Q4 Net Operating Income grew 10.0% from accretive acquisitions, development, and 5.1% industrial SPNOI
Advanced the strategic transition to a pure-play industrial REIT
TORONTO, March 10, 2025 (GLOBE NEWSWIRE) -- Nexus Industrial REIT (the “REIT”) (TSX: NXR.UN) announced today its results for the fourth quarter and year ended December 31, 2024.
“2024 was a formative year for Nexus Industrial, and I am very pleased with the results. We executed a purposeful strategic re-shaping, focusing our business as the Canada-focused pure-play industrial REIT. We made significant future investments, while also delivering strong organic growth”, said Kelly Hanczyk, CEO.
“During the year we opportunistically sold our legacy office and non-core industrial properties, and have firm sales contracts for the majority of the retail portfolio, closing in March. We completed three development projects adding 500,000 sq ft of GLA and have advanced two more which will be finished mid this year. Combined, these five new developments will contribute over $13 million to NOI annually.
“Our industrial portfolio has continued to deliver strong results growing NOI 12.4% for the year to a record of $126 million, and full-year SPNOI growth was an enviable 4.7%”, continued Mr. Hanczyk.
“I am very excited with the progress that we have made, and I am confident that our strategy will continue to be meaningful and rewarding for our stakeholders.”
Fourth Quarter 2024 Highlights:
Further advanced towards a pure-play industrial REIT by selling 3 legacy office properties, a mixed-use industrial property, and four non-core industrial buildings for total proceeds of $48.2 million.
Net income was $49.7 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.
NOI increased 10.0% 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 5.1% year over year to $26.1 million.
Normalized FFO(1) per unit increased $0.013 versus a year ago to $0.192 and Normalized AFFO(1) per unit increased $0.011 versus a year ago to $0.161.
Unitholders' equity increased by $61.4 million versus a year ago and NAV(1) per unit of $13.19 increased $0.32 or 2.5% versus a year ago.
2024 Highlights:
Focused Nexus as a pure-play industrial REIT by selling legacy office assets and non-core industrial buildings for total proceeds of $72.9 million, and executing firm sales contracts for the legacy retail portfolio.
Net income was $90.9 million driven by net operating income ("NOI")(1) of $125.9 million and by fair value gains on investment properties and on Class B LP Units, partially offset by financing expense.
NOI increased 12.4% year over year to $125.9 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 4.7% year over year to $87.8 million.
Completed construction and tenanted a new 325,000 sq. ft. industrial building in Regina, SK, and a new 96,000 sq. ft. industrial intensification project in London, ON. Completed construction of a new 115,000 sq. ft. building in Hamilton, ON.
Advanced construction on the 325,000 sq. ft. expansion project in St. Thomas, ON., and on a 115,000 sq. ft. new industrial small-bay complex in Calgary, AB.
Normalized FFO(1) per unit decreased $0.036 versus a year ago to $0.722 and Normalized AFFO(1) per unit decreased $0.036 versus a year ago to $0.602.
Subsequent event:
On February 21, 2025, the REIT completed the sale of an office property located in Laval, Quebec for a selling price of $3.9 million. This property was previously classified as an asset held for sale. At the time of disposal, the REIT repaid a mortgage that was on the property of $2.4 million.
