Nexus Industrial REIT Q3 2025 Earnings Report

Nexus Industrial REIT EPS Results

• Actual EPS: C$0.04
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Nexus Industrial REIT Revenue Results

• Actual Revenue: $43.30 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Nexus Industrial REIT Announcement Details

• Quarter: Q3 2025
• Date: 11/13/2025
• Time: After Market Closes
• Conference Call Date: Thursday, November 13, 2025
• Conference Call Time: 10:00AM ET

Nexus Industrial REIT (TSE:NXR.UN) 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.

Nexus Industrial REIT Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Completed two developments adding 440,000 sq ft of GLA that will generate CAD 6.6 million of annual stabilized NOI and deliver a combined 9.4% unlevered return on development costs.
• Positive Sentiment: The speculative 115,000 sq ft building at 102 Avenue (Calgary) is 8 of 9 units pre-leased, should begin cash flow in Q4 2025, stabilize by Q2 2026, and is forecast to earn an 11% unlevered return on CAD 15 million of costs.
• Positive Sentiment: Strong leasing momentum with ~1.1 million sq ft YTD and an average leasing spread >60%, driving Q3 industrial same-property NOI +2.9% and 96% occupancy; highlighted by a 15-year replacement lease at Clark Road with rents ramping to CAD 7/sq ft.
• Negative Sentiment: Despite GAAP net income of CAD 3.4 million (versus a prior-year loss), normalized AFFO per unit fell to CAD 0.146 from CAD 0.157 and NAV/unit dipped to $12.98 after issuing 2.7 million Class B units at CAD 10.50, reflecting dilution and lower cash earnings per unit.
• Neutral Sentiment: Nexus is pursuing an investment-grade rating (targeted H2 2026) and aims to reduce leverage to below 10x (mid-9s) by mid-next year, using disposition proceeds to delever and fund development; a slight Q4 same-property NOI revision reflects timing of lease-ups with no expected material impact to 2026.

Presentation

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the Nexus Industrial REIT's third quarter 2025 results conference call. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one, on your telephone keypad. Should you need assistance during the conference call, you may signal 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.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

I'd like to welcome everyone to the 2025 third 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 netcedar.com, for cautions regarding forward-looking information and for information about non-GAAP measures. In the third quarter, we took another step in our journey as Canada's industrial building partner by completing two exciting new industrial developments and by completing another strong quarter of leasing.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

Combined, our new developments will add 440,000 sq ft of additional GLA and will generate CAD 6.6 million of annual stabilized NOI, representing an enviable 9.4% unlevered return on development costs. On the leasing front, we continue to drive strong organic growth, completing the backfill of two of the three properties vacated by CCA tenants earlier in the year, advancing leasing on the remaining 2025 and upcoming 2026 renewals, and delivering healthy same property NOI growth in the quarter. I will dive into both the development and the leasing achievements into more detail, but first, I'd like to reflect on how far we've come in the last 12 months. In September 2024, we were a growing industrial REIT, but we still had 16 retail buildings with over 1.6 million sq ft of GLA.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

We also still had six office buildings with nearly 500,000 sq ft, having just closed on the sale of six other office buildings. We had completed three development projects but still had significant work to do on our largest project in St. Thomas, and we had not yet broken ground at our 102 Avenue project in Calgary. Today, one year later, we are in a completely different position. We have nearly sold all of our retail and office buildings at good prices and have used the proceeds to reduce debt and complete development. We are now a pure-play industrial REIT with over 99% of our NOI derived from industrial assets. In this quarter, we completed two more attractive projects. We have come a long way in a short time, and I am immensely proud of our team and the work that we have done.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

Looking more closely at the development projects that we finished during this quarter, the larger property was a 325,000 sq ft expansion, our largest development yet, of our building at 70 Dennis Road in St. Thomas, Ontario. This expansion was for an existing tenant, Element Five, a leading laminated timber manufacturer. The project was originally planned at 70,000 sq ft, but as the tenants' needs grew, we worked with them to adjust the building scope. This resulted in a huge win-win. Element Five has a North American flagship facility, while Nexus owns a well-located, high-quality building under a long-term lease. During construction, we earned 7.8% on the development spend. However, effective September, having now met the criteria for substantial completion, the project transitioned to yielding 9% on the completed development cost of CAD 55 million.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

