2022 | ||||
| FFO | $ | $ | |||
| Net income | 3,717 | 18,064 | |||
| Adjustments: | |||||
| Fair value adjustment of investment properties | 2,715 | (1,925 | ) | ||
| Fair value adjustment of Class B LP Units | 2,608 | 3,692 | |||
| Fair value adjustment of unit options | - | 142 | |||
| Fair value adjustment of restricted share units | 9 | 42 | |||
| Fair value adjustment of derivative financial instruments | 3,829 | (8,467 | ) | ||
| Adjustments for equity accounted joint venture (1) | 88 | (304 | ) | ||
| Distributions on Class B LP Units expensed | 3,178 | 3,205 | |||
| Amortization of tenant incentives and leasing costs | 296 | 265 | |||
| Lease principal payments | (15 | ) | (13 | ) | |
| Amortization of right-of-use assets | 23 | 23 | |||
| Funds from operations (FFO) | 16,448 | 14,724 | |||
| Weighted average units outstanding (000s) - basic (4) | 87,741 | 77,560 | |||
| FFO per unit - basic | 0.187 | 0.190 | |||
| FFO | 16,448 | 14,724 | |||
| Add: Vendor rent obligation (2) | 604 | 555 | |||
| Less: Other income (2) | (601 | ) | (400 | ) | |
| Normalized FFO | 16,451 | 14,879 | |||
| Weighted average units outstanding (000s) - basic (4) | 87,741 | 77,560 | |||
| Normalized FFO per unit - basic | 0.187 | 0.192 | |||
| (In thousands of Canadian dollars, except per unit amounts) | Three months ended March 31, | ||||
| 2023 | 2022 | ||||
| AFFO | $ | $ | |||
| FFO | 16,448 | 14,724 | |||
| Adjustments: | |||||
| Straight-line adjustments ground lease and rent | (1,100 | ) | (796 | ) | |
| Capital reserve (3) | (1,400 | ) | (1,250 | ) | |
| Adjusted funds from operations (AFFO) | 13,948 | 12,678 | |||
| Weighted average units outstanding (000s) - basic (4) | 87,741 | 77,560 | |||
| AFFO per unit - basic | 0.159 | 0.163 | |||
| AFFO | 13,948 | 12,678 | |||
| Add: Vendor rent obligation (2) | 604 | 555 | |||
| Less: Other income (2) | (601 | ) | (400 | ) | |
| Normalized AFFO | 13,951 | 12,833 | |||
| Weighted average units outstanding (000s) - basic (4) | 87,741 | 77,560 | |||
| Normalized AFFO per unit - basic | 0.159 | 0.165 | |||
(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 amount related to the REIT's Richmond, BC property, which are 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 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 consolidated statements of income and comprehensive income and include the scheduled quarterly rents receivable in the form of vendor rent obligation.
(3) 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.
(4) Weighted average number of units includes the Class B LP Units.
| (In thousands of Canadian dollars) | Three months ended March 31, | ||||
| 2023 | 2022 | ||||
| Same Property NOI | $ | $ | |||
| Property revenues | 37,476 | 31,699 | |||
| Property expenses | (11,748 | ) | (9,675 | ) | |
| NOI | 25,728 | 22,024 | |||
| Add/(Deduct): | |||||
| Amortization of tenant incentives and leasing costs | 296 | 265 | |||
| Straight-line adjustments of rent | (1,017 | ) | (779 | ) | |
| Acquisitions | (4,713 | ) | (1,618 | ) | |
| Disposals | - | (375 | ) | ||
| Termination fees and other non-recurring items | 74 | - | |||
| Same Property NOI | 20,368 | 19,517 | |||
