Nexus Ind REIT (TSX:NXR) reported third-quarter financial results on Saturday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Nexus Ind REIT reported strong financial performance in Q3 2026, with net operating income up 7.8% year-over-year to $34.7 million and normalized AFFO per unit at 16.6 cents, leading to a 95.6% payout ratio.
Strategic initiatives included the completion of the third investment grade bond offering, capital recycling through property sales, and progress in infill development projects in British Columbia with a focus on data infrastructure.
The company maintained a high occupancy rate of 97% and achieved significant rent lifts on lease renewals, demonstrating effective market capture.
Management highlighted the potential of its data infrastructure projects, with Richmond, BC as a primary focus, expecting significant returns and value creation from these developments.
The future outlook remains strong, with expected industrial same-property NOI growth and a normalized AFFO payout ratio below 100% for the full year 2026.
Full Transcript
OPERATOR
Thank you for standing by. Welcome to the Nexus Ind REIT third 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 will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. If 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 Hancic, Chief Executive Officer. Please go ahead.
Kelly Hancic (Chief Executive Officer)
Thank you. I’d like to welcome everyone to the 2026 third quarter results conference call for Nexus Ind REIT. Joining me today is Mike Rall, Chief Financial Officer of the REIT. Before we begin, I’d like to caution with regard to forward-looking statements and non-GAAP measures. Certain statements made during this conference call may constitute forward-looking statements, which reflect the REIT’s current expectations and projections about future results.
Also during this call, we’ll be discussing non-GAAP measures. Please refer to our MD&A and the REIT’s other securities filings, which can be found on our website and at sedar.com, for cautions regarding forward-looking information and for information about non-GAAP measures. The third quarter was an excellent quarter for Nexus Ind REIT. We delivered sequential and year-over-year growth in net operating income, normalized AFFO, and last 12 months adjusted EBITDA. These improvements reflect strong operating results while we also advanced three strategic initiatives. First, in September, we completed our third investment grade bond offering of the year, which has transformed our capital structure. Second, we advanced our capital recycling and focused our portfolio further by closing on property sales at 40th Avenue in Red Deer, Alberta, and surplus land in Blackfalds, Alberta, in October after quarter-end.
Third, we advanced our sub-strategy infill development projects in British Columbia, which have the potential to be significant growth opportunities for Nexus Ind REIT. I will first review our operating performance, then provide an update on financing, capital recycling, and development before closing with our outlook for the balance of 2026. In the third quarter, we delivered another quarter of excellent operating performance. We renewed 225,000 square feet at an average rent lift over in-place and expiring rents of 29%. Of this, 150,000 square feet was at the building in London, Ontario, where we were able to negotiate rents from $7.50 per square foot to $9.75 per square foot, net, with healthy 2.75% escalators in a seven-year lease term. In Quebec, we renewed three smaller units for a total of 37,000 square feet for an average lift of 34%.
These renewals resulted in industrial same-property NOI growth of 4.2% and demonstrate our continued ability to capture the market lift on renewals. At September 30th, we had an attractive average spread between market and in-place rents of 14.6%. We also leased an additional 36,000 square feet of vacant space in the quarter, resulting in a strong 97% occupancy as of September 30th. This healthy occupancy combined with our recent completed developments, expansions, and acquisitions grew net operating income by 7.8% from a year ago to $34.7 million. Normalized FFO increased to $18.8 million and, on a last 12 months basis, adjusted EBITDA grew to $123.8 million. For the quarter, we posted normalized AFFO per unit of 16.6 cents, resulting in a payout ratio of 95.6% as we remain on track to deliver a full-year 2026 payout ratio below 100%.
Looking at our fourth quarter renewals, we have approximately 270,000 square feet remaining for renewal. Of this amount, we have already renewed or expect to renew over 75,000 square feet. The remaining space includes a 90,000 square foot strategic vacancy in Montreal where the tenant was paying $9 per square foot, which is well below market rent. This lease comes due at the end of November. The remaining space also includes 80,000 square feet in London where the tenant is paying $8 per square foot rent, also well below market rent, and the lease comes due at the end of December.
