NXR.UN:CC - 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
- On June 22, 2022, the REIT acquired an 80% interest in land located in Hamilton, Ontario for $17.8 million. The REIT anticipates being able to develop an approximately 250,000 square foot class A industrial building on the site, with construction completion scheduled for late 2024.
- On July 11, 2022, the REIT acquired an approximately 94,000 square foot single-tenant industrial property located in St-Augustin-de-Desmaures, Quebec for $18.9 million.
- On July 18, 2022, 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 scheduled for early 2024.
- On August 3, 2022, the REIT sold a retail property located in Châteauguay, Quebec for $8.3 million.
- On August 3, 2022, the REIT waived conditions with respect to an agreement to purchase a single-tenant industrial property located in Baie-D'Urfe, Quebec for a contractual purchase price of $17.8 million.
- Occupancy of 97% at June 30, 2022, held steady from March 31, 2022 and increased from 95% at June 30, 2021.
- Q2 2022 net operating income of $24.0 million increased by $11.7 million or 96% as compared to $12.2 million for Q2 2021 and by $1.9 million or 8.8% as compared to $22.0 million for Q1 2022.
- Q2 2022 Same Property NOI ( 1) of $12.1 million increased by $0.1 million or 1% as compared to Q2 2021. The increase is 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.
- Q2 2022 results included a $0.5 million unrealized foreign exchange loss which impacted per unit measures by $0.006 per unit.
- Q2 2022 Normalized FFO ( 1) per unit of $0.203, as compared to $0.192 for Q1 2022 and $0.185 for Q2 2021.
- Q2 2022 Normalized AFFO ( 1) per unit of $0.177, as compared to $0.165 for Q1 2022 and $0.166 for Q2 2021.
- Q2 2022 Normalized AFFO payout ratio ( 1) of 90.3%, as compared to 96.7% for Q1 2022 and 96.2% for Q2 2021.
- As at June 30, 2022, the REIT had $150 million of recently acquired properties which were unencumbered. Once these properties are financed and the proceeds are deployed to acquire additional properties, the proceeds of 2021 equity raises will be fully deployed.
- NAV ( 1) per unit increased to $12.41 at June 30, 2022 as compared to $12.35 at March 31, 2022 and $11.21 at June 30, 2021.
- Management of the REIT will host a conference call on Friday August 12 th at 11AM EST to review results and operations.
(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 3 rd , 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, |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| Financial Results |
| $ |
| $ |
| $ |
| $ |
| Property revenues |
| 34,142 |
| 18,715 |
| 65,841 |
| 35,303 |
| Net operating income (NOI) |
| 23,962 |
| 12,220 |
| 45,986 |
| 22,786 |
| Net income |
| 79,640 |
| 50,645 |
| 97,704 |
| 60,854 |
| Financial Highlights |
| Funds from operations (FFO) (1) |
| 15,700 |
| 8,916 |
| 30,424 |
| 15,601 |
| Normalized FFO (1) (2) |
| 16,027 |
| 8,952 |
| 30,905 |
| 16,274 |
| Adjusted funds from operations (AFFO) (1) |
| 13,621 |
| 7,999 |
| 26,299 |
| 13,954 |
| Normalized AFFO (1) (2) |
| 13,948 |
| 8,035 |
| 26,780 |
| 14,627 |
| Same Property NOI (1) |
| 12,071 |
| 11,948 |
| 20,238 |
| 20,601 |
| Distributions declared (3) |
| 12,598 |
| 7,731 |
| 25,010 |
| 13,508 |
| Weighted average units outstanding (000s) - basic (4) |
| 78,842 |
| 48,293 |
| 78,204 |
| 42,201 |
| Weighted average units outstanding (000s) - diluted (4) |
| 79,001 |
| 48,389 |
| 78,410 |
| 42,273 |
| Per unit amounts: |
| Distributions per unit - basic (3) (4) |
| 0.160 |
| 0.160 |
| 0.320 |
| 0.320 |
| FFO per unit - basic (1) (4) |
| 0.199 |
| 0.185 |
| 0.389 |
| 0.370 |
| Normalized FFO per unit - basic (1) (2) (4) |
| 0.203 |
| 0.185 |
| 0.395 |
| 0.386 |
| AFFO per unit - basic (1) (4) |
| 0.173 |
| 0.166 |
| 0.336 |
| 0.331 |
| Normalized AFFO per unit - basic (1) (2) (4) |
| 0.177 |
| 0.166 |
| 0.342 |
| 0.347 |
| NAV per unit (1) |
| 12.41 |
| 11.21 |
| 12.41 |
| 11.21 |
| Normalized AFFO payout ratio - basic (1) (2) (3) |
| 90.3% |
| 96.2% |
| 93.4% |
| 92.3% |
| Debt to total assets ratio |
| 46.0% |
| 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 income |
| 79,640 |
| 50,645 |
| 28,995 |
| 97,704 |
| 60,854 |
| 36,850 |
| Adjustments: |
| Loss on disposal of investment properties |
| - |
| - |
| - |
| - |
| 95 |
| (95 |
| ) |
| Fair value adjustment of investment properties |
| 4,548 |
| (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 expensed |
| 3,323 |
| 2,355 |
| 968 |
| 6,528 |
| 3,350 |
| 3,178 |
| Amortization of tenant incentives and leasing costs |
| 211 |
| 177 |
| 34 |
| 476 |
| 321 |
| 155 |
| Lease principal payments |
| (11 |
| ) |
| (17 |
| ) |
| 6 |
| (24 |
| ) |
| (33 |
| ) |
| 9 |
| Amortization of right-of-use assets |
| 23 |
| 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 – basic |
| 0.199 |
| 0.185 |
| 0.014 |
| 0.389 |
| 0.370 |
| 0.019 |
| FFO |
| 15,700 |
| 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 FFO |
| 16,027 |
| 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 - basic |
| 0.203 |
| 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 |
| $ |
| $ |
| $ |
| $ |
| $ |
| $ |
| FFO |
| 15,700 |
| 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 - basic |
| 0.173 |
| 0.166 |
| 0.007 |
| 0.336 |
| 0.331 |
| 0.005 |
| AFFO |
| 13,621 |
| 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 AFFO |
| 13,948 |
| 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 - basic |
| 0.177 |
| 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 NOI |
| 2022 |
| 2021 |
| Change |
| 2022 |
| 2021 |
| Change |
| $ |
| $ |
| $ |
| $ |
| $ |
| $ |
| Property revenues |
| 34,142 |
| 18,715 |
| 15,427 |
| 65,841 |
| 35,303 |
| 30,538 |
| Property expenses |
| (10,180 |
| ) |
| (6,495 |
| ) |
| (3,685 |
| ) |
| (19,855 |
| ) |
| (12,517 |
| ) |
| (7,338 |
| ) |
| NOI |
| 23,962 |
| 12,220 |
| 11,742 |
| 45,986 |
| 22,786 |
| 23,200 |
| Add/(Deduct): |
| Amortization of tenant incentives and leasing costs |
| 211 |
| 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 NOI |
| 12,071 |
| 11,948 |
| 123 |
| 20,238 |
| 20,601 |
| (363 |
| ) |