Thank you. I'd like to welcome everyone to the 2026 second 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 sedar.com, for cautions regarding forward-looking information and for information about non-GAAP measures. The second quarter was an excellent quarter for Nexus.

We delivered sequential and year-over-year growth in revenue, net operating income, normalized FFO, and the last 12 months adjusted EBITDA. These improvements reflect strong operating results while we also advanced three transformative strategic initiatives.

First, early in the quarter, we obtained an investment grade credit rating and completed an inaugural bond offering. Second, we advanced our capital recycling program by closing on the sale of surplus land and advancing two other dispositions.

Third, we advanced our development projects in British Columbia, which have the potential to be significant growth opportunities for Nexus. I will first review our operating performance, then provide an update on financing, capital recycling, and development before closing with our outlook for the balance of 2026.

In the quarter, we grew occupancy significantly to 97%. This improvement came primarily from two properties in Alberta: at 8th Street in Nisku, where we signed a lease for the full 40,000 square feet at a 15% increase over expiring rent; and 40th Avenue in Red Deer, where we have sold a 190,000 square foot property and the buyer is paying us a healthy 10% yield on the purchase price until they are able to close, which we expect to be any day now.

I am very happy with this progress, and I expect occupancy to improve further to our long-run average of 98% to 99%. Apart from leasing up of these vacant units, we also made excellent headway on renewals, completing 380,000 square feet of renewals at an average lift of 6% over expiring and in-place rents.

This demonstrates our continued ability to capture the market lift on lease renewals. At June 30th, we had an attractive average spread between market and in-place rents of 14.9%.

Looking at the remaining renewals for 2026, we have approximately 600,000 square feet coming up for renewal in the second half of the year. Of this amount, we have already renewed or expect to renew over 400,000 square feet.

The remaining space includes a 90,000 square foot strategic vacancy in Montreal, where the tenant was paying $9 per square foot, which is well below market rent. This lease comes due at the end of November.

The remaining space also includes 80,000 square feet in London, where the tenant is paying $8 per square foot rent, also well below market rent, and the lease comes due at the end of December. It's early on this one, but we are in close discussions with a new tenant for this space in London.

The occupancy improvement combined with our recent completed developments, expansions, and acquisitions grew net operating income by 6.2% from a year ago to $34.1 million. Normalized FFO increased to $17.9 million, and on a last 12 months basis, adjusted EBITDA grew to $121.8 million.

For the quarter, we posted normalized AFFO per unit of 15.4 cents, resulting in a year-to-date payout ratio of 99.3%, as we remain on track to deliver a full year 2026 payout ratio below 100%. Turning to our strategic initiatives, at the beginning of the quarter, we received an investment grade rating and completed an inaugural bond issuance of $500 million.

The debentures were issued in two tranches: $300 million of 3-year bonds with a coupon of 4.236%, and $200 million of 5-year bonds with a coupon of 4.641%. These issuances marked significant milestones in our evolution, and I'm incredibly proud of this achievement.

Looking forward, access to the bond market should help reduce financing costs, increase funding flexibility, and reduce financing risk over time. We also have continued to make good headway on our capital recycling program.

In the quarter, we sold our 80% interest in development land on South Service Road in Hamilton for $14.1 million. The property no longer fit into our plans and we were able to use the sale proceeds to reduce debt.

Since we are familiar with the project, we have agreed to guarantee the construction debt on a secured basis for a fee of 1%. We have also entered into an agreement to sell nearly 14 acres of excess land in Blackfalds, Alberta.

Previously, the land had been leased along with the building on an adjoining property. Upon renewing the tenant, we severed off the unused land and have found a buyer at $184,000 per acre, which we expect to close in October.

We will use the proceeds of $2.5 million to reduce our debt. As mentioned earlier, 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. The buyer is obtaining a development permit from the city, after which the sale will close, which we said will be any day.

In the meantime, the buyer is paying us monthly rent, which is a great outcome for us. In Hamilton, we are looking for a buyer or a tenant for our 115,000 square foot new build on Glover Road.

We own 80% of the property, and it has been a challenging market in Hamilton. In July, we advanced the sale by issuing our 20% partner with a right of first offer notice to acquire the property.

They did not exercise the offer, and as a consequence, we now have the ability to market 100% of the property for sale. Selling the building would contribute meaningful to our FFO per unit as the carrying costs are significant and sale proceeds could be used to pay down debt.

