Nexus Industrial REIT Announces First Quarter 2025 Financial Results

Yahoo

15-05-2025

Q1 Net Operating Income grew 8.6% from accretive acquisitions, development, and 6.6% industrial SPNOI
Completed the strategic transition to a pure-play industrial REIT
TORONTO, May 14, 2025 (GLOBE NEWSWIRE) -- Nexus Industrial REIT (the 'REIT') (TSX: NXR.UN) announced today its results for the first quarter ended March 31, 2025.
'In the first quarter we completed our strategic transition to a pure-play, Canada-focused industrial REIT' said Kelly Hanczyk, CEO of Nexus Industrial REIT. 'We sold fifteen legacy retail properties and an additional office building. Industrial assets now contribute over 99% of our NOI on a proforma basis. The sale proceeds reduced our debt and are being used to complete two ongoing development projects that will add $6.6 million of annual stabilized NOI after completion in the third quarter, representing an unlevered 9.4% return on development costs.
'Over the past five years we have successfully re-focused and grown Nexus to be a scale pure-play industrial REIT. Our updated portfolio of industrial properties positions us well to withstand the turbulent economic environment: our buildings are tenanted by high-quality lessees focusing on Canadian distribution, with long average lease terms. And, our buildings are geographically diversified within Canada.
'We have also had an excellent start to our 2025 leasing,' continued Mr. Hanczyk. 'We have already renewed over 80% of our expiring GLA, including three value-add renewals that will contribute another $2.6 million to NOI this year and $2.9 million in 2026, increasing thereafter. These renewals further demonstrate the quality of our portfolio and the strength of our tenant relationships.
'I am very excited with the progress that we have made, and I am confident that our strategy will continue to be rewarding for our unitholders' concluded Mr. Hanczyk.
First Quarter 2025 Highlights:
Completed the transition to a pure-play industrial REIT by selling 15 legacy retail properties and one legacy office property for total proceeds of $50.9 million.
Industrial in-place and committed occupancy increased to 97% from 96% in 2024.
Net income was $33.2 million driven by net operating income ("NOI")(1) of $32.1 million and by fair value gains on Class B LP units and on investment properties, partially offset by financing expense, general and administrative expense and fair value losses on derivative instruments.
NOI increased 8.6% versus year ago to $32.1 million from the acquisition of high-quality, tenanted income-producing industrial properties, and growth in industrial Same Property NOI(1).
Industrial Same Property NOI(1) increased 6.6% year over year to $27.4 million.
Normalized FFO(1) per unit increased $0.022 versus a year ago to $0.187 and Normalized AFFO(1) per unit increased $0.019 versus a year ago to $0.154.
Unitholders' equity increased by $24.5 million and NAV(1) per unit of $13.21 increased $0.02 or 0.2% versus Q4 2024.
Advanced construction on the 325,000 sq. ft. expansion project in St. Thomas, ON, and on the 115,000 sq. ft. new industrial small-bay complex in Calgary, AB. Combined, these projects will add annual stabilized NOI of $6.6 million when complete. Completion of both projects is planned for the third quarter.(1) Non-IFRS Financial Measure
Subsequent events:
On April 14, 2025, the REIT acquired a land parcel adjacent to one of its existing properties in Kelowna, BC for a purchase price of $18.8 million. The land is intended for the future development of Class A industrial buildings. The purchase consideration was settled through the transfer of a non-core industrial property in Fort St. John valued at $7.0 million and the balance settled in cash.
Concurrent with the above transaction, the REIT entered into an agreement with the vendor of the REIT's Richmond, BC property, The REIT will develop 51,467 square feet for additional courts and parking, representing a value of approximately $29 million. The Developer will manage the development and assume the costs of the construction. The agreement provides that, as long as certain conditions are met, the fee may be paid by issuing to the Developer Class B LP Units of a subsidiary limited partnership of the REIT, valued at $10.50 per unit and exchangeable on a 1 for 1 basis for REIT units. In accordance with the agreement, the REIT has agreed to issue 2,764,464 Class B LP units which will be released in stages as consideration for the construction costs.
