NXR.UN Nexus Industrial REIT

Nexus Real Estate Investment Trust (TSX:NXR.UN) (“Nexus” or the “REIT”) announced today that it has waived conditions on the acquisition of a portfolio of three distribution centres located in Saskatchewan and New Brunswick for a purchase price of approximately $230.4 million (the “Distribution Centre Acquisition”). The purchase price is expected to be funded with the net proceeds from the REIT’s $75 million public offering of trust units (the “Units”) (see “The Offering” below) and up to approximately $172.4 million from new mortgage financing to be placed on the properties at closing.

The REIT also announced today entry into of, or the waiving of diligence conditions under, two purchase and sale agreements to acquire five industrial properties. Together with an Alberta industrial property which the REIT announced having waived conditions to acquire on August 12, 2021, the aggregate purchase price for the properties to be acquired is $128.6 million (the "Additional Industrial Acquisitions"). The REIT anticipates that the purchase price for certain of the Additional Industrial Acquisitions will be funded by the issuance of Class B LP Units, cash on hand, assumed mortgage financing on the properties and the proceeds from new mortgage financing.

In aggregate, Nexus expects to add approximately 2.5 million square feet of gross leasable area (“GLA”) to the REIT’s income producing portfolio from the acquisitions announced today and on August 12, 2021.

Kelly Hanczyk, the REIT’s Chief Executive Officer, stated that “This is truly a breakout year for the REIT. 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% of NOI, well surpassing our previously stated goal of 75%. The acquisition opportunities are highly compelling and consistent with our stated strategy. 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. We continue to see good industrial acquisition opportunities across Canada and expect strong fundamentals and momentum in the asset class to persist.”

Recent Investment Activity Highlights

• Continued Increased Industrial Weighting – Upon closing of the Distribution Centre Acquisition and the Additional Industrial Acquisitions (collectively, the “Acquisitions”), Nexus’ portfolio weighting to the industrial asset class will increase from 73% to approximately 80% of NOI. The Acquisitions highlight Nexus’ continued commitment to enhance its weighting towards the industrial asset class.
• Off-Market Transaction – The Acquisitions are being completed on an off-market basis, highlighting Nexus’ deep network of relationships within the Canadian real estate landscape.
• High Quality Portfolio – The Acquisitions comprise high quality modern distribution industrial assets with an average clear height of 28 feet, site coverage of 30% and an average building size of approximately 279,000 square feet. 85% of the Acquisitions comprise single-tenant assets, on a net rent basis.
• Positive Improvement in Key Operating Metrics – The Acquisitions possess strong operating metrics that will significantly enhance Nexus’ overall portfolio profile, including a WALT of approximately 8.7 years and weighted average occupancy of 99%.
• Highly Accretive Transaction – The Acquisitions are expected to be immediately accretive to Adjusted Funds From Operations (“AFFO”) per Unit (see “Non-IFRS Financial Measures” below).

Pro forma Nexus portfolio metrics assuming completion of the Acquisitions are set out below:

		Portfolio Metrics
		Current(1)	New Acquisitions(1)	Pro Forma
Number of Properties	(#)	91	8	99
GLA (at Nexus’ Ownership Interest)	(square feet)	7,188,829	2,321,483	9,510,312
Occupancy	(%)	96%	99%	96%
Weighted Average Lease Term	(years)	5.0	8.7	5.9
Industrial as % of Total Portfolio (by NOI)	(%)	73%	100%	~80%

Note: 1. “Current” metrics include 2 previously announced acquisitions in London, Ontario and Red Deer, Alberta for which the REIT has waived diligence conditions. “New Acquisitions” metrics exclude these two previously announced acquisitions.

In aggregate, the Acquisitions would represent a 5.7% effective going-in capitalization rate and after giving effect to the Acquisitions, the REIT expects its debt to gross book value ratio to be 47.8% based on its reported Q2 2021 financial results.

The Distribution Centre Acquisition

Pursuant to the Distribution Centre Acquisition, the REIT will acquire three single-tenant distribution centres, comprising total GLA of approximately 1.4 million square feet, for a combined purchase price of approximately $230.4 million. One property is located in Regina, Saskatchewan while two properties are located in Moncton, New Brunswick. The properties are occupied by a single investment grade rated company (BBB (high) / DBRS; BBB / S&P), under a triple-net lease with a weighted average lease term (“WALT”) of approximately 10.6 years. The Distribution Centre Acquisition is expected to close on or about October 1, 2021.

The Offering

The REIT also announced today in connection with the waiver of conditions on the Distribution Centre Acquisition that it has entered into an agreement to sell to a syndicate of underwriters led by BMO Capital Markets and Desjardins Capital Markets (collectively, the “Underwriters”), on a bought deal basis, 6,640,000 Units at a price of $11.30 per Unit (the “Offering Price”) for gross proceeds of approximately $75 million (the “Offering”). In addition, the REIT has granted the Underwriters an over-allotment option to purchase up to an additional 966,000 Units on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the closing of the Offering, which, if exercised in full, would increase the gross proceeds of the Offering to approximately $86 million (the “Over-Allotment Option”).

The REIT intends to use the net proceeds from the Offering to fund part of the purchase price for the Distribution Centre Acquisition and for general business purposes.

