Q1 2026 Nexus Industrial REIT Earnings Call

May 12, 2026

Operator 3: Thank you for standing by. This is the conference operator. Welcome to the Nexus Industrial REIT First Quarter 2026 Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there'll be an opportunity for analysts to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. You'll hear a tone acknowledging your request. Should you need assistance during the conference call, you may reach an operator by pressing star then 0. I would now like to turn the conference over to Kelly Hanczyk, Chief Executive Officer. Please go ahead.

Operator: Thank you for standing by. This is the conference operator. Welcome to the Nexus Industrial REIT Q1 2026 Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there'll be an opportunity for analysts to ask questions. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. Should you need assistance during the conference call, you may reach an operator by pressing star then zero. I would now like to turn the conference over to Kelly Hanczyk, Chief Executive Officer. Please go ahead.

Speaker #2: After the presentations, there'll be an opportunity for analysts to ask questions. To join the question queue, you may press *1 on your telephone keypad.

Speaker #2: You'll hear a tone acknowledging your request. Should you need assistance during the conference call, you may reach an operator by pressing *0. I would now like to turn the conference over to Kelly Hunsick, Chief Executive Officer.

Speaker #2: Please go ahead. Welcome everyone to the 2026 Q1 results conference call for Nexus Industrial Q3. Joining me today is Mike Rahl, Chief Financial Officer of the Q3.

Kelly Hanczyk: Welcome, everyone, to the 2026 Q1 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. During this call, we'll be discussing non-GAAP measures. Please refer to our MD&A in the REIT's other securities filings, which can be found on our website, sedar.com for cautions regarding forward-looking information and for information about non-GAAP measures.

Speaker #2: Before we begin, I'd like to caution with regard to forward-looking statements and non-gap measures. Certain statements made during this conference call may constitute forward-looking statements, which reflect the Q3's current expectations and projections about future results.

Speaker #2: Also, during this call, we'll be discussing non-gap measures. Please refer to our MD&A in the Q3's other securities filings, which can be found on our website and at com for cautions regarding forward-looking information and for information about non-gap measures.

Speaker #2: In Q1, income was $33.8 million, an increase of 5.4% compared to last year, and normalized FFO increased to $17.2 million. On a last 12-month basis, adjusted EBITDA grew to $121.3 million, and this quarter marked the first Q1 in 10 quarters with 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.

Kelly Hanczyk: In Q1, income of CAD 33.8 million, an increase of 5.4% compared to last year. Normalized FFO increased to CAD 17.7 million. On a last 12 months basis, adjusted EBITDA grew to CAD 121.3 million. This quarter marked Q1 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. NAV grew seven

Speaker #2: 16.2. NAV grew 7%.

Operator 3: I'm so sorry to interrupt, but your line is dropping out quite consistently. I think we should probably try to reconnect. Okay, I'm just gonna disconnect your line, then reconnect it quickly. Just one moment.

Speaker #3: I'm sorry to interrupt.

Speaker #2: 29 per unit.

Speaker #3: But I'm so sorry to interrupt. But your line is dropping out quite consistently, and I think we should probably try to reconnect. Okay. I'm just going to disconnect your line and then reconnect it quickly.

Operator: I'm so sorry to interrupt, but your line is dropping out quite consistently. I think we should probably try to reconnect. Okay, I'm just gonna disconnect your line, then reconnect it quickly. Just one moment.

Speaker #3: One moment.

Kelly Hanczyk: Again.

Speaker #2: Yeah. We're going to.

Operator 3: One-

Operator: One-

Speaker #4: What do you want to do?

Kelly Hanczyk: What do you want to do? Find the lips. Find that phone.

Speaker #2: Find the webs. Find that phone.

Operator 3: Thank you for your patience, ladies and gentlemen. We have the presenters reconnected. Mr. Hensic, please proceed.

Speaker #3: I'll put the whole music on momentarily. Okay. Thank you for your patience, ladies and gentlemen. We have the presenters reconnected. Mr. Hunsick, please proceed.

Operator: Thank you for your patience, ladies and gentlemen. We have the presenters reconnected. Mr. Hanczyk, please proceed.

Speaker #2: Once again, I'd like to welcome everyone to the 2026 Q1 results conference call for Nexus Industrial Q3. Joining me today is Mike Rahl, Chief Financial Officer of the Q3.

Kelly Hanczyk: Once again, I'd like to welcome everyone to the 2026 Q1 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. During this call, we'll be discussing non-GAAP measures. Please refer to our MD&A in the REIT's other securities filings, which can be found on our website, and that's sedar.com for cautions regarding forward-looking information and for information about non-GAAP measures. In the Q1, we delivered healthy net operating income of CAD 33.8 million, an increase of 5.4% compared to last year, normalized FFO increased to CAD 17.7 million.

