Welcome everyone to the 2026 first quarter results conference call for Nexus Industrial REIT. Joining me today is Mike Rawle, Chief Financial Officer of the REIT.

Before we begin, I'd like to caution with regard to forward-looking statements and non-GAAP measures. Certain statements made during this conference call may constitute forward-looking statements, which reflect the REIT's current expectations and projections about future results.

Also during this call, we'll be discussing non-GAAP measures. Please refer to our MD&A and the REIT's other securities filings, which can be found on our website and at sedarplus.com for cautions regarding forward-looking information and for information about non-GAAP measures.

In the first quarter, we delivered [unclear] income of $33.8 million, an increase of 5.4% compared to last year, and normalized FFO increased to $17.7 million. On a last 12-month basis, adjusted EBITDA grew to $121.3 million.

This quarter marked the first quarter in 10 quarters of a sub-100% payout ratio, as we posted a normalized AFFO payout ratio of 96.6%, resulting from a strong normalized AFFO per unit of $0.162, 16.2 cents. NAV grew $0.07 [unclear] $0.29 per unit.

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Once again, I'd like to welcome everyone to the 2026 first quarter results conference call for Nexus Industrial REIT. Joining me today is Mike Rawle, Chief Financial Officer of the REIT.

Before we begin, I'd like to caution with regard to forward-looking statements and non-GAAP measures. Certain statements made during this conference call may constitute forward-looking statements, which reflect the REIT's current expectations and projections about future results.

Also during this call, we'll be discussing non-GAAP measures. Please refer to our MD&A and the REIT's other securities filings, which can be found on our website and at sedarplus.com for cautions regarding forward-looking information and for information about non-GAAP measures.

In the first quarter, we delivered healthy net operating income of $33.8 million, an increase of 5.4% compared to last year, and normalized FFO increased to $17.7 million. On a last 12-month basis, adjusted EBITDA grew to $121.3 million.

This quarter marked the first quarter in 10 quarters of a sub-100% payout ratio, as we posted a normalized AFFO payout ratio of 96.6%, resulting from a strong normalized AFFO per unit of 16.2 cents. NAV grew 7 cents compared to December 31st, 2026, ending the quarter at $13.29 per unit.

While we're very pleased with these headline earnings, the results were impacted by a number of different puts and takes, which I'll outline in a minute. The quarter, we also made good headway on several strategic initiatives.

We advanced our leasing. We were granted an investment-grade credit rating from DBRS, which led to our inaugural bond offering in April.

Lastly, we have firm sales for two of the four buildings that we had for sale at year end and also advanced our development. I will now discuss each of these items in more detail.

Starting with our operating performance, we made good progress this quarter. We completed roughly 41,000 square feet of new leases and average rent lift of 32% over expiring and in-place rents.

This demonstrates our continued ability to capture the market lift on lease renewals, which bodes well for our future, since March 31st, we had an attractive average spread between market and in-place rents of 15.8%. From an occupancy perspective, the progress we made on renewals was overshadowed by two unplanned vacancies in the quarter, which led to a drop in occupancy to 95%, but which, interestingly, also had a positive impact on our financial results.

Roughly half, or 0.5%, of the occupancy decrease came from our property at 4590 Portland Boulevard in Sherbrooke, Quebec. We early terminated the tenant for non-payment.

This resulted in additional termination income of approximately $1.2 million, since we expect to fully collect on a guarantee from the tenant's parent company. While this quarter our NOI and AFFO benefited from the lease termination, the 62,000-square-foot property is now vacant, and it will likely take several months to find a new tenant.

Overall, on a full-year basis, I don't expect any impact. The benefit from the lease termination income that we earned this quarter will be offset by some downtime over the next couple of quarters, leaving us whole on a full-year basis.

The remaining vacancy came from our building at 1020 Adelaide Street in London. A tenant who had 88,000 square feet decided to vacate at the end of February.

The tenant was paying gross rent of only $6.80 per square foot, which is significantly undermarket. We have already had good interest and expect to fill it over the next couple of quarters at market rents of about $9 to $10 per square foot net, resulting in a significant longer-term value creation for us.

In total, we delivered industrial same-property NOI growth of 1% in the quarter, as our positive leasing activities outweighed the impact of the temporary vacancies. In 2026, a total of 990,000 square feet of gross leasable area was scheduled to expire.

To date, the REIT has successfully renewed 510,000 square feet at an average increase of 7% over the expiring rental rates. We had one reset renewal in Alberta that was a long-term deal that expired and that has dragged this percentage down.

If we exclude this, the rental lift was 26%. Of the 380,000 square feet remaining for the year, we are currently in solid discussions with two tenants that represent 240,000 square feet that expires in Q4.

Of the remaining expiring GLA, 140,000 square feet is represented by mostly three strategic vacancies where we anticipate achieving higher rents upon releasing. Overall, our outlook for 2026 remains unchanged.