I’d also like to highlight some leasing activity that will drive additional NOI in the new year in Hamilton. I’m pleased to share that we have executed an offer to lease for our 115,000 square foot new build on Glover Road. We own 80% of the property, and it has been a challenging market in Hamilton. We expect to finalize a 10-year lease with the tenant for the entire building, commencing in Q2 2027. This will resolve a long-standing vacancy, and I expect it to contribute significantly to our NOI.
The tenant will be granted an incentive rate in the first year, quickly ramping up to market rent in the third year. Also, at our newly built small-bay 115,000 square foot building at 102 Avenue, Calgary, we have signed two additional five-year leases starting in February and April. We have now leased eight of the nine units of the 115,000 square foot building, and we anticipate having the final unit leased very soon. Turning to our strategic initiatives, during the quarter, we built on our momentum from April by completing our third investment grade bond issuance of the year. I’ll let Mike speak more about it in a minute, but suffice to say that the outcome was very positive for Nexus Ind REIT.
We have also continued to make good headway on our capital recycling program. At the beginning of the quarter, we closed on the $11.25 million sale of our 190,000 square foot building in Red Deer, Alberta, marking the end of a challenging situation that our team managed extraordinarily well, demonstrating resourcefulness and ingenuity to continually add unitholder value. You may recall that 18 months ago, in March 2025, our tenant PV Mart surprised us by filing for CCAA protection.
They were a tenant in two of our buildings: a Western distribution warehouse at 40th Avenue in Red Deer and an Ontario distribution warehouse in London. We quickly filled the London property in August 2025 with a top-tier tenant in a long term, who has invested over $22 million to update and fully modernize the building and leased it for a 15-year term at rates over double PV’s rate with strong escalators. In contrast, we knew that it would take time to address the Red Deer property, which was large for the area.
However, our team steadily pursued options and found an owner-user to buy the building. It took the buyer time to achieve a development permit and to close their financing, so we arranged for them to lease it from us for a few months before they closed on the purchase in August. All told, I’m very pleased with the outcome, and Nexus Ind REIT is left in a better position than where we started. During the quarter, we also contracted for two opportunistic sales. We contracted for the sale of our 105,000 square foot building at 140 9th Street NW, Edmonton, for approximately $12 million. This represents a cap rate of approximately 6.5% on in-place rents and is scheduled to close at the end of November. At our 29,000 square foot empty cross-dock facility at 4700 102 Avenue in Calgary, we received a purchase offer well above our carrying value from the City of Calgary, and accordingly we have decided to sell the building to them for $12.5 million, equivalent to a cap rate of 5.2%.
The transaction has gone firm and is scheduled to close in December. After quarter’s end, we closed on an opportunistic sale at our property in Blackfalds, Alberta. Previously, the land had been leased along with a building on an adjoining property. In April, upon renewing the tenant, we severed off the unused land and in October sold the land for proceeds of $2.5 million. Turning to development, we have launched a sub-strategy with our portfolio to consider development of data infrastructure projects where such investments meet our investment objectives in our disciplined approach to capital allocation in addition to other properties. As a start, we believe that 1751 Savage Road, Richmond, and 555 Adams Road, Kelowna, have the existing electrical infrastructure, power capacity, and strategic locations that may provide a competitive advantage in pursuing possible digital infrastructure opportunities.
During the quarter, we entered into a development profit-sharing agreement with the tenant that enables Nexus Ind REIT to earn income from the tenant’s data operations. The agreement creates a conditional exclusive platform for the tenant to construct and develop data infrastructure projects across our portfolio. Data revenues generated from the portfolio will be first used to fund the operating costs, after which Nexus Ind REIT will earn a prescribed return, and then the residual net operating profits are shared equally between Nexus Ind REIT and the tenant after we sign the end users.
At our Savage Road property in Richmond, BC, we are developing additional micro industrial units that may be used individually or combined as data infrastructure, referred to as micro vaults. These vaults are designed to accommodate data operations, micro industrial activities, or storage. Vaults fitted for data operations are designed with dedicated power, backup power, and cooling systems, providing customers with separately secured space for their equipment.
