Nexus REIT (NXR-UN-T) announced Monday afternoon it has deals to acquire a total of nine distribution centres and other industrial properties in four provinces, for a total price of $359 million, as it continues to transform to a pure-play industrial entity.
There are four transactions involved in the announcement, including the acquisition of a portfolio of three distribution centres in Saskatchewan and New Brunswick for $230.4 million. The REIT has waived conditions on this portfolio.
Nexus has also waived conditions on five industrial properties in two separate acquisitions in Southwestern Ontario. Four of the properties are being purchased in one transaction and the fifth, which is undergoing a 150,000-square-foot expansion, will be acquired under a forward-purchase agreement.
Nexus is also acquiring an Alberta industrial property which was announced on Aug. 12.
“Breakout year” for Nexus REIT
In total, the nine properties will add 2.5 million square feet of GLA to the Nexus portfolio.
All are being acquired as a result of off-market transactions.
“This is truly a breakout year for the REIT,” said Kelly Hanczyk, the REIT’s chief executive officer, in the announcement. “We are pleased with the significant progress we have made this year toward our goal of transforming into a pure-play industrial REIT. Upon closing of the announced transactions, we will have completed over $640 million of industrial acquisitions since the beginning of 2021.
“Our industrial portfolio weighting will increase to approximately 80 per cent of NOI, well surpassing our previously stated goal of 75 per cent. The acquisition opportunities are highly compelling and consistent with our stated strategy.”
The acquisitions are modern facilities with an average clear height of 28 feet, site coverage of 30 per cent and an average building size of approximately 279,000 square feet. Eighty-five per cent of the acquisitions are single-tenant assets.
The remaining weighted average lease term is approximately 8.7 years and weighted average occupancy is 99 per cent.
The three distribution centres
The distribution centres are single-tenant facilities comprising total GLA of approximately 1.4 million square feet. Nexus will pay $230.4 million for these acquisitions, with one facility located in Regina and the other two in Moncton.
The single tenant of the centres is under a triple-net lease with a weighted average term of 10.6 years. This acquisition is expected to close at the beginning of October.
It will be funded in part by an expanded offering of units led by BMO Capital Markets and Desjardins Capital Markets (see Editor’s Note below). The offering, which was increased several days after the original announcement, now consists of 8,625,000 units at $11.30 per unit, for gross proceeds of approximately $97 million. If a 15 per cent over allotment provision is also fully exercised, it could raise a total of $112 million.
Nexus plans to fund the rest of the price via up to $172.4 million in new mortgage financing.
The Ontario and Alberta acquisitions
The five industrial properties in Southwestern Ontario total about 900,000 square feet, and are being acquired for a total of $108.8 million.
The vendor is the same counterparty from whom the REIT has acquired six industrial properties so far in 2021. Similar to these past transactions, this acquisition will also be partially funded by the issuance of 5,460,275 Class B LP Units, valued at approximately $61.7 million, to the London-based vendor.
The balance will be funded by a combination of cash on hand, assumed and/or new mortgage financing.
“The pipeline of asset acquisition opportunities in exchange for units from our London Vendor reinforces their commitment to Nexus and their belief in the REIT’s strong growth fundamentals,” Hanczyk said. “We continue to see good industrial acquisition opportunities across Canada and expect strong fundamentals and momentum in the asset class to persist.”
Four of the Southwestern Ontario properties are expected to close in January 2022; the forward-purchase property is expected to close by the end of 2022. The transactions are subject to standard closing conditions and diligence.
The previously announced 189,625 square foot warehouse property in Red Deer, Alta., is expected to close on or about Sept. 9, 2021.
About Nexus REIT
Nexus is a growth-oriented REIT focused on the acquisition, ownership and management of industrial, office and retail properties located in primary and secondary markets in North America.
The REIT owns a portfolio of 89 properties comprising approximately 6.6 million square feet of gross leasable area.
EDITOR’S NOTE: This article was updated after being published, to reflect the enlarged unit offering by Nexus.