Summary of Results
(In thousands of Canadian dollars, except per unit amounts)
Three months ended March 31,
2025
2024
$
$
FINANCIAL INFORMATION
Operating Results
Property revenues
44,754
41,597
NOI (1)
32,090
29,537
Net Income
33,151
43,671
Adjusted EBITDA (LTM) (1)
121,151
107,206
FFO (1)
17,043
14,355
Normalized FFO (1) (2)
17,580
15,378
AFFO (1)
14,397
11,588
Normalized AFFO (1) (2)
14,478
12,611
Distributions declared (3)
15,073
14,940
Same Property NOI (1)
27,824
26,268
Industrial Same Property NOI (1)
27,353
25,650
Weighted average units outstanding (000s):
Basic (4)
94,203
93,341
Diluted (4)
94,477
93,448
Per unit amounts:
Distributions per unit – basic (3) (4)
0.160
0.160
Distributions per unit – diluted (3) (4)
0.160
0.160
Normalized FFO per unit – basic (1) (2) (4)
0.187
0.165
Normalized FFO per unit – diluted (1) (2) (4)
0.186
0.165
Normalized AFFO per unit – basic (1) (2) (4)
0.154
0.135
Normalized AFFO per unit – diluted (1) (2) (4)
0.153
0.135
Normalized AFFO payout ratio – basic (1) (2) (3)
104.1
%
118.5
%
Normalized AFFO payout ratio – diluted (1) (2) (3)
104.6
%
118.5
%
Same Property NOI Growth % (1)
5.9
%
-1.5
%
Industrial Same Property NOI Growth % (1)
6.6
%
1.0
%(1)
This is a Non-IFRS Financial Measure.
(2)
Until Q1 2024, Normalized FFO and Normalized AFFO included adjustments for vendor rent obligation amounts due from the vendor of the REIT's Richmond, BC property, until certain conditions were satisfied. During Q2 2024, these conditions were satisfied and the vendor settled all outstanding amounts.
(3)
Includes distributions payable to holders of Class B LP Units which are accounted for as finance expense in the consolidated financial statements.
(4)
Weighted average number of units includes Class B LP Units.
As at March 31, 2025 and December 31, 2024
2025
2024
(In thousands of Canadian dollars, unless stated otherwise)
$
$
PORTFOLIO INFORMATION
Total Portfolio
Number of Investment Properties (2)
90
106
Number of Properties Under Development
2
2
Investment Properties Fair Value (excludes assets held for sale)
2,469,045
2,458,174
Gross leasable area ('GLA') (in millions of sq. ft.) (at the REIT's ownership interest)
11.7
12.5
Industrial occupancy rate – in-place and committed (period-end) (3)
97
%
96
%
Weighted average lease term ('WALT') (years)
6.7
6.8
Industrial WALT (years)
6.8
7.0
Estimated spread between industrial portfolio market and in-place rents
21.8
%
25.3
%
FINANCING AND CAPITAL INFORMATION
Financing
Net debt (1)
1,255,667
1,279,538
Total Indebtedness Ratio (1)
48.8
%
49.1
%
Net Debt to Adjusted EBITDA (1)
10.36
10.87
Adjusted Net Debt to Adjusted EBITDA (1)
10.31
10.27
Debt service coverage ratio (times)
1.64
1.62
Secured Indebtedness Ratio
26.3
%
27.4
%
Unencumbered investment properties as a percentage of investment properties
40.2
%
39.5
%
Total assets
2,574,184
2,604,460
Cash and cash equivalents
9,080
11,532
Capital
Total equity (per consolidated financial statements)
1,086,233
1,061,724
Total equity (including Class B LP Units)
1,244,968
1,241,747
Total number of Units (in thousands) (4)
94,221
94,159
NAV per Unit
13.21
13.19
(1)
See Non-IFRS Financial Measure.
(2)
Includes 3 properties (17 properties - December 31, 2024) classified as assets held for sale.
(3)
Includes committed new leases for future occupancy.
(4)
Includes Class B LP Units.
Non-IFRS Measures
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 months ended March 31, 2025, available on SEDAR at www.sedarplus.ca 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.
NOI
NOI for the three months ended March 31, 2025 was $32.1 million or $2.6 million higher than the prior year, which was primarily due to $1.1 million from acquisitions of industrial income producing properties completed subsequent to Q1 2024, an increase in Same Property NOI by $1.6 million, and $1.6 million relating to development projects, partially offset by $1.4 million relating to dispositions completed since Q1 2024, and $0.1 million relating to higher tenant incentives and leasing costs amortization.
Fair value adjustment of investment properties
The fair value gains on investment properties for the three months ended March 31, 2025, totalled $8.9 million. The REIT engaged external appraisers to value properties totaling $90.7 million in the quarter. Overall, fair value gains recorded for the REIT's portfolio primarily consists of $4.5 million relating to properties held for development based on development progress relative to the as-completed appraisal value and $10.0 million relating to changes in stabilized NOI and capitalization rates. Partially offsetting this is $2.9 million of capital expenditures net of adjustments that were not deemed to increase the fair value of the properties and therefore fair valued to zero and $2.7 million relating to investment property sale price adjustments prior to disposition.
Outlook
The REIT is focused on delivering total unitholder return through profitable long-term growth, and by pursuing its strategy as a Canada-focused pure-play industrial REIT.
Overall, the REIT anticipates mid-single digit Same Property NOI growth in its industrial portfolio for the full year.
