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BTB aims to make more noise selling, acquiring

Look to see more announcements from BTB REIT in 2017. The Montreal-based trust (BTB.UN-T) had a q...

Look to see more announcements from BTB REIT in 2017.

BTB REITThe Montreal-based trust (BTB.UN-T) had a quiet 2016, focusing on internal housekeeping such as reducing its debt level and shaving its borrowing costs.

Its biggest deal of the year didn’t even involve buying or selling assets, coming in the form of a $33-million share offering in June.

Still, BTB president and chief executive Michel Leonard sees the past year as a success.

“It was a good year, not a great year. Our results are better than the previous year,” Leonard said. “Although there hasn’t been significant acquisitions, I think that overall we managed to reduce our debt level by doing a redemption of debentures prior to maturity.”

Strategic plan forward

The big news for the mixed-asset REIT is a go-ahead from the board to revamp the mix of properties this year. Currently BTB owns 72 properties serving retail, office and industrial users.

“Now that the strategic plan has been done and the board has basically agreed to the strategic plan and approved the sale of certain properties, I can sell those properties and recycle the capital.”

The trust’s new strategy can be summed up as “bigger and better located.”

“There are some properties we are going to put up for sale, either because they don’t fit our core properties anymore, so they are basically non-core, also probably markets that we don’t want to be in anymore,” said Leonard.

Has outgrown some of its properties

BTB, in other words, has outgrown some of its properties. Today, it has 5.1 million in leasable square feet, $658 million in assets and $189 million in market capitalization.

“We can afford to buy larger properties,” says the REIT chief. “For us to manage an office property that is 12,000 square feet, it is the same time and effort as one that is 50,000 square feet.”

Mix and match

Currently, BTB’s asset mix is approximately 40 per cent office and the rest split between retail and industrial. “Our goal is to be a third, a third, a third,” Leonard said.

The trust has identified 10 properties it hopes to sell and another 10 properties for sale in the following year. The shopping list for new properties has four major markets in mind: Montreal, Quebec City, Ottawa and “a foray” into suburban Toronto.

BTB does own an industrial property in London, Ont., but currently nothing in the GTA.

“I started to look at that market last year and I saw that there were acquisitions that we could have concluded,” Leonard said. “I saw other REITs acquiring and they were definitely buildings that we could have acquired accretively as well.”

By the numbers

For the year ended Dec. 31, 2016, BTB reported a slight decrease in net income from its same-property portfolio, a reduction in its total debt ratio and the average interest rate on mortgage debt.

Over the year, more than 520,000 square feet of leases were renewed and new leases signed during the year with a 5.6% increase in the average rental rate of renewed leases during the year.

It completed $9.9 million in financings, with an average term of 4.2 years and an average rate of 3.59% and $87.2 million in refinancings, with terms varying from 1 year to 10 years, for a weighted average term of 7.5 years, as well as fixed rates of 2.88% to 4.11% and a weighted average rate of 3.50%.

These refinancings allowed for an equity take-out of approximately $16 million.

BTB REIT’s objectives are:

* (i) to grow its revenues from its assets to increase distributable income and therefore fund distributions;
* (ii) to maximize the value of its assets by “dynamic management of its properties” to sustain the long-term value of its units;
* (iii) to generate cash distributions that are fiscally beneficial to unitholders.

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