Customers may occupy one or more vaults to meet the required power needs. We anticipate development costs of $41.3 million and additional data infrastructure and fixturing costs of $19 million, for a combined investment of $60.3 million. The planned data operations are for an aggregate gross electric capacity of 9.9 megawatts across the site. The property currently has 2.1 megawatts of electrical capacity available for use right now, with conditional approval to increase the capacity to 6.6 megawatts and then to a further 9.9 megawatts.
The REIT expects the project to generate significant returns and meaningful value creation for unitholders. If market conditions or other circumstances prevent operation of a data business at the property, the completed units will instead be used for micro industrial or storage purposes with an expected stabilized blended return comparable to the property’s current return. During the quarter, foundations were poured and framing was initiated. Framing should be completed in a few weeks, and we incurred development expenditures of $9.2 million on the project.
At our Adams Road property in Kelowna, BC, we are developing micro industrial units which may also be used individually or combined as data infrastructure. We do not anticipate any change in the development cost of $47.3 million, and we expect the project to generate a minimum unlevered return on investment of 6%. Again, the project has potential for much greater returns if the micro industrial units are used as data infrastructure. The planning phase has been completed, and the construction permit application has been submitted for review.
During the quarter, we incurred development expenditures of $4.3 million on the project. Turning to our outlook, I continue to expect Nexus Ind REIT 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. Due to the opportunistic sale of 4700 102 Avenue, Calgary, as well as slower lease-up of 4750 102 Avenue in Calgary and 1020 Adelaide, London, I now anticipate industrial same-property NOI growth to be between 3% to 4% for the full year.
I continue to expect our normalized AFFO payout ratio to average well below 100% for the full year. With that overview, I’ll now turn the call over to Mike for some more color on our financial results.
Mike Rall (Chief Financial Officer)
Thank you, Kelly, and good morning, everyone. As Kelly mentioned, during the quarter we raised $300 million of three-and-a-half-year bonds at a coupon of 4.563% and used the proceeds to repay existing drawings on our credit facility. This issuance resulted in several positive outcomes for Nexus Ind REIT. We are now left with our $585 million credit facility virtually undrawn, which gives us plenty of rainy day liquidity and an ability to continue to absorb mortgage expiries on our credit facility, increasing our unencumbered asset pool.
We now have well-laddered, termed-out debt maturities with expiries evenly spaced in 2029, 2030, and 2031. This also will reduce our cost of debt while adding flexibility. Our latest debenture issuance priced at GoC +105 basis points, which is significantly tighter than the CORRA +170 basis points that we pay on our unsecured credit facility. I anticipate we will begin to realize these interest savings going forward. Finally, having now established a robust investment-grade debenture program, we have both lightened our covenant package as compared to the credit facility and increased our flexibility by diversifying our lender base and adding the ability for fast debt financing if needed.
Turning to our financial results, starting with headline earnings in the quarter, net income was $31.9 million, a $28.4 million increase compared to a net income of $3.4 million last year. The increase is due to higher fair value adjustments on Class B LP units and on derivative financial instruments by $23.4 million and $7.2 million, respectively, and a higher net operating income of $2.5 million. These increases are partially offset by a higher fair value adjustment loss on investment property by $2.8 million and a higher loss on equity-accounted investments by $1.3 million.
As Kelly mentioned, our Q3 net operating income increased 7.8%, or $2.5 million, year over year to $34.7 million. This was primarily due to a $1.2 million increase in same property NOI, $1 million from the completion of our St. Thomas and Calgary developments, and the acquisition of the two Montreal buildings in November 2025, which added $700,000. This was partially offset by $600,000 of straight-line rent adjustments and $200,000 relating to dispositions completed since Q2 2025.
Normalized AFFO for the period was 16.6 cents per unit compared to 14.6 cents from a year ago, primarily due to the higher net operating income that I just mentioned. Total general and administrative expenses for the quarter were $2.1 million, slightly lower than a year ago due to lower professional service fees. Net interest expense in the quarter was $13.9 million, which was $800,000 higher than a year ago, primarily due to lower capitalized interest in the quarter by half a million dollars as well as a higher average debt balance.
