BTB Funding Belief (BTB REIT) has introduced its third-quarter 2024 outcomes, specializing in a strategic shift towards industrial belongings and the upkeep of a conservative debt construction. The Belief has elevated its industrial asset holdings to 36.6% and decreased suburban workplace holdings to 42%. Regardless of a dip in occupancy charges, BTB REIT reported a rise in rental income and web working revenue, together with a profitable reimbursement of its convertible debenture, reinforcing its monetary stability.
Key Takeaways
- BTB REIT’s industrial asset focus has grown to 36.6% of its portfolio.
- Suburban workplace holdings have decreased to 42%.
- New lease exercise for Q3 was roughly 65,000 sq. toes.
- Occupancy price fell to 92.3% resulting from Nuera Air’s chapter.
- Rental income and web working revenue rose by 3.9% and three.8%, respectively.
- Adjusted funds from operations (FFO) per unit elevated to $0.107.
- Distribution remained at $0.30 per unit, with a 77% adjusted payout ratio.
- No acquisitions or inclinations occurred in Q3.
- Three workplace properties are available on the market, anticipated to yield web proceeds of $30 million to $40 million.
- Densification tasks might permit for 600 to 928 new items, with development doubtlessly beginning in 2026.
Firm Outlook
- BTB REIT is prioritizing investments in industrial properties and necessity-based retail sectors.
- The Belief is in search of metropolis approval for densification tasks that might result in important development in 2026.
Bearish Highlights
- The chapter of Nuera Air left a 132,000 sq. foot property vacant.
- Retail occupancy decreased from 97% to 94.7%, doubtlessly resulting from current bankruptcies.
Bullish Highlights
- The Belief’s technique led to a web acquire of $0.3 million from exterior value determinations.
- The reimbursement of Collection J convertible debentures optimizes the corporate’s mortgage debt.
- Liquidity stays sturdy with roughly $33 million obtainable, together with money and credit score amenities.
Misses
- No important acquisitions or inclinations have been made through the quarter.
Q&A Highlights
- Michel Léonard mentioned rental market positioning and the challenges with a newly acquired property.
- Important debt maturities are due in 2026, however the debt is well-balanced throughout the Belief’s 75 properties.
- The Belief reported sturdy leasing exercise, with almost 720,000 sq. toes leased for the reason that starting of the yr.
General, BTB Real Estate Funding Belief (ticker: BTB.UN) is navigating the market by actively managing its portfolio composition, specializing in industrial and necessity-based retail investments, and sustaining monetary self-discipline. The corporate’s strategic choices, together with the reimbursement of debentures and the potential for future densification tasks, place it for continued development. Market watchers will probably be trying ahead to the This autumn 2024 earnings replace for additional insights into the Belief’s efficiency and strategic course.
Full transcript – None (BTBIF) Q3 2024:
Operator: Good morning. My title is Eric, and I will probably be your convention name facilitator right this moment. Right now, I wish to welcome everybody to the BTB Real Estate Funding Belief 2024 Third Quarter Outcomes Convention Name for which administration will talk about the quarter ended September 30, 2024. All traces have been positioned on mute to forestall any background noise. Do you have to want to comply with the presentation in larger element, administration has made a presentation obtainable on BTB’s web site at www.btbreit.com/buyers/displays/quarterlymeetingpresentation [Operator Instructions]. Earlier than turning the assembly over to administration, please be suggested that among the statements that could be made throughout this name could also be forward-looking statements in nature. Such statements contain quite a few components and assumptions and are topic to inherent dangers and uncertainties, each normal and particular, which give rise to the chance that predictions, forecasts, projections and different forward-looking statements won’t be achieved. A number of essential components may trigger BTB Real Estate Funding Belief’s precise outcomes to vary materially from the expectations expressed or implied by such forward-looking statements. These dangers, uncertainties and different components that might affect precise outcomes are described in BTB Real Estate Funding Belief’s administration dialogue and evaluation and in its annual info type, which have been filed on SEDAR+ and on BTB’s Website at www.btbreit.com/buyers/experiences. I wish to remind everybody that this convention is being recorded. Thanks. I’ll now flip the convention over to Mr. Michel Léonard, President and Chief Govt Officer, accompanied right this moment by Mr. Marc-Andre Lefebvre, Vice President and Chief Monetary Officer; and Ms. Stephanie Leonard, Senior Director of Leasing. Mr. Leonard, chances are you’ll start the convention.