(1) Non-IFRS Financial Measure
Summary of Results
(In thousands of Canadian dollars, except per unit amounts)
Three months ended December 31,
Year ended December 31,
2024
2023
2024
2023
$
$
$
$
FINANCIAL INFORMATION
Operating Results
Property revenues
44,664
42,005
175,700
157,652
NOI (1)
32,146
29,225
125,868
111,973
Net Income
49,677
2,137
90,882
160,030
Adjusted EBITDA (1)
31,329
28,317
118,774
105,101
FFO (1)
16,464
15,404
65,009
66,687
Normalized FFO (1) (2)
18,032
16,502
67,760
68,039
AFFO (1)
13,589
12,721
53,743
55,841
Normalized AFFO (1) (2)
15,157
13,819
56,494
57,193
Distributions declared (3)
15,065
14,771
60,038
57,482
Same Property NOI (1)
27,576
26,421
94,151
90,849
Industrial Same Property NOI (1)
26,058
24,794
87,833
83,918
Weighted average units outstanding (000s):
Basic (4)
94,159
92,275
93,797
89,709
Diluted (4)
94,322
92,377
93,960
89,811
Per unit amounts:
Distributions per unit – basic (3) (4)
0.160
0.160
0.640
0.640
Distributions per unit – diluted (3) (4)
0.160
0.160
0.640
0.640
Normalized FFO per unit – basic (1) (2) (4)
0.192
0.179
0.722
0.758
Normalized FFO per unit – diluted (1) (2) (4)
0.191
0.179
0.721
0.758
Normalized AFFO per unit – basic (1) (2) (4)
0.161
0.150
0.602
0.638
Normalized AFFO per unit – diluted (1) (2) (4)
0.161
0.150
0.601
0.637
Normalized AFFO payout ratio – basic (1) (2) (3)
99.4
%
106.9
%
106.3
%
100.5
%
Normalized AFFO payout ratio – diluted (1) (2) (3)
99.4
%
106.9
%
106.3
%
100.5
%
Same Property NOI Growth % (1)
4.4
%
1.3
%
3.6
%
3.6
%
Industrial Same Property NOI Growth % (1)
5.1
%
2.9
%
4.7
%
4.3
%
(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 December 31, 2024 and December 31, 2023
2024
2023
(In thousands of Canadian dollars, unless stated otherwise)
$
$
PORTFOLIO INFORMATION
Total Portfolio
Number of Investment Properties(2)
106
116
Number of Properties Under Development
2
4
Investment Properties Fair Value (excludes assets held for sale)
2,458,174
2,364,027
Gross leasable area (“GLA”) (in millions of sq. ft.) (at the REIT's ownership interest)
12.5
12.5
Industrial occupancy rate – in-place and committed (period-end)(3)
96
%
99
%
Weighted average lease term (“WALT”) (years)
6.8
6.9
Industrial WALT (years)
7.0
7.2
Estimated spread between industrial portfolio market and in-place rents
25.3
%
29.0
%
FINANCING AND CAPITAL INFORMATION
Financing
Net debt(1)
1,279,538
1,203,432
Total Indebtedness Ratio(1)
49.13
%
48.86
%
Net Debt to Adjusted EBITDA(1)
10.8
11.5
Adjusted Debt to Adjusted EBITDA(1)
10.3
10.9
Debt service coverage ratio (times)
1.62
1.72
Secured Indebtedness Ratio
27.4
%
30.4
%
Unencumbered investment properties as a percentage of investment properties
40.8
%
35.6
%
Total assets
2,604,460
2,463,067
Cash and cash equivalents
11,532
5,918
Capital
Total equity (per consolidated financial statements)
1,061,724
1,000,329
Total equity (including Class B LP Units)
1,241,747
1,199,434
Total number of Units (in thousands)(4)
94,159
93,201
NAV per Unit
13.19
12.87
(1)
See Non-IFRS Financial Measure.
(2)
Includes 17 properties (4 properties - December 31, 2023) 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 year ended December 31, 2024, 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 December 31, 2024 was $32.1 million or $2.9 million higher than Q4 2023, which was primarily due to $1.6 million from acquisitions of industrial income producing properties completed subsequent to Q3 2023, Same Property NOI of $1.2 million from lease up of 1751-1771 Savage Rd, Richmond, BC, $0.5 million relating to development projects and $0.2 million relating to straight-line adjustments of rent, partially offset by $0.5 million relating to dispositions completed since Q4 2023 and $0.1 million relating to tenant incentives and leasing costs amortization.
NOI for the year ended December 31, 2024 was $125.9 million or $13.9 million higher than the prior year, which was primarily due to $11.8 million from acquisitions of industrial income producing properties completed subsequent to Q4 2023, an increase in Same Property NOI of $3.3 million, and $0.9 million relating to development projects, partially offset by $1.8 million relating to dispositions completed since Q4 2023, and $0.3 million relating to tenant incentives and leasing costs amortization.
Fair value adjustment of investment properties
The fair value adjustment of investment properties for the three months ended December 31, 2024, totalled $8.1 million. The REIT engaged external appraisers to value properties totaling $125.6 million in the quarter. Overall, fair value gains recorded for the REIT’s portfolio primarily consists of $13.4 million relating to properties held for development based on development progress relative to the as-completed appraisal value. Partially offsetting this is $3.0 million of capital expenditures that were not deemed to increase the fair value of the properties and therefore fair valued to zero, $1.7 million relating to investment property sale price adjustments and $0.7 million relating to changes in stabilized NOI and capitalization rates.