We continue to expect our industrial same-property NOI to be in the mid-single digits for the year, and we expect our normalized AFFO payout ratio to average below 100% for the full year. In the first quarter, DBRS granted Nexus an investment-grade rating of BBB (low) stable.

In April, we completed an inaugural bond issuance of $500 million. The debentures were issued in two tranches: $300 million of a 3-year bond with a coupon of 4.236% and $200 million of a 5-year bond with coupon of 4.641%.

These issuances marked a significant milestone in our evolution, and I'm incredibly proud of this achievement. The capital pool company that we started 13 years ago with $5 million in cash is now investment-grade rated with assets of nearly $2.7 billion, has created nearly $1.3 billion equity for our Class A and B unitholders, while also having paid cumulative distributions of $361 million.

Looking forward, the ability to access bond markets will save on financing costs and will significantly increase funding flexibility and reduce financial risk. At the year end, we had four buildings identified as being held for sale, and we have already addressed two of them.

In February, we closed on the sale of 41 Royal Vista Drive in Calgary. An existing tenant in the building submitted an unsolicited offer above our market value to secure long-term control of the site.

They offered us $8.5 million, which was equal to a cap rate of 5.7%. Given the competitive pricing and strategic rationale, we accepted the offer and closed the sale.

We have used the proceeds to repay debt. Our building at 40th Avenue in Red Deer, Alberta is under firm sale contract for $11.25 million.

This building went vacant when Peavey Mart filed for CCAA in April 2025. At 119,000 square feet, it is large for the area and was challenging to release.

The buyer is obtaining a development permit from the city, after which the sale will close. In the meantime, the buyer is paying us monthly rent starting in May of $95,000, which is a great outcome for us.

In Hamilton, we're still looking for a buyer or tenant for 115,000-square-foot new build on Glover Road. We own 80% of this property, and it has been a challenging market in Hamilton, but we have a brand new facility.

Once sold, it will contribute significantly to our AFFO per unit as the carrying costs are significant, and we'll be able to use the sale proceeds to pay down debt. The last building is our sole remaining retail property, Ville d'Anjou, which we are marketing gently.

It cash flows well for us, we're not in a rush to make a sale. In addition, we're close on a deal to sell our 80% interest in development land on South Service Road in Hamilton.

The property doesn't fit into our strategy anymore, and we will use the sale proceeds to reduce debt. As we shared in March, we are in the planning stage of two additional development projects which will get underway later this year.

At our Savage Road property in Richmond, BC, we're adding 80,000 square feet for a combination of cash and 2.9 million REIT units issued at $10.50 per unit. We'll earn 6% on the REIT units issued during the construction period and will earn a contractual 6% yield upon completion.

At Adams Road property in Kelowna, we'll build up to 180,000 square feet of micro-industrial units on vacant land surrounding our existing industrial building for a total estimated cost of approximately $47 million. Turning to our outlook, we continue to expect Nexus to deliver a strong 2026 driven by our completed development projects, embedded rent steps, the lease-up of vacant space, and the releasing of space at market rents above expiring rents.

We see no change in our outlook and anticipate mid-single-digit same-property NOI growth in our industrial portfolio for the year, and normalized AFFO payout ratio to an average below 100% for the full year. I will now turn the call over to Mike to give some more color on our financials.

Thank you, Kelly, and good morning, everyone. Starting with headline earnings in the quarter, net income was $32.2 million, a $1 million decrease compared to a net income of $33.2 million last year.

The decrease was primarily due to lower fair value adjustments on our investment properties by $6.8 million and a decrease in the Class B LP unit fair value adjustments by $5.6 million, partially offset by higher fair value adjustments on derivative financial instruments by $11.3 million and an increase in net operating income by $1.7 million. As Kelly mentioned, our Q1 net operating income increased 5.4%, or $1.7 million year over year, to $33.8 million.

This was primarily due to the completion of our St. Thomas and Calgary developments, which combined added $1.3 million, the acquisition of the two Montreal buildings in November, which added $700,000, and an increase in lease termination income by $600,000 from the eviction of the tenant at 4590 Portland Boulevard in Sherbrooke that Kelly spoke about.

NOI also benefited from a change in how we treat improvements and leasing commissions to better align our approach with our peers. For this quarter onwards, we have stopped amortizing TIs and LCs, and instead we are now adjusting these balances through fair value.

When compared to prior periods, this resulted in a $400,000 benefit to NOI this quarter, and has no impact to other metrics such as net income, FFO, or AFFO. In the quarter, the benefits to NOI were partially offset by a one-time write-off of straight-line rent of $600,000 resulting from a lease change, and a $600,000 decrease from foregone rent from properties that we have sold since Q1 2025.