Michel Léonard: Thanks, Eric. Good morning, all. It is a pleasure to report our Q3 outcomes for the yr 2024 — again 20 years. Our funding exercise is — we’re nonetheless centered on industrial belongings and we’ll undergo some numbers on that entrance, nonetheless concerned within the densification of a few of our properties. On one, we perceive that the town in query is voting on a zoning change on November 14th. So through the subsequent quarter, we’ll have extra visibility on that. We’re actively engaged on the development of the Winners retailer in Lévis subsequent to — or throughout the river from Quebec Metropolis. And so it’s a densification alternative that’s ongoing. The development may be very effectively superior the place we predict that we’re going to ship the property for Winners Fittings in January of subsequent yr. We did eliminate two suburban workplace properties earlier this yr. We now have two suburban workplace properties below contract presently. And so we’re simply ready for the outcomes of due diligence on these fronts. If we go — if we take a look at the development of our portfolio in 2021, we have been nearly 20% industrial whereas now we’re at 36.6%. We now have a lower in our holding of the suburban workplace section from 2021 at nearly 54% down now to 42%. And so far as necessity primarily based retail, in ’21, we have been at 27% and in ’24, we’re nearly at 22%. So far as the geographical diversification, nothing has actually modified on that entrance. So far as — I am turning to the web page referred to as growth alternative, in case you are trying on the presentation on the Website. So now we have extra land in Ottawa and the town is actively engaged on transitioning our zoning from a TUD to a HUB, which means the next density because of the truth that there’s an LRT station being constructed simply throughout from our property. We perceive that the zoning goes to be applied by the town. The important thing metrics, I am turning to the web page of key metrics. So 6.1 million sq. toes,f air worth of our funding property at $1.2 billion. The exercise for the quarter so far as new leases have been at nearly 65,000 sq. toes and the full lease renewals for the quarter have been at 255,000 sq. toes, a powerful quantity, which is year-to-date, the full leasing exercise is 719,000 sq. toes. Our occupancy price is down at 92.3% because of the beforehand introduced chapter of Nuera Air in one among our industrial properties situated in Laval. It is 132,000 sq. toes. So this property is presently vacant. The trustee in chapter has vacated the premises, left the premises in a dire want of a very good cleansing and likewise of disposing of the remaining belongings. So we have mandated an organization so as to take action. In order that they proceeded to do an public sale. And we do not know what the results of the public sale was so far as the financial sum of money that is gleaned from the public sale, however the premises proper now are within the higher form than they have been in July when the tenant principally left the premises. So because of this, we did put this property available on the market by way of CBRE (NYSE:), which is the dominant participant within the industrial panorama on the island of Laval. And because of the truth that now the property is best — in a greater state of cleanliness, now we perceive that we’ll be in a greater place with a view to lease that property. So with this, I might like to show the presentation to Stephanie to speak about our leasing and renewal exercise.
