TORONTO and MONTREAL, March 17, 2021 (GLOBE NEWSWIRE) -- Nexus Real Estate Investment Trust (the "REIT") (TSX: NXR.UN) announced today its results for the year and fourth quarter ended December 31, 2020.
Highlights
Occupancy of 93% at December 31, 2020 remained consistent as compared to Q3 2020 and Q4 2019.
Rent collections continue to be strong despite the challenges of COVID-19.
Completed a total of $50.25MM of industrial acquisitions during the fourth quarter of 2020.
YTD 2020 net operating income of $39,226,095 increased $1,297,995 or 3.4% as compared to 2019 net operating income of $37,928,100. Q4 2020 net operating income of $9,698,301 decreased $251,061 or 2.5% compared to $9,949,362 for Q3 2020 and increased $41,027 or 0.4% compared to $9,657,274 for Q4 2019. Q3 2020 NOI was higher primarily due to a $124,000 early lease termination fee and COVID-19 wage subsidies indirectly benefiting the REIT in Q3.
YTD 2020 normalized FFO per unit of $0.215, as compared to $0.225 for 2019; Q4 2020 normalized FFO per unit of $0.051, as compared to $0.055 for Q3 2020 and $0.058 for Q4 2019.
YTD 2020 normalized AFFO per unit of $0.193, as compared to $0.201 for 2019; Q4 2020 normalized AFFO per unit of $0.046, as compared to $0.048 for Q3 2020 and $0.052 for Q4 2019.
YTD 2020 normalized AFFO payout ratio 82.4% compared to 79.4% for 2019; Q4 2020 normalized AFFO payout ratio of 86.1%, as compared to 84.2% for Q3 2020 and 77.0% for Q4 2019.
Ended 2020 with $14MM of cash and full availability of $5MM credit facility; debt to total assets of 48.2%.
Book NAV per unit, including Class B LP Units, of $2.54 ($10.16 post-Consolidation) at December 31, 2020, as compared to $2.46 ($9.84 post-Consolidation) at September 30, 2020 and $2.52 ($10.08 post-Consolidation) at December 31, 2019.
Graduated to the Toronto Stock Exchange on February 1, 2021, with a 1 for 4 consolidation of outstanding units.
On February 19, 2021, went firm on an agreement to acquire six industrial properties in London, Ontario, for $103.5MM.
Acquired two industrial properties in Edmonton, Alberta for $14MM, on March 1, 2021.
Closed a $34.9MM bought deal equity offering on March 4, 2021 with 4,255,000 REIT Units issued, including 555,000 Units issued as part of a fully exercised overallotment.
Management of the REIT will host a conference call on Thursday March 18th at 1PM EST to review results and operations.
“As mentioned last quarter, we’ve focused on maintaining liquidity and a strong balance sheet in response to the economic and other uncertainty which COVID-19 created.” commented Kelly Hanczyk, the REIT’s Chief Executive Officer. “As vaccine roll out has commenced and economic recovery seems closer, we have shifted focus to deploying our capital to make thoughtful acquisitions. We are focusing our growth on industrial assets, and we completed just over $64 million of industrial acquisitions since Q3 2020, and we expect to close on the previously announced $103.5 million acquisition of six industrial properties in London, Ontario on April 1st, a portfolio where we expect to see significant upside. Our acquisition pipeline is strong, and we are evaluating numerous industrial acquisitions where we may deploy the proceeds of our recently completely $34.9 million bought deal equity financing. We believe that our recent graduation to the TSX concurrent with a 1 for 4 unit consolidation, additional liquidity created through the bought deal equity financing and continuing to build scale with pending industrial acquisitions all combine to make the REIT’s units an attractive investment for a wider range of investors. We are very proud of the REIT’s performance, especially during these unprecedented times. 2021 has started with exceptionally positive momentum for the REIT and we look forward to carrying that through the balance of this year and beyond.”