The second property that we finished was a new 115,000 sq ft small bay industrial building at 102 Avenue in southwest Calgary. We built this on spec, on empty land adjacent to one of our buildings. We completed construction in August, and leasing is tracked ahead of plan. We already have tenants for eight of the nine units, five of which are now firm. We expect the building to begin cash flowing in the fourth quarter and to be fully stabilized in the second quarter of 2026. Once stabilized, the building will generate an 11% unlevered return on its development cost of CAD 15 million and contribute an annual net operating income of CAD 1.6 million. We are still looking for a tenant for our 150,000 sq ft Glover New Build in Hamilton, which we completed last summer.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

We own 80% of the property and expect to earn around a 5.9% going in yield on our CAD 20 million share of the development costs. It's been a challenging market in Hamilton lately, but we do have a brand new state-of-the-art 40-foot clear LEED certified product, and we actually will have some pretty good news on that very shortly as things are looking pretty good for us there. It's a little premature to announce anything, but we'll wait for the next few weeks. We also recently announced two additional development projects, which will get underway in the first half of 2026. We're going to build small bay industrial units on vacant land surrounding our industrial building at Adams Road in Kelowna, BC. On our Richmond property, we're adding 52,000 sq ft for an estimated cost of CAD 29 million.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

The cost being paid in REIT units issued at CAD 10.50 per unit. We'll earn 6% on our costs during the construction period, and we'll earn a contractual 6% yield upon completion. We expect construction to begin in the first half of 2026. The third quarter was another strong quarter of organic growth for Nexus. In total, we completed nearly 150,000 sq ft of renewals and an average rent lift of 13%. Year to date, we have completed a total of 1.1 million sq ft of leasing and realized an average leasing spread of over 60% on expiring and in-place rents. In the quarter, our industrial occupancy grew 1% to 96%. Combined with embedded rent escalation in our leases, our leasing activities drove industrial same property NOI growth of 2.9% in the quarter and on a year-to-date basis.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

For the full year 2025, we expect to realize same property NOI growth of approximately 3%. In the third quarter, we signed a 15-year lease for our 223,000 sq ft building at Clark Road in London, Ontario, with one of Canada's largest construction services firms. This building was vacated in April after PV Mart entered creditor protection. The new tenant took occupancy August 1st. During their six-month fixturing period, the tenant will invest between CAD 8 million-CAD 10 million to update the building and pay net rent of CAD 3 per sq ft, roughly equivalent to PV Mart's exit rate. In January 2026, the fixturing period ends and the rent ramps up to CAD 7 a foot with annual dollar rent steps until 2031 and then 2% thereafter. Our ability to quickly backfill this property is a testament to the strength of our operating team and the quality of the portfolio.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

It's a really good deal for us. This brings a very strong, large tenant, and the reduced rent was due to the fact that we had to put nothing in it. It was an older building, lower clear heights, and the rent ramps up relatively quickly back up to market. We are really pleased with this deal. In April, PV Mart also vacated a second building at 40 Avenue in Red Deer, Alberta. We are in discussions with a few prospective tenants; however, it is not yet leased. The building is 190,000 sq ft, which is very large for that area. We are marketing it both for lease and for sale in the event we find an owner-operator who is interested. At our cross-dock facility at 102 Avenue in southeast Calgary, the receiver continued to pay rent through to the end of September, which was longer than what we thought.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

We have now a new tenant lined up for December 1. The tenant will pay nominal rent to cover costs during a short fixturing period. Upon the conclusion of the fixturing period, which will be approximately February of 2026, the rent steps up to CAD 27.83 for the 29,000 sq ft building. This is approximately 45% higher than the outgoing rent of CAD 19 per sq ft. Overall, while we saw strong organic growth in the quarter, we expect to realize an even bigger benefit in early 2026 and from rent steps at Clark Road and 102 Avenue. We have also made good progress on our 2026 renewals. In total, we have 765,000 sq ft coming for renewal in 2026. Roughly 50% of this, or 385,000 sq ft, comes due in the first nine months, and the remaining 50% in the fourth quarter.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

