Nexus Industrial REIT (TSE:NXR.UN) reported what management described as a strong finish to 2025, highlighting record annual operating results, continued portfolio repositioning into industrial assets, and plans to further delever the balance sheet in 2026.
Management highlights record 2025 NOI and EBITDA
Chief Executive Officer Kelly Hanczyk said the REIT is entering 2026 with “good momentum” despite a challenging economic backdrop. For full-year 2025, the REIT delivered record net operating income (NOI) of $129 million, up 2.8% year-over-year, and record adjusted EBITDA of $120 million. Hanczyk said the REIT also grew per-unit metrics, with FFO per unit increasing to $0.61 and net asset value (NAV) rising to $13.22 per unit.
Development and acquisitions add to industrial footprint
Hanczyk detailed two “transformative” development projects completed during 2025:
- St. Thomas, Ontario (70 Dennis Road): A 325,000-square-foot addition for an existing tenant. The project was completed in September and is earning a 9% contractual yield on approximately C$55 million of development costs.
- Calgary (4750 102 Ave SE): Construction completed in August of 115,000 square feet of small-bay industrial units on adjacent vacant land. Five of nine units are leased, with one additional lease under negotiation and offers on two more units. Hanczyk said leasing slowed after a prospective large tenant “unexpectedly retired,” but interest remains high and management expects the project to be fully leased by late summer. Total cost was about C$15 million, with management projecting an 11% cash-on-cash return when stabilized.
On the acquisition front, Hanczyk said the REIT purchased two industrial buildings in Montreal in late November through a sale-leaseback arrangement tied to a private equity firm’s acquisition of an operating business. The REIT acquired the properties for C$40 million at a going-in cap rate of 6.6%. Management said the lease rate resets to market in 2028, implying a stabilized cap rate of approximately 10.4% based on current rates.
Hanczyk noted the transaction added 283,000 square feet at an estimated C$145 per square foot, compared to what management said is a typical range of C$215 to C$235 per square foot for similar assets. The REIT had the buildings appraised at year-end and recorded a mark-to-market lift of approximately C$23 million.
Capital recycling continues; additional sales in progress
Management also outlined several dispositions completed in 2025 and after year-end, largely aimed at recycling capital and reducing leverage:
- Surplus land sale (October): Sold surplus land at the REIT’s last remaining retail property for C$8.5 million following a zoning and severance process. Proceeds were used to delever. Hanczyk said the timing appeared favorable as the condominium land market has shown signs of slowing since.
- Industrial dispositions (2025): Sold a vacant Fort St. John property for C$7 million (above carrying value), a non-core small Edmonton building for C$4.2 million (in line with carrying value), and a St. Laurent, Quebec building for C$9.2 million (above carrying value) at a 5.5% cap rate.
- Post year-end sale (February 20): Sold a 35,000-square-foot Calgary building to the existing tenant for C$8.5 million at a 5.7% cap rate, with proceeds used to pay down debt.
Hanczyk said the REIT is “soft marketing” its 50% interest in Les Halles d’Anjou, describing it as a high-quality retail property that cash flows well, and added that the REIT does not feel forced to sell quickly.
The REIT is also working on additional dispositions, including seeking a buyer or tenant for a 115,000-square-foot new build on Glover Road in Hamilton after a planned sale fell through at the last minute. Hanczyk said the REIT’s preference is to sell the asset and that a successful sale would reduce carrying costs and free equity to pay down debt, improving AFFO per unit. He said he is hopeful a transaction can be completed this year, potentially closing “early fall” if not sooner.
In Red Deer, Alberta, Hanczyk said the REIT has a firm contract to sell a 190,000-square-foot building on 40th Avenue for a little over C$11 million, with an expected April closing. The property became vacant after Peavey Mart filed for CCAA in April 2025. Management also said it expects to market its 80% interest in development land on South Service Road in Hamilton for sale in the near future.
Leasing activity, 2026 outlook, and balance sheet priorities
On operating performance, Hanczyk said the REIT completed nearly 117,000 square feet of renewals in the fourth quarter at an average 2% rent lift. For the full year, the REIT completed 1.2 million square feet of leasing and achieved an average leasing spread of 60% over expiring and in-place rents. Industrial occupancy was steady at 96% in the quarter, contributing to industrial same-property NOI growth of 2.8% in Q4 and 2.6% for the full year, which management said was in line with guidance.
Hanczyk also noted that at the REIT’s cross-dock facility on 102 Avenue SE in Calgary, a tenant slated for a December 1 start date backed out after lease negotiations were completed. The REIT is now marketing 29,000 square feet and said it expects to lease the space quickly given ongoing interest and recent showings.
Looking ahead, management said it anticipates mid-single-digit industrial same-property NOI growth in 2026 and expects its normalized AFFO payout ratio to average below 100%.
On 2026 lease maturities, Hanczyk said the REIT has about 990,000 square feet up for renewal, with 415,000 square feet expiring in the first nine months and 575,000 square feet expiring late in the fourth quarter. Management said it has committed tenants for roughly 65% of the January-through-September expiries and expects three large Q4 tenants totaling 405,000 square feet to renew. During the Q&A, Hanczyk discussed rent expectations on certain large renewals and indicated an estimated increase of about C$1.50 to C$2.00 per square foot on a subset of the expiries he referenced.
The REIT also announced two additional development projects expected to begin in the first half of 2026:
- Adams Road (Kelowna): Up to 180,000 square feet of micro-industrial units on vacant land adjacent to an existing property, with an estimated cost of about C$47 million. Hanczyk said the project is in the permitting phase and could involve a mix of leasing and selling units, with expected returns described as “between seven and 10.”
- Savage Road (Richmond, BC): Expansion increased to 80,000 square feet (from 52,000 previously announced), with the additional 28,000 square feet expected to cost about C$19 million. Hanczyk said the original 52,000-square-foot expansion is being paid in REIT units at C$10.50 per unit and described the arrangement as yielding 6% during construction and 6% upon completion.
Chief Financial Officer Mike Rawle reported fourth-quarter net income of C$30.6 million, down C$19.1 million from the prior year. He attributed the change primarily to a lower fair value adjustment on Class B units (down C$31 million) and fair value losses on the REIT’s Montreal office building joint venture (C$4.2 million), partially offset by higher fair value adjustments on investment properties (up C$10.6 million) and derivatives (up C$3.9 million).
Rawle said fourth-quarter NOI increased 2.7% year-over-year to C$33 million, driven by contributions from the St. Thomas development and Montreal acquisitions, same-property NOI growth, and higher straight-line rent adjustments, partially offset by NOI lost from properties sold over the past year. Normalized AFFO was C$0.151 per unit versus C$0.153 a year ago, which Rawle said was primarily due to the issuance of 2.8 million Class B LP Units tied to prepayment of the Richmond development, partially offset by higher NOI.
On leverage, management acknowledged debt-to-EBITDA remained elevated, with a questioner referencing a level near 11 times. Hanczyk said the REIT expects “pretty rapid” delevering in 2026 and that its goal is to reach an investment-grade balance sheet this year. He said DBRS has indicated a target around the “mid-nines” for that objective, and management said that would be its target to achieve a BBB- investment-grade rating.
About Nexus Industrial REIT (TSE:NXR.UN)
Nexus Industrial REIT is a growth-oriented real estate investment trust focused on increasing unitholder value through the acquisition, ownership, and management of industrial, office and retail properties.
