Le Lézard
Classified in: Business
Subject: EARNINGS

Nexus Industrial REIT Announces Q2 2022 Results and August Distribution


TORONTO, Aug. 11, 2022 (GLOBE NEWSWIRE) -- Nexus Industrial REIT (the "REIT") (TSX: NXR.UN) announced today its results for the quarter ended June 30, 2022.

Highlights

(1)   Non-IFRS Financial Measure

"Our portfolio performed well in the quarter, with year over year same property NOI increasing $0.1MM. Leasing activity continues to be strong, particularly in southwestern Ontario. On 164,278 square feet of Ontario leasing and renewals, we realized 68% rental rate growth. We will continue to see strong rental rate growth in the Ontario and Quebec industrial markets in particular. The positive impact of this leasing activity will be seen in the third and fourth quarters. We have a number of acquisition opportunities that are being evaluated, and will acquire opportunistically in the current economic environment," commented Kelly Hanczyk, the REIT's Chief Executive Officer. "On August 3rd, we sold one of our retail properties and we have another retail property under contract to sell. Our retail and office properties perform well for the REIT and we will continue to patiently execute on our disposition program."

Summary of Results

Included in the tables that follow 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 six months ended June 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.

 


(In thousands of Canadian dollars, except per unit amounts)Three months ended
June 30,
Six months ended
June 30,
 2022202120222021
Financial Results$$$$
     
Property revenues34,14218,71565,84135,303
Net operating income (NOI)23,96212,22045,98622,786
Net income79,64050,64597,70460,854
     
Financial Highlights    
     
Funds from operations (FFO)(1)15,7008,91630,42415,601
Normalized FFO(1) (2)16,0278,95230,90516,274
Adjusted funds from operations (AFFO)(1)13,6217,99926,29913,954
Normalized AFFO(1) (2)13,9488,03526,78014,627
Same Property NOI(1)12,07111,94820,23820,601
Distributions declared(3)12,5987,73125,01013,508
     
Weighted average units outstanding (000s) - basic(4)78,84248,29378,20442,201
Weighted average units outstanding (000s) - diluted(4)79,00148,38978,41042,273
     
Per unit amounts:    
Distributions per unit - basic(3) (4)0.1600.1600.3200.320
FFO per unit - basic(1) (4)0.1990.1850.3890.370
Normalized FFO per unit - basic(1) (2) (4)0.2030.1850.3950.386
AFFO per unit - basic(1) (4)0.1730.1660.3360.331
Normalized AFFO per unit - basic(1) (2) (4)0.1770.1660.3420.347
     
NAV per unit(1)12.4111.2112.4111.21
     
Normalized AFFO payout ratio - basic(1) (2) (3)90.3%96.2%93.4%92.3%
Debt to total assets ratio46.0%40.4%46.0%40.4%
     


 (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.


Q2 2022 NOI of $24.0 million was $11.7 million higher than Q2 2021 NOI of $12.2 million. Acquisitions completed since March 31, 2021 generated $11.0 million of incremental NOI in Q2 2022 as compared to Q2 2021. Incremental rental income from the completion of an expansion at the REIT's Ajax property increased Q2 2022 NOI by $0.1 million as compared to Q2 2021. Q2 2022 Same Property NOI increased $0.1 million as compared to Q2 2021, primarily driven by rental steps and CPI increases at certain of the REIT's industrial properties offsetting vacancy at one of the REIT's industrial properties ($0.1 million). The disposal of a retail property in 2021 reduced NOI by $0.1 million. Straight-line rents also contributed $0.7 million to the increase over Q2 2021, driven primarily by newly acquired properties with steps in rent. Amortization of tenant incentives and leasing costs increased slightly over the prior period reducing NOI, offset by higher termination fees in the current quarter.

Q2 2022 fair value adjustment of investment properties of $4.5 million reflects $5.4 million of fair value write downs primarily related to capitalization rate expansion for industrial properties located in certain markets in Western Canada and for certain retail and office properties in Quebec. These amounts were partially offset by a $3.5 million gain related to contractual changes in cash flows at certain industrial properties. In addition, the REIT's assets held for sale were written down by $2.3 million due to capitalization rate expansion.

Q2 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 11:00 AM Eastern Standard Time on Friday August 12, 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 September 12, 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 9113.