The Units under the Offering will be offered in Canada pursuant to a prospectus supplement filed under Nexus’s short form base shelf prospectus dated July 16, 2021. The Offering is expected to close on or about August 23, 2021 and is subject to customary conditions and receipt of all necessary approvals, including the approval of the Toronto Stock Exchange (“TSX”). The Offering is not conditional on the closing of the Distribution Centre Acquisition.

The Units have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the "1933 Act") and may not be offered, sold or delivered, directly or indirectly, in the United States, or to, or for the account or benefit of, "U.S. persons" (as defined in Regulation S under the 1933 Act), except pursuant to an exemption from the registration requirements of the 1933 Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any Units in the United States or to, or for the account or benefit of, U.S. persons.

The Additional Industrial Acquisitions

The REIT has entered into conditional purchase agreements or waived diligence conditions to acquire the following six properties for a combined purchase price of approximately $128.6 million:

• A portfolio of five industrial properties located in Southwestern Ontario totaling approximately 0.9 million square feet for an aggregate purchase price of approximately $108.8 million (the “Southwestern Ontario Acquisition”). One of the properties is structured as a forward purchase agreement whereby Nexus will acquire the asset upon completion of a 150,000-square foot planned expansion. The vendor of the Southwestern Ontario Acquisition (the “London Vendor”) is the same counterparty from whom the REIT has acquired six industrial properties so far in 2021. Similar to these past transactions, the Southwestern Ontario Acquisition will be partially funded by the issuance of 5,460,275 Class B LP Units, valued at approximately $61.7 million, to the London Vendor as partial purchase price consideration. The REIT anticipates that balance of the purchase price for the Southwestern Ontario Acquisition will be funded by a combination of cash on hand, assumed mortgage financing on the acquired properties and the proceeds from new mortgage financing to be placed on the properties at closing. The Southwestern Ontario Acquisition is expected to close in January 2022, with the exception of the property under forward purchase agreement, which the REIT expects to close by the end of 2022. Closing of the Southwestern Ontario Acquisition is subject to various customary closing conditions, including satisfactory completion of the REIT’s due diligence, TSX approval and (if necessary) approval of the REIT’s unitholders.
• The previously announced 189,625 square foot warehouse property in Red Deer, Alberta which the REIT has waived conditions on August 10, 2021, expected to close on or about September 9, 2021.

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 89 properties comprising approximately 6.6 million square feet of gross leasable area. The REIT has approximately 33,788,000 Units issued and outstanding. Additionally, there are Class B LP Units of subsidiary limited partnerships of Nexus issued and outstanding, which are convertible into approximately 16,442,000 Units.

Non-IFRS Financial Measures

Certain financial measures disclosed in this press release do not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and are therefore non-IFRS financial measures. The REIT’s method of calculating such non-IFRS financial measures may differ from other issuers’ methods and, accordingly, may not be comparable to such non-IFRS financial measures reported by other issuers.

AFFO is defined by the REIT as Funds From Operations (being net income in accordance with IFRS, excluding gains or losses on sales of investment properties, tax on gains or losses on disposal of properties, transaction costs expensed as a result of acquisitions being accounted for as business combinations, gain from bargain purchase, fair value adjustments of investment properties, warrants, unit options, restricted share units and derivative financial instruments, fair value adjustments and other effects of redeemable units classified as liabilities and the Class B LP Units, if any, amortization of right-of-use assets, lease principal payments, deferred income taxes, and amortization of tenant incentives and leasing costs, including adjustments for equity accounted entities), adjusted for certain items including differences resulting from recognizing ground lease payments and rental income on a straight-line basis, and reserves for normalized maintenance capital expenditures, tenant incentives and leasing costs. The REIT calculates AFFO in accordance with the Real Property Association of Canada. The REIT regards AFFO as an important performance measure of recurring economic earnings.

Debt to gross book value does not have any standardized meaning prescribed by IFRS and is therefore a non-IFRS financial measure. Debt to gross book value is calculated as Indebtedness (as defined in the declaration of trust governing the REIT, which is available under the REIT’s profile on SEDAR at www.sedar.com) divided by Gross Book Value (being, the acquisition cost of the assets of the REIT plus (i) the cumulative impact of fair value adjustments, (ii) acquisition related costs in respect of completed investment property acquisitions that were expensed in the period incurred, (iii) accumulated amortization on property, plant and equipment, and other assets, and (iv) deferred loan costs).

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, including with respect to the terms of, timing for completion of and source of funding for the Acquisitions, the expected benefits of the Acquisition and the timing thereof, the expected impact of the Acquisitions on the REIT’s AFFO per Unit and debt to gross book value, the satisfaction of conditions for the Acquisitions, including TSX and unitholder approval, as applicable, the waiver of due diligence conditions and statements regarding the satisfaction of other conditions. 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.

Although management believes the expectations reflected in such forward-looking statements are reasonable and represent the REIT’s internal expectations and beliefs at this time, such statements involve known and unknown risks and uncertainties and may not prove to be accurate and certain objectives and strategic goals may not be achieved. A variety of factors, many of which are beyond the REIT’s control, could cause actual results in future periods to differ materially from current expectations of events or results expressed or implied by such forward-looking statements, such as the risks identified in the REIT’s current annual information form available at www.sedar.com and other materials filed with the Canadian securities regulatory authorities.

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.

For further information please contact:Kelly Hanczyk, CEO at (416) 906-2379; orRob Chiasson, CFO at (416) 613-1262.