Stephanie Leonard: Thanks, Michel. In order a reminder for all of you following us on our on-line presentation, we’re presently at Web page 8 of our presentation. For the third quarter, our new lease exercise totaled 64,583 sq. toes, of which 45,870 sq. toes belong to a long run lease signed with Winners/Homesense in Lévis, Quebec, as Michele talked about. One other 18,713 sq. toes of latest leases have been signed with new tenants throughout our portfolio. Notably, a 5,000 sq. toes roughly suburban workplace transaction introduced our Ottawa portfolio to a 99.4% occupancy price, which is a historic excessive for that sector. For the cumulative 9 month interval, our new lease exercise totaled roughly 162,000 sq. toes, of which 60.1% have been concluded in our suburban workplace section, 38.6% have been concluded in our necessity primarily based retail section and 1.3% in our industrial section. For the third quarter, we renewed 58.4% of leases coming to maturity with one other 9,900 sq. toes awaiting execution. For the 9 month cumulative interval, we renewed 75.3% of our leases coming to maturity. As we proactively guarantee communication with our shoppers and seize alternatives to conclude early renewals, through the quarter, we renewed 207,000 sq. toes — roughly 207,000 sq. toes with shoppers whose time period expire in 2025 and thereafter. When it comes to some noteworthy transactions, we signed a lease extension with Lowe Martin Group in Ottawa in our industrial section for 116,000 sq. toes, 44,000 sq. toes with the Authorities of Canada in Gatineau and a 36,000 sq. toes renewal with Hydro-Quebec in Trois-Rivieres. It is to notice that our common enhance in our lease renewal charges for the quarter, particularly in our suburban workplace section, confirmed a 0.2% lower primarily resulting from our Hydro-Quebec renewal, which was an as is the place is renewal, which means no lease incentives have been granted. When it comes to our industrial section, we noticed a 5.8% enhance and our retail section a 6.7% enhance. General, we famous a 4.6% enhance in our common lease renewal price for the reason that starting of the yr and our weighted common lease time period stood at 5.7 years. In complete, our leasing — our complete leasing exercise for the quarter totaled 319,495 sq. toes, which introduced our occupancy price to 92.3%, a 1.4% lower versus Q3 2023 because of the aforementioned Nuera Air chapter. When it comes to our presentation, should you flip to Web page 10, you may discover a snapshot of our first ever growth in Lévis, Quebec, as we have beforehand talked about in our — all through the second quarter as effectively. As Michel talked about as effectively, the supply is deliberate in January 2025 and the pad development is about 45,000 sq. toes signed with Winners and Homesense. On Web page 11, you may see the snapshot of the chance that Michel had talked about in Laval, so our property situated at 3695 des Laurentides presently for lease with CBRE. On that word, I am going to hand it over to Marc-Andre for the monetary assessment.
Marc-Andre Lefebvre: Thanks, Stephanie. Good morning, everybody. Let’s assessment the monetary part beginning on Web page 13. So the monetary outcomes for the third quarter mirror the nice efficiency of our operations, our capability to generate natural development and the sound administration of our liquidity profile by way of focused mortgage top-ups. This constructive efficiency was partially mitigated by the chapter of two tenants. Rental income for the quarter elevated by 3.9% in comparison with the identical interval final yr. This enhance is expounded to a number of gadgets, specifically acquisitions made in 2023, working enhancements, larger lease renewal charges and embedded will increase in lease charges for in-place leases. Internet working revenue elevated by 3.8% in comparison with the identical quarter final yr. The rise in NOI is instantly associated to the rise in rental income. Nevertheless, this enhance was offset partially by the bankruptcies, as I discussed, of two tenants. The primary one is Energie Cardio for $0.3 million and the second is Nuera Air, as we beforehand talked about, and the quantity is for $0.5 million. similar property NOI, which is a metric — a very good measure of our natural development, it elevated by 7.3% for the quarter in comparison with the identical interval final yr. This enhance is because of larger lease renewal charges throughout all three segments of the portfolio. FFO adjusted per unit was $0.107 for the quarter, a rise of $0.03 from the identical quarter final yr. The rise is principally defined by larger NOI, which was partially offset by a rise in web curiosity bills. Notice that the weighted common variety of items excellent elevated by 1.4 million items and that is because of the participation of a few of our unitholders into our distribution reinvestment plan. When it comes to distribution paid to unitholders, we preserve our distribution at an annualized price of $0.30 per unit. The AFFO adjusted payout ratio was barely over 77% for the quarter, a 3% lower from the second quarter of this yr. Now trying on the worth of our funding properties, it stood at over $1.2 billion on the finish of the quarter, a slight enhance from the earlier quarter. As of September 30, 2024, BTB had 52% of its total portfolio externally appraised. The train resulted in a web acquire of $0.3 million for the cumulative 9 month interval. Notice that we didn’t make any portfolio extensive adjustments to our cap charges this quarter and to this point this yr. As of the third quarter, the common cap price for the commercial portfolio was 6.1%. For the suburban workplace portfolio, it was 7%. And for the need primarily based retail, it stood at 7.1%, leading to a weighted common cap price for your complete portfolio of 6.7%. When it comes to portfolio allocation by asset class, 36.6% of the