Speaker #2: Before we get in, I'd like to caution with regard to forward-looking statements and non-gap measures. Certain statements made during this conference call may constitute forward-looking statements, which reflect the Q3's current expectations and projections about future results.

Speaker #2: Also, during this call, we'll be discussing non-gap measures. Please refer to our MD&A in the Q3's other securities filings, which can be found on our website and at cedar.com for cautions regarding forward-looking information and for information about non-gap measures.

Speaker #2: In the Q1, 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.

Speaker #2: On the last 12-month basis, adjusted EBITDA grew to $121.3 million, and this quarter marked the Q1 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.

Kelly Hanczyk: On a last twelve months basis, adjusted EBITDA grew to CAD 121.3 million. This quarter marked the Q1 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 CAD 0.162. NAV grew CAD 0.07 compared to 31 December 2026, ending the quarter at CAD 13.29 per unit. While I'm 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. In 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.

Speaker #2: NAV grew 7 cents compared to December 31, 2026, ending the quarter at 13.29 per unit. While I'm 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.

Speaker #2: This quarter, we also made good headway on several strategic initiatives to advance our leasing. We were granted an investment-grade credit rating from DBRS, which led to our inaugural bond offering in April.

Speaker #2: And 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.

Kelly Hanczyk: 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, an 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 31 March, 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.

Speaker #2: Starting with our operating performance, we made good progress this quarter. We completed roughly 41,000 square feet of new leases and an average rent lift of 32% over expiring and in-place rents.

Speaker #2: This demonstrates our continued ability to capture the market lift on lease renewals, which bodes well for our future since March 31, we had an attractive average spread between market and in-place rents of 15.8%.

Speaker #2: 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%.

Speaker #2: 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.

Kelly Hanczyk: Roughly 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 CAD 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 sq ft property is now vacant and will likely take several months to find a new tenant. On a full year basis, I don't expect any impact. The benefit from the lease termination income that we earn 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.

Speaker #2: 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. So while this quarter, our NOI and AFFO benefited from the lease termination, the $62,000 square foot property is now vacant.

Speaker #2: 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.

Speaker #2: 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.

Kelly Hanczyk: A tenant who had 88,000 sq ft decided to vacate at the end of February. The tenant was paying gross rent of only CAD 6.80 per sq ft, which is significantly under market. We have already had good interest and expect to fill it over the next couple of quarters at market rents of about CAD 9 to 10 per sq ft 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 998,000 sq ft of gross leasable area was scheduled to expire.

Speaker #2: The tenant was paying gross rent of only $6.80 per square foot, which is significantly under market. 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.

Speaker #2: 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.

Speaker #2: 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.

Kelly Hanczyk: To date, the REIT has successfully renewed 510,000 sq ft 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 sq ft remaining for the year, we are currently in solid discussions with two tenants that represent 240,000 sq ft that expires in Q4. Of the remaining expiring GLA, 140,000 sq ft is represented by mostly 3 strategic vacancies where we anticipate achieving higher rents upon re-leasing. Overall, our outlook for 2026 remains unchanged.

Speaker #2: 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.

Speaker #2: Of the remaining expiring GLA, 140,000 square feet is represented by mostly three strategic vacancies where we anticipate achieving higher rents upon release. Overall, our outlook for 2026 remains unchanged.

Speaker #2: 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.

Kelly Hanczyk: We continue to expect our industrial same property NOI to be in the mid-single digits for the year. We expect our normalized AFFO payout ratio to average below 100% for the full year. In Q1, DBRS granted Nexus an investment-grade rating of BBB, triple B low, stable. In April, we completed an inaugural bond issuance of CAD 500 million. The debentures were issued in 2 tranches, CAD 300 million of a 3-year bond with a coupon of 4.236% and CAD 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 CAD 5 million in cash is now investment-grade rated with assets of nearly CAD 2.7 billion.

Speaker #2: In the quarter, DBRS granted Nexus an investment-grade rating. Of BBB, BBB low, stable, and April, we completed an inaugural bond issuance of 500 million.

Speaker #2: The debentures were issued in two tranches, 300 million of a three-year bond with a coupon of 4.236% and 200 million of a five-year bond with coupon of 4.641%.

Speaker #2: 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.

Speaker #2: With assets of nearly $2.7 billion. Has created nearly $1.3 billion equity for our Class A and B unit holders, while also having paid cumulative distributions of $361 million.