Turning to development, we have launched a sub-strategy within our portfolio to consider development of data infrastructure projects where such investments meet our investment objectives and our disciplined approach to capital allocation. We believe that 1751 Savage Road in Richmond and 555 Adams Road in Kelowna have the existing electrical infrastructure, available power capacity, and strategic locations that may provide a competitive advantage in pursuing possible digital infrastructure opportunities.

At our Savage Road property in Richmond, BC, we have transitioned the planned development from adding additional tennis courts to a combination of a tennis court and micro-industrial units that may be used individually or combined as data infrastructure. At this time, we do not anticipate any change in the development cost of $41.3 million, and we expect the project to continue to generate a minimum unlevered return on investment of 6%.

In saying that, however, the project has a potential for much, much greater returns if the micro-industrial units are used as data infrastructure. During the quarter, permitting was completed and construction commenced.

At our Adams Road property in Kelowna, we're developing micro-industrial units as well, which may also be used individually or combined as data infrastructure. We do not anticipate any change in development costs of $47.3 million, and we expect the project to generate a minimum unlevered return on investment of 6%.

Again, the project has a much greater potential for returns if the micro-industrial units are used as data infrastructure. The planning phase has been completed, and the construction permit application has been submitted for review.

Overall, our outlook for 2026 remains unchanged. 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 anticipate mid-single-digit industrial same-property NOI growth for the year and expect our normalized AFFO payout ratio to average well below 100% for the full year. With that overview, I'll now turn the call over to Mike for more color on our financial results.

Thank you, Kelly, and good morning, everyone. Starting with headline earnings in the quarter, net loss was $12.8 million, a $5.2 million decrease compared to a net loss of $7.6 million last year.

The fluctuation is due to lower fair value adjustments on derivative financial instruments and Class B LP units of $5.5 million and $3.2 million, respectively, and a higher net interest expense of $2 million. These costs were partially offset by a higher fair value adjustment of investment property by $3.5 million and a higher NOI of $2 million.

As Kelly mentioned, our Q2 net operating income increased 6.2% or $2 million year-over-year to $34.1 million. This was primarily due to the completion of our St.

Thomas and Calgary developments, which together added $1.3 million; an increase in same-property NOI, which added $900,000; and the acquisition of the two Montreal buildings in November 2025, which added $700,000. This was partially offset by lower termination fee income by $1.2 million and $200,000 relating to dispositions completed since Q2 2025.

Normalized AFFO for the period was 15.4 cents per unit compared to 16 cents from a year ago, primarily due to an increase in the weighted average number of units outstanding and higher interest expense due to having more debt outstanding. This was partially offset by the higher NOI that I just mentioned.

Total general and administrative expenses for the quarter were $2.2 million, which was consistent with a year ago. Net interest expense in the quarter was $14.7 million, which was $2 million higher than a year ago, mainly due to a higher debt balance and the non-cash write-off of deferred financing costs associated with the $200 million term loan that we retired early with the proceeds from our inaugural bond issuance in April.

In addition, capitalized interest in the quarter was $300,000, or $700,000 lower than a year ago. The carrying value of our investment properties decreased by $15.7 million in the quarter, primarily due to the sale of our 80% interest in the development land at 1540 South Service Road for $14.1 million, as well as fair value adjustments on properties of $7.6 million, partially offset by investment in development and capital expenditures, tenant improvements, and leasing costs.

At June 30th, our NAV per unit was $13.23, a 6 cent per unit decrease from last quarter. Our weighted average cap rate increased by 1 basis point to 5.95% in the quarter compared to 5.94% at March 31st.

I will now turn the call back to Kelly.

Thanks, Mike. We're working hard at turning over every stone to create value for our unitholders.

We're advancing our strategy as Canada's industrial building partner by continuing to realize organic growth through embedded rent steps and positive mark-to-market on renewal. We'll continue our track record of accretive capital recycling through opportunistic acquisition, dispositions, and development.

With that, operator, please open the line to any questions.

Hey, good morning.

Morning.

Just, I guess hitting on your the strategic updates on the development side, Richmond and Kelowna. I guess specifically with Richmond, you put in kind of new language around the potential for digital infrastructure use along with the micro-industrial.

I guess from the concept perspective today, it sounds like the plan is to build out the shell for now, and then I guess the leasing will dictate sort of what the use could be. Just could you walk through that a bit more in terms of the initial plan and what to expect in terms of construction?

Then, I just would like to understand how power would be secured for in case there is data center users.

Yeah. Okay.

I just [no?] , I guess watch my words.