worth of our funding properties come from our industrial section. As Michel beforehand talked about in his opening remarks, in keeping with our strategic plan, we’re continually trying to scale back our workplace allocation and recycle the capital into industrial property. There have been no acquisitions nor inclinations through the quarter. Wanting on the capital construction, we concluded the quarter with a complete debt ratio of 58.3% and a mortgage debt ratio of 52.5%, which is comparatively secure versus the prior quarter and likewise versus the identical interval final yr. The weighted common time period on our debt is three years,t hat excludes the credit score line and it is a slight lower of 0.1 yr from the final quarter, so just about in line. The weighted common curiosity on our mortgage debt was 4.33% and that is a lower of 24 foundation factors from the final quarter. Relating to our refinancing commitments till yr finish, now we have lower than $9 million of mortgages coming to maturity and we presently have indicative provides from lenders for your complete quantity. Our debt ladder stays conservatively structured, decreasing rate of interest threat. Now with the Financial institution of Canada firming up its price reducing cycle, this factors to a greater price atmosphere for future mortgage refinancing. Close to the maturity of the convertible debenture Collection J — G, we’re happy to report that now we have repaid your complete principal quantity of debentures on October thirty first. So by optimizing mortgage debt on a few of our properties, we generated proceeds and repaid the convertible debenture. We additionally achieved a weighted common price value that was considerably beneath the price we’d have incurred by issuing a brand new convertible debenture. This can be a testomony to our efforts to scale back the curiosity value on our debt. Lastly, we held near $3.3 million in money on the finish of the quarter and roughly $29.3 million is out there below our two credit score amenities for a complete liquidity of just about $33 million. This completes our presentation. And with that, we will probably be happy to take your questions. Operator, can we please have the primary query on the road?
Operator: [Operator Instructions] Your first query comes from the road of Matt Kornack with Nationwide Financial institution Monetary.
Matt Kornack: Simply shortly on the stability sheet and the publish quarter reimbursement of the convertible debenture. Are you able to — first off, it sounds such as you’ve obtained a couple of property gross sales which can be underway, so may you give us a way of the quantum there after which simply perhaps different gross sales that you just’d be anticipating on that entrance? And perhaps as effectively, what you assume you may get from mortgage up financing at this level to glean some extra capital there?
Marc-Andre Lefebvre: So by way of our disposition program, now we have three workplace properties available on the market proper now. Throughout our final name, we talked about that we — the gross proceeds would — have been ranging between $50 million to $60 million. Internet of mortgages, it is $30 million to $40 million. So that is what we’re engaged on proper now by way of disposition. extra mortgage top-ups, I imply, we’re continually reviewing the portfolio, ensuring we’re optimizing properties, particularly properties which have elevated in worth considerably. Keep in mind that we’re additionally maintaining — we’re additionally — we additionally had the target of sustaining our leverage, our complete leverage beneath 60%. So we at all times maintain that in thoughts once we’re doing top-ups. And sure, we have been capable of get the total quantity or nearly the total $24 million in mortgage top-ups to repay the convertible debenture.
Matt Kornack: After which simply on the leasing aspect, should you may give us an replace. I feel you touched on the commercial emptiness, however any sense of the timing there. However then additionally Energie Cardio, I feel you’ve got re-leased that area. Are you able to give us a way of the timing and the NOI on that? After which additionally for the Winners lease, January 2025 for 45,000 sq. toes. What could be the NOI contribution? And can that be when money lease commences or will or not it’s subsequent and there will probably be a form of free lease or a straight line lease interval on the entrance finish of that?
Stephanie Leonard: So by way of Energie Cardio, Energie Cardio declared chapter, I imagine it was in Q2, it was in our Q2 report. We have efficiently re-leased that area and money move has commenced, I imagine, to the — I am constructive in Q1 –. In Q1 2025, money move will begin. There was some free lease interval. So free lease interval for Energie Cardio, however it’s dedicated in place. When it comes to Winners, so occupancy is January 2025, they are going to be opening their doorways in March 2025. And we — there is no free lease interval by way of — solely free lease interval is between January and March. So lease will begin in March 2025.
Charles Dorais Bédard: And full yr NOI will probably be about $1 million.
Matt Kornack: $1 million?
Charles Dorais Bedard: Sure.
Matt Kornack: After which perhaps only a broader form of query round capital allocation and the place the portfolio goes from right here. Industrial has been the main target and we totally count on industrial after a interval of perhaps a little bit little bit of softness will rebound and be very sturdy once more. However necessity primarily based retail has form of taken on the mantle of the place that everyone needs to be. So how ought to we take into consideration that focus in your portfolio going ahead? And is there a way that it’s essential de-diversify and be simply industrial or does necessity-based retail have form of an even bigger element in the way forward for BTB as effectively?
