BTB REIT Reports Results for the Fourth Quarter and Year 2023

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MONTRÉAL, Feb. 26, 2024 /CNW/ – BTB Real Estate Investment Trust (TSX:BTB) (“BTB” or the “REIT”) releases today its financial results for the fourth quarter and year ended December 31st, 2023.

“I am delighted to reflect upon the remarkable journey that was 2023 for BTB.” says Michel Léonard, President and Chief Executive Officer. “The rental revenues, a cornerstone of our financial success, reached an all-time high of $127.8 million for the year, showcasing a remarkable 7.0% increase compared to the same period in 2022. This achievement is a testament to the effectiveness of our leasing strategies and the strategic repositioning of our portfolio. The total weight of our total industrial properties increased to 36.4%, from 18.1% in 2020.

In the last quarter alone, BTB completed 158,790 square feet of lease renewals, coupled with an additional 78,340 square feet of new leases.  On an annual basis, BTB’s leasing accomplishments for 2023 were also impressive: a total of 485,751 square feet of lease renewals were successfully completed, complemented by 296,240 square feet of new leases. These figures affirm our sustained leasing momentum, underpinned by strategic initiatives that resonate with the evolving needs of our clients. As a direct result of these strong leasing endeavors, our occupancy rate surged to an impressive 94.2%, marking a significant 49 basis points increase compared to the prior quarter and an outstanding 99 basis points increase compared to the same period in 2022. The average lease renewal rental rate for the quarter demonstrated a substantial 14.3% increase, contributing to the overall growth trajectory.

The Net Operating Income (NOI), a key indicator of our operational excellence, totaled $75.4 million for the year, reflecting a 7.0% increase compared to the previous year. This growth is a direct result of our priority to value creation across our assets and our strategic focus on optimizing operational efficiencies. Our same-property NOI (1) demonstrated resilience and growth as we witnessed a 2.1% increase. Our leasing efforts in the necessity-based retail segment, coupled with enhanced rental spreads in the industrial sector, contributed significantly to this positive performance. For the off-downtown core office segment, we concluded the year with a notable 7.7% increase in the fourth quarter of the same-property NOI and an impressive increase in the lease renewal rental rate of 5.3%.

In January 2024 we published our inaugural Environmental, Social, and Governance (ESG) report. This milestone represents more than a document; it symbolizes our commitment to responsible growth, sustainability, and the highest standards of ethical business practices. As we actively integrate ESG initiatives into our daily practices, we are aligning our business strategies with broader environmental and social responsibilities. This is a pledge embedded in the fabric of our corporate culture.”

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(1) Non-IFRS financial measure. See Appendix 1. 

OPERATIONAL HIGHLIGHTS

BTB completed a total of 158,790 square feet of lease renewals and 78,340 square feet of new leases for the quarter. Due to strong leasing efforts, the occupancy rate increased to 94.2%, representing a 49 basis points increase compared to the prior quarter and a 99 basis points increase compared to the same period in 2022. The increase in the average renewal rate for the quarter was 14.3% and 9.2% for the year. BTB completed a total of 485,751 square feet of lease renewals and 296,240 square feet of new leases for the year.

Periods ended December 31

Quarter

Year

2023

2022

2023

2022

Occupancy – committed (%)

94.2 %

92.8 %

Signed new leases (in sq.ft.)

78,340

49,568

296,240

167,602

Renewed leases at term (in sq.ft.)

126,427

87,399

384,558

356,454

Renewal rate (%)

73.4 %

53.0 %

62.4 %

63.0 %

Renewed leases prior to the end of the term (in sq.ft.)

32,363

66,633

101,193

148,736

Average increase lease renewal rental rate

14.3 %

8.0 %

9.2 %

12.2 %

FINANCIAL RESULTS HIGHLIGHTS

Periods ended December 31

               Quarter                      Year

(in thousands of dollars, except for ratios and per unit data)

2023

2022

2023

2022

$

$

$

$

Rental revenue

31,922

31,486

127,826

119,495

Net operating income (NOI)

19,255

18,624

75,379

70,430

Net income and comprehensive income

1,734

1,769

36,598

38,154

Adjusted EBITDA (1)

18,065

16,347

69,719

64,409

Same-property NOI (1)

17,636

16,552

66,533

65,152

FFO Adjusted (1)

9,688

10,059

38,946

37,879

FFO adjusted payout ratio

67.2 %

63.6 %

66.5 %

66.1 %

AFFO Adjusted (1)

8,966

8,550

34,956

34,137

AFFO adjusted payout ratio

72.6 %

74.9 %

74.1 %

73.3 %

FINANCIAL RESULTS PER UNIT

Net income and comprehensive income

2.0¢

2.1¢

42.4¢

45.7¢

Distributions

7.5¢

7.5¢

30.0¢

30.0¢

FFO Adjusted (1)

11.1¢

11.8¢

45.1¢

45.4¢

AFFO Adjusted (1)

