Nexus Industrial REIT

Thank you for standing by. This is the conference operator. Welcome to the NEXO Street 2021 Fourth Quarter Results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, You may signal an operator by pressing star and zero. I would now like to turn the conference over to Mr. Kelly Hansik, Chief Executive Officer. Please go ahead, sir.

Thank you. I'd like to welcome everyone to the 2021 Full Year and Fourth Quarter Results Conference Call for Nexus Industrial REIT. Joining me today is Robert Chason, the Chief Financial Officer of the REIT. Before we begin, I'd like to caution with regard to forward-looking statements and non-GAAP measures. Certain statements made during this conference call may constitute forward-looking statements which reflect the REIT's current expectations and projections about future results. Also during this call, we will be discussing non-GAAP measures. Please refer to our MD&A and the REIT's other securities filings, which can be found at cedar.com, for cautions regarding forward-looking information and for information about non-GAAP measures. So 2021 was a defining year for the REIT. We continue to successfully execute on our strategy of becoming Canada's next pure play industrial REIT, which culminated in a recent name change as of March 7th to Nexus Industrial REIT, which is a name that better defines our strategy and objectives moving forward. In the fourth quarter, we closed on approximately $416 million of industrial acquisitions with strong covenants such as Loblaws, Sobeys, and MRC Globals. The blended cap rate for these acquisitions is approximately 5.13%. For the year, our acquisitions totaled $674 million at a cap rate of approximately 5.7%. As we look forward to 2022, we continue to be focused on growing our platform and deploying the capital raised in 2021. We've closed on an additional 10 high-quality industrial buildings, totaling $236.5 million. at a blended cap rate of approximately 5.12 in the first quarter of 2022. In addition, we are under contract for two additional properties, a brand new build, Strong Covenant Distribution Center in Ottawa, and one in London, which is in the process of having 150,000 square foot new addition being built. These two properties total approximately 167 million, and they're expected to close hopefully in January and April of next year. As you can see, we continue to have a very active pipeline of deal flow, and we have the liquidity to be able to execute on a significant amount of additional industrial transactions throughout the balance of this year. Our occupancy for the fourth quarter was up slightly from last quarter. In the industrial portfolio, our vacancy continues to be mainly a 25,000 square foot industrial space at 41 Royal Vista Drive in Calgary. A new lease deal that was scheduled to commence in January has been slow to transpire, and they're waiting for permitting. So we're hopeful that the deal we had agreed to in principle is successfully completed. But in the interim, we've begun to remarket the space. In Richmond, BC, we continue with the redevelopment of an approximately 60,000 square foot building for two tenants. Unfortunately, timelines continue to get expanded from what we originally anticipated as the developer continues to run into some supply chain issues. Approximately half of the building will be effectively a brand new structure as the previously structured was demolished and rebuilt from scratch. Both tenants' rent will commence once they take possession of the space. While delayed again, it is expected completion and possession to occur sometime in July of this year. That's what I'm hopeful for. As mentioned previously, it's fairly important to us because upon completion, our NOI will increase by approximately $165,000 per month. In Montreal, we continue to work with the developer on the sale of some excess land at Les Halles d'Anjou. The developer is moving along with their approvals from the city, but is much slower than they originally anticipated. So it looks like now is expected a closing of the transaction towards the end of the year, which will allow us to realize our first payment from the developer. In our recently acquired London portfolio, 2022 should be a solid year for renewals and new leasing. We have approximately 345,000 square feet expiring throughout the year and expect renewals and new deals to create approximately $1 to $2 per square feet and increase rental rates. We're currently finalizing permit drawings for an approximately 100,000 square foot addition to our existing building at 1285 Hooghury that we will build on spec and are also working on another deal with an existing tenant which would expand them by approximately 35,000 square feet Vacancy in London continues to be an all-time low, and the fundamentals in the market remain really strong. On the disposition front, we have two of our suburban Montreal office properties currently under due diligence by a purchaser, one more suburban office, a mixed office retail, and a single-tenant retail property currently in a marketed process, so we expect bids by the end of the month. In addition, our retail mall in Victoria will be launched for sale by the end of the month, and we are also in the process of a portfolio review identifying non-core assets that we may dispose of throughout the year and continue with our evolution of high grading of the portfolio. I'll now hand it over to Rob to give greater detail of the REITs financials.

Thanks, Kelly. As Kelly mentioned, we've been busy deploying capital raised throughout 2021 and 2022. On November 22nd, we completed $148 million bought deal equity financing part of the proceeds of which were used to acquire the Sobeys Distribution Center on December 9. However, we ended the year with $83 million of cash on the balance sheet available to deploy on acquisitions. We'll see acquisitions completed in the first quarter of 2022 contribute to increasing our FFO and AFFO per unit and decreasing our payout ratio. Q4 FFO and AFFO were impacted by an approximately $100,000 early repayment fee for debt on a retail property which was sold in November. We've revalued our portfolio in the quarter, seeing fair value increases primarily in our industrial portfolio. We also had a small fair value adjustment of our retail properties, where we took COVID-related valuation allowances in 2020, which were partially reversed in the fourth quarter of 2021, as the impact of COVID on our retail tenants has dwindled. Same-store NOI was up approximately $50,000 in the fourth quarter as compared to the third quarter, primarily due to percentage rents, and up $200,000 over Q4 2020, primarily due to steps and rents. As Kelly mentioned, we continue to have a 25,000-square-foot vacancy in a Calgary industrial property. Upon leasing this space, we'll see a boost to NOI. Also, upon the completion of the Richmond, B.C. property repurposing, we'll earn approximately $1.9 million a year of rents and NOI. GMA expense was higher, Q4, as compared to Q3, primarily due to increased staffing costs, including bonus accrual true-ups. I'll now turn the call back to Kelly.