Kelly Hanczyk: It has created nearly CAD 1.3 billion equity for our Class A and Class B unitholders, while also having paid cumulative distributions of CAD 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 4 buildings identified as being held for sale, and we have already addressed 2 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 CAD 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.

Speaker #2: 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.

Speaker #2: In February, we closed on the sale of 41 Royal Vista Drive in Calgary and existing tenant in the buildings submitted and unsolicited offer above our market value to secure long-term control of the site.

Speaker #2: 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.

Speaker #2: We have used the proceeds to repay debt. Our building at 40th Avenue in Red Deer, Alberta, is under a firm sale contract for $11.25 million; this building went vacant when PV Mart filed for CCAA in April 2025.

Kelly Hanczyk: Our building at 40th Avenue in Red Deer, Alberta is under firm sale contract for CAD 11.25 million. This building went vacant when Peavey Mart filed for CCAA in April 2025. At 190,000 sq ft, it is large for the area and was challenging to re-lease. 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 CAD 95,000, which is a great outcome for us. In Hamilton, we are still looking for a buyer or a tenant for our 115,000 sq ft new build in Glover Road. We own 80% of this property, and it has been a challenging market in Hamilton, but we have a brand-new facility.

Speaker #2: At 190,000 square feet, it is large for the area and was challenging to release. The buyers obtaining a development permit from the city after which the sale will close.

Speaker #2: In the meantime, the buyers paying us monthly rent starting in May of $95,000, which is a great outcome for us. In Hamilton, we are still looking for a buyer or a tenant for our 150,000 square foot new build in Glover Road; we own 80% of this property and it has been a challenging market in Hamilton.

Speaker #2: 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.

Kelly Hanczyk: 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, Les Halles d'Anjou, which we are marketing gently. Cash flows well for us, so we're not in a rush to make a sale. In addition, we're closed 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.

Speaker #2: The last building is our sole remaining retail property; they all down as you. Which we are marketing gently. Cash flow is well for us, so we're not in a rush to make a sale.

Speaker #2: In addition, we're closed 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.

Speaker #2: As we shared in March, we are in the planning stage of two additional development projects, which we'll 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 $29 million in REIT units.

Kelly Hanczyk: At our Savage Road property in Richmond, BC, we're adding 80,000 sq ft for a combination of cash and CAD 29 million in REIT units issued at CAD 10.50 per unit. We'll earn 6% on the REIT units issued during the construction period, and we'll earn a contractual 6% yield upon completion. At Adams Road property in Kelowna, we'll build up to 180,000 sq ft of micro-industrial units on vacant land surrounding our existing industrial building for a total estimated cost of approximately CAD 47 million.

Speaker #2: Issued at 1050 per unit. We'll earn 6% on the REIT units issued during the construction period and we'll earn a contractual 6% yield upon completion.

Speaker #2: 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.

Speaker #2: 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.

Kelly Hanczyk: 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 re-leasing 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 normalize AFFO payout ratio to an average below 100% for the full year. I'll now turn the call over to Mike to give some more color on our financials.

Speaker #2: 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.

Speaker #2: I'll now turn the call over to Mike to give some more color on our financials.

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

Mike Rawle: Thank you, Kelly, and good morning, everyone. Starting with headline earnings in the quarter, net income was CAD 32.2 million, a CAD 1 million decrease compared to a net income of CAD 33.2 million last year. The decrease was primarily due to lower fair value adjustments on our investment properties by CAD 6.8 million and a decrease in the Class B LP unit fair value adjustments by CAD 5.6 million, partially offset by higher fair value adjustments on derivative financial instruments by CAD 11.3 million and an increase in net operating income by CAD 1.7 million. As Kelly mentioned, our Q1 net operating income increased 5.4% or CAD 1.7 million year over year to CAD 33.8 million.

Speaker #1: The decrease was primarily due to lower fair value adjustments on our investment properties by 6.8 million dollars and a decrease in the Class B LP unit fair value adjustments by 5.6 million dollars.

Speaker #1: Partially offset by higher fair value adjustments on 11.3 million dollars and an increase in net operating income by 1.7 million dollars. As Kelly mentioned, our Q1 net operating income increased 5.4% or 1.7 million dollars year over year to 33.8 million dollars.

Speaker #1: This was primarily due to the completion of our St. Thomas and Calgary developments which combined added 1.3 million dollars. 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 tenants at 4590 Portland Boulevard in Sherbrooke.