Summary of Results
Included in the tables that follow and elsewhere in this news release are non-IFRS 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. Readers are encouraged to refer to the REIT’s MD&A for further discussion of the non-IFRS measures presented.
Three months ended December 31,
Year ended December 31,
2020
2019
2020
2019
Financial Results
$
$
$
$
Property revenues
15,648,288
15,583,030
61,385,585
60,010,310
Net operating income (NOI)
9,698,301
9,657,274
39,226,095
37,928,100
Net income
9,831,115
27,332,940
35,234,361
42,387,970
Three months ended December 31,
Year ended December 31,
2020
2019
2020
2019
Financial highlights
$
$
$
$
Funds from operations (FFO) (1)
6,612,764
7,892,732
27,458,202
28,230,409
Normalized FFO (1) (2)
6,992,342
6,993,921
28,262,574
26,568,084
Adjusted funds from operations (AFFO) (1)
5,909,260
7,141,757
24,522,214
25,451,219
Normalized AFFO (1) (2)
6,288,838
6,242,946
25,326,586
23,788,894
Distributions declared (3)
5,413,912
4,808,507
20,864,837
18,897,262
Weighted average units outstanding – basic (4)
136,058,373
120,205,902
131,433,360
118,131,076
Weighted average units outstanding – diluted (4)
136,146,624
120,317,048
131,521,611
118,202,305
Distributions per unit, basic and diluted (3) (4)
0.040
0.040
0.159
0.160
FFO per unit, basic (1) (4)
0.049
0.066
0.209
0.239
Normalized FFO per unit, basic (1) (2) (4)
0.051
0.058
0.215
0.225
AFFO per unit, basic (1) (4)
0.043
0.059
0.187
0.215
Normalized AFFO per unit, basic (1) (2) (4)
0.046
0.052
0.193
0.201
Normalized AFFO payout ratio, basic (1) (2) (3)
86.1%
77.0%
82.4%
79.4%
Debt to total assets ratio
48.2%
49.1%
48.2%
49.1%
(1)
Non-IFRS Measure
(2)
Normalized FFO and Normalized AFFO include a vendor rent obligation amount related to the REIT’s Richmond, BC property which is 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 IFRS accounting purposes. Normalized FFO and Normalized AFFO exclude amounts recorded in other income related to estimated future vendor rent obligation amounts. Normalized FFO and Normalized AFFO for year ended December 31, 2019 include adjustments for debt repayment fees of $578,399 included in interest expense in that period.
(3)
Includes distributions payable to holders of Class B LP Units which are accounted for as interest expense in the consolidated financial statements.
(4)
Weighted average number of units includes the Class B LP Units.
COVID-19 Update
While vaccine roll out has begun, COVID-19 continued to impact the REIT and its tenants through the fourth quarter of 2020 and the first quarter of 2021. The REIT’s retail portfolio, the majority of which is made up of national strong-credit tenants, has proven to be resilient. There are signs that the REIT may experience headwinds within its office portfolio, with some near-term lease renewals expected to be challenging while most office employees are working from home.
The Canada Emergency Rent Subsidy (“CERS”) announced on October 9, 2020 provides up to 90% rent support for qualifying businesses that are temporarily shut down by a mandatory public health order. On March 3, 2021, the Government of Canada announced its intention to extend the program from March 14, 2021, when it was previously set to expire, to June 5, 2021.
