Nexus REIT (NXR-UN-X) completed $91.5 million in acquisitions last year and has already added a new portfolio in 2019, continuing the steady growth since it was created in April 2017 through the merger of Edgefront REIT and Nobel REIT.
“We’ve had a very successful year in continuing to build on our core fundamentals,” Nexus president and chief executive officer Kelly Hanczyk said during an April 3 conference call to address the real estate investment trust’s 2018 financial results and future prospects. “We’ve focused on having a conservative balance sheet and have grown the REIT patiently with accretive acquisitions.”
Nexus completed a $31-million deal on April 2 to acquire four industrial properties in Fort St. John, B.C., Estevan, Sask. and Blackfalds and Medicine Hat in Alberta. All four buildings, which were appraised in December for $40 million, are occupied by construction firm MasTec Canada. The properties have leases ranging from four to seven years.
Nexus is doing due diligence on another acquisition worth $18.35 million. Hanczyk said the REIT is negotiating lease issues with the vendor, estimating there’s a 60 per cent chance the deal will be completed.
“I think you’ll see the same types of transactions that we’ve done in the past,” Hanczyk said of the acquisition pipeline. “We’re looking at a couple right now in addition to that one.”
Strategic relationships feed pipeline
Nexus benefits from strategic relationships and acquisition opportunities provided by Toronto-based RFA Capital Inc. and Calgary-based TriWest Capital Partners. The REIT owns 70 properties, comprising approximately 3.8 million square feet of rentable area and valued at more than $500 million.
Nexus acquired a 177,490-square-foot single-tenant industrial building and a multi-tenant sports mall in Richmond, B.C. last May for $57.4 million. There’s potential to add to its value by adding gross leasable area and expanding the sports mall.
“After experiencing permitting delays that have now been resolved, tenant improvements at our Richmond, B.C. asset are moving along and expected to be completed as scheduled by the end of the year,” said Hanczyk. “Until complete, the vendor is responsible to fund the rental obligations, which will be replaced by lease revenue throughout the year.
“We have delayed the phase two plan until we have substantial completion of the build-out for existing tenants.”
Leasing improvements for Nexus
“From a leasing perspective, the overall portfolio ended the quarter with approximately 94.6 per cent occupancy, up from the previous quarter of 93.9 per cent, with gains across the entire portfolio,” said Hanczyk.
Nexus entered into a five-year lease agreement with a tenant for 23,597 square feet of vacant space in its 39,952-square-foot industrial building at 3490 Griffith St. in Montreal. The lease filled one of Nexus’ largest vacancies and, after starting on March 1, should bring in about $250,000 in annual overall rent.
Nexus also owns a 50 per cent share of a 113,714-square-foot office building at 2045 Stanley St. in Montreal, where the space is now 82 per cent occupied or committed. Rents will commence for 8,200 square feet in June and another 7,100 square feet in August.
“We continue to market the vacant spaces and are hopeful of seeing more activity in the coming months,” said Hanczyk.
Increased net operating income
Nexus boosted its net operating income (NOI) to $33.77 million last year, up from $25.14 million in 2017. The increase was primarily due to the Nobel merger and the $147-million acquisition of the 26-property Sandalwood portfolio in July 2017, combined with incremental NOI from 2018 acquisitions.
Industrial properties now account for about 50 per cent of Nexus’ NOI, which is right around where the REIT wants to be — while also maintaining office and retail portfolios.
Nexus, which has offices in Oakville and Montreal, reduced its debt-to-total-assets ratio to 51.7 per cent at the end of 2018 from 53.6 per cent three months earlier.
“Our portfolio continues to deliver consistent results,” said chief financial officer Rob Chiasson.