Nexus Industrial REIT (NXR-UN) Q2 2024 earnings summary

Executive summary

• Achieved a material improvement in results, passing an inflection point with a long runway for growth ahead, driven by portfolio optimization, strategic investments, and portfolio upgrades.

• Net operating income (NOI) grew 14.2% year-over-year to CAD 31.6 million, reflecting returns from recent investments.

• Net income for Q2 2024 was CAD 43.5 million, supported by fair value gains on Class B LP Units and investment properties, but down from CAD 77.2 million last year due to lower non-cash fair value gains.

• Portfolio repositioning advanced with the sale of an office property and contracts to dispose of 28 non-core assets for CAD 107 million.

• Focused on becoming a pure-play Canadian industrial REIT, with significant progress in asset sales, development completions, and prioritization of unitholder distributions.

Financial highlights

• Q2 FFO rose 9.2% to 17.8 cents/unit; AFFO up 10.4% to 14.8 cents/unit, both driven by stronger NOI.

• Property revenues rose to CAD 43.9 million in Q2 2024 from CAD 38.4 million in Q2 2023; NOI increased to CAD 31.6 million from CAD 27.7 million.

• Normalized FFO per unit was 0.178, down 0.018 year-over-year; Normalized AFFO per unit was 0.148, down 0.017.

• NAV per unit increased to CAD 13.20, up 11 cents from last quarter and 5.7% year-over-year.

• AFFO payout ratio (basic) was 108.7% in Q2 2024, with normalized AFFO payout ratio at 100.7%.

Outlook and guidance

• Expect mid-single-digit same-property NOI growth for the industrial portfolio in 2024, with further rent lifts on renewals due to market rents averaging 25% above in-place rents.

• Completion of four major development projects in 2024 to add over CAD 10 million in annual stabilized NOI.

• Dispositions of non-core assets targeted at approximately CAD 110 million in the second half of 2024, with proceeds to reduce debt.

• Portfolio expected to be close to 100% industrial by year-end, with continued focus on deleveraging and organic growth.

• Normalized AFFO payout ratio expected to improve to a more sustainable level for the remainder of 2024.