In 2025, the REIT expects to benefit from the completion of two significant development projects. Combined, these properties will add annual stabilized NOI of approximately $6.6 million when complete:
The REIT expects to complete its 325,000 sq ft Dennis Rd. expansion project in St. Thomas, ON in the third quarter of 2025. This project is being constructed for an existing tenant. The REIT earns 7.8% on capital expenditures during the construction phase, and will earn a contractual going-in yield of 9.0% on the total development costs of $54.9 million upon completion.
The REIT is constructing a 115,000 sq ft small-bay industrial building adjacent to an existing building that it owns in Calgary, AB. The project is now expected to be completed in the third quarter of 2025 and to earn a going-in yield of approximately 11% on total development costs of $15.4 million.
Earnings Call
Management of the REIT will host a conference call at 10:00 AM Eastern Standard Time on Thursday May 15, 2025 to review the financial results and operations. To participate in the conference call, please dial 647-846-8414 or 1-833-752-3601 (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, 2025. To access the recording, please dial 1-412-317-0088 or 1-855-669-9658 (toll free in Canada and the US) and enter access code 4446040.
May and June Distributions
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 June 13, 2025, to unitholders of record as of May 30, 2025.
The REIT will also make a cash distribution in the amount of $0.05333 per unit, representing $0.64 per unit on an annualized basis, payable July 15, 2025, to unitholders of record as of June 30, 2025.
Annual Meeting Voting Results
Each of the matters set out in the REIT's management information circular dated March 26, 2025 (the 'Circular') for the annual meeting of unitholders held on May 14, 2025 (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
23,448,607
59.583%
15,906,168
40.417%
Bradley Cutsey
27,573,968
70.065%
11,780,807
29.935%
Daniel Oberste
39,198,350
99.603%
156,425
0.397%
Mary Vitug
29,108,794
73.965%
10,245,981
26.035%
Kelly C. Hanczyk
33,109,525
84.131%
6,245,250
15.869%
Ben Rodney
27,578,382
70.076%
11,776,393
29.924%
The voting results for the audit committee, including Ms. Floriana Cipollone, Mr. Bradley Cutsey, and Mr. Ben Rodney, have been negatively impacted by Glass Lewis and Institutional Shareholder Services ("ISS") recommendation to the REIT's unitholders to withhold votes for these trustees due to excessive non-audit fees paid by the REIT to the REIT's auditor PricewaterhouseCoopers LLP ("the REIT's auditor"). This recommendation is based on Glass Lewis' and ISS' assessment ("their assessment") of the audit fees disclosed in the REIT's annual information form (AIF) for the year ended December 31, 2024.
The REIT disagrees with their assessment. Audit fees paid by the REIT to the REIT's auditor during the year ended December 31, 2024, were $0.35 million as compared to non-audit fees of $0.28 million. This demonstrates that the audit fees paid exceeded non-audit fees by $0.07 million. The amounts referenced by Glass Lewis and ISS are fees billed by the REIT's auditor and disclosed as such in the REIT's AIF, and not amounts paid by the REIT.
Final results on all matters considered at the Meeting are reported in the Report of Voting Results as filed on SEDAR (www.sedarplus.ca).
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 89 properties (including one property held for development in which the REIT has an 80% interest) comprising approximately 11.7 million square feet of gross leasable area. The REIT has approximately 94,234,000 voting units issued and outstanding, including approximately 71,128,000 REIT Units and approximately 23,106,000 Class B LP Units of subsidiary limited partnerships of Nexus, which are convertible to REIT Units on a one-to-one basis.
