Nexus Industrial REIT

Thank you for standing by. This is the conference operator. Welcome to the Nexus Industrial REIT first quarter 2023 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 Kelly Handrick, Chief Executive Officer. Please go ahead.

Thank you. I'd like to welcome everyone to the 2023 First Quarter Result Conference Call for the Next Industrial Week. Joining me today is Robert Chasson, Chief Financial Officer of the REIT. Before I 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 2023 has begun as expected with our southwestern Ontario portfolio providing strong rental rate growth on renewals. We'll continue to see strong growth in this market for this year as rates are now pushing in the $11 to $12 range. This will be tempered by a 26,400 square foot vacancy in Fort St. John, B.C. that vacated on April 30th that we're working to fill. In the quarter, we purchased a 532,000-square-foot brand-new Ford distribution center in Ottawa, Ontario, and sold one of our grocery-anchored retail properties in Victoria, Quebec. In addition, we closed on a 264,600-square-foot distribution center adjacent to the London, Ontario airport, where in-place rents are approximately 260% below market, with a short-weighted average lease term of just over two years. This increased our weighting to the industrial sector to just over 9% of the REITs NOI. We'll see this continue to grow in 2023 as we add another 970,000 square feet of industrial properties throughout the year. Comprised of a 191,000 square foot Class A distribution facility with Yokohama Tire as a tenant in Montreal, and a 304,000 square foot Class A distribution facility in London, Ontario, which is anticipated to close on June 1st, plus 141,000 square foot Class A distribution facility in Burlington, Ontario, and then finally another 335,000 square foot distribution center in London, Ontario. That's expected to close, I believe, in August. Our waiting will continue to grow as we close on these assets and recycle out of our retail and our office portfolio in the balance of the year. On the development front, we have broken ground on two sites, approximately 96,000 square foot addition to our building at 1285 Hubrie Road in London, Ontario, where we are awaiting finalization of a deal that will provide us an outside return of over 10% upon completion. As mentioned previously, we have broken ground on the 312,000 square foot new building on 22 acres of excess land at the Titan Industrial Site in Regina, Saskatchewan, that was acquired in February of 2022. We have a signed lease in place for a minimum 200,000 square feet with a strong covenant tenant from the leased portfolio, and we are fairly certain they will sign on for the majority of the balance of the space. This is scheduled to be complete for the late spring 2024 delivery. It also looks like we'll be proceeding in the fall with the expansion of an existing tenant in our Southwestern Ontario portfolio to add another approximately 70,000 square feet to their existing premises. We will be purchasing 18 acres of land adjacent to this site to accommodate this expansion. This site is across from a newly announced Volkswagen lithium plant in St. Thomas, Ontario. In Richmond, B.C., we continue working to complete the space for the Greater Vancouver Sports Club. The site is progressing along. They are currently taking memberships and hope to have them live and operational soon. somewhere at some time in August. This will be a significant boost to our FFO once the tenant commences operation. We'll now hand it over to Rob Chason to go over the REITs financials.

Thanks, Kelly. Year over year, same property NOI was up $900,000 or 4.4% for the quarter, benefiting from strong renewals in southwestern Ontario. Ontario accounted for just under 40% of same-store NOI growth. Alberta, where we have a number of leases with embedded CPI increases and where occupancy at one of the REITs properties improved in Q1 2023 as compared to Q1 2022, accounted for just under 20% of the increase. Approximately 20% or $150,000 of the same store NOI improvement related to our St. John New Brunswick office property, where there were free rents in Q1 of 2022 that did not recur in Q1 2023. As Kelly mentioned, we will experience some headwinds from an April 30th expiry in Western Canada. However, we expect significant rental rate growth on lease renewals, Southwestern Ontario lease renewals in Q2 2023. Notably, we have a contractual rental step of $0.78 per square foot on a million square feet that is effective August 1st. Kelly mentioned the repositioning of approximately 60,000 square feet at our Richmond, D.C. properties anticipated to complete in the third quarter. Upon completion, this is expected to have an approximately $700,000 positive quarterly NOI impact. Q1 2023 general and administrative expense increased as a result of timing of RSU grants, one-third of which vested in Q1 2023. There was also a severance cost in the quarter. These two items primarily accounted for the increase in general admin expense in Q1 2023 as compared to Q4 2022. Interest expense was relatively flat in the first quarter as compared to the fourth quarter. $117 million acquisition of the Ottawa, Ontario area Ford Distribution Center closed on March 1st and was financed with variable rate debt drawn on the REIT's unsecured credit facilities, which will increase Q2 interest expense. Debt to total assets was 47.3% at March 31st, 2023. We had $200 million on drawn on our unsecured line of credit, and we had $455 million in our unencumbered asset pool supporting the unsecured credit facility. And I'll turn the call back to Kelly.