Mike Rawle: This was primarily due to the completion of our St. Thomas and Calgary developments, which combined added CAD 1.3 million. An increase in lease termination income by CAD 600,000 from the eviction of a tenant at 4590 Portland Boulevard in Sherbrooke that Kelly spoke about. The acquisition of the two Montreal buildings in November, which added CAD 700,000. 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 CAD 400,000 benefit to NOI this quarter and has no impact to other metrics such as net income, FFO, or AFFO.

Speaker #1: The 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.

Speaker #1: For this quarter onwards, we have stopped amortizing TIs and LCs and instead we are now adjusting these balances through fair periods. This resulted in a $400,000 benefit to NOI this quarter.

Speaker #1: 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.

Mike Rawle: In the quarter, the benefits to NOI were partially offset by a one-time write-off of straight line rent of CAD 600,000 resulting from a lease change and a CAD 600,000 decrease from foregone rents from properties that we have sold since Q1 2025. Normalized AFFO for the period was CAD 0.162 per unit compared to CAD 0.154 from a year ago, primarily due to a higher normalized AFFO of CAD 1.2 million, driven by the higher NOI discussed earlier, partially offset by higher interest expense of CAD 700,000 and a CAD 200,000 increase in general and administrative expense due to higher compensation and legal fees.

Speaker #1: 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 dollars driven by the higher NOI discussed earlier.

Speaker #1: Partially offset by higher interest expense of $700,000 and a $200,000 increase in general and 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.

Mike Rawle: Total general and administrative expense for the quarter was CAD 2.5 million, which was CAD 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 CAD 14.1 million, a CAD 700,000 increase from the same period in 2025, driven by higher interest on the credit facility by CAD 800,000 resulting from higher borrowings during the period to fund mortgage maturities and development expenditures and lower capitalized interest by CAD 400,000 due to the completion of development properties. These increases were partially offset by a lower mortgage interest by CAD 500,000 resulting from principal repayments and property dispositions.

Speaker #1: Net interest expense in the quarter was 14.1 million dollars. 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.

Speaker #1: 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 dollars in the quarter primarily due to capital expenditures tenant improvements and leasing costs by 7.8 million dollars.

Mike Rawle: The carrying value of our investment properties increased by CAD 14.3 million in the quarter, primarily due to capital expenditures, Tenant Improvements, and leasing costs by CAD 7.8 million, CAD 4.2 million of development expenditures, and CAD 2.1 million of fair value gains. At 31 March, our NAV per unit was CAD 13.29, a CAD 0.07 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 31 December. I will now turn the call back to Kelly.

Speaker #1: 4.2 million dollars of development expenditures and 2.1 million dollars of fair value gains. At March 31st, our NAV per unit was $13.29 a 7 cent per unit increase from last quarter.

Speaker #1: Our weighted average cap rate increased by 6 basis points to 5.94% in the quarter, compared to 5.88% at December 31. I will now turn the call back to Kelly.

Speaker #2: Thanks, Mike. I will now pass it back to the operator to open up the line for questions.

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

Speaker #3: Thank you. We'll now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad.

Operator 3: Thank you. We'll now begin the question-and-answer session. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. Our first question is from Brad Sturges with Raymond James. Please go ahead.

Operator: Thank you. We'll now begin the question-and-answer session. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. Our first question is from Brad Sturges with Raymond James. Please go ahead.

Speaker #3: You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two.

Speaker #3: Our first question is from Brad Sturgis with Raymond James. Please go ahead.

Speaker #4: 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?

Brad Sturges: Hey, good morning. Congrats on the investment grade credit rating. Just curious, you know, with the unwind of some of the currency swaps, would there be a one-time cost associated that we should expect in Q2?

Mike Rawle: No, no income impact because it's already been accrued. Like the derivatives are already carried at fair value. There was a cash impact of just under CAD 2 million.

Speaker #2: No income impact because it's already been accrued. The derivatives are already carried at fair value. But there was a cash impact of just under $2 million.

Speaker #4: Perfect. Appreciate that. And then just given the lease termination fee income in the quarter, but no change in the guidance, would that assume I guess the guidance is including the lease termination fee income going forward?

Brad Sturges: Perfect. Appreciate that. Just, you know, given the lease termination fee income in the quarter, but no change to the guidance, would that assume, I guess, your, the guidance, is including the lease termination fee income going forward? If so, I guess if we were to strip that out, what would be the growth guidance for the rest of the year?

Speaker #4: And then if so, I guess if we were to strip that out, what would be the growth guidance for the rest of the year?

Speaker #2: No, it is stripped out from that SPNOI. So that would be another 1.2 million we could add if we were to include it in that calculation.

Mike Rawle: No, it is stripped out from that SPNOI. That would be another CAD 1.2 million we could add if we were to include it in that calculation.