Normalized AFFO for the period was 16.2 cents per unit compared to 15.4 cents from a year ago, primarily due to a higher normalized AFFO of $1.2 million driven by the higher NOI discussed earlier, partially offset by higher interest expense of $700,000 and a $200,000 increase in general administrative expense due to higher compensation and legal fees. Total general and administrative expense for the quarter was $2.5 million, which was $200,000 higher than a year ago, predominantly due to higher non-recurring compensation costs and legal fees.

Net interest expense in the quarter was $14.1 million, a $700,000 increase from the same period in 2025, driven by higher interest on the credit facility by $800,000 resulting from higher borrowings during the period to fund mortgage maturities and development expenditures, and lower capitalized interest by $400,000 due to the completion of development properties. These increases were partially offset by a lower mortgage interest by $500,000 resulting from principal repayments and property dispositions.

The carrying value of our investment properties increased by $14.3 million in the quarter, primarily due to capital expenditures, tenant improvements, and leasing costs by $7.8 million, $4.2 million of development expenditures, and $2.1 million of fair value gains. At March 31st, our NAV per unit was $13.29, a 7 cent per unit increase from last quarter.

Our weighted average cap rate increased by 6 basis points to 5.94% in the quarter compared to 5.88% at December 31st. I will now turn the call back to Kelly.

Thanks, Mike. I will now pass it back to the operator to open up the line for questions.

Hey, good morning. Congrats on the investment-grade credit rating.

Just curious, with the unwind of some of the currency swaps, would there be a one-time cost associated with that that we should expect in Q2?

Hi. No income impact because it's already been accrued.

I think the derivatives are already carried at fair value. There was a cash impact of just under $2 million.

Perfect. Appreciate that.

Then just, given the lease termination fee income in the quarter, but no change to guidance, would that assume, I guess, the guidance is including the lease termination fee income going forward? Then, if so, I guess if we were to strip that out, what would be the growth guidance for the rest of the year?

No, it is stripped out from that SPNOI.

That would be

another 1.2 million we could add if we were to include it in that calculation.

Okay. No major changes to guidance as you said.

Understood. I guess my last question would be on Kelowna.

I guess you're making progress on that front. When would the project be complete from a construction point of view, and when would you be looking to start the sales process on the micro-units?

I think we're just still in the drawing stage right now, finalizing, I think probably not till the end of the year start. While Richmond is a little different, and that one we're in for permit on that one as we've finalized design.

It's kind of a unique, cool design. There could be further upside there.

At the end of the day, each of them kind of will go in stages.

Okay. I'll turn it back.

Thank you.

Yeah.

Thanks. Morning, guys.

Maybe just going back to the guidance, kind of as Brad asked about there. Obviously reiterated the guidance.

Softer print this quarter. We understand because of the vacancy, but that would imply pretty significant acceleration into the last three quarters of the year.

I'm just wondering, where is that growth really coming from over the balance of the year? What are the drivers that maybe didn't contribute this quarter that we should expect to really ramp?

That's a fair comment, Kyle. Couple of things there.

The primary thing is leasing of empty space. We had a big one that was a drag versus prior year is 102nd Avenue in Calgary.

That was the old Peavey Mart space. That was occupied Q1 of last year, and it was vacant this year, and we anticipate filling that later this year.

Another one is the other Peavey Mart space that we were looking at selling, we have that under firm contract now, and we're actually going to receive rent from it from May forwards before the sale ends up closing in October. Those will both benefit SPNOI going forward.

Okay. Thank you for that.

Would you say just as you look forward, I think you highlighted, I just want to confirm, another maybe 140,000 square feet of expected non-renewals later this year. Is that correct?

That's correct.

Okay. Would you say anything has changed in the leasing environment?

Is it more challenging maybe than it was? Is there different areas of strength or weakness or secondary markets coming under any pressure, or just would love to hear, I guess, your thoughts on the leasing environment?

Yeah. We have one in Montreal, it's a 91,000-square-footer.

That tenant, I think I've mentioned this before, but that tenant had three 5-year renewal options at no more than I think 2.5% of their expiring rent. Last year, they wanted to stay for one year, and so we moved their rent to $9 from $5.

That was strategic. We knew it would be a one-year hit.

$9 is still well under market for that area in Montreal. That comes up at the end of the year.

That's one of them. Another one, a 20,000-square-footer in London where they were paying $6 gross.

So $6 gross is very, very undermarket, not willing to pay the increase, we're out to market with that. Then another one in Ajax where they were sitting at I believe $11 a square foot no, $13 $13 a square foot, we'll get an uptick on that, and we also did a buyout with them, a termination, we got full income till the end of the year from them.

At the end of the day, those were all strategic where we saw a significant amount of upside. To answer your question on the actual leasing, I feel London is, I wouldn't say slowed down, people are just more cautious.