The fair value adjustment of investment properties for the year ended December 31, 2024, totalled $47.9 million. The fair value adjustment reflects the net write up of income properties primarily due to $35.7 million in respect of properties held for development, $22.3 million relating to changes in stabilized NOI and capitalization rates, $2.4 million relating to fair value gains from the sale of an excess land at Fort St-John, BC, and $1.4 million from the remeasurement of Class B LP Units issued as part of an acquisition in Q3 2024. Partially offsetting this is $8.2 million of capital expenditures that were not deemed to increase the fair value of the properties and therefore fair valued to zero, $3.9 million relating to revaluation adjustments to investment properties prior to disposition, and $1.7 million of transaction costs from acquisitions completed during the year.
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 $6.8 million when complete:
The REIT expects to complete its 325,000 sq ft Dennis Rd. expansion project in St. Thomas, ON in the second 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 expected to be completed in the second quarter of 2025 and to earn a going-in yield of 12.0% on total development costs of $15.4 million.
The REIT is focused on transitioning to a pure-play industrial REIT. The REIT has executed firm contracts to sell its legacy retail properties for approximately $47 million, which are anticipated to close in the first quarter of 2025. Following the dispositions, the REIT will no longer earn income from the sold properties. The REIT will use the sale proceeds to reduce debt and to fund existing development.
Earnings Call
Management of the REIT will host a conference call at 10:00 AM Eastern Standard Time on Monday March 10, 2025 to review the financial results and operations. To participate in the conference call, please dial 647-484-8814 or 1-844-763-8274 (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 April 10, 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 9645419.
March and April 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 April 15, 2025, to unitholders of record as of March 31, 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 May 15, 2025, to unitholders of record as of April 30, 2025.
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 105 properties (including one property held for development in which the REIT has an 80% interest) comprising approximately 12.5 million square feet of gross leasable area. The REIT has approximately 94,208,000 voting units issued and outstanding, including approximately 71,102,000 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 (416) 906-2379 or Mike Rawle, CFO at (647) 823-1381
APPENDIX A – NON-IFRS FINANCIAL MEASURES
(In thousands of Canadian dollars, except per unit amounts)
Three months ended December 31,
Year ended December 31,
2024
2023
Change
2024
2023
Change
FFO
$
$
$
$
$
$
Net income
49,677
2,137
47,540
90,882
160,030
(69,148
)
Adjustments:
Loss on disposal of investment properties
922
—
922
1,455
807
648
Fair value adjustment of investment properties
(8,087
)
(35,542
)
27,455
(47,911
)
(95,970
)
48,059
Fair value adjustment of Class B LP Units
(26,220
)
23,419
(49,639
)
(10,628
)
(27,765
)
17,137
Fair value adjustment of incentive units
(178
)
92
(270
)
(3
)
(160
)
157
Fair value adjustment of derivative financial instruments
(2,630
)
21,868
(24,498
)
15,164
15,531
(367
)
Fair value adjustment of Other investments
—
(1,450
)
1,450
—
(1,450
)
1,450
Adjustments for equity accounted joint venture (1)
(1,412
)
740
(2,152
)
(1,117
)
615
(1,732
)
Distributions on Class B LP Units expensed
3,746
3,810
(64
)
15,278
13,846
1,432
Amortization of tenant incentives and leasing costs
376
318
58
1,478
1,171
307
Lease principal payments
(19
)
(10
)
(9
)
(64
)
(59
)
(5
)
Amortization of right-of-use assets
31
22
9
121
91
30
Net effect of unrealized foreign exchange on USD debt and related hedges
258
—
258
354
—
354
Funds from operations (FFO)
16,464
15,404
1,060
65,009
66,687
(1,678
)
Weighted average units outstanding (000s) Basic (4)