I'm looking at this like miners trying to find the diamond in the rough. We have broken ground, we've poured foundation, and shortly we'll begin framing on a very unique design that I think will be able to deliver by the end of the year.

Our engineers discovered an opportunity, and we're exploring it very closely. I think what we have is obviously a great opportunity to create real value in the near term for the REIT.

I'd say it's a little early to give too much detail, but I can say if we're successful in landing the tenant, and we are speaking with a number, and the reception has been very, very positive. It's going to be a diamond.

I say let's see how it all plays out, but I hope to have some positive news within a month, month and a half. All goes well, their early conversations are going extremely well, but it's a bit too early to make that call.

We do have available power. We've been approved for additional power.

From that perspective, it looks pretty positive.

In the MD&A, you used similar language around Kelowna. I guess it doesn't sound like it's as far advanced as Richmond.

Is that a fair assessment? It could be a similar opportunity?

Exactly. We're in for permit there on the same design.

When I'm able to and ready, when we move closer and we land something, I'll give a fullsome probably press release on what we're doing. It is very unique, very different, and I think what we have is something I think looks really good from what we're seeing right now.

We kind of fell into it. At Richmond, we applied for additional power pretty early on, a while back.

Things have been going pretty well. I knock on wood, I don't want to jinx it and then come back and say, "Oh, we're just doing our standard 6% return."

I think right now it looks pretty positive.

Okay. I'll turn it back.

Thank you.

Thanks.

Thanks. Morning, guys.

Morning.

Just sticking along the same lines as Brad questions there about the data infrastructure and data center opportunity. You talked about you have the permit existing for Richmond, you're in for permit in Kelowna.

You mentioned giving us an update as you can. What is it that you're waiting for to provide the update?

Is it a change of use at the site? Is it leasing discussions?

Just curious what it is that we need to wait for before we can learn more.

Yeah. It'd be an update on leases, on having it papered in my hands, it's pricing, it gets priced per kilowatt hour per month, what is the final pricing.

I think we have something really unique in our design that is going to become very popular, and let's face it, the actual ability to deliver quickly is imperative in that world, because if you consider a traditional data center, it takes probably 3, 4 years to finish off, probably more like 4, to be honest. We're in a little bit of a unique position that I think we can deliver at the end of the year.

I'm hoping, I don't want to say too much because I don't want everyone going crazy and then all of a sudden we can't secure the deal. This is kind of new for us, but it is going pretty positive.

Okay. No, fair enough.

Just a follow-up there on the types of tenants that you might be engaging with, what are they? Are they large tech companies?

If you could just give us a bit of a sense of the type of tenant that would be looking for a smaller footprint data center like this?

To be honest, all of them. From very, very large to smaller co-locators to different types of groups.

There's just overall interest, and there's a general shortage of available power to supply data right now, that's available in the short term. When I say everyone, it's pretty much everyone right now.

Okay. Interesting.

I know it said one question, one follow-up, but I'm going to ask one more quick one, just on actually the industrial portfolio. Where do you see industrial same-property NOI trending over time?

Obviously, restated the mid-single digit. We've seen growth in the second quarter from the first quarter.

Do you see that transitioning into a more mid to high single digit range, maybe aligning a little bit more directly with some of the other kind of Canadian peers at this point?

I think candidly, it's a little early for us to give longer-term guidance outside of this year. I'd say we're very comfortable with our guidance this year of the mid-single digits.

I think, given where we're at today or on a year-to-date basis, fair to expect some acceleration from us in the back half of the year. I think on the longer term, don't want to give guidance into '27, '28 at this point.

Okay. Fair enough.

I will turn it back. Thanks, guys.

Morning, guys. Just maybe a follow-up to Kyle line of questioning there, but on the straight-line rent component, I know you guys have done some pretty creative leasing deals, we expected it to go up, but how should we think of that translating into cash NOI over what period?

Because I know there were some steps in some of the leasing that you did.

I I I don't really know how to answer that other than to say we typically have pretty I think our average rent steps are in the order of 2% to 3% per year on on our portfolio overall. I think if you're looking to kind of see how, the kind of cash our in-place rents grow, that's probably a fair a fair number to use.

Then, the As you mentioned, there are a few where we've tried to call them out specifically where that are they're abnormal, like, for example, 1000 Clarke Road in London, which which had a big step at the beginning of this year, and and the building we had in in Calgary last year in March of last year, which had a, big rent step which we which we disclosed individually. I think, otherwise, fair to look at the portfolio as being, kind of 2% to 3% as an underlying rent step.

Okay. No, that's fair.