The carrying value of our investment properties decreased by $800,000 in the quarter, primarily due to the $12.5 million transfer of our building at 4700 102 Avenue, Calgary, into assets held for sale and fair value adjustments of $7.1 million, partially offset by $13.5 million of development expenditures and $3.6 million of additional capital expenditures, tenant improvements, and leasing costs. At September 30th our NAV per unit was $13.24, a $0.01 per unit increase from last quarter, and our weighted average cap rate was 5.95%, which is consistent with last quarter.
I will now turn the call back to Kelly.
Kelly Hancic (Chief Executive Officer)
Thanks, Mike. In summary, as you can see, we are delivering on our strategy as Canada’s Industrial Building Partner by continuing to realize organic growth through embedded rent steps and positive mark to market on renewal. We have an A-class portfolio that is beginning to reap rewards, a sub-strategy that we expect to provide significant growth, and we will continue our track record of accretive capital recycling through opportunistic acquisitions, dispositions, and development.
With that, operator, please open up the line to any questions.
OPERATOR
Thank you. To join the question queue, you may press star then 1 on your telephone keypad. You will 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 2. The first question comes from Kyle Stanley with Desjardins. Please go ahead.
Kyle Stanley (Analyst)
Thanks. Morning, guys.
Kelly Hancic (Chief Executive Officer)
Good morning.
Kyle Stanley (Analyst)
Got a few here, so I’ll probably ask a couple and jump back in the queue and see if they’re asked later on. But just first on the data center opportunity, can you walk through what your current leasing prospects might look like and if you can provide maybe an expected timeline to, you know, a result?
Kelly Hancic (Chief Executive Officer)
Okay, I would like to under-promise and over-deliver on this one. So I don’t know what that said, but I want to start by saying it’s a very well-advanced sub-strategy as we began this whole process over 22 months ago. So we’re well on our way. Like as I mentioned, we’ll have completed framing within about a week, a week and a half, so we’re moving pretty quickly. We do have 2 megawatts available right now. We are in, like I said, for 6.6. I’m anticipating that to be able to be tapped in by, let’s call it, second quarter, and then up to 9.9, which will take a little bit longer.
I don’t know. It’ll depend on Hydro. We have paid deposits and are in the planning stage for that upgrade. So for us it’s been, I would say, robust activity with activity even picking up after the midterms in the States. With the change in the House and Senate, things have kind of come to a stop, and projects, I think, that were earmarked have been halted. And so there’s a manifest because there is a substantial need for data with not much available. And anything that’s being built is either taken or it is well out three, four, five years out. And what we’re doing is if you take an existing warehouse, you know, it’s all about entitlements, and entitlements: as you may have the power, do you have the entitlements to use it as data?
So that’s a whole other question. And if you take an existing warehouse, you become a tier 2 facility, which is not as good, and ours is, you know, purpose-built micro industrial units called micro data vaults. That is going to be a tier 3 facility which is much preferred by the AI under lock and key, which is good for sovereignty. So on the leasing side, I’d say it’s not a matter of if anymore, it’s a matter of when. And we are doing everything, I guess, to maximize our value in certain negotiations. So the more demand, the better it gets. So it’s a little bit, still a little bit early, but when I do have something, we will release it because it’ll be extremely positive to our results.
Kyle Stanley (Analyst)
Okay, great. So good progress, just not there quite yet. That checks out. Just switching over to the kind of the disclosure on the profit share. Can you walk through some of the nuances of that? You know, is there a predetermined hurdle rate before the profit share is enacted? And then I guess just as we think about the incremental projects to the two that are currently underway, can you talk about how the agreement looks specifically regarding the profit share there and how the development partner studio would participate in the development cost?
Kelly Hancic (Chief Executive Officer)
Yeah, so we’re the developers. So we build, we will finance. We’re focused on Richmond right now. Richmond is well underway. It is the one to focus on. And if we’re successful in our lease negotiations, which I believe we will be, it’s material to our NOI. And so our focus is pretty much there for right now. That has a specific hurdle that would be, I guess, what you would call a good hurdle from a development project, like in general terms. So we get that return and then on top of that, the profit after that, after expenses come out, is split 50/50, which is pretty substantial if we get the terms that we’re looking at.