10.3¢

10.0¢

40.5¢

40.9¢

Rental revenue: Stood at $31.9 million for the current quarter, which represents an increase of 1.4% compared to the same quarter of 2022. For the year 2023, rental revenue totalled $127.8 million which represents an increase of 7.0% compared to the same period in 2022.
Net Operating Income (NOI): Totalled $19.3 million for the current quarter, which represents an increase of 3.4% compared to the same quarter of 2022. For the year 2023, the NOI totalled $75.4 million which represents an increase of 7.0% compared to the same period in 2022.
Net income and comprehensive income: Totalled $1.7 million for the quarter compared to $1.8 million for the same period in 2022. For the year 2023, Net income and comprehensive income totalled $36.6 million compared to $38.2 million for the same period in 2022, representing a decrease of $1.6 million. The decrease for the year 2023 is primarily driven by an increase in net financial expenses of $18.9 million offset by an increase in NOI of $5.0 million; an increase in financial income of $1.2 million and a positive variance of $10.2 million driven by net change in fair value of investment properties (Gain of $2.0 million for the year 2023 compared to a loss of $8.2 million for the year 2022).
Same-property NOI (1): For the quarter the same-property NOI increased by 6.6% compared to the same period in 2022, and for the year 2023 increased by 2.1% compared to the same period last year. The increase is primarily due to increase in renewal rates of 21.4% for the year in the necessity-based retail segment, an increase in rental spreads for in-place leases in the industrial segment and recent strong leasing efforts for the off-downtown core office segment with a same-property NOI increase of 7.7% for the quarter.
FFO adjusted per unit (1): Was 11.1¢ per unit for the quarter compared to 11.8¢ per unit for the same period in 2022, representing a decrease of 0.7¢ per unit. For the year 2023, the FFO adjusted was 45.1¢ per unit compared to 45.4¢ per unit for the same period in 2022, representing a decrease of 0.3¢ per unit. The $1.1 million increase of FFO adjusted for the year is driven by an NOI increase of $2.7 million due to acquisitions net of dispositions; NOI increase of $1.4 million due to leasing efforts and stability of occupancy rates offset by an increase in financial expenses net of financial income of $3.0 million. Despite the increase of FFO adjusted for the year 2023, the FFO adjusted per unit has decreased by 0.3¢ due to 3.2 million additional weighted average number of units outstanding reducing the per unit value compared to the same period in 2022.
FFO adjusted payout ratio (1): Was 67.2% for the quarter compared to 63.6% for the same period in 2022. For the year 2023, the FFO adjusted payout ratio was 66.5% compared to 66.1% for the same period in 2022.
AFFO adjusted per unit (1): Was 10.3¢ per unit for the quarter compared to 10.0¢ per unit for the same period in 2022, representing an increase of 0.3¢ per unit. For the year 2023, the AFFO adjusted per unit was 40.5¢ per unit compared to 40.9¢ per unit for the same period in 2022, representing a decrease of 0.4¢ per unit compared to the same period in 2022. Despite an increase of AFFO adjusted for the year of $0.8 million the FFO adjusted per unit has decreased due to an increase of 3.2 million in weighted average number of units outstanding reducing the per unit value.
AFFO adjusted payout ratio (1): Was 72.6% for the quarter compared to 74.9% for the same period in 2022. For the year 2023, the AFFO adjusted payout ratio was 74.1% compared to 73.3% for the same period in 2022.

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(1) Non-IFRS financial measure. See Appendix 1. The referred non-IFRS financial measures do not have a standardized meaning prescribed by IFRS and these measures cannot be compared to similar measures used by other issuers.

BALANCE SHEET AND LIQUIDITY HIGHLIGHTS

Periods ended December 31

Year

(in thousands of dollars, except for ratios and per unit data)

2023

2022

$

$

Total assets

1,227,648

1,179,340

Total debt ratio (1)

58.6 %

58.5 %

Mortgage debt ratio (2)

52.2 %

54.2 %

Weighted average interest rate on mortgage debt

4.37 %

4.09 %

Market capitalization

254,048

311,120

Market price of units

2.93

3.65

NAV per unit (1)

5.42

5.42

Investment properties: 75% of BTB’s properties were appraised by a third party during the quarter, resulting in a net gain of $2.0 million driven by an increase in capitalization rates across the 3 asset classes netted by the updated cash flow assumptions which were impacted by an increase in market rents for industrial assets and increased renewal rates for specific properties.
Debt metrics: BTB ended the quarter with a total debt ratio (1) of 58.6%, recording an increase of 8 basis points compared to December 31, 2022. The REIT ended the quarter with a mortgage debt ratio (1) of 52.2%, a decrease of 202 basis points compared to December 31, 2022.
Liquidity position: The REIT held $0.9 million of cash at the end of the quarter and $21.6 million is available under its credit facilities. The Trust has the option to increase its capacity under credit facilities by $10.0 million.

SUMMARY OF SIGNIFICANT ITEMS AS AT DECEMBER 31st, 2023

Total number of properties: 77 (3)
Total leasable area: 6.1 million square feet
Total asset value: $1,228 million
Market capitalization: $254 million (unit price of $2.93 as at December 31, 2023)

SUBSEQUENT EVENT

On February 26th, 2024, the Toronto Stock Exchange (the “TSX”) approved the renewal of the normal course issuer bid (“NCIB”) program authorized by the Trust’s Board of Trustees to repurchase for cancellation up to 6,085,804 units, from February 26,2024 to February 25,2025, representing approximately 7% of the Trust’s outstanding units and of its public float. As of December 31,2023, no units have been repurchased for cancellation under the NCIB.

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(1) Non-IFRS financial measure. See Appendix 1. The referred non-IFRS financial measures do not have a standardized meaning prescribed by IFRS and these measures cannot be compared to similar measures used by other issuers.

(2) This is a non-IFRS financial measure. The mortgage debt ratio is calculated by dividing the mortgage loans outstanding by the total gross value of the assets of the Trust less cash and cash equivalents.

(3) Includes a property in Edmonton reclassified as a finance lease and not included in fair value.

QUARTERLY CALL INFORMATION

Management will hold a conference call on Tuesday, February 27th, 2024, at 9 am, Eastern Time, to present BTB’s financial results and performance for the fourth quarter of 2023.

DATE:

Tuesday, February 27th, 2024

TIME:

9 am, Eastern Time

URL ENTRY:

https://emportal.ink/3HlpoLW

DIAL:

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