Nexus Industrial REIT (NXR-UN-T) has sold its interests in 15 retail properties and an office building in Quebec for $51 million, marking the “substantial completion” of its five-year plan to transition to a pure-play industrial real estate owner and operator.

The divestments include approximately 750,000 square feet of retail space in Quebec as well as a 27,097-square-foot office building (1600 Montgolfier Rd. in Laval). Nexus had owned 50 per cent interests in the properties.

The share of the retail properties was sold for $47 million, while the office interest was sold for $4 million, representing in-place cap rates of 6.8 per cent and 9.5 per cent respectively, the company reports.

“These sales mark the substantial completion of our transition to a pure-play, Canada-focused industrial REIT” Kelly Hanczyk, the chief executive officer of Nexus Industrial REIT, said in the announcement.

“Over the past five years we have successfully refocused and grown Nexus to be a scale pure-play industrial REIT, with a portfolio of high-quality industrial properties tenanted by first-class lessees and geographically diversified within Canada.”

The Nexus website lists just three remaining retail and office properties in its portfolio. All located in Quebec, they comprise about 150,000 square feet of total space.

Proceeds to aid development

Hanczyk said proceeds of the sales will be utilized for several purposes, including its development program. 

“We will use the sale proceeds to reduce debt and to complete our two ongoing development projects that will add $6.8 million of annual stabilized NOI after completion in the second quarter, representing an unlevered 9.7 per cent return on development costs.”

The properties range from retail shopping assets of just over 32,000 (total) square feet to mid-sized shopping centres of over 200,000 square feet, including 3856 Taschereau Blvd., in Greenfield Park, and 161 Route 230 Ouest, La Pocatière.

Nexus did not identify the buyer or buyers.

Nexus completes two major leases

The Oakville-based trust (just west of Toronto) also offered a leasing update for its industrial portfolio, which now stands at 90 properties and approximately 11.7 million square feet of leasable space. 

Nexus completed an early renewal of its 265,000-square-foot building at 15745 Robin’s Hill Rd. in London, Ont.

The “blend-and-extend” with the existing tenant is a three-year lease with a rent increase from $4.35 to $12.50 per square foot back-dated to Jan. 1. It also includes seven per cent annual rent escalations.

Nexus also completed a lease expansion and five-year renewal with the existing primary tenant at its 293,000-square-foot building at 650 Riverview Dr. in Chatham.

The tenant increased their occupancy to 269,000 square feet at $9.60 per square foot effective June 1, with annual rent steps thereafter. The company absorbed 31,000 square feet from another tenant which was to vacate on March 31. The vacating tenant was paying rent of $4.50 per square foot.

“We have already renewed over 80 per cent of our expiring GLA, including two value-add renewals that will contribute another $2.3 million to NOI this year and increasing thereafter,” Hanczyk said in the announcement. “These renewals demonstrate the quality of our portfolio and the strength of our tenant relationships.

“I am very excited with the progress that we have made, and I am confident that our strategy will continue to be rewarding for our unitholders.”