So, you know, Richmond is our full focus. We have other ones earmarked, but it’s also a very volatile market, right. So I have them earmarked, but who knows what’s going to happen with different governments. And the way it works, Canada looks like it’s in good shape right now in this side of things. So I’m focused on Richmond because if we execute on that properly, it is meaningful to our numbers. And if at the end of the day that’s all we get out of it, it’s still substantial to us.
So I’m hoping it is a sub-strategy right across our portfolio. The hurdle on future ones, on other locations, our first return on our construction is higher. So it’s substantially higher and it becomes even more lucrative. So like I said, we are focused on Richmond. We’re going to execute on Richmond and I’m extremely positive on it.
Kyle Stanley (Analyst)
Okay, sounds good. And just one last one. Just trying to understand again the, I guess, how the development could unfold in the event you were unable to secure a data center lease. Obviously with your commentary, it doesn’t seem like that’s the case. But just in that event, is there part of the total project budget that relates more to the data infrastructure that you would not incur? So, meaning, you know, if there’s roughly 19 or 20 million of data infrastructure cost here, you wouldn’t spend that if you didn’t get a data center lease.
Kelly Hancic (Chief Executive Officer)
Yeah, correct.
Kyle Stanley (Analyst)
Okay, thank you.
Kelly Hancic (Chief Executive Officer)
This is called micro data vaults. That would be tier 3. And we are delivering something really that is plug and play for them. So a little different strategy.
Kyle Stanley (Analyst)
Okay, understood. I will turn it back. Thank you.
OPERATOR
The next question comes from Sam Damiani with TD Cowen. Please go ahead.
Sam Damiani (Analyst)
Thanks. Thanks and good morning. I’m just going to continue on the same theme, I guess. I guess the focus is Richmond, and I’m just wondering how long will it take or could it take for that project to reach completion, reach some sort of stabilization to a point that you’re ready to, you know, I guess with confidence and visibility, you know, commit capital to the second project?
Kelly Hancic (Chief Executive Officer)
Yeah, I’m pretty optimistic that we’ll have something to release in the, you know, in the upcoming weeks, hopefully. You know, we are trying to maximize our value here. When we’re looking at rates, you know, we aim to do deals at wholesale rates for colocation facilities, which are very attractive. And I think we’ll have something, you know, within a month. And at the end of the day we have two, so we can deliver two right now. That’s the first hurdle.
And then, you know, depending on Hydro, we’re at the whim of Hydro as well, to be able to move to the 6.6 and then again to the 9.9. So like I said, I think 6.6 I’m hopeful for second quarter of next year. We’ll probably be done with construction as a whole and just need to power up. And then the 9.9 could take a little longer. And we’ve also, you know, we’ve applied for more than that as well. So whether we get it or not, I don’t know. But this is what we’ve got conditional approval on.
Sam Damiani (Analyst)
Okay, that’s helpful. And like, it’s pretty capital intensive, Richmond, and I guess subsequent projects might have some similar capital intensity. What’s the sort of funding strategy for this, for the strategy, you know, to fully realize the potential?
Mike Rall (Chief Financial Officer)
Well, hey Sam, it’s Mike here. First off, I mean, funding strategy for us, we have plenty of headroom on our revolver as we mentioned, so we have tons of liquidity. But ultimately at this point, with the way we expect the business will unfold, it will be able to fund most of operating cash flow.
Sam Damiani (Analyst)
Okay, okay. And maybe last one for me, I guess the relationship with Studio Events seems pretty integral to at least the Richmond and maybe other Kozaks too. I’ve never heard of them. Is there anything you can say to just help us understand who they are, what their background is?
Kelly Hancic (Chief Executive Officer)
No. It was our development partner on the site and when we were looking at the infill of building the micro industrial units, it started off as just a straight state. We were going to build micro industrial. And then as we realized we have additional power and started looking at it 22 months ago, we had applied for before the, I guess all the rage. Applied for additional power across a number of sites and began to get conditional approval. And they’ve been integral with working with the brokers.
So we have two major data provider brokers that are working on the file. And for us, it’s just to build. And over these last 22 months, we’ve had a number of engineers that have come in and tweaked the design and tweaked the design over and over until now that design is finalized. So it’s a project that we’re entering together. We have significant interest in the project from a number of different groups. And so that’s kind of where we are in the, in the lifeline right now.
