Release Date: February 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BTB Real Estate Investment Trust (BTBIF, Financial) reported a total leasing activity of almost 1 million square feet for 2024, indicating strong leasing performance.
- The occupancy rate increased to 92.7%, showing a positive trend in tenant retention and space utilization.
- BTBIF successfully delivered a new 45,000 square foot store for Winners/HomeSense on time and on budget, highlighting effective project management.
- The company achieved an 18.7% lease renewal spread across all business segments for the year, demonstrating strong demand and effective lease negotiations.
- BTBIF improved its liquidity position by issuing a $40 million convertible debenture, enhancing financial flexibility.
Negative Points
- The company experienced a delay in filing financial statements with SEDAR, which could affect investor confidence.
- Net Operating Income (NOI) decreased by 0.9% due to the bankruptcy of two tenants, impacting financial performance.
- Same property NOI decreased by 2.8% for the quarter, primarily due to tenant bankruptcies.
- The weighted average interest rate on the mortgage portfolio increased by 18 basis points, indicating rising borrowing costs.
- BTBIF suspended its distribution reinvestment plan to eliminate dilution, which may concern income-focused investors.
Q & A Highlights
Q: Can you explain the mechanics of the retail lease increase mentioned in the call?
A: Michel Leonard, President and CEO, explained that the lease is part of a parcel of land subject to an industrial lease where BTB owns the land but not the building. The industrial rent was established 20 years ago and was quite low. The tenant exercised its option to renew the lease for 10 years, allowing BTB to reset the rent, which was increased threefold based on land value assessments by JLL.
Q: What is the expected trajectory for in-place occupancy, considering the current macroeconomic environment?
A: Michel Leonard, President and CEO, noted that some industrial leases are coming to maturity, and there is a reduction in demand for large spaces in Laval. BTB is open to subdividing the building to accommodate demand. Stephanie Leonard, Senior Director of Leasing, added that they expect to reach a committed occupancy rate of 92.7% by the end of Q2 2025, with cash flow from new tenancies starting in Q2.
Q: What are your plans regarding capital allocation, and will you be a net acquirer or disposer of assets in 2025?
A: Michel Leonard, President and CEO, stated that BTB has suburban office properties on the market and will carefully consider capital allocation. They are cautious about investing in industrial properties due to potential impacts from U.S. tariffs and repatriation policies. BTB plans to be cautious with investments until there is more clarity on these issues.
Q: What is your outlook for same-property NOI growth in 2025?
A: Marc-Andre Lefebvre, Vice President and CFO, estimated that same-property NOI growth for 2025 will range from 2% to 4%.
Q: What are your expectations for office rent spreads for 2025 maturities, given the current market conditions?
A: Stephanie Leonard, Senior Director of Leasing, indicated that tenants are now looking for landlords to handle construction costs, which could help maintain or potentially increase office rent spreads due to the high cost of construction.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