Michel Léonard: Matt, we do not intend to eliminate our grocery anchored retail properties for now. I feel that it’s a section that’s actually attention-grabbing to be in lately. And never solely that however there’s worth to be gleaned from these properties so far as densification. So because of it, and we won’t do every part directly. So now we have two bigger tasks on the densification and we’re concentrating on that for now. However we have principally proven that attracting Winners in our middle in Lévis began by redefining the buying middle the place we have been capable of entice, as an illustration, Sephora, BBW. Now we’re in dialog and nearly signed a lease with a nationwide retailer of nice notoriety inside the market. So there’s quite a lot of room proper now for these properties with a view to principally take a brand new presence inside these markets. So it will be very troublesome for us to half with sure properties, retail properties the place the worth that we’d glean from a sale wouldn’t be the true worth, as a result of if these properties have a growth play then I feel that we’re a very good actor with a view to seize the chance on that entrance. So once we discuss disposition, we solely discuss inclinations for our suburban workplace properties. And the one in Quebec Metropolis is a property that’s occupied at 50%. Subsequent (LON:) yr goes to be occupied at 40%. So we’re more than happy to have the ability to eliminate this one so far as it undoubtedly helps the portfolio and it’ll assist NOI. In order that’s principally the place we’re at the place we do not — we might should eliminate a retail property nevertheless it’s not a part of our plan. It might be one thing that will be a possibility, a market alternative aside from a choice that we’d have made on that entrance.
Matt Kornack: After which simply shortly going again to the density worth. It sounds just like the mission nature has modified, a minimum of on one of many websites and that you may doubtlessly get extra density. Are you able to give us a way — I do know we have talked about this previously and clearly there’s sensitivities, however as to when and the way you’d both construct these out or monetize the residential density element?
Michel Léonard: So if we — what we perceive from the town and what we perceive the town goes to vote on on the 14th is so as to add density to our website of a minimal of 200 doorways per acre and that will imply principally 600 and a few doorways that may very well be constructed on the location, however they are saying it is a minimal. So we’d be pushing for 250 or 260 doorways per acre. And that will principally give us the full items that we needed within the first place, which we at all times talked about 928, simply shy of 1,000 doorways. And in order that’s our goal. I feel that the mission could be seemingly viable at 600 doorways however it will undoubtedly be higher so as to add one other 300 doorways only for the location itself. So so far as timing is worried, if as an instance that the town votes on what I’ve simply described as a result of there is no affordable certainty on what they will vote on. And so whether it is then at this level there’s going to be — the presentation to residents of our mission and so forth within the early 2025 and doubtless go forward from the town by June of 2025. If that is the case, then the primary section would begin in 2026. It might be roughly 18 months for development of the primary section, then second section would begin after that. And we’re speaking about 5 phases and the primary two phases are the biggest of all of the phases. And we’re speaking roughly near 450 items within the first two phases. So it is nearly half the mission. So that is what we’re hopeful. And should you’re speaking about cost, so cost for densification. So the cost from densification happens on the train of — it isn’t — for the primary two phases, it isn’t an possibility, it is just like the minute that they train, they train. However the minute that they put the shovel within the floor for every section, because of that, then there is a cost for densification.
Matt Kornack: So this can be a prearranged settlement with a companion that’s going to compensate you for the mission, is that honest?
Michel Léonard: Right, precisely.
Operator: Your subsequent query comes from the road of Sumayya Syed with CIBC (TSX:).
Sumayya Syed: I needed to comply with up on the commercial emptiness and questioning in regards to the prospects for re-leasing there and what you are seeing on the lease aspect. I feel final time you talked about being out there at round $14.50?
Michel Léonard: Sure. We’re out there at round $15. And as I discussed, we expect round $12 or $13 web.
Sumayya Syed: After which any sense of timing on that primarily based on curiosity you’ve got gotten to this point?