94,159
92,275
1,884
93,797
89,709
4,088
FFO per unit – basic
0.175
0.167
0.008
0.693
0.743
(0.050
)
FFO
16,464
15,404
1,060
65,009
66,687
(1,678
)
Add: Vendor rent obligation (2)
—
629
(629
)
628
2,552
(1,924
)
Less: Other income (2)
—
(1,001
)
1,001
—
(2,603
)
2,603
Add: Non-recurring personnel transition costs
—
1,619
(1,619
)
344
1,619
(1,275
)
Add: Non-recurring adjustments from asset dispositions(5)
1,065
—
1,065
1,192
—
1,192
Add: Other non-cash items(6)
503
(149
)
652
587
(216
)
803
Normalized FFO
18,032
16,502
1,530
67,760
68,039
(279
)
Weighted average units outstanding (000s) Basic (4)
94,159
92,275
1,884
93,797
89,709
4,088
Normalized FFO per unit – basic
0.192
0.179
0.013
0.722
0.758
(0.036
)
(In thousands of Canadian dollars, except per unit amounts)
Three months ended December 31,
Year ended December 31,
2024
2023
Change
2024
2023
Change
AFFO
$
$
$
$
$
$
FFO
16,464
15,404
1,060
65,009
66,687
(1,678
)
Adjustments:
Straight-line adjustments ground lease and rent
(1,275
)
(1,083
)
(192
)
(4,866
)
(4,746
)
(120
)
Capital reserve (3)
(1,600
)
(1,600
)
—
(6,400
)
(6,100
)
(300
)
Adjusted funds from operations (AFFO)
13,589
12,721
868
53,743
55,841
(2,098
)
Weighted average units outstanding (000s) Basic (4)
94,159
92,275
1,884
93,797
89,709
4,088
AFFO per unit – basic
0.144
0.138
0.006
0.573
0.622
(0.049
)
AFFO
13,589
12,721
868
53,743
55,841
(2,098
)
Add: Vendor rent obligation (2)
—
629
(629
)
628
2,552
(1,924
)
Less: Other income (2)
—
(1,001
)
1,001
—
(2,603
)
2,603
Add: Non-recurring personnel transition costs
—
1,619
(1,619
)
344
1,619
(1,275
)
Add: Non-recurring adjustments from asset dispositions(5)
1,065
—
1,065
1,192
—
1,192
Add: Other non-cash items(6)
503
(149
)
652
587
(216
)
803
Normalized AFFO
15,157
13,819
1,338
56,494
57,193
(699
)
Weighted average units outstanding (000s) Basic (4)
94,159
92,275
1,884
93,797
89,709
4,088
Normalized AFFO per unit – basic
0.161
0.150
0.011
0.602
0.638
(0.036
)
(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 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 2023 have been updated to conform with the current period presentation.
SAME PROPERTY RESULTS
(In thousands of Canadian dollars)
Three months ended December 31,
Year ended December 31,
2024
2023
Change
2024
2023
Change
$
$
$
$
$
$
Property revenues
44,664
42,005
2,659
175,700
157,652
18,048
Property expenses
(12,518
)
(12,780
)
262
(49,832
)
(45,679
)
(4,153
)
NOI
32,146
29,225
2,921
125,868
111,973
13,895
Add/(Deduct):
Amortization of tenant incentives and leasing costs
376
317
59
1,478
1,170
308
Straight-line adjustments of rent
(1,274
)
(1,079
)
(195
)
(4,856
)
(4,728
)
(128
)
Development and expansion
(791
)
(309
)
(482
)
(2,103
)
(1,237
)
(866
)
Acquisitions
(2,166
)
(558
)
(1,608
)
(21,935
)
(10,176
)
(11,759
)
Disposals
(654
)
(1,112
)
458
(4,093
)
(5,939
)
1,846
Termination fees and other non-recurring items
(61
)
(63
)
2
(208
)
(214
)
6
Same Property NOI
27,576
26,421
1,155
94,151
90,849
3,302
Industrial same property NOI
26,058
24,794
1,264
87,833
83,918
3,915
ADJUSTED EBITDA
(In thousands of Canadian dollars)
Three months ended December 31,
Year ended December 31,
2024
2023
Change
2024
2023
Change
$
$
$
$
$
$
Net income
49,677
2,137
47,540
90,882
160,030
(69,148
)
Add (deduct):
Net interest expense
13,976
12,378
1,598
54,865
41,545
13,320
Distributions on Class B LP Units
3,746
3,810
(64
)
15,278
13,846
1,432
Fair value adjustments(1)
(38,526
)
9,196
(47,722
)
(44,495
)
(109,130
)
64,635
Amortization expense(1)(2)
(893
)
(760
)
(133
)
(3,368
)
(3,569
)
201
Loss on disposal of investment properties
922
—
922
1,455
807
648
Unrealized foreign exchange loss (gain)
716
(143
)
859
923
(202
)
1,125
Income from development property
646
80
566
1,698
155
1,543
Non-recurring personnel transition costs
—
1,619
(1,619
)
344
1,619
(1,275
)
Non-recurring costs related to asset dispositions
1,065
—
1,065
1,192
—
1,192
Adjusted EBITDA
31,329
28,317
3,012
118,774
105,101
13,673
(1)
Includes equity accounted investments adjustments.
(2)
Includes amortization of Straight Line Rent, Tenant Improvement, and Leasing Commissions.