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 [phone] orMike Rawle, CFO at [phone]
APPENDIX A – NON-IFRS FINANCIAL MEASURES
(In thousands of Canadian dollars, except per unit amounts)
Three months ended March 31,
2025
2024
Change
FFO
$
$
$
Net income
33,151
43,671
(10,520
)
Adjustments:
Loss on disposal of investment properties
85
-
85
Fair value adjustment of investment properties
(8,878
)
(15,183
)
6,305
Fair value adjustment of Class B LP Units
(19,037
)
(10,828
)
(8,209
)
Fair value adjustment of incentive units
199
(9
)
208
Fair value adjustment of derivative financial instruments
7,989
(7,491
)
15,480
Adjustments for equity accounted joint venture (1)
76
(42
)
118
Distributions on Class B LP Units expensed
3,713
3,938
(225
)
Amortization of tenant incentives and leasing costs
366
273
93
Lease principal payments
(26
)
(4
)
(22
)
Amortization of right-of-use assets
30
30
-
Net effect of unrealized foreign exchange on USD debt and related hedges
(625
)
-
(625
)
Funds from operations (FFO)
17,043
14,355
2,688
Weighted average units outstanding (000s) Basic (4)
94,203
93,341
862
FFO per unit – basic
0.181
0.154
0.027
FFO
17,043
14,355
2,688
Add: Vendor rent obligation (2)
-
628
(628
)
Add: Non-recurring personnel transition costs
107
260
(153
)
Add: Non-recurring adjustments from asset dispositions (5)
472
-
472
Add: Other non-cash items (6)
(42
)
135
(177
)
Normalized FFO
17,580
15,378
2,202
Weighted average units outstanding (000s) Basic (4)
94,203
93,341
862
Normalized FFO per unit – basic
0.187
0.165
0.022
(In thousands of Canadian dollars, except per unit amounts)
Three months ended March 31,
2025
2024
Change
AFFO
$
$
$
FFO
17,043
14,355
2,688
Adjustments:
Straight-line adjustments ground lease and rent
(1,046
)
(1,167
)
121
Capital reserve (3)
(1,600
)
(1,600
)
-
Adjusted funds from operations (AFFO)
14,397
11,588
2,809
Weighted average units outstanding (000s) Basic (4)
94,203
93,341
862
AFFO per unit – basic
0.153
0.124
0.029
AFFO
14,397
11,588
2,809
Add: Vendor rent obligation (2)
-
628
(628
)
Add: Non-recurring personnel transition costs
107
260
(153
)
Add: Non-recurring adjustments from asset dispositions (5)
16
-
16
Add: Other non-cash items (6)
(42
)
135
(177
)
Normalized AFFO
14,478
12,611
1,867
Weighted average units outstanding (000s) Basic (4)
94,203
93,341
862
Normalized AFFO per unit – basic
0.154
0.135
0.019
(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 a fair value adjustment of the joint venture investment property.
(2)
Until Q1 2024, Normalized FFO and Normalized AFFO included adjustments for vendor rent obligation amounts due from the vendor of the REIT's Richmond, BC property, until certain conditions were satisfied. During Q2 2024, these conditions were satisfied and the vendor settled all outstanding amounts.
(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 capital expenditures.
(4)
Weighted average number of units includes the Class B LP Units.
(5)
These adjustments represent balance sheet write-offs, early mortgage repayment charges, and other costs associated with the disposals made during the period. Given the one-time, non-recurring, nature of these costs, the REIT has adjusted for these in determining normalized FFO and normalized AFFO.
(6)
This adjustment represents unrealized foreign exchange losses (gains) on transactions relating to deferred purchase consideration. Note that the comparative periods for 2024 have been updated to conform with the current period presentation.SAME PROPERTY RESULTS
(In thousands of Canadian dollars)
Three months ended March 31,
2025
2024
Change
$
$
$
Property revenues
44,754
41,597
3,157
Property expenses
(12,664
)
(12,060
)
(604
)
NOI
32,090
29,537
2,553
Add/(Deduct):
Amortization of tenant incentives and leasing costs
366
273
93
Straight-line adjustments of rent
(1,045
)
(1,164
)
119
Development and expansion
(1,622
)
(70
)
(1,552
)
Acquisitions
(1,335
)
(248
)
(1,087
)
Disposals
(630
)
(2,025
)
1,395
Termination fees and other non-recurring items
-
(35
)
35
Same Property NOI
27,824
26,268
1,556
Industrial same property NOI
27,353
25,650
1,703
ADJUSTED EBITDA
(In thousands of Canadian dollars)
Three months ended March 31,
2025
2024
Change
$
$
$
Net income
80,362
199,984
(119,622
)
Add (deduct):
Net interest expense
55,049
46,680
8,369
Distributions on Class B LP Units
15,053
14,606
447
Fair value adjustments (1)
(30,593
)
(151,931
)
121,338
Amortization expense (1)(2)
(3,151
)
(3,732
)
581
Loss on disposal of investment properties
1,540
807
733
Unrealized foreign exchange loss (gain)
123
(53
)
176
Income from development property
2,374
325
2,049
Non-recurring personnel transition costs
191
520
(329
)
Non-recurring costs related to asset dispositions
203
-
203
Adjusted EBITDA
121,151
107,206
13,945
(1)
Includes equity accounted investments adjustments.
(2)
Includes amortization of straight line rent, tenant improvement, and leasing commissions.ADJUSTED NET DEBT
(In thousands of Canadian dollars)
March 31,
December 31,
2025
2024
$
$
Current and non-current:
Mortgages payable
581,204
590,292
Credit facilities
663,632
649,836
Lease liabilities
10,689
10,715
Liabilities associated with assets held for sale
9,222
40,227
Total indebtedness
1,264,747
1,291,070
Less: Unrestricted cash
(9,080
)
(11,532
)
Less: Additions to properties under development
(7,130
)
(70,232
)
Adjusted net debt
1,248,537
1,209,306