Nexus Industrial REIT T.NXR.UN

Alternate Symbol(s): EFRTF

Nexus Industrial REIT is a Canada-based open-ended real estate investment trust. The Company and its subsidiaries own and operate commercial real estate properties across Canada. The Company is 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. It owns a portfolio of 119 properties comprising approximately 13.0 million square feet of gross leasable area. Its industrial properties include 11250 - 189 STREET, 3501 GIFFEN ROAD NORTH, 10774 - 42 STREET SE, 261185 WAGON WHEEL WAY, 502-25 AVENUE and others. Its office properties include 127-145 RUE SAINT-PIERRE, 360 RUE NOTRE-DAME WEST, 329 RUE DE LA COMMUNE WEST, 353 RUE SAINT NICOLAS, 410 RUE SAINT NICOLAS, 2045 Rue Stanley, and others. Its retail properties include 2000 BOULEVARD LOUIS-FRECHETTE, 250 BOULEVARD FISET AND 240 RUE VICTORIA, 340 RUE BELVEDERE SOUTH and others.

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Nexus Industrial REIT > BMO analyst update

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Comment by Larrymartin77on Nov 22, 2021 4:45pm

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Post# 34154524

RE:BMO analyst update

CanSiamCyp wrote: Steady Portfolio Transformation Cadence

Bottom Line:

Our outlook on Nexus remains unchanged after Q3/21 earnings and today's equity raise. Our positive thesis continues to be supported by NXR.UN's steady transformation towards a pure-play industrial REIT. We also believe NXR.UN is well-positioned to capture the tailwinds from the next Canadian Industrial growth markets, as highlighted in our recent thematic note (Canadian Industrial CRE: Focusing on the Next Growth Markets). We maintain our Outperform rating and are now applying a slightly higher premium to arrive at our target price of $13.80.

Key Points

Equity issue. Today, NXR.UN closed on the issuance of 11,543,356 units (with the full over-allotment) at $12.85/unit for gross proceeds of $148.3M to the REIT. Net proceeds will be utilized towards the funding of NXR.UN's future acquisitions and for general corporate purposes. At the same time, a secondary offering of NXR.UN's units (1,106,644 units) for gross proceeds of $14.2 million to the selling unit holder (vendor of the Richmond, BC asset) was also completed.

Q3/21 mostly in line. As noted in our flash on November 12, 2021, NXR.UN reported Q3/21 FFO/unit of $0.19, a touch lower than BMO Research's estimate ($0.20) but in line with consensus ($0.19).

Steady cadence on Industrial transformation. As detailed herein, NXR.UN undertook several industrial acquisitions during Q3/21 and post quarter end. In addition, NXR.UN remains in negotiations on potential acquisitions of seven industrial properties. Pro forma these potential acquisitions, NXR.UN's industrial weighting will increase to 83% of the REIT's NOI from 61% at the beginning of 2021. With respect to acquisition cap rates, NXR.UN continues to target ~6.75%, though could be a mixture of 4.2% to 7.0%.

Persistent industrial demand drives opportunities for renewals. Management believes there are good opportunities on the mark-to-market front for industrial renewals over the course of next year.

Progression on capital recycling initiatives. At the end of Q3/21, NXR.UN has $10M of assets held for sale. NXR.UN has three suburban Montreal office properties and two retail properties under contract/negotiation (expected to close in January). NXR.UN is also targeting four additional retail/office properties for sale in early 2022.

Valuation. We have modestly tweaked our cash flow estimates to reflect today's equity raise. Our NAV estimate was also tweaked slightly upwards to $11.50 from $11.30 to mostly reflect a lower utilized cap rate and a slightly higher NOI outlook