Programs such as CERS, its predecessor program the Canada Emergency Commercial Rent Assistance (“CECRA”) program and the Canada Emergency Wage Subsidy program have benefitted many of the REIT’s tenants, and the REIT has been able to maintain a high level of rent collections through the pandemic. The following table summarizes rent collections presented as a percentage of contractual gross rent:
Q2 2020
Q3 2020
Q4 2020
January
February
March
Cash collected from tenants
92.3%
94.4%
98.7%
96.6%
95.9%
95.3%
CECRA collected from government
3.5%
3.7%
0.0%
0.0%
0.0%
0.0%
Subtotal of cash collected from tenants and government
95.8%
98.1%
98.7%
96.6%
95.9%
95.3%
Deferrals granted
7.0%
0.8%
0.3%
0.0%
0.0%
0.0%
Cash collected on deferrals granted
(4.6)%
(0.4)%
0.0%
0.0%
0.0%
0.0%
Subtotal of deferrals granted, net of cash collected
2.4%
0.4%
0.3%
0.0%
0.0%
0.0%
CECRA abatement (1)
1.0%
1.0%
0.0%
0.0%
0.0%
0.0%
Cash to be collected from government (2)
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Sub-total of cash collected, adjusted for CECRA and deferrals granted
99.2%
99.5%
99.0%
96.6%
95.9%
95.3%
Remaining to be collected
0.8%
0.5%
1.0%
3.4%
4.1%
4.7%
Total
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
(1)
Represents 25% of gross rent required to be abated under the CECRA program, net of the Quebec Government’s 12.5% contribution for qualifying Quebec tenants where applicable.
(2)
Cash to be collected from government relates to the Quebec Government program which effectively reduced the landlord CECRA abatement from 25% to 12.5% of gross rents. The Quebec program became available for application on November 2, 2020.
The REIT has also been an indirect beneficiary of the Canada Emergency Wage Subsidy program, net of which, COVID-19 directly resulted in a reduction of the REIT’s NOI by approximately $326,000 for the year ended December 31, 2020, and $151,000 for Q4 2020. Partially offsetting, travel and other general and administrative costs decreased as an indirect result of COVID-19 travel and commercial operation restrictions.
Revenues and Results from Operations
Net operating income for Q4 2020 of $9,698,301 was $41,027 higher than net operating income of $9,657,274 for Q4 2019. Properties acquired in 2020 and CPI increases generated incremental NOI of approximately $634,000 and $57,000, respectively, in Q4 2020 as compared to Q4 2019. The early termination of a tenant at the REIT’s Richmond, BC property in Q4 2019 reduced Q4 2020 NOI by approximately $163,000 as compared to Q4 2019. The tenancy was early terminated to allow the REIT to proceed with a value-add project for this property. Q4 2020 COVID-19 related costs, which were primarily comprised of an allowance for expected credit losses, totalled $151,000 as compared to $nil in Q4 2019. A vacancy at a REIT industrial property in Calgary, Alberta reduced Q4 2020 NOI by approximately $110,000 as compared to Q4 2019. An early lease termination completed in Q3 2020 reduced Q4 2020 NOI by approximately $130,000 as compared to Q4 2019, with lower rental revenue due to the vacancy, and repairs and maintenance costs incurred to ready the space for a new tenancy. Occupancy remained stable at 93% at both December 31, 2019 and 2020.
Q4 2020 NOI of $9,698,301 was $251,061 lower than Q3 2020 NOI of $9,949,362. The REIT received an early lease termination fee in Q3 2020, with the space being vacant in Q4 2020 and costs incurred in Q4 2020 to ready it for a new tenant, decreasing Q4 NOI by $254,000 as compared to Q3 2020. A vacancy at a REIT industrial property in Calgary, Alberta reduced Q4 2020 NOI by approximately $110,000 as compared to Q3 2020. Expenses directly related to COVID-19 reduced Q4 2020 NOI $151,000 as compared to Q3 2020 NOI. Partially offsetting, acquisitions completed in Q4 2020 generated incremental NOI of approximately $295,000 in Q4 2020 as compared to Q3 2020.
Earnings Call
Management of the REIT will host a conference call at 1:00 PM Eastern Standard Time on Thursday March 18, 2021 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 REIT conference call.
A recording of the conference call will be available until April 18, 2021. 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 6311.
About Nexus REIT
Nexus is a growth-oriented real estate investment trust focused on increasing unitholder value through the acquisition, ownership and management of industrial, office and retail properties located in primary and secondary markets in North America. The REIT currently owns a portfolio of 76 properties comprising approximately 4.5 million square feet of rentable area. The REIT has approximately 33,295,000 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 6,281,000 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.