As of today, we have tenants lined up for 90% of the January through September expires, and we will soon begin working on the fourth quarter expires. Nexus has a track record of accretive capital recycling through the disposition of legacy buildings and acquiring newer high-quality tenant industrial buildings. During the quarter, we sold a non-core industrial building located in St. Laurent, Quebec, for total proceeds of CAD 9.2 million and an implied cap rate of 5.5%. The proceeds were used for debt reduction and for development. After the quarter end, we also closed on the sale of excess land at a remaining retail property, L'Arme d'Anjou, for cash proceeds to us of CAD 8.5 million. We're now marketing our 50% share of the retail mall for sale. The mall is an attractive asset in cash flow as well, so we hope it sells in due time.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

Summary, we continue to advance our strategy in 2025 as Canada's industrial building partner. We will continue to realize organic growth through embedded rent steps and positive mark-to-market on renewal. We will continue our track record of accretive capital recycling through opportunistic acquisition and development. I'll now turn the call over to Mike to give some more color on our financials.

[Mike Rawle, CFO at Nexus Industrial REIT]

Thank you, Kelly, and good morning, everyone. Starting with headline earnings in the quarter, net income was CAD 3.4 million, a CAD 49.4 million increase compared to a net loss of CAD 46 million last year. The increase was primarily due to higher fair value adjustments on Class B LP units by CAD 43.3 million compared to a year ago, and higher fair value adjustments on derivatives by CAD 20.9 million compared to a year ago, partially offset by lower fair value adjustments on investment properties by CAD 15.4 million, and further offset by lower net interest expense by CAD 900,000. Our Q3 net operating income decreased 1.1%, or CAD 400,000 year-over-year to CAD 32.2 million.

[Mike Rawle, CFO at Nexus Industrial REIT]

This was primarily due to a CAD 2 million decrease resulting from property dispositions completed since Q3 2024, partially offset by a CAD 800,000 increase in same property NOI, higher straight-line rent adjustments of CAD 500,000, and a CAD 200,000 increase from completed developments and expansions. Normalized AFFO for the period was CAD 14.6 per unit compared to CAD 15.7 from a year ago, primarily driven by the lower NOI, lower straight-line rent adjustments by CAD 500,000, and a CAD 300,000 increase in general and administrative expenses from higher compensation and legal expenses. Net interest expense in the quarter was CAD 13.1 million, a CAD 900,000 decrease from the same period last year. The decrease was primarily due to lower credit facility interest expense of CAD 400,000, resulting from more favorable borrowing rates during the period, and lower interest on mortgages by CAD 400,000 resulting from property dispositions.

[Mike Rawle, CFO at Nexus Industrial REIT]

At September 30th, 2025, our NAV per unit was $12.98, a $0.19 per unit decrease from last quarter, primarily due to the issuance of 2.7 million Class B units in the quarter at $10.50 per unit to fund additional development at our property in Richmond, BC. Our weighted average cap rate decreased by two basis points to 5.85% in the quarter. The carrying value of our investment properties decreased by $5.4 million in the quarter, primarily due to the reclassification of our building at 41 Royal Vista Drive, Calgary, to assets held for sale. As Kelly mentioned, this quarter we finished two development projects. The completion of these projects will have accounting impacts on our financial results in the future. At our 70 Dennis Road property in St.

[Mike Rawle, CFO at Nexus Industrial REIT]

Thomas, Ontario, the tenant is now paying rent equal to a 9% yield on the CAD 55 million of development costs compared to a 7.8% yield during development. As a consequence, we will generate additional cash flow of approximately CAD 220,000 each quarter. In addition, from an accounting perspective, the full quarterly rent of CAD 1.25 million generated by the building now qualifies as net operating income. This means that it will be included in our FFO and AFFO metrics. Up until September, the 7.8% yield on this expansion was capitalized to property under development and did not qualify as net operating income, FFO, or AFFO. Going forward, our key financial metrics will be higher and paint a more accurate picture of our cash earnings.

[Mike Rawle, CFO at Nexus Industrial REIT]

Since we have now completed both the Dennis Road and 102 Avenue projects, we will no longer be able to be capitalizing interest on these buildings, which in the third quarter amounted to approximately CAD 500,000 for the two of them combined. I will now turn the call back to Kelly.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

All right. Thanks, Mike. We will now pass the call over to the operator to open the line for questions.

