Imagine collecting a steady stream of passive income that ends up on your brokerage account every month. Imagine that income comes from a company whose company is the backbone of the economy, such as renting warehouses and distribution centers that facilitate the flow of goods in Canada. This is the reality offered by Nexus Industrial Real Estate Investment Trust (TSX: NXR.UN), A jewel with a high return that has successfully reinvented itself and is now ready for growth. The small Canadian Reit of $ 750 million could be a compelling source of passive income to buy for October.
The strategic transformation of Nexus Reit unfolds
Nexus has carried out a dramatic and strategic makeover over the past year. It sold 33 Legacy Properties, a mix of shops, office and non-core industrial assets, to come forward as a pure-play industrialist. This sharpened focus is a big problem. Industrial properties, in particular those in the logistics and storage sector, are nowadays among the most much -needed real estate activa.
This pivot has already begun to pay dividends. The most important profitability of the trust, measured by net business income (NOI), which is the cash profit from his property after the costs, grew 1.7% year after year in the second quarter of 2025 despite the smaller portfolio, with the higher quality and superior deserving power of the remaining assets.
The remaining portfolio of the Reit of 88 properties comprises 11.7 million square feet in the gross leasable area. It has a strong occupancy rate at 94%, with a weighted average lease period of 7.1 years, so that investors are seen in future income and distributable cash flow.
A safer distribution yield of 8.3%
The most critical number for income investors is often the relationship between distribution. Is the Canadian industrial Reit sufficient cash flow generated to safely cover the distributions he pays every month? Here Nexus Industrial Reit recently showed a remarkable improvement.
The AFFO -payment ratio, which measures distributions as a percentage of adapted funds from operations (AFFO), an important metric that measures the available cash flow to pay benefits, dramatically improved by June to 97.6% of 108.7% a year ago. On a normalized basis it is 100.3%, a decrease of 102.2%. This means that the monthly distribution, which yields a juicy 8.3%, is a lot of firmer terrain today. The distribution is now well covered by the distributable operational cash flow of the Reit, making that high efficiency considerably safer and more sustainable.
The path to further improvement of coverage is clear. In the third quarter, Nexus Industrial Reit went after the completion of two major development projects that can add $ 6.6 million to annual NOI. Moreover, renting in place are a stunning 18.5% below current market rates. As the leases expire, the reit was again rented space in massive spreads of an average of 38% higher in the second quarter. The lower rents below the market offer a powerful, built -in engine for future income and distributable cash flow growth.
Buy an income active with a high return with a 40% discount
Perhaps the most exciting part of the story of the Nexus Industrial Reit is the strong potential for capital valuation on top of the hefty monthly income.
The net asset value (NAV) of the trust per unit, an estimate of the underlying value of his real estate, was $ 13.17 at the end of June. Units traded around $ 7.78 at the time of writing. This implies a discount of around 40.9%. For income investors this can be if the chance to buy a dollar bill for around 59 cents. The enormous gap between the unit price of Nexus and its intrinsic value creates a considerable safety margin and a clear path for price increases as the Reit continues to perform its winning strategy.
With a weighted average lease period of 7.1 years, Nexus has an exceptional visibility of income, which means that it isolation of volatility in the short term. This stability, combined with an occupancy rate of 94%, creates a reliable basis for the monthly cash flow.
The most remarkable, the competence of compiling can perform miracles for Canadian tax -free savings account investors who reinvest their benefits. A return of 8.3% has the potential to double your investment in less than 8.7 years if the price of the unit remains stable, according to the rule of 72. If the price of the unit rises to reduce that NAV discount, your total return can be more impressive.
Investor collection meals
Canadian investors on the hunt for an undervalued high-yield Reit to buy in October for passive income can today view the Nexus Industrial Reit. It offers a high yield and a better covered monthly distribution, has a clear strategy for growth and an important valuation gap that offers the potential for substantial capital wins.
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