August 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 September 15, 2022 to unitholders of record as of August 31, 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 108 properties comprising approximately 10.6 million square feet of gross leasable area. The REIT has approximately 58,473,000 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 20,724,000 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
June 30,
Six months ended
June 30,
 2022 2021 Change 2022 2021 Change 
FFO$ $ $ $ $ $ 
             
Net income79,640 50,645 28,995 97,704 60,854 36,850 
Adjustments:            
Loss on disposal of investment properties- - - - 95 (95)
Fair value adjustment of investment properties4,548 (68,987)73,535 2,623 (74,083)76,706 
Fair value adjustment of Class B LP Units(64,346)23,664 (88,010)(60,654)27,900 (88,544)
Fair value adjustment of unit options(550)735 (1,285)(408)901 (1,309)
Fair value adjustment of restricted share units(287)100 (387)(245)148 (393)
Fair value adjustment of derivative financial instruments(7,399)191 (7,590)(15,866)(3,682)(12,184)
Adjustments for equity accounted joint venture(1)548 9 539 244 (257)501 
Distributions on Class B LP Units expensed3,323 2,355 968 6,528 3,350 3,178 
Amortization of tenant incentives and leasing costs211 177 34 476 321 155 
Lease principal payments(11)(17)6 (24)(33)9 
Amortization of right-of-use assets23 24 (1)46 47 (1)
Deferred income taxes- 20 (20)- 40 (40)
Funds from operations (FFO)15,700 8,916 6,784 30,424 15,601 14,823 
Weighted average units outstanding (000s) - basic(5)78,842 48,293 30,549 78,204 42,201 36,003 
FFO per unit ? basic0.199 0.185 0.014 0.389 0.370 0.019 
             
FFO15,700 8,916 6,784 30,424 15,601 14,823 
Add: Vendor rent obligation(2)728 617 111 1,283 1,247 36 
Less: Other income(2)(401)(581)180 (802)(781)(21)
Add: TSX graduation listing fees(3)- - - - 207 (207)
Normalized FFO16,027 8,952 7,075 30,905 16,274 14,631 
Weighted average units outstanding (000s) - basic(5)78,842 48,293 30,549 78,204 42,201 36,003 
Normalized FFO per unit - basic0.203 0.185 0.018 0.389 0.386 0.009 


(In thousands of Canadian dollars, except per unit amounts)Three months ended
June 30,
Six months ended
June 30,
 2022 2021 Change 2022 2021 Change 
AFFO$ $ $ $ $ $ 
             
FFO15,700 8,916 6,784 30,424 15,601 14,823 
Adjustments:            
Straight-line adjustments ground lease and rent(829)(167)(662)(1,625(272)(1,353)
Capital reserve(4)(1,250)(750)(500)(2,500(1,375)(1,125)
Adjusted funds from operations (AFFO)13,621 7,999 5,622 26,299 13,954 12,345 
Weighted average units outstanding (000s) - basic(5)78,842 48,293 30,549 78,204 42,201 36,003 
AFFO per unit - basic0.173 0.166 0.007 0.336 0.331 0.005 
             
AFFO13,621 7,999 5,622 26,299 13,954 12,345 
Add: Vendor rent obligation(2)728 617 111 1,283 1,247 36 
Less: Other income(2)(401)(581)180 (802)(781)(21)
Add: TSX graduation listing fees(3)- - - - 207 (207)
Normalized AFFO13,948 8,035 5,913 26,780 14,627 12,153 
Weighted average units outstanding (000s) - basic(5)78,842 48,293 30,549 78,204 42,201 36,003 
Normalized AFFO per unit - basic0.177 0.166 0.011 0.342 0.347 (0.005)


 (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 six-month period ended June 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
June 30,
Six Months ended
June 30,
Same Property NOI2022 2021 Change 2022 2021 Change 
 $ $ $ $ $ $ 
       
Property revenues34,142 18,715 15,427 65,841 35,303 30,538 
Property expenses(10,180)(6,495)(3,685)(19,855)(12,517)(7,338)
NOI23,962 12,220 11,742 45,986 22,786 23,200 
Add/(Deduct):      
Amortization of tenant incentives and leasing costs211 178 33 476 345 131 
Straight-line adjustments of rent(807)(144)(663)(1,583)(229)(1,354)
Development(90)- (90)(180)- (180)
Acquisitions(11,146)(163)(10,983)(24,398)(2,203)(22,375)
Disposals- (131)131 (4)(266)262 
Termination fees and other non-recurring items(59)(12)(47)(59)(12)(47)
Same Property NOI12,071 11,948 123 20,238 20,601 (363)
       


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