TORONTO and MONTREAL, March 12, 2020 (GLOBE NEWSWIRE) -- Nexus Real Estate Investment Trust (the "REIT") (TSXV: NXR.UN) announced today its results for the fourth quarter and year ended December 31, 2019, the completion of an acquisition and the declaration of the March 2020 distribution.
Highlights
- Recognized as a top 50 Venture Exchange Company in the 2020 TSX Venture 50.
- Completed a $31,000,000 accretive acquisition of industrial properties in the year at a 9.33% blended capitalization rate and a $17,400,000 accretive acquisition of industrial properties at a blended cap rate of 7.62% on February 3, 2020.
- Net income for the year of $42,387,970 was up 9.2% as compared to 2018 net income of $38,834,266.
- Normalized AFFO per unit for the quarter of $0.052 increased 5.0% as compared to Q4 2018 normalized AFFO per unit of $0.049. Q4 2019 normalized AFFO per unit of $0.052 increased 2.4% as compared to Q3 2019 normalized AFFO per unit of $0.051.
- Normalized AFFO payout ratio for the year of 79.4% is down from 82.9% for the year ended December 31, 2018. Q4 2019 normalized AFFO payout ratio of 77.0% decreased from 78.9% for Q3 2019.
- Conservative debt to total assets ratio of 49.1%.
- Management of the REIT will host a conference call on Friday, March 13th at 1PM EST to review results and operations.
“2019 was another exceptional year for the REIT. We were named to the TSX Venture Top 50, we completed $31 million of acquisitions, and we saw continued strengthening in our operating metrics, driving our payout ratio down to 77.0% for the quarter and 79.4% for the year,” commented Kelly Hanczyk, the REIT’s Chief Executive Officer. “2020 should be a milestone year for the REIT. We plan on graduating to the TSX in April, have completed $17.4 million in acquisitions to date and will soon be in a position to make an announcement with respect to our value creation project in Richmond, BC. The acquisition pipeline remains extremely strong and we will continue to look within our existing portfolio for additional value creation opportunities.”
Summary of Results
Included in the tables that follow and elsewhere in this news release are non-IFRS measures that should not be construed as an alternative to net income / loss, cash from operating activities or other measures of financial performance calculated in accordance with IFRS and may not be comparable to similar measures as reported by other issuers. Readers are encouraged to refer to the REIT’s MD&A for further discussion of the non-IFRS measures presented.
| Three months ended December 31, | Year ended December 31, | ||||||
| 2019 | 2018 | 2019 | 2018 | ||||
| $ | $ | $ | $ | ||||
| Financial Results | |||||||
| Property revenue | 15,583,030 | 14,221,166 | 60,010,310 | 54,097,493 | |||
| Net operating income | 9,657,274 | 9,004,890 | 37,928,100 | 33,765,529 | |||
| Net income | 27,332,940 | 23,753,407 | 42,387,970 | 38,834,266 | |||
| Three months ended December 31, | Year ended December 31, | ||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||
| $ | $ | $ | $ | ||||||||
| Financial highlights | |||||||||||
| Funds from operations (FFO) (1) (7) | 7,892,732 | 5,609,093 | 28,230,409 | 20,994,342 | |||||||
| Normalized FFO (1) (6) (7) | 6,993,921 | 6,279,593 | 26,568,084 | 22,788,447 | |||||||
| Adjusted funds from operations (AFFO) (1) (7) | 7,141,757 | 4,875,406 | 25,451,219 | 18,403,914 | |||||||
| Normalized AFFO (1) (6) (7) | 6,242,946 | 5,545,906 | 23,788,894 | 20,198,019 | |||||||
| Distributions declared (2) | 4,808,507 | 4,494,971 | 18,897,262 | 16,879,656 | |||||||
| Distributions declared on units issued April 30, 2018 on the closing of an acquisition (2) (4) | - | - | - | 128,857 | |||||||
| Normalized distributions declared (2) (4) | 4,808,507 | 4,494,971 | 18,897,262 | 16,750,799 | |||||||
| Weighted average units outstanding – basic (3) | 120,205,902 | 112,169,870 | 118,131,076 | 104,620,008 | |||||||
| Weighted average units outstanding – diluted (3) | 120,317,048 | 112,216,160 | 118,202,305 | 104,677,571 | |||||||
| Distributions per unit, basic and diluted (2) (3) | 0.040 | 0.040 | 0.160 | 0.161 | |||||||
| Adjusted distributions per unit, basic and diluted (1) (2) (3) (4) | 0.040 | 0.040 | 0.160 | 0.160 | |||||||
| FFO per unit, basic (1) (3) (7) | 0.066 | 0.050 | 0.239 | 0.201 | |||||||
| Normalized FFO per unit, basic (1) (3) (6) (7) | 0.058 | 0.056 | 0.225 | 0.218 | |||||||
| AFFO per unit, basic (1) (3) (7) | 0.059 | 0.043 | 0.215 | 0.176 | |||||||
| Normalized AFFO per unit, basic (1) (3) (6) (7) | 0.052 | 0.049 | 0.201 | 0.193 | |||||||
| Normalized AFFO payout ratio, basic, adjusted (1) (2) (4) (5) (6) (7) | 77.0 | % | 81.1 | % | 79.4 | % | 82.9 | % | |||
| Debt to total assets ratio | 49.1 | % | 51.7 | % | 49.1 | % | 51.7 | % | |||
- Non-IFRS Measure
- Includes distributions payable to holders of Class B LP Units which are accounted for as interest expense in the consolidated financial statements.
