Nexus Industrial REIT

Thank you for standing by. This is the conference operator. Welcome to the Nexus Industrial REIT fourth 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 one 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 Kelly Hansik, Chief Executive Officer. Please go ahead.

Thank you. I would like to welcome everyone to the 2022 year-end and fourth quarter results conference call for Nexus Industrial REIT. Joining me today is Robert Chaison, 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 in the last two years, we've been focused on the high grading of our industrial portfolio. In 2022, we continued with this strategy, closing on 16 high-quality industrial properties. We have five more A-class new build properties, two of which are unit deals, coming online throughout the year, which will add about another million square feet to our portfolio. We have a solid pipeline of additional acquisition opportunities, including unit deals that we're currently reviewing. Our development pipeline is strong, and we are preparing to break ground on two sites this spring. So in Southwestern Ontario in London, we are getting ready to break ground on 100,000 square foot addition to our building at 1285 Hubrie Road. There's significant demand for the addition as we are working through three possible tenants where we're seeking to maximize our return for the site. It also looks good for two existing tenants expansions in the Southwestern Ontario portfolio to add another approximately 65,000 square feet each of expansion space to their existing premises. We're currently finalizing the build costs for each of these to see if we can move those forward. As mentioned previously, the REIT has 22 acres of excess land at the Titan Industrial Site in Regina, Saskatchewan that was acquired in February 2022. We will be constructing a new building here of approximately 312,000 square feet. We now have a signed lease in place for a minimum 200,000 square feet with a strong covenant tenant. We also have offers out to two additional prospective tenants for the balance of the space. We intend on breaking ground here in April, which will lead to, I think, a spring 2024 delivery or early late winter 2024, early spring. This still leaves us with about 6.5 acres of developable land left at the site. The development side will continue to be a focus for us over the next several years, as our developments will provide outsized returns to the REIT. We continue to have an active pipeline of off-market opportunities, and we'll continue to recycle capital into both developing the aforementioned sites at higher returns with our existing portfolio, newer Class A industrial opportunities with solid annual increases, and assets where we see the ability to increase rent significantly on renewals. In Richmond, BC, we had a bit of a setback as Skate Canada, which was supposed to occupy half of the newly renovated 60,000 square feet, executed a termination provision allowing them to back out of the lease just weeks before taking possession of the space. We pivoted quickly and we were working with the other tenant to repurpose the space into a private racket club called the Greater Vancouver Sports Club, which is now online, with a focus on pickleball, which is North America's fastest growing sport. It will include 36 indoor and outdoor courts. We're well underway with the conversion. It's moving very, very quickly, and the site looks fantastic. They're currently taking memberships, and we hope to have them live and operational by mid-summer. We continue the process of reallocating and high-grading our portfolio by selling some of its office, retail, and non-core industrial buildings and reinvesting the proceeds to acquire high-quality industrial buildings, creating an institutional-quality portfolio. I mentioned last quarter that the REIT was under contract to sell a four-property portfolio of smaller industrial properties in Saskatchewan. That deal is now dead. We do have one smaller one still under contract. We are currently under a firm agreement to sell our grocery-anchored retail property in Victoriaville, Quebec. So post-sale of this Victoriaville property, over 90% of the REIT's NOI will now be derived from the industrial properties. This will continue to grow throughout the year as we close on all the aforementioned acquisitions. So it looks pretty positive that we'll be by the year end approaching the 94, 95%. I'll now hand it over to Rob Chason to give greater detail of the REITs financials.

Thanks, Kelly. Year over year, Saints for NOI was up $400,000 or 2.2% for the quarter, benefiting from strong renewals in southwestern Ontario. Approximately $150,000 of the year-over-year increase is attributable to items that will not recur in 2023. However, we expect that strength in the southwestern Ontario market, where we have approximately 400,000 square feet expiring in 2023, will continue. Partially offsetting will be the expiry of two leases in western Canada, where renewal rates are expected to be lower than expiring rents. Acquisitions completed on November 1st contributed approximately $450,000 of NOI in the fourth quarter and will contribute approximately $200,000 of additional NOI in Q1 2023 when they are owned for the full quarter. As Kelly mentioned, the repositioning of approximately 60,000 square feet at our Richmond, BC property was anticipated to be complete in the fourth quarter, and this has been delayed to the third quarter of this year. Upon completion, this is expected to have an approximately $600,000 positive quarterly NOI impact. Interest expense was up approximately $600,000 in the fourth quarter as compared to the third quarter, with higher levels of debt from financing $80 million of acquisitions completed in the second and third quarters. More of the REITs debt was also in the form of floating rate interest. Proceeds from the offering completed in December were used to pay down debt. and the March 7th $117 million acquisition of the Ford Distribution Center in Casamon, Ontario was financed with variable rate debt drawn on the REIT's unsecured credit facilities. $80 million of proceeds from the December offering and the establishment of $375 million unsecured credit facilities provides the REIT with the flexibility required to fund the announced acquisitions and certain of the REIT's development plans. We are monitoring the markets and will consider swapping variable rates under the credit facility for fixed as and when swaps are priced in acceptable ranges. In 2023, we have approximately $50 million in mortgages with a weighted average interest rate of 4.26% maturing. Five-year Government of Canada bond yield was approximately 2.8% this morning. If maturing mortgages were refinanced with five-year mortgages, there wouldn't be a significant spread on refinancing based on today's bond yields. I'll now turn the call back to Kelly.