[Operator]

We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as callers join the queue. The first question today comes from Kyle Stanley with Desjardins. Please go ahead.

[Kyle Stanley, Managing Director and Equity Research Analyst at Desjardins]

Thanks. Good morning, guys.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

Good morning.

[Kyle Stanley, Managing Director and Equity Research Analyst at Desjardins]

Just looking at the slight downward revision to your guidance for 2025 on the same property front, I'm just curious what changed, I guess, between August and today that would have driven that, and how much maybe was related to just getting the timing of getting income online, or was it something more long-term in nature that could have an impact to your 2026 growth outlook? I guess in another way, just trying to think about the slight revision for Q4, does it have an impact on the outlook for 2026?

[Mike Rawle, CFO at Nexus Industrial REIT]

Hi, Kyle. Yeah, good question. No impact on 2026. It was driven by primarily two different buildings, slightly slower lease up than we had anticipated. At our 102 Avenue in southeast Calgary, the receiver stayed in position longer than we had hoped, and it took us a little longer to get it will take us a little longer to get the new tenant in at that healthy CAD 2,783 rent because there's a bit of a fixturing period. They are coming in in February instead of in 2025, early in 2025. That is one. The second one is our lease up at 855 in Park Street in Saskatchewan. We had an expectation to get the new tenant in there a little earlier, and they are lined up for the back half of this year, but it is not as early as we had hoped back in August.

[Kyle Stanley, Managing Director and Equity Research Analyst at Desjardins]

Okay. Okay. No, that's helpful. Limited impact, I guess, on '26, maybe a month in Calgary, to your point, on getting that tenant in in February.

[Mike Rawle, CFO at Nexus Industrial REIT]

Yeah, exactly. Precisely.

[Kyle Stanley, Managing Director and Equity Research Analyst at Desjardins]

Okay. Just moving over to your debt stack. Hypothetically, if you were to get an investment-grade credit rating tomorrow, looking at where rates are in the markets, it does look like there would be some pretty significant savings for you. With your swap book, how quickly would you be able to unwind that? And would it be at significant cost, or just walk me through, I guess, your thoughts on that?

[Mike Rawle, CFO at Nexus Industrial REIT]

Yeah, good question. I mean, yes, we've been pretty, I guess, pretty clear that we're heading for an investment-grade credit rating, which is we're working through that with the agencies at the moment, but that's probably a back half of 2026 thing. As far as pricing goes, yeah, very attractive rates right now. You're right. There's some benefit there. We're trying to push the rate a little and get there as soon as we can, but there are limitations. As far as unwinding the hedge book, at the moment, we actually want the hedge book because that effectively keeps us in position for there's a really strong correlation between swap rates and GOCs and government and investment-grade borrowing yields. This effectively is like a bond lock for us now.

[Mike Rawle, CFO at Nexus Industrial REIT]

We would unwind the swap book when we issue investment-grade debt, but up until that point, it basically acts as a good hedge on that bond issuance. No desire to unwind it at this point, but when we do, it would just be a standard transaction with our counterparties, which are our regular banking partners, so very easy to unwind them at that point.

[Kyle Stanley, Managing Director and Equity Research Analyst at Desjardins]

Okay. No, fair enough. And then just last one for me. Kelly, you mentioned Glover and Hamilton making progress. That's great to hear. Obviously, still in negotiations, but how would you say the rent is looking versus maybe what your underwriting had called for? And do you expect a more significant PI package required to get someone in place?

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

Yeah, a little different route here, Kyle. We are working through an offer to purchase. I think hopefully that gets wrapped up and we get something firm and wave, and away we go. I think at the end of the day, a little different version. It'd be a strong deal for us. It would free up capital and reduce any burn that we're existing on the asset right now as it sits empty. I think that's the play that's going to happen here.

[Kyle Stanley, Managing Director and Equity Research Analyst at Desjardins]

Okay. So just confirm, you'd be looking to sell it to a potential end user or something like that? That's what you're saying?

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

Yes, correct.

[Kyle Stanley, Managing Director and Equity Research Analyst at Desjardins]

Okay. Perfect. Okay. Thank you for that. I will turn it back.

[Operator]

The next question comes from Brad Sturges with Raymond James. Please go ahead.