Speaker #4: Okay. So, no major changes to the guidance, as you said. Okay, understood. I guess my last question would be on Kelowna. I guess you're making progress on that front.

Brad Sturges: Okay. No major changes to guidance as you said. Okay, 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?

Speaker #4: When would the projects be complete from a construction point of view? And when would you be looking to start the sales process on the micro units?

Speaker #2: Yeah, I think we're just still in the drawing phase right now finalizing. So I think probably not till the end of the year start.

Kelly Hanczyk: Yeah, I think we're just still in the drawing phase right now, finalizing. I think probably not till the end of the year, start. Well, Richmond's a little different and that one will we're in for permit on that one as we finalize design. It's kind of a unique, cool design. And there could be further upside there. At the end of the day, each of them kind of will go in stages.

Speaker #2: Well, Richmond's a little different. And that one will we're in for permit on that one as we finalize design. It's kind of a unique cool design.

Speaker #2: And there could be further upside there. So at the end of the day, each of them kind of will go in stages.

Speaker #4: Okay. I'll turn it back. Thank you.

Brad Sturges: Okay. I'll turn it back. Thank you.

Kelly Hanczyk: Yeah.

Speaker #2: Okay.

Speaker #3: The next question is from Kyle Stanley with Desjardins. Please go ahead.

Operator 3: The next question is from Kyle Stanley with Desjardins. Please go ahead.

Operator: The next question is from Kyle Stanley with Desjardins. Please go ahead.

Speaker #5: Thanks, morning guys. Maybe just going back to the guidance, kind of the Brad asked about there. So obviously reiterated the guidance, softer print this quarter.

Kyle Stanley: Thanks. Morning, guys. Maybe just going back to the guidance, kind of that Brad asked about there. Obviously reiterated the guidance, softer print this quarter, we understand because of the, you know, the vacancy, but that would imply a pretty significant acceleration into the, you know, the last 3 quarters of the year. I'm just wondering, you know, where is that growth really coming from over the balance of the year? Like, what are the drivers that maybe didn't contribute this quarter that we should expect to really ramp?

Speaker #5: 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?

Speaker #5: What are the drivers that maybe didn't contribute this quarter that we should expect to really ramp?

Speaker #2: Yeah, that's a fair comment, Kyle. A couple of things there. One is the primary thing is leasing of empty space. So we had a big one that was a drag versus prior year is 102 Avenue in Calgary.

David Brown: Yeah, that's a fair comment, Kyle. A couple of things there. One is the primary thing is leasing of empty space. We had a big one that was a drag versus prior year is 102 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're looking at selling. We have that under firm contract now, and we're actually going to receive rent from it from May forwards before it ends up closing, the sale ends up closing in October. You know, those will both benefit SPNOI going forward.

Mike Rawle: Yeah, that's a fair comment, Kyle. A couple of things there. One is the primary thing is leasing of empty space. We had a big one that was a drag versus prior year is 102 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're looking at selling. We have that under firm contract now, and we're actually going to receive rent from it from May forwards before it ends up closing, the sale ends up closing in October. You know, those will both benefit SPNOI going forward.

Speaker #2: So that was the old PV Mart space. That was occupied Q1 of last year, and it was vacant this year. And we anticipate filling that later this year.

Speaker #2: Another one is the other PV Mart space that we were looking at selling. So we have that under firm contract now, and we were actually going to receive rent from it from May forwards before it ends up closing the sale, ends up closing in October.

Speaker #2: So those will both benefit SPNOI going forward.

Speaker #5: Okay. Thank you for that. Would you say just as you look for, I think you highlighted I just want to confirm another maybe 140,000 square feet of expected non-renewals later this year.

Kyle Stanley: Okay. Thank you for that. Would you say, just as you know, you look for, I think you highlighted, I just want to confirm another maybe 140,000 sq ft of expected non-renewals later this year, is that correct?

Speaker #5: Is that correct?

Speaker #2: That's correct.

Kelly Hanczyk: That's correct.

Speaker #5: Okay. So 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?

Kyle Stanley: Okay. So would you say anything has changed in the leasing environment? Is it more challenging maybe than it was? Is there, you know, different areas of strength or weakness or, you know, secondary markets coming under any pressure? Just, you know, would love to hear, I guess, your thoughts on the, on the leasing environment.

Speaker #5: Or just would love to hear I guess your thoughts on the leasing environment.

Speaker #2: Yeah. So we have one in Montreal. It's a 91,000 square footer. That tenant, I think I mentioned this before, but that tenant had three five-year renewal options at no more than, I think, two and a half percent of their expiring rent.