It is a little bit harder to get the deals done right now, although the leasing market is still pretty healthy. We have two two larger ones that were in paper with back and forth that we hope to have wrapped up in the next quarter or so that represents call it 230,000 square feet.

I'm still pretty positive on those to renew. Overall, I think things have calmed down, but it's still a fairly healthy leasing market.

Thank you for the color. Just the last one for me.

Just wondering where we stand on the stabilization of the Calgary kind of industrial condo development. How much NOI was realized this quarter versus how much do you expect to ramp throughout the year?

It was 56% occupied. At the end of the quarter, we had about probably about half of that contributed during the quarter.

That full 56% we'd receive next quarter. We've made pretty good progress in the leasing.

I think there's one one out for signature of the remaining four units. Two are in negotiation, and then one we're still looking for tenants.

Our expectation is to have that done by the end of September, have it fully stabilized in September.

Perfect. I will turn it back.

Thanks.

Thank you, and I'll echo the congratulations on the investment grade and the inaugural debenture offerings. Just on that, Mike, how do you see the interest cost run rate changing in I guess Q3 will be the first clean quarter with the debentures versus the 14 million booked in Q1?

I think, overall, the benefit of the bonds where credit spreads are, it'll save us in the order of 10 to 10 to 20 basis points. That's variable depending on credit spreads of the credit facility at the time.

What we've locked in there is basically 10 to 20 basis points relative to what we were paying.

You're saying, all else the same in terms of debt levels, the interest cost should be a snick lower

That's it.

on a run rate basis by Q3, I guess. Okay.

Yeah. On the 500 million that we've raised.

Yeah.

On the 500 million. Got it.

Okay.

Nice.

Then just also on the new vacancies in the quarter, and thank you for I guess the color you provided there. I'm just curious, could you identify who the parent company is of I guess the former tenant at Sherbrooke?

I believe it's CoCo Frutti.

Okay. Then the tenant in London, what was the reason they chose to vacate the premises there?

Was that at the end of a lease term, or did they have an early termination right?

No, that was an expiry. It actually was, I call them, our partner, Ian McLaughlin,

who had 88,000 square feet

at a gross rent of $6.80. We want more.

They have some of their own vacant space in one of their buildings that was an old manufacturing site that they just moved into to take some of that space there. It's pretty good space, and at only $6.80 gross, we see upside there.

For sure. That's it for me.

Thanks very much.

Thanks.

thanks. Just a follow-up on that interest savings comment of 20 10 to 20 basis point savings.

I just want to make sure I understand. The debenture blended rate is about 4.4%,

and

isn't the term facility at 5.3?

The term facility was 170 basis points over CORRA. We still have the swaps in place, well some of the swaps in place, I guess.

Or put another way, we have unwound the swaps. We have the impact of the swaps because we've paid them off.

We have the additional debt of the swaps. The real savings here is the credit spread that we're paying.

We're paying effectively credit spreads slightly tighter, 10 to 20 basis points tighter than the effective credit spread on the credit facility.

All right. I think I get it.

Maybe just in general then on the leasing comments, where are you seeing potential tenant stress? Then you made a comment about leasing people are a bit more cautious.

Kind of what would you attribute that to? Is it the oil environment, tariff that you could point out?

I think Alberta and out west is still really strong. There's no doubt.

Montreal, it's a slow down in Montreal from what it used to be. London, southwestern Ontario, it's an interesting, interesting market.

Windsor, for example, has literally almost no availability. You think that would be the opposite of what's happening in the auto industry.

It's a little bit bizarre, but Windsor itself has very little vacancy at all. London, we've just seen some larger manufacturers that kind of have disappeared that have left a big space.

Like the one that our partner has, it's a pretty big building, but on that note, they're making pretty good headway of filling it back up, in subdividing it into warehousing. I feel that when you look at the tenant base right now, they're having trouble forecasting what's going to happen.

Their growth plans have paused. I think until we get through the tariff thing, I think that's going to be the case.

Guys are just pausing on decisions and taking their time and waiting. Until that, it's just going to be uncertain times.

Overall, it hasn't hurt us too much. The ones that we have are kind of planned ones, because we're going to get a pretty good lift.

When you think about $6.80 gross, that sits down to a $4 and something $4, $4.20 net rent that we can take to $9 or $10. The short downtime is worth the lift that gives.

Thanks for that.

Hi, good morning. Just on the Glover Road development, do you have an estimate of what your quarterly carrying costs are on that asset right now?

I believe, it's in between $80,000 and $90,000 a month. It's significant.

When we sell that, it's going to make a significant improvement to our NOI.

Okay. In terms of price talk around the asset, are you comfortable you'll be able to recoup your development costs here?

We believe so.

Okay. That's great.

Thanks very much.

Yeah.

All right, I want to thank everybody for attending, and we'll talk to you next quarter.