BTB Real Estate Investment Trust

For Q2, rental revenue was $31.9 million, up 4.5% versus the same quarter last year. NOI increased 10.5% year over year, while cash same-property NOI was stable in the quarter; for the 6-month period, cash same-property NOI decreased 4.8%. FFO adjusted per unit was $0.097, up $0.014, and adjusted AFFO per unit was $0.098, up $0.03 versus last year. The AFFO adjusted payout ratio was 76.5%, occupancy was 91.3%, debt ratio was 58.1%, the weighted average mortgage term was 2.2 years, and the weighted average mortgage interest rate was 4.4%. Liquidity at quarter-end was $15.4 million, including $0.6 million in cash and $14.8 million available under credit facilities. Guidance/commentary: management said the 50% Montclair buyout for $7 million should add about $500,000 of annualized NOI, and the $38.5 million of acquisitions completed over 6 months are expected to contribute about $3 million annualized NOI. No formal companywide revenue or FFO guidance was given.

Michel Léonard emphasized continued portfolio repositioning: buying industrial assets, selling office properties, and densifying select Montreal and Ottawa assets. He said the trust is seeing stronger demand for industrial and still healthy demand for office and retail leasing, and he framed the Montclair buyout as necessary to resolve problems with a partner and move the asset toward a future sale. His tone was confident and constructive, with repeated comments that the REIT has a pipeline to redeploy capital and expects to stay active on dispositions.

Marc-André Lefebvre highlighted the quarter’s operating lift: rental revenue of $31.9 million, NOI up 10.5%, FFO adjusted per unit of $0.097, and AFFO adjusted per unit of $0.098. He pointed to the payout ratio improving to 76.5%, the portfolio value remaining virtually unchanged at $1.2 billion, and the cap rate holding at 6.7%. He also noted total debt of 58.1% and liquidity of $15.4 million, while explaining that weaker cash same-property NOI year to date was driven by industrial and office issues including planned vacancies, free rent, and a $0.4 million rent reduction to Lion Electric.

Analysts focused on the leasing spreads, occupancy trajectory, and capital allocation. Management said the lease spread results were a good indication of what can be achieved going forward, and noted there were no nonrenewal notices for next year so far. On the large vacant Laval asset at 3695 des Laurentides, management said discussions were ongoing with multiple prospects, one requiring a long fit-up period, and that any lease would likely not contribute cash flow next year but could help streamlining rent; they also said the rent being discussed is north of $11 versus just under $8 net for the prior tenant, with TIs and leasing costs still undecided. On dispositions, management said it wants to sell roughly $100 million, if not more, of office assets and recycle proceeds into industrial.