Kelly Hanczyk: Yeah. We have one in Montreal. It's a 91,000 square footer. That tenant, I think I mentioned this before, but that tenant had 3, 5-year renewal options at no more than, I think, 2.5% of their expiring rent. Last year, they wanted to stay for 1 year, and so we moved their rent to CAD 9 from, like, CAD 5. That was strategic. We knew it would be a 1-year hit. CAD 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 CAD 6 gross.

Speaker #2: So last year, we wanted to stay for one year. And so we moved their rent to $9 from like $5. So that was strategic.

Speaker #2: We knew it would be a one-year hit. $9 is still well under market for that area in Montreal. So that comes up at the end of the year.

Speaker #2: That's one of them. Another one at 20,000 square footer in London, where they were paying $6 gross. So $6 gross is very, very under market.

Kelly Hanczyk: CAD 6 gross is very, very under market, not willing to pay the increase, so we're out to market with that. Another one in Ajax where they were sitting at, I believe, CAD 11 a square foot. CAD 13 a square foot. We'll get an uptick on that. 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.

Speaker #2: Not willing to pay the increase. So we're out to market with that. And then another one in Ajax, where they were sitting at, I believe, $11 a square foot.

Speaker #2: No, $13 a square foot. So we'll get an uptick on that. And we also did a buyout with them, a termination. So we got full income till the end of the year from them.

Speaker #2: So 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.

Speaker #2: I feel London is I wouldn't say slowed down. People are just more cautious. So it is a little bit harder to get the deals done right now.

Kelly Hanczyk: It is a little bit harder to get the deals done right now, although the leasing market's still pretty healthy. We have 2 larger ones that we're 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.

Speaker #2: Although the leasing market's still pretty healthy. We have two larger ones that were in paper with back and forth that we hope to have wrapped up in the next quarter or so.

Speaker #2: That represents, call it, 200 in 30,000 square feet. So I'm still pretty positive on those. To renew. So overall, I think things have calmed down, but it's still a fairly healthy leasing market.

Speaker #5: Okay. Thank you for the color. Just the last one for me. Just on the 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 you expect to ramp throughout the year?

Kyle Stanley: Okay. Thank you for the color. Just the last one for me. Just on the, you know, 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 you expect it to ramp throughout the year?

Mike Rawle: It was 66% occupied. We probably had about half at the end of the quarter, we had about, probably about half of that contributed during the quarter. You know, I do have that full 56% we'd receive next quarter. We see we've made pretty good progress on the leasing. I think there's one out for signature of the remaining 4 units. Two are in negotiation, one we're still looking for a tenant. Our expectation is to have that done by the end of September, have it fully stabilized in September.

Speaker #2: It was 56% occupied. We probably had about half at the end of the quarter; we had probably about half of that contributed during the quarter.

Speaker #2: So we have a full that full 56% we'd receive next quarter. And we see we've made pretty good progress in the leasing. I think there's one out for signature of the remaining four units.

Speaker #2: Two are in negotiation, and then one we're still looking for tenants. So our expectation is to have that done by the end of September, have it fully stabilized in September.

Speaker #5: Okay. Perfect. I'll turn it back. Thanks.

Kyle Stanley: Okay, perfect. I will turn it back. Thanks.

Speaker #3: The next question is from Sam Damiani with TD Securities. Please go ahead.

Operator 3: The next question is from Sam Damiani with TD Securities. Please go ahead.

Operator: The next question is from Sam Damiani with TD Securities. Please go ahead.

Speaker #4: Thank you and I'll echo the congratulations on the investment grade and the inaugural venture offerings. And 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 deventures versus the 14 million booked in Q1?

Sam Damiani: Thank you, 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, you know, in, I guess, Q3 will be the first clean quarter with the debentures, versus the CAD 14 million booked in Q1?

Speaker #2: I think overall, the benefit of the bonds—where credit spreads are—they'll save us in the order of 10 to 20 basis points. But that is very, that's like, variable depending on credit spreads of the credit facility at the time.

Mike Rawle: I think overall the benefit of the bonds where credit spreads are, they'll save us in the order of 10 to 20 basis points. You know, that's very, that's like variable depending on credit spreads of the credit facility at the time. Yeah, what we've locked in there is basically 10 to 20 basis points relative to what we were paying.

Speaker #2: So but yeah, what we've locked in there is basically 10 to 20 basis points relative to what we were paying.

Speaker #4: So you're saying the all else the same in terms of debt levels, the interest cost should be a snick lower?

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

Speaker #2: That's it.