Sam Damiani (Analyst)
Okay, before I wrap up here, the relationship with your partner on Richmond before this strategy was limited to just two assets in the portfolio or were there other assets? Are there other assets in the portfolio today? Yeah,
Kelly Hancic (Chief Executive Officer)
It was those two.
Sam Damiani (Analyst)
Thank you. I’ll turn it back. Thank you very much.
Kelly Hancic (Chief Executive Officer)
No problem.
OPERATOR
The next question comes from Jimmy Shawn with RBC. Please go ahead.
Jimmy Shawn (Analyst)
Thanks. So just to follow up on the same theme, this may be a bit of a silly question, but so is your lease contract that you have at Richmond, would that be with Studio Events, or be in turn subleased out to these—exactly how it works?
Kelly Hancic (Chief Executive Officer)
That’s how it works. And the reason for that, it takes Nexus Ind REIT one step out of the process. So we have a head lease with them and then they would take on the risk with the sub-tenant who we would have on covenant. But it just removes us one step in case there are power outages. I think that there are issues, whether it’s, you know, penalties or whatever, that removes that liability from Nexus Ind REIT and moves it downstream.
Jimmy Shawn (Analyst)
Okay, so is that why you felt the need to sort of give an exclusivity for the entire portfolio?
Kelly Hancic (Chief Executive Officer)
Well, it’s a strategy we developed together and the design is patent pending. So it’s their design. It’s been tweaked over a number of months to where it’s actually. I personally think with what’s going on with data, it’s a perfect infill strategy and I think it’s going to be very fruitful. But the design is patent pending. And so overall they’ve been the lead on with the tenants and moving things along and with the engineers and everything. So for us it’s optionality, like across the portfolio.
It’s us who approves them as we go along. It’s not, yeah, we’re doing this, we’re doing this. It’s… Yeah, we’re… Here’s our site, we have power approved and then it’s possible to do another site. So. But right now we’re really focused just on Richmond and executing on that one.
Jimmy Shawn (Analyst)
Okay, and is it possible for you to give us sort of maybe bracket the upside and downside? It sounds like the upside is quite material. Can you give us a range in terms of what the yield could look like?
Kelly Hancic (Chief Executive Officer)
It’s too early. I’m not willing to do it yet. But when we do have paper, we will release and explain in greater detail what it could mean to us. But if we aim to do deals at wholesale rates for colocation facilities in a tier three facility, it’s pretty good.
Jimmy Shawn (Analyst)
Okay. And then last, if I look at the 2027 lease maturities, you do have about 336,000 square feet expiring in Ontario. Any progress in renewing that and what’s your expectation in terms of rent that you’ll get there?
Mike Rall (Chief Financial Officer)
A little early for us as we’re going through our budgeting process now for us to give direct guidance for 2027, Jimmy. But we are very optimistic on the year. We love the momentum we have right now and I expect it’ll continue through 2027. We’ll give you a more fulsome update with guidance as we complete our budgets and are able to do so.
Jimmy Shawn (Analyst)
Okay. Okay, thank you.
OPERATOR
Once again, if you have a question, please press star then 1. The next question comes from Shaloni Seth, Raymond James. Please go ahead.
Shaloni Seth (Analyst)
Good morning. For the Glover Road property in Hamilton, could you throw some light on the tenant incentives being offered, including the magnitude and duration?
Kelly Hancic (Chief Executive Officer)
Yeah, give me just two seconds. I’m just trying to look it up. Glover Road just going out $10, and then… Yeah, I believe it’s non-incentive. It was part of the build cost of the facility. We just have to finish off the offices portion that we held back because as an empty building, brand new build, each tenant requirement’s different from offices. So we have to build that. And then I believe we’ve done a pretty significant deal for us where first year incentive rate is something like $10 a foot but ramps up to market in year three. And then I believe it has 3% annual growth.
So for us it’s a pretty good transaction. Takes the operating cost burn away from us and starts to provide income I believe in around second quarter next year. And that’s a pretty big swing on our AFFO.
Shaloni Seth (Analyst)
Okay, thank you. I’ll turn it back.
Kelly Hancic (Chief Executive Officer)
No problem.
OPERATOR
The next question comes from Matt Kornack with National Bank Financial. Please go ahead.
