Nexus REIT Earnings Call: Strategic Gains Amid Challenges

Nexus Real Estate Investment Trust (($TSE:NXR.UN)) has held its Q1 earnings call. Read on for the main highlights of the call.

Nexus Real Estate Investment Trust’s recent earnings call conveyed a generally positive sentiment, driven by successful strategic repositioning, robust leasing performance, and notable income growth. Despite these achievements, the call also acknowledged ongoing challenges related to economic conditions and tenant issues, which slightly tempered the overall enthusiasm.

Strategic Repositioning Completion

Nexus Industrial REIT has successfully completed its strategic repositioning by divesting 15 of its 16 retail properties. This move has transformed the company into a Canada-focused pure-play industrial REIT, aligning with its long-term strategic goals.

Robust Industrial Occupancy

The company reported an impressive increase in industrial occupancy, reaching 97% in the first quarter. This achievement was bolstered by successful lease renewals and pre-leasing activities that exceeded expectations.

Net Operating Income Growth

Nexus Industrial REIT experienced a significant boost in total net operating income, which rose by $2.6 million or 8.6% to $32.1 million. This growth was fueled by acquisitions, organic growth, and ongoing development projects.

Strong Lease Renewals

The REIT successfully renewed over 80% of its expiring gross leasable area (GLA), achieving a 30% increase on expiring rents. This effort added $3.5 million to the net operating income, underscoring the company’s strong leasing performance.

Positive Development Progress

Nexus is making significant strides in its development projects, including a 325,000 square foot expansion in St. Thomas and a new 115,000 square foot building in Calgary, indicating robust growth potential.

Economic Challenges Due to Tariff War

Despite the ongoing tariff war negatively impacting the Canadian industrial sector, Nexus remains relatively insulated from these economic challenges, maintaining a stable outlook.

Tenant Creditor Protection

The company faces potential impacts from two tenants entering creditor protection, which could affect results in 2025. However, rent payments have been secured through April, providing some reassurance.

Unleased Property in Hamilton

A 115,000 square foot project in Hamilton remains unleased, posing challenges in a tough market environment. The company is actively seeking solutions to address this issue.

Red Deer Tenant Exit

PV Mart’s lease termination in Red Deer presents another challenge, with expectations of a longer timeframe to secure a new tenant for the property.

Forward-Looking Guidance

Looking ahead, Nexus Industrial REIT has provided robust guidance for the first quarter of 2025. The company has completed the sale of 15 retail properties for $47 million, reinforcing its strategic shift to an industrial-focused REIT. With industrial occupancy at 97% and a 6.6% growth in industrial same-property NOI, the company anticipates mid-single-digit growth for the year. Development projects are expected to yield unlevered returns of 9% and 11% on new properties in St. Thomas and Calgary, respectively.

In summary, Nexus Real Estate Investment Trust’s earnings call highlighted a positive outlook, driven by strategic repositioning and strong leasing performance. While challenges persist, particularly in the economic landscape and tenant issues, the company remains optimistic about its growth trajectory and future prospects.