[Brad Sturges, Managing Director and Publishing Equity Research Analyst at Raymond James]

Hey, guys. Good morning. Just to follow up on that line of questioning on Hamilton, just would the purchase price be more than the original construction cost, or how do we think about that?

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

I guess my answer would be yes.

[Brad Sturges, Managing Director and Publishing Equity Research Analyst at Raymond James]

Okay. Understood. Just on the guidance revision, obviously, a little bit related to timing of leasing, just what would that imply from an occupancy rate by the end of the year? Just to round that discussion off.

[Mike Rawle, CFO at Nexus Industrial REIT]

Yeah, I'd have to do the calculation. I think looking pretty healthy. I mean, if you back up and look at where we're at today, we have about 475,000 sq ft of vacant space, and that is predominantly four different buildings. One is Glover. The other is 7740, the Red Deer, the XPB building in Red Deer. We have 855 in Saskatchewan, which we have a tenant lined up for. The final one is the new development at 102 Avenue, which we also have eight of the nine units already lined up. It is just a matter of the tenants coming in. Leasing for 2025 is in great shape.

[Brad Sturges, Managing Director and Publishing Equity Research Analyst at Raymond James]

I guess once the new leasing kicks in start of next year after the fixturing period, do you think that organic growth would kind of get back into that mid-single-digit range?

[Mike Rawle, CFO at Nexus Industrial REIT]

Yeah, I think a little early for us to give guidance for next year as we're working through our budgeting process now. I mean, just from what we've disclosed so far, next year looks really strong with the development coming on board and the embedded rent steps that we have. Yeah, next year should be a good year for us.

[Brad Sturges, Managing Director and Publishing Equity Research Analyst at Raymond James]

Nothing material at this point from a non-renewal perspective for next year?

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

No, it's looking pretty good. Three of them, fairly large. What is this total? One, two, 60, 263, 20, like 400,000 sq ft or so comes up from October 31st, December 31st. We fully expect all three of those to renew. It's all in London. All three are kind of long-term hold tenants for us. Another one in November in that batch was a 91,000 sq ft in Montreal. This tenant, just to explain this one, if anyone's going to leave, it's this one. They were in at a CAD 6 rate, and I think they had like three renewal options, five-year renewal options for 2% each renewal option flat. They were looking to consolidate their operation. We did a one-year deal with them at CAD 9 per sq ft.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

I expect them to vacate possibly at the end of November, and we think we can release that in the low teens. That is the one that possibly, but that is end of the year, November 30th. We have made good progress already on the first half of the year. Things are looking pretty good.

[Mike Rawle, CFO at Nexus Industrial REIT]

Yeah. Just to reiterate Kelly's comments on the call, for next year's renewals, half of this GLA renews in the first nine months, and of that, we've done 90% of it already. We've got it lined up. We've got tenants lined up. Really good jump on that.

[Brad Sturges, Managing Director and Publishing Equity Research Analyst at Raymond James]

Last question, just from a modeling perspective, straight-line rent, just given the moving parts around fixturing before rent payment, how should we think about that over the next couple of quarters in terms of contribution to FFO?

[Mike Rawle, CFO at Nexus Industrial REIT]

Yeah, it's elevated because we've put in with these new leases, we've been bringing in people with pretty rapid escalation to rent, so healthy rent steps. It is higher than it has been in the past. You saw that this quarter where straight-line rent is higher than where it has been in the past.

[Brad Sturges, Managing Director and Publishing Equity Research Analyst at Raymond James]

I guess it would be a similar level for Q4 relative to Q3, and then it kind of subs back to where you were.

[Mike Rawle, CFO at Nexus Industrial REIT]

Yeah, I think so. That kind of thing is probably a fair way of thinking about it. Yeah.

[Brad Sturges, Managing Director and Publishing Equity Research Analyst at Raymond James]

Okay. I'll turn it back.

[Operator]

The next question comes from Matt Kornack with National Bank Financial. Please go ahead.

[Matt Kornack, Analyst at National Bank Financial]

Hey, good morning, guys. Just quickly on the Alberta lease maturities, and you may have mentioned it, but I missed it. They're a bit higher rents, presumably, as the type of space that's maturing. Are you expecting kind of a newer renewal leasing spread consistent with the Alberta market on those, or how should we think about the rents that you'd achieve on those?