I was just thinking more in terms of I think you had $1.3 million in straight-line rent, if I'm looking at this correctly, in this quarter. It was what, $400,000 [unclear]?

I think the Q2 I think Q2 run rate's pretty good, if we take if we take the

figure.

Like straight-line rent in Q1 was lower because that we had so much adjustments and write-offs, this year this quarter is a is more indicative of of a future run rate.

Makes sense. Then maybe going back to the earlier discussion on the data center opportunity, is it exclusive to those two properties that have been highlighted, or do you think this is something that you could roll out more broadly across the portfolio?

I would say we've surveyed the entire portfolio. We're in applications on a significant number of properties.

We do have available power. Our concept is unique, and it is something that could be rolled out right across the portfolio if warranted by potential users.

Interesting. Then I don't know if you'd disclose it, but from an incremental capital deployment standpoint, assuming a deal is to come forth, is it a significant amount of dollars on your side with high returns, or is it a reasonable commitment from a capital standpoint?

I think if we went that way, maybe the budget increases a little bit in Richmond, but the returns become quite large.

Potential,

and again, it depends on what price per kilowatt, a number of different factors,

so. Makes sense.

Then maybe stepping back just high level in terms of capital allocation, you have been a little bit more active on the disposition front. Obviously, you've got these opportunities that may take some of that capital, but what are you seeing on the acquisition side?

Or is there a view towards kind of redeploying some of these disposition proceeds into new purchases as well, or just deleveraging?

I think we're focused on the deleveraging. An opportunity may come that's just too good to be true, and we would pursue it, but right now, I see the returns on allocating some of that capital to this new sub-strategy just are way higher.

A better use of our capital right now, and if it's successful, we'll continue on, and that should free up free cash flow, etc., etc., etc. We'll just see how it all goes.

Just to highlight, too, Matt, we have some other non-data related internal projects, just as we've had in the past, which are high-return projects which would, I think, take precedence in capital allocation ahead of acquisitions. Talking like our internal ones are 10% plus return on capital, those we'd certainly put those first in line.

Okay. Makes sense.

Maybe I'll ask one more just because I think people are maybe busy figuring out what H&R is doing this morning, but in terms of known non-renewals or future leasing, either positive in terms of some of the vacant space or expected non-renewals, is there anything to note for the balance of the year?

I think we noted the three, right? One is I believe Dubo Electric.

That's the building that's coming back to us, we'll look to lease. That's end of the year.

That's on the lower rent, I think 8 bucks a foot, hopefully we have positive there. Then two in London, one which I believe was 80,000 square feet I said, but we're in pretty good discussions with a group that hopefully that one gets off the radar with either little or no downtime.

Then that leaves us one more in London. Mike, how many square feet was that?

88.

88,000 square feet, but it was at a lower rent, I believe, as well,

6 bucks

a foot, we should be able to do better on that as well.

Perfect. Thanks.

Appreciate the update, guys.

No, no problem.

Thank you. Good morning.

Just wanted to start on the leasing spreads in the quarter, which were quite weak, particularly in Alberta. I'm just wondering are there any other similar properties in the portfolio that come up for lease in the near term that might see similar reductions in their rent?

I don't believe in the near term there are any. That Mazdek 1, it was coming off Mazdek, that was signed way back in that kind of the oil heyday, and then it was just coming off.

They had actually been subleasing and we did a direct deal with the sublease tenant, so that was kind of an anomaly.

Actually, that was a good news story as well, Sam. That was one where, as part of that renewal, we've partitioned off 14 acres of land and that's under contract for sale.

I know rent dropped, but we were able to peel off a bunch of an asset there which was unproductive and now monetize it.

That was a $2.3 million sale, I believe you said?

That's it.

Yeah.

Yeah.

Okay. I guess the other question is just on the data center disclosure last night.

How long had you been working on this sort of pivot on these two projects?

I would say it's probably been six, from where we kind of got the idea and applied for additional power was maybe 6 months ago, and then the real kind of harder pivot maybe in about 3 months ago where it looked pretty feasible. We're still in that earlier stage, but we altered our design, and it looks like it's going really well.

It kind of came up on us when we were just exploring opportunities to create bigger value.

Got it. Are there other assets in the portfolio that are maybe sort of further behind in the process that might come to fruition in the coming quarters?

I would say there are other assets that we definitely are looking at in the shorter term, yes. Correct.

Okay. Thank you.

I'll turn it back.

Okay.

Awesome. All right.

Thanks, guys. We will see you next quarter.