- Weighted average number of units includes the Class B LP Units.
- 9,666,667 units were issued on April 30, 2018 on the closing of an acquisition. These units were eligible to receive distributions for the month of April. Normalized distributions declared and Normalized AFFO payout ratio, basic, adjusted each exclude distributions declared on these units for the month of April 2018.
- Calculated based on normalized distributions declared as presented in the table above.
- Normalized FFO and Normalized AFFO include a vendor rent obligation amount related to the Richmond Property which is payable from the vendor of the Richmond Property until the property build out is complete and all tenants are occupying and paying rent. The vendor rent obligation amount is not included in NOI for IFRS accounting purposes. Normalized FFO and Normalized AFFO exclude amounts recorded in other income related to estimated future vendor rent obligation amounts.
- 2018 comparative period FFO, AFFO, Normalized FFO and Normalized AFFO have been restated to include an adjustment for amortization of tenant incentives and leasing costs, not adjusted in 2018.
Revenues and Results from Operations
Net operating income for the fourth quarter of $9,657,274 was $652,384 higher than net operating income of $9,004,890 for the same quarter of 2018 and was up $68,728 as compared to net operating income for the third quarter of $9,588,546. Net operating income for 2019 was up due to the accretive acquisition of a portfolio of properties in the second quarter, combined with contractual rent increases based on CPI, and strong operational execution with occupancy levels at 95% as at December 31, 2019 as compared to 94.3% as at September 30, 2019.
Net income for the fourth quarter included positive fair value adjustment totaling $18,263,089, comprised of fair value adjustments of investment properties in the amount of $19,779,867, negative fair value adjustments of Class B LP Units, options and restricted share units in aggregate amount of $3,260,231, and positive fair value adjustments of interest rate swaps of $1,743,383. Other income of $1,416,625 was also recorded in the quarter, relating to the accrual of vendor rent obligations expected to be receivable from the vendor of the REIT’s Richmond BC property in 2020.
Net interest expense was relatively consistent from the third to the fourth quarter and quarter over quarter. For the year ended December 31, 2019, net interest expense was $1.7 million higher than the prior year, primarily due to interest cost incurred on debt used to finance acquisitions in the current and prior year.
For the year ended December 31, 2019, fair value adjustments totaled $15,525,561, and net income includes other income of $4,624,419 relating to adjustments to the amount of vendor rent obligations receivable during the year and at year end.
Earnings Call
Management of the REIT will host a conference call at 1:00 PM Eastern Standard Time on Friday, March 13, 2020 to review the financial results and operations. To participate in the conference call, please dial 416-915-3239 or 1-800-319-4610 (toll free in Canada and the US) at least five minutes prior to the start time and ask to join the Nexus REIT conference call.
A recording of the conference call will be available until April 13, 2020. To access the recording, please dial 604-674-8052 or 1-855-669-9658 (toll free in Canada and the US) and enter access code 4046.
Completion of Acquisition
On February 3, 2020, the REIT purchased three single-tenant industrial properties located in Regina and Saskatoon, Saskatchewan for a contractual purchase price of $17,400,000 and an attractive 7.6% going-on capitalization rate in an all-unit deal. The properties total 231,700 square footage of gross leasable area, are leased by a strong-credit tenant and have a weighted average remaining lease term of 3.23 years, at rates believed to be below market rents. The contractual purchase price was satisfied through the issuance of 4,809,524 Class B LP Units of a subsidiary limited partnership of the REIT, which are convertible to REIT Units on a one to one basis, and 3,476,190 REIT units, all of which units were issued at deemed value of $2.10 per unit.
March Distribution
The REIT announced today that it will make a cash distribution in the amount of $0.01333 per unit, representing $0.16 per unit on an annualized basis, payable April 15, 2020 to unitholders of record as of March 31, 2020.
The REIT’s current distribution per unit continues to be $0.01333 per month. The REIT’s distribution reinvestment program (“DRIP”) entitles eligible unitholders to elect to receive all, or a portion of the cash distributions of the REIT reinvested in units of the REIT. Eligible unitholders who so elect will receive a bonus distribution of units equal to 4% of each distribution that was reinvested by them under the DRIP.
About Nexus REIT
Nexus is a growth oriented real estate investment trust focused on increasing unitholder value through the acquisition, ownership and management of industrial, office and retail properties located in primary and secondary markets in North America. The REIT currently owns a portfolio of 72 properties comprising approximately 4.0 million square feet of rentable area. The REIT has approximately 105,757,000 units issued and outstanding. Additionally, there are Class B LP units of subsidiary limited partnerships of Nexus REIT issued and outstanding, which are convertible into approximately 23,025,000 REIT units.
Forward Looking Statements
Certain statements contained in this news release constitute forward-looking statements which reflect the REIT’s current expectations and projections about future results. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “estimates”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the REIT to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this news release. Such forward-looking statements are based on a number of assumptions that may prove to be incorrect.
While the REIT anticipates that subsequent events and developments may cause its views to change, the REIT specifically disclaims any obligation to update these forward-looking statements except as required by applicable law. These forward-looking statements should not be relied upon as representing the REIT’s views as of any date subsequent to the date of this news release. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The factors identified above are not intended to represent a complete list of the factors that could affect the REIT.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
For further information please contact:
Kelly C. Hanczyk, CEO at (416) 906-2379 or
Rob Chiasson, CFO at (416) 613-1262.