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

I have to just see here what we have expiring. It is not Matt, I have to get back to you because I do not offhand know what the expiring rents are.

[Matt Kornack, Analyst at National Bank Financial]

Okay. No, fair enough. Just to.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

One of the.

[Matt Kornack, Analyst at National Bank Financial]

I think 79,000 sq ft. Yeah, 79,000 sq ft at CAD 17, and next year it's 47,000 sq ft at CAD 35.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

34.

[Matt Kornack, Analyst at National Bank Financial]

Yeah, yeah.

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

Yeah, I have to look at which ones those are. I think one of them we will take a hit. I believe it is the Blackfalds asset that was formerly or that is currently occupied by a subtenant of Maztech. And that one I know we would definitely take probably, I want to say maybe a $10 hit on that one. That is kind of the one outlier.

[Matt Kornack, Analyst at National Bank Financial]

Okay. If I look at, I mean, we're at like mid 40% spreads for 2026 across everything. Obviously, London drives a bit of that, but I guess Alberta would maybe bring it down into the 30s, somewhere in the 30s, I guess.

[Mike Rawle, CFO at Nexus Industrial REIT]

Yeah. I mean, we do not have a lot of GLA in Alberta, right? It is renewing just so it is less than 50,000 sq ft.

[Matt Kornack, Analyst at National Bank Financial]

Okay. No, fair enough. And then just to confirm, on St. Thomas, you had no NOI contribution in Q3. You'll get the full CAD 1.25 million in Q4, and obviously, you have a step down in capitalized interest, but you're still going to have kind of CAD 300,000 of residual capitalized interest against other assets still under development. Is that correct?

[Mike Rawle, CFO at Nexus Industrial REIT]

Yeah, there will be. Two questions, two answers. With St. Thomas, we had one month's worth of NOI contribution from it. I think it was around, so that it was in with September contribution. You're right on the three, it's about $300,000 of capitalized interest going forward from the other projects that we have underway.

[Matt Kornack, Analyst at National Bank Financial]

Okay. For the CAD 400,000 per quarter contribution from Calgary that you're going to get in Q2 of 2026, should we assume kind of half of that you get before or should we kind of split it out over the next couple of quarters? I think it was 33% leased as of Q3, so it's going to ramp up, but just wondering how we should think about that?

[Mike Rawle, CFO at Nexus Industrial REIT]

Yeah. I mean, I would just move it over the months, assume a straight linear ramp up.

[Matt Kornack, Analyst at National Bank Financial]

Okay. Fair enough. Thanks, guys.

[Operator]

As a reminder, if you would like to ask a question, please press star, then one to join the question queue. The next question comes from Sam Damani with TD Cowen. Please go ahead.

[Sam Damani, Analyst at TD Cowen]

Thanks, Sarah. Good morning. Question for me just on the, I guess, the use of proceeds from the dispositions in coming up in Q4. Will we sort of take the opportunity to delever or redeploy into acquisitions? How are we thinking about, I guess, target leverage as you head toward investment-grade rating next year?

[Mike Rawle, CFO at Nexus Industrial REIT]

Yeah. So ultimately, we're looking to achieve investment-grade rating. Our focus now from a leverage perspective is to get to below 10x. We have a clear path to that by mid-next year-ish. That is our target from that perspective. Going forward, we will use surplus capital or cash from sales for delevering and the development that we have in flight. If there are just amazing opportunities that come up, we'd consider them. Really, our focus at this point is getting to a mid-9s leverage profile.

[Sam Damani, Analyst at TD Cowen]

Perfect. That's all for me. Thank you.

[Operator]

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

[Kelly Hanczyk, CEO at Nexus Industrial REIT]

All right. Thanks, everyone, for attending, and we'll chat next quarter. If any questions, just feel free to reach out to Mike or myself.

[Operator]

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

Participants

Executives

• Kelly Hanczyk, CEO
• Mike Rawle, CFO

Analysts

• Matt Kornack, Analyst at National Bank Financial
• Sam Damani, Analyst at TD Cowen
• Brad Sturges, Managing Director and Publishing Equity Research Analyst at Raymond James
• Kyle Stanley, Managing Director and Equity Research Analyst at Desjardins