Matt Kornack (Analyst)
Hey guys, actually going back to Glover, I apologize I missed the opening comments, but can you give a sense as to how the discussions ultimately ended up getting to where they got to and what other alternatives you would have thought about for the property?
Kelly Hancic (Chief Executive Officer)
So funny enough, Glover was very interesting because we had very little activity for, you know, we had it under contract once and then the guy just walked away and very little leasing activity. And then we went and we made the decision to drop the rate and offer year one incentive. So in a matter of a week we had three offers to purchase and two lease deals. And so we looked at on the offers to purchase, the ability of the purchaser to close. And we looked at our tenant here versus the other tenant and this one we were, I guess, 98% certain that we would end up in a long-term lease deal that was good for the property.
So, you know, great covenant tenant, 10-year term, and we can tuck it away and take, once it ramps up to market, tuck it away and take our 3% increases with, you know, a brand new Class A property in the portfolio. So we looked kind of long and hard at who is the covenant, the ability to close and who did we want, had the least conditions and the least risk to starting to generate income for us.
Matt Kornack (Analyst)
Okay, makes sense. And now that you have a tenant, is the idea to keep the property or does it also make it more attractive on a sale basis? Interested?
Kelly Hancic (Chief Executive Officer)
Yeah, I think we’ll end up purchasing the other 20% from our partner at some point. I just don’t know when that is, but it would be probably some point next year.
Matt Kornack (Analyst)
Okay, makes sense. And then maybe, fair enough, maybe just a quick lay of the land in terms of geographic tenant demand and who’s taking space and what you’re seeing. I know the macro has been volatile to say the least on a number of different fronts. But maybe it’s getting a little bit better going forward. But yeah, I mean we saw a good leasing update from CBRE, but I think ultimately things got a little dicey after that. So interested in a lay of the land on industrial at this point?
Kelly Hancic (Chief Executive Officer)
Yeah. So for us obviously Glover was a good sign. Two larger tenants looking for space in a market that has been pretty slow. So very positive. London to us—London to us has been pretty good. We’ve seen some activity there. You know, our partner down there had at one point a 500,000 square foot manufacturing facility come back to them that they had to come in and I call it, make it bright, light and watertight, you know, do all the things that you need to do.
And they’ve been successful in pretty much filling up that 500,000 square feet. So from an overall demand I’m seeing things pick up, especially southwestern Ontario, even where nothing was going on. And now there’s 2 to 3 kind of larger mandates out there in the 2 to 300,000 square feet of people looking for space. So overall it bodes well where we weren’t seeing that before. So, you know, we take Hamilton, we’ve got that, we’ve got London where I’m seeing that demand.
Montreal, still quieter out west. Edmonton, Calgary is still pretty solid overall. So for us, you know, I’m feeling pretty positive for the first time in a while on the leasing front. I think things are starting to turn a corner. I think we’re getting, guys are getting more comfortable that there is going to be a trade agreement relatively soon. And I think that just bodes well, even more well for the industrial market as a whole. We’ve had a couple deals.
I had a deal the other day where we did—we haven’t announced it, but it’s not announceable—but our second largest tenant, we just expanded for another 10 years, so we have them till 2040 and that’s a pretty big cash cow for us. Two and a half percent increases a year on a higher cap rate portfolio. So overall I’m feeling more positive on the general business than in past quarters because I feel it’s getting there. And if I think if you look at our results, we’re all focused on the data, which is a sub-strategy that’s really, really move the needle and be game changer for us overall.
But our overall portfolio is kind of doing exactly what we said and that payout ratio is starting to drive down and as the new deals kick in. So from overall performance, we’re feeling pretty good. And then when we throw in the sub-strategy, like, we’re feeling really good. So we’re—so I’m pretty positive on the future.
Matt Kornack (Analyst)
Awesome. That’s great. Glad to hear. Take care.
OPERATOR
This concludes the question and answer session. I would like to turn the conference back over to Kelly Hancic for closing remarks. Please go ahead.
Kelly Hancic (Chief Executive Officer)
All right, thanks, everybody. Thanks for attending, and we’ll see you next quarter.
OPERATOR
This brings to a close today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
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