Mike Rawle: That's it.

Mike Rawle: on a run rate basis in, you know, by Q3, I guess. Okay.

Sam Damiani: on a run rate basis in, you know, by Q3, I guess. Okay.

Speaker #4: Basis in by Q3, I guess. Okay.

Speaker #2: Yeah. Yeah. On the 500 million that we've raised. Yeah.

Mike Rawle: Yeah. Yeah. On, you know, on the CAD 500 million that we've raised. Yeah.

Speaker #4: On the 500 million. Got it. Okay. Okay. And just on the new vacancies in the quarter, and thank you for, I guess, the color you provided there.

Sam Damiani: On the CAD 500 million. Got it. Okay.

Mike Rawle: Yeah.

Sam Damiani: Okay. Just on the new vacancies in the quarter, and thank you for, I guess, the color you provided there. I am just curious, could you identify who the parent company is of, I guess, the former tenant at Sherbrooke?

Speaker #4: I'm just curious, could you identify who the parent company is of the, I guess, the former tenant at Sherbrooke?

Kelly Hanczyk: Yeah. I believe it's Coco Frutti.

Speaker #2: Yeah, I believe it's Coco Fruity.

Kelly Hanczyk: Yeah. I believe it's Coco Frutti.

Speaker #4: Okay. And then the tenant in London, what was the reason they chose to vacate the premises there? And was that at the end of their lease term, or did they have an early termination right?

Sam Damiani: Okay. The tenant in London, what was the reason they chose to vacate the premises there? Was that at the end of their lease term, or was it that they have an early termination right?

Speaker #2: Yeah. No, that was an expiry it actually was I call them our partner. Amy McLaughlin, who had.

Kelly Hanczyk: Yeah. No, that was an expiry. It actually was, I call him our partner, Edwin McLaughlin, who has.

Speaker #4: Oh, okay. Yeah. That's what I thought.

Sam Damiani: Okay. Yeah, that's what I thought. Yeah.

Speaker #2: 88,000 square feet at a gross rent of 680. 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.

Kelly Hanczyk: 80,000 sq ft at a gross rent of CAD 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 CAD 6.80 gross, we see upside there.

Speaker #2: To take some of that space there. So it's pretty good space at only 680 gross. We see upside there.

Speaker #4: Oh, sure. Okay. That's it for me. Thanks very much.

Sam Damiani: For sure. Okay. That's it for me. Thanks. Thanks very much.

Speaker #2: Thanks.

Kelly Hanczyk: Thanks.

Operator 3: The next question is from Jimmy Shan with RBC. Please go ahead.

Operator: The next question is from Jimmy Shan with RBC. Please go ahead.

Speaker #3: The next question is from Jimmy Shan with RBC. Please go ahead.

Jimmy Shan: Thanks. Just to follow up on that interest savings comment of 20, 10 to 20 basis point savings. I just wanna make sure I understand. The debenture blended rate is about 4.4%.

Speaker #5: Thanks. Just a follow-up on that interest savings comment of 2010 to 20 basis point savings. I just want to make sure I understand. So the deventure blended rate is about 4.4%.

Jimmy Shan: Thanks. Just to follow up on that interest savings comment of 20, 10 to 20 basis point savings. I just wanna make sure I understand. The debenture blended rate is about 4.4%.

Speaker #5: And isn't the term facility at 5.3?

Mike Rawle: Yeah

Operator 2: Isn't the term facility at 53?

Jimmy Shan: Isn't the term facility at 53?

Speaker #2: The term facility was so term facility was 170 basis points over Cedar. Or Vacora. We still have a swaps in place. Well, some of the swaps in place, I guess.

Mike Rawle: Term facility was 170 basis points over CDOR or CORRA. We still have the swaps in place. Well, some of the swaps in place, I guess. Or said another way, we have unwound the swaps. We have the impact of the swaps because we've paid them off, so we have the additional debt of the swaps. The real savings here is the credit spread that we're paying. Which we're paying effectively, credit spread's slightly tighter, 10 to 20 basis points tighter than the effective credit spread on the credit facility.

Speaker #2: So or said another way, we have unwound the swaps. We have the impact of the swaps because we've paid them off. So we have the additional debt of the swaps.

Speaker #2: So the real savings here is the credit spread that we're paying. And so we're paying effectively credit spreads slightly tighter, 10 to 20 basis points tighter than the effective credit spread on the credit facility.

Speaker #5: All right. I think I get it. The and maybe just in general then on the leasing comments, where are you seeing potential tenant stress?

