Nexus Industrial REIT

Thank you for standing by. This is the conference operator. Welcome to the NEXUS Industrial REIT second quarter 2026 results conference call. As a reminder, all participants are in a 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 then zero. I would now like to turn the conference over to Kelly Hanczyk, Chief Executive Officer. Please go ahead.

Thank you. I'd like to welcome everyone to the 2026 Second Quarter Results Conference call for Nexus Industrial REIT. Joining me today is Mike Rawle, 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'll be discussing non-GAAP measures. Please refer to our MD&A and the REIT's other securities filings which can be found on our website and at CDAR.com for cautions regarding forward-looking information and for information about non-GAAP measures. The second quarter was an excellent quarter for Nexus. who delivered sequential and year-over-year growth in revenue, net operating income, normalized FFO, and the last 12 months adjusted EBITDA. These improvements reflect strong operating results while we also advanced three transformative strategic initiatives. First, early in the quarter, we obtained an investment grade credit rating and completed an inaugural bond offering. Second, we advanced our capital recycling program by closing on the sale of surplus land and advancing two other dispositions. Thank you. Thank you. Thank you. at 8th Street in Nisku, where we signed a lease for the full 40,000 square feet at a 15% increase over expiring rent. In 40th Avenue in Red Deer, where we have sold 190,000 square foot property and the buyer is paying us a healthy 10% yield on the purchase price until they are able to close, which we expect to be any day now. I am very happy with this progress and I expect occupancy to improve further to our long run average of 98 to 99%. are from leasing up of these vacant units. We also made excellent headway on renewals, completing 380,000 square feet of renewals at an average lift of 6% over expiring and in place rents. This demonstrates our continued ability to capture the market lift on lease renewals. At June 30th, we had an attractive average spread between market and in place rents of 14.9%. Looking at the remaining renewals for 2026, we have approximately 600,000 square feet coming up for renewal in the second half of the year. of this amount, we have already renewed or expect to renew over 400,000 square feet. The remaining space includes a 90,000 square foot strategic vacancy in Montreal where the tenant was paying $9 per square foot, which is well below market rent. This lease comes due at the end of November. The remaining space also includes 80,000 square feet in London where the tenant is paying $8 per square foot rent, also well below market rent, and the lease comes due at the end of December. It's early on this one, but we are in close discussions with a new tenant for this space in London. The occupancy improvement combined with our recent completed developments, expansions and acquisitions grew net operating income by 6.2% from a year ago to $34.1 million. Normalized FFO increased to $17.9 million. And on the last 12 months basis, adjusted EBITDA grew to $121.8 million. For the quarter, we posted normalized AFFO per unit of 15.4 cents, resulting in a year-to-date payout ratio of 99.3%, as we remain on track to deliver a full year 2026 payout ratio below 100%. Turning to our strategic initiatives, at the beginning of the quarter, we received an investment-grade rating and completed inaugural bond issuance of $500 million. The debentures were issued in two tranches, $300 million of three-year bonds with a coupon of 4.236%, and 200 million of five-year bonds with a coupon of 4.641%. These issuances marked a significant milestones in our evolution and I'm incredibly proud of this achievement. Looking forward, access to the bond market should help reduce financing costs, increase funding flexibility and reduce financing risk over time. We also have continued to make good headway on our capital recycling program. In the quarter, we sold our 80% interest in development land on South Service Road in Hamilton for $14.1 million. The property no longer fit into our plans, and we were able to use the sale proceeds to reduce debt. Since we are familiar with the project, we have agreed to guarantee the construction debt on a secured basis for a fee of 1%. We have also entered into an agreement to sell nearly 14 acres of excess land in Black Falls, Alberta. Previously, the land had been leased along with the building on an adjoining property Upon renewing the tenant, we severed off the unused land and have found a buyer at $184,000 per acre, which we expect to close in October. We will use the proceeds of $2.5 million to reduce our debt. As mentioned earlier, our building at 40th Avenue in Red Deer, Alberta is under firm sale contract for $11.25 million. This building went vacant when PV Mart filed for CCAA in April 2025. The buyer is obtaining a development permit from the city after which the sale will close, which we said will be any day. In the meantime, the buyer is paying us monthly rent, which is a great outcome for us. In Hamilton, we are looking for a buyer or a tenant for our 115,000 square foot new build on Glover Road. We own 80% of the property and has been a challenging market in Hamilton. In July, we advanced the sale by issuing our partner, our 20% partner with a right of first offer notice to acquire the property. They did not exercise the offer and as a consequence, we now have the ability to market 100% of the property for sale. Selling the building would contribute meaningful to our FFO per unit as the carrying costs are significant and sale proceeds could be used to pay down debt. Turning to development, we have launched a sub-strategy within our portfolio to consider development of data infrastructure projects where such investments meet our investment objectives and our disciplined approach to capital allocations. We believe that 1751 Savage Road in Richmond and 555 Adams Road in Kelowna have the existing electrical infrastructure, available power capacity and strategic locations that may provide a competitive advantage in pursuing possible digital infrastructure opportunities. At our Savage Road property in Richmond, BC, we have transitioned the planned development from adding additional tenants courts to a combination of a tenants court and micro-industrial units that may be used individually or combined as data infrastructure. At this time, we do not anticipate any change in the development costs of $41.3 million, and we expect the project to continue to generate a minimum unlevered return on investment of 6%. In saying that, however, the project has a potential for much, much greater returns if the micro-industrial units are used as data infrastructure. During the quarter, permitting was completed and construction commenced. At our Adams Road property in Kelowna, we are developing micro-industrial units as well, which may also be used individually or combined as data infrastructure. We do not anticipate any change in the cost of 47.3 million and we expect the project to generate a minimum unlevered return on investment of 6%. And again, the project has a much greater potential for returns if the micro-industrial units are used as data infrastructure. The planning phase has been completed and the construction permit application has been submitted for review. Overall, our outlook for 2026 remains unchanged. We continue to expect Nexus to deliver a strong 2026, driven by our completed development projects, embedded rent steps, the lease up of vacant space, and the re-leasing of space at market rents above expiring rents. We anticipate mid-single-digit industrial property NOI growth for the year and expect our normalized AFFO payout ratio to average well below 100% for the full year. With that overview, I'll now turn the call over to Mike for more color on our financial results.