Michel Léonard: Sumayya, the issue that we have had to this point is the truth that the premises have been left in such a dire want of a brush that it was — it is almost unimaginable to point out the constructing. It is actually troublesome to explain however let me attempt. Once we first obtained into the constructing, it is as if on the Friday earlier than, the staff did not know that on the Monday (NASDAQ:) morning they’d go — the enterprise would go bankrupt, as a result of every part was left on the desks in all places, paper in all places as if it was a ghost city. And so we needed to discover any person that might assist us clear, recycle all of the papers that have been left and attempt to promote every part that the trustee could not promote. And so we gave — we signed a contract with Continental Auctioneers and so they proceeded to principally make a listing of what they’d, then reached out with a view to discover bidders for the gadgets that have been left behind after which began the method of the public sale, that took 1.5 months. Now we went to the constructing yesterday afternoon and it is considerably cleaned up, nonetheless, it is nonetheless not prepared for tenants to go to. And that is the unhappy a part of it. It is because of the way in which that it was left for us, it was principally — it was like these exhibits on TV that you just see individuals which can be hoarding the place it was like that. It was horrible. So now we’re able the place we are able to see the dimensions of the constructing in order that any person that will go to could be principally capable of principally place all their operation inside the property, as a result of earlier than it was actually unimaginable to take action. So now we’re getting there. And I feel that by — all through the month of November, we have determined that we have been going to do a couple of enhancements to the constructing to ensure that it to point out higher. Actually, now we have to — they use what they name a Zamboni, it has nothing to do with hockey or ice. However with a view to clear, now we have to energy wash the partitions, now we have to energy wash the construction. So there’s nonetheless issues that now we have to do with a view to make it clear in order that it exhibits effectively. And that is a hindrance and it isn’t enjoyable and it isn’t essentially acceptable however that is one thing that now we have to cope with and we’ll make it proper.
Sumayya Syed: We’ll keep tuned for an replace there. After which the opposite query I had was on the occupancy aspect. I used to be noting on the retail, the dedicated was secure from Q2 however that the in-place moved from 97% to 94.7%. Was that tied to one of many bankruptcies or one thing else occurring right here?
Stephanie Leonard: I’ve to get again to you on that. I may — I am going to take a look at our recordsdata and I can get again to you by way of e-mail to reply your query extra in depth. I haven’t got the knowledge in entrance of me proper now.
Sumayya Syed: After which simply the final query I had was your debt maturities, you do have a major roll coming in 2026. Is that skewed to any specific asset kind or is it form of effectively balanced out? After which simply questioning the place you’re by way of discussions on the 2026 maturities?
Marc-Andre Lefebvre: 2025 or 2026, Sumayya?
Sumayya Syed: 2026 the place you’ve gotten nearly 1 / 4 of your debt rolling.
Marc-Andre Lefebvre: There’s nothing that is actually particular. It is simply the way in which the debt is staggered,there’s nothing chunky in there greater than the rest. As you already know, now we have 75 properties, so it is — I might say it is simply — it’s what it’s.
Operator: Right now, there are not any additional questions. Please go forward, Mr. Léonard.
Michel Léonard: Thanks. Thanks very a lot for becoming a member of us this morning. I feel that the massive occasion of the quarter is an occasion that occurred after the quarter, which is the reimbursement at maturity of the debentures. It was a good way for us to get — however to do away with the debentures and it is one thing that we at all times talked about that we did not need to subject new debentures inside our portfolio. If we needed to we needed to but when we did not should then we did not should. And we discovered the chance with a view to redeem these debentures for $24 million plus accrued curiosity. So it is in any other case usually a boring quarter, if I can say this, and all our metrics are trending positively, apart from the unresolved subject of the commercial property the place we’re going to resolve this subject. So we take a look at our lease renewals, we take a look at our leasing velocity and every part is trending positively. And as I discussed, nearly 720,000 sq. toes of exercise on the leasing entrance for the reason that starting of the yr. It is extremely lively within the sense that we’re capable of do, shut on our renewals, enhance rents, nonetheless enhance rents and lease our properties. So it’s a constructive and we’re fairly pleased with these outcomes. And because of this, thanks very a lot for taking part in our name this morning and we’ll see you for the outcomes of — not see you, we’ll hear from you for the outcomes of the This autumn 2024 within the new yr. Thanks very a lot.
Operator: This concludes right this moment’s convention name. You might now disconnect.
This text was generated with the help of AI and reviewed by an editor. For extra info see our T&C.