Operator 2: All right. I think I get it. Maybe just in general on the leasing comments, where are you seeing potential tenant stress? Then you made a comment about, you know, leasing people a little bit more cautious. What would you attribute that to? Is it the oil environment, the tariff? Anything that you could point out?

Jimmy Shan: All right. I think I get it. Maybe just in general on the leasing comments, where are you seeing potential tenant stress? Then you made a comment about, you know, leasing people a little bit more cautious. What would you attribute that to? Is it the oil environment, the tariff? Anything that you could point out?

Speaker #5: And then you made a comment about leasing people a little bit more cautious, kind of what would you attribute that to? Is it the oil environment, the tariff, and that you could point out?

Speaker #2: So I'd say Alberta in out west is still really strong. There's no doubt. Montreal, I see a slight I mean, it's a slowdown in Montreal from what it used to be.

Kelly Hanczyk: I'd say Alberta in the west is still really strong. There's no doubt. Montreal, I mean, it's a slowdown in Montreal from what it used to be. London, Southwestern Ontario, it's an 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. Windsor itself has, like, very little vacancy at all. London, we've just seen some larger manufacturers for that kind of have disappeared that have left, you know, a big space. Like the one that our partner has, it's a pretty big building.

Speaker #2: London, Southwestern Ontario—it's an interesting, interesting market. Windsor, for example, has literally almost no availability. And you'd think that would be the opposite of what's happening in the auto industry.

Speaker #2: So it's a little bit bizarre, but Windsor itself has very little vacancy at all. And London, we've just seen some larger manufacturers for that kind of have disappeared that have led a big space.

Speaker #2: 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.

Kelly Hanczyk: 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. The growth plans have paused. I think until we get through the tariff thing, I think that's going to be the case. You know, guys are just pausing on decisions and taking their time and waiting. Until that, it's just gonna 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.

Speaker #2: So in subdividing it into warehousing. So I feel that when you look at the tenant base right now, they're having trouble forecasting what's going to happen.

Speaker #2: So, the growth plans have paused. And I think until we get through the tariff thing, I think that's going to be the case. Guys are just pausing on decisions.

Speaker #2: And taking their time and waiting, and so until that, it's just going to be uncertain times. But overall, it hasn't hurt us too much.

Speaker #2: The ones that we have are kind of planned ones because we're going to get a pretty good lift when you think about 680 gross.

Kelly Hanczyk: When you think about CAD 680 gross, you know that sits down to a CAD 4, you know, CAD 4.20 net rent that we can take to 9 or 10. The short downtime is worth the lift that gives.

Speaker #2: That sits down to a $4 and something $4 and $4.20 net rent that we can take to 9 or 10. So the short downtime is worth the lift that gives.

Speaker #5: Okay. Okay. Thanks for that.

Jimmy Shan: Okay. Okay, thanks for that.

Speaker #3: Once again, if you have a question, please press star, then one. The next question is from Tal Woolley with CIBC. Please go ahead.

Operator 3: Once again, if you have a question, please press star then one. The next question is from Tal Woolley with CIBC. Please go ahead.

Operator: Once again, if you have a question, please press star then one. The next question is from Tal Woolley with CIBC. Please go ahead.

Speaker #4: All right. 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?

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

Kelly Hanczyk: I believe, in between CAD 80,000 and 90,000 a month. It's significant.

Speaker #2: I believe I'm somewhere around in between 80 and 90 thousand a month. So it's significant. And when we sell that, it's going to make a significant improvement to our NOI.

Tal Woolley: Okay.

Kelly Hanczyk: You know, when we sell that, it's going to make a significant improvement to our NOI.

Speaker #4: Okay. And in terms of price talk around the asset, are you comfortable you’ll be able to recoup your development costs here?

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

Speaker #2: Yeah, we believe so.

Kelly Hanczyk: Yeah, we believe so.

Speaker #4: Okay. That's great. Thanks very much.

Tal Woolley: Okay. That's great. Thanks very much.

Speaker #2: Yeah.

Kelly Hanczyk: Yeah.

Operator 3: This concludes the question and answer session. I'd like to turn the conference back over to Kelly Hanczyk for any closing remarks.

Operator: This concludes the question and answer session. I'd like to turn the conference back over to Kelly Hanczyk for any closing remarks.

Speaker #3: This concludes the question and answer session. I'd like to turn the conference back over to Kelly Hansek for any closing remarks.

Speaker #2: All right. I want to thank everybody for attending, and we'll talk to you next quarter.

Kelly Hanczyk: All right. I wanna thank everybody for attending, we'll talk to you next quarter.

Operator 3: This brings to an end today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Operator: This brings to an end today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

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