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. It has a portfolio of industrial, office and retail properties in Canada, with a focus on acquiring and owning industrial properties. The Company owns a portfolio of 115 properties (including two properties held for development, in which the Company has an 80% interest) comprising approximately 12.1 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 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

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Post by retiredcfon Apr 10, 2023 10:22am

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Post# 35386560

RBC

April 6, 2023

Nexus Industrial REIT Takeaways from meetings

TSX: NXR-U | CAD 9.36 | Sector Perform | Price Target CAD 11.00

Sentiment: Neutral
Event: Yesterday, we hosted in-person client meetings with CEO Kelly Hanczyk in Toronto. Below are key takeaways.

Takeaways:

Building an institutional quality portfolio: This was the key message yesterday, one that is consistent with the last few quarters. Nexus is looking to be the “premier pure-play” Canadian industrial REIT and is focused on acquiring in Greater Toronto, Montreal and Southwestern Ontario. Nexus is also looking to add to its team and expects 2023 to be somewhat of a transitional year from that perspective.

Acquisition pipeline fairly large: We tally properties under contract or under due diligence to be ~$370M to close in 2023. In 2022, Nexus closed on ~$340M of acquisitions. Acquisitions will be financed by cash, equity issued to vendor, asset sales and credit facility. Acquisition cap rates are ~6% for the London assets, and low 4% for the GTA and Ford distribution centre in Casselman ON. Debt to GBV will likely reach ~49% by end of this year (44% as of Q4/22). Longer term, Nexus will look to be in the low 40% range.

Tenant demand still there: Nexus has not noticed any real weakness in tenant demand, especially in its largest market of London ON. Nexus noted that there are still several tenants in London with large requirements looking to expand. Recent CBRE data shows London with the tightest vacancy in Canada at 0.6%.

Development – the low-hanging fruit: Nexus has two expansion/development projects set to break ground this year – one in London with an estimated yield on cost of 12% and one in Regina at an expected 8.75%, with combined budgeted costs of ~$58M. Other potential future projects are in Windsor, St Thomas and Hamilton.

Modest growth in 2023; ramp-up in 2024: Nexus expects more modest NOI growth in 2023 (3-4%) with strong lease spreads in ON being offset by leases in AB rolling down. Moreover, it expects 2024 to ramp up given contribution from development and more leases expiring in 2024. Nexus may also provide further details on its portfolio contractual rent escalation going forward. It estimates that the current mark-to-market rent potential on the portfolio to be ~20%.