Nexus Industrial REIT

Thank you for standing by. This is the conference operator. Welcome to the Nexus Industrial REIT first quarter 2022 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 0. I would now like to turn the conference over to Mr. Kelly Hansik, Chief Executive Officer. Please go ahead, sir.

Great. Thanks. I'd like to welcome everyone to the 2022 First Quarter Results Conference Call for Nexus Industrial REIT. Joining me today is Robert Chase, 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 CDAR.com, for cautions regarding forward-looking information for information about non-GAAP measures. So as we look forward to the balance of 2022, we continue to be focused on growing our platform, the continued high grading of our portfolio, and executing on a capital recycling program as we move out of some office retail assets as well as some non-core industrial assets. In the first quarter, we have closed on an additional nine high-quality industrial buildings totaling 236.5 million square feet at a blended cap rate of 5.12%. In addition, we are under contract for four additional properties, a brand new build, strong covenant distribution center in Ottawa to be completed in January of 2023. One in London, which is in the process of having 150,000 square foot new addition being built and expected to be completed by mid 2023. And approximately 85,000 square foot building new build to be built in Balzac, Alberta. with one of the REIT's existing tenants, which is expected to be completed in the late fall of 2023. The REIT is also in due diligence on a 94,000 square foot strong tenant and industrial facility in Quebec City. There's several additional assets that we're in varying stages of discussions on that we hope to come to fruition over the next several months. As you can see, we have an active pipeline of deal flow, and with our current liquidity and available funds from our capital recycling program, we'll be able to execute on a significant amount of additional industrial acquisitions throughout the balance of 2022. We have 22 acres of excess land at the Titan Industrial Site in Regina, one that we recently closed on, that was acquired in February 2022. We also have the option to transact on 10 additional acres of land at the Acropolis Warehouse facility located on the Edmonton Airport grounds. We have engaged an architect and are having renderings created for these parcels of excess lands. So we plan on presenting these renderings to some existing tenants to find one that we can complete a build to suit. One of the REIT's existing tenants in Edmonton has expressed a possible level of interest in both of the sites. We're also in the process of submitting to the City of London on a 100,000 square foot spec addition at our property at 1285 Hubrie and a 33,000 square foot expansion for one of our existing tenants at 5 Cuddy in London. We're also exploring a development program with RFA Capital where the REIT would participate in the development, which would provide a pipeline of high quality distribution facilities in the future. In Richmond, BC, we continue with the redevelopment of our 60,000 square foot building for two tenants. Both tenants' rent will commence once they take possession of the space. It's still expected completion and possession to occur sometime in July of this year. As mentioned previously, upon completion, our NOI will increase by approximately $165,000 a month. We also are planning the 74,000 square foot addition, which would provide a significant lift to the REITS NAV. We'll also be applying at the same time for bonus density, which, if approved, would allow for additional square foot to be built in the future. In Montreal, we continue to work with a developer on the sale of some excess land at Les Halles d'Anjou. The developer is still moving along nicely with their approvals from the city, and it is still anticipated 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 is a solid year for renewals and new leasing. We'll see huge growth there. We have approximately 345,000 square feet expiring throughout the year, and it looks like we're averaging an overall 30% increase in rental rates. with significant yearly increases. The portfolio also has a similar renewal square foot profile in 2023, which we are expecting to renew at approximately, I'd say, 50% to 75% premium to the existing rates. Vacancy in London continues to be an all-time low and the fundamentals remain really strong. On the disposition front, we still have our three suburban Montreal office properties currently being marketed. A mixed-use office retail and a single-tenant retail property are about to go under a purchase and sale agreement. In addition, our retail mall in Victoriaville will be launched for sale once we have completed a lease extension and expansion with one of our largest tenants, which is expected to be in our hands shortly. We're also in the process of dealing with a non-solicited offer for a portfolio of non-core assets that would allow us to recycle this capital in the future. I'm also pleased to announce As part of their semiannual review announced last evening, Nexus Industrial REIT has been added to the MSCI Small Cap Index, which changes will take effect on May 31st. So very positive for us. Now I'm going to hand it over to Rob Chaison to give greater detail of the REIT's financials.

Thanks, Kelly. In November 2021, we issued approximately 13.4 million units, primarily in respect of a bought deal equity offerings. Roughly half those units were included in our weighted average units outstanding for Q4, and they were fully included in Q1 2022. We started Q1 2022 with $82.3 million of cash on our balance sheet, which was deployed as partial purchase price consideration in the completion of $236.4 million of acquisitions. At the end of Q1, we had $150 million of recently acquired properties that were unlevered, representing capital to deploy for future acquisitions. Acquisitions completed in Q1 2022 generated approximately $1.6 million of cash NOI and are expected to generate approximately $1.5 million of additional cash NOI in Q2 2022. The timing of our RSU grant with one-third vesting in the quarter increased G&A expense for Q1 2022. G&A expense related to RSUs will be approximately $500,000 lower in Q2 2022. In connection with the acquisitions completed in the first quarter, we entered into mortgages totaling approximately $130 million, including three mortgages with an aggregate value of $109 million, which were financed for terms of 7 and 10 years at rates of 3.18% and 3.28%. Our same-store NOI for the quarter was impacted by vacancies at our office property in New Brunswick, where the impact of the pandemic had 25,000 square feet come back to us last April and a further 13,000 square feet come back to us at the end of November. We also had a 22,000 square foot industrial space that was vacated on November 1st. There are currently discussions with three potential tenants for this space. Acquisitions completed over the course of the last year were the primary contributors of approximately $800,000 of straight line rent in the quarter. Properties acquired have embedded steps in rent. As Kelly mentioned, we expect to see some significant lift in new leases and lease renewals in the second half of the year, particularly in London, Ontario, which will bolster our same store NOI. A 100,000 square foot addition at the Ajax property that we co-own was completed at the beginning of the quarter. This brought online approximately $100,000 of quarterly NOI. The redevelopment of a 60,000 square foot space at our Richmond, BC property is expected to be completed in the second half of the year, and we'll see approximately $165,000 a month of incremental NOI. For the remainder of 2022, we have approximately $4.5 million of mortgages at a weighted average 3.17 interest rate that will mature. In 2023, we'll have approximately $49 million of mortgages with a weighted average interest rate of 4.26% that will mature. So we're not significantly exposed to the recent rising interest rate environment. I'll now turn it back to Kelly.