Thank you, Kelly, and good morning, everyone. Starting with headline earnings in the quarter, net loss was $12.8 million, a $5.2 million decrease compared to a net loss of $7.6 million last year. The fluctuation is due to lower fair value adjustments on derivative financial instruments and Class B LP units of $5.5 million and $3.2 million, respectively, and a higher net interest expense of $2 million. These costs were partially offset by a higher fair value adjustment of investment property by $3.5 million and a higher NOI of $2 million. As Kelly mentioned, our Q2 net operating income increased 6.2% or $2 million year over year to $34.1 million. This was primarily due to the completion of our St. Thomas and Calgary developments, which together added $1.3 million, an increase in same property NOI, which added $900,000, and the acquisition of the two Montreal buildings in November 2025, which added $700,000. This was partially offset by lower termination fee income by $1.2 million and $200,000 relating to dispositions completed since Q2 2025. Normalized AFFO for the period was 15.4 cents per unit compared to 16 cents from a year ago, primarily due to an increase in the weighted average number of units outstanding and higher interest expense due to having more debt outstanding. This was partially offset by the higher NOI that I just mentioned. General and administrative expenses for the quarter were $2.2 million, which was consistent with a year ago. Net interest expense in the quarter was $14.7 million, which was $2 million higher than a year ago, mainly due to a higher debt balance and the non-cash write-off of deferred financing costs associated with the $200 million term loan that we retired early with the proceeds from our inaugural bond issuance in April. In addition, capitalized interest in the quarter was $300,000, or $700,000 lower than a year ago. The carrying value of our investment properties decreased by $15.7 million in the quarter, primarily due to the sale of our 80% interest in the development land at 1540 South Service Road for $14.1 million. as well as fair value adjustments on properties of $7.6 million, partially offset by investment in development and capital expenditures, tenant improvements, and leasing costs. At June 30th, our NAV per unit was $13.23, a six cent per unit decrease from last quarter. Our weighted average cap rate increased by one basis point to 5.95% in the quarter, compared to 5.94% at March 31st. I will now turn the call back to Kelly.