Mr. Michel Leonard reports

BTB REIT REPORTS RESULTS FOR THE FOURTH QUARTER AND YEAR 2023

BTB Real Estate Investment Trust has released its financial results for the fourth quarter and year ended Dec. 31, 2023.

"I am delighted to reflect upon the remarkable journey that was 2023 for BTB," says Michel Leonard, 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-per-cent 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 per cent, from 18.1 per cent 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 endeavours, our occupancy rate surged to an impressive 94.2 per cent, 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-per-cent increase, contributing to the overall growth trajectory.

"The net operating income (NOI), a key indicator of our operational excellence, totalled $75.4-million for the year, reflecting a 7.0-per-cent increase compared with 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-per-cent 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-per-cent increase in the fourth quarter of the same-property NOI and an impressive increase in the lease renewal rental rate of 5.3 per cent.

"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."

(1) Non-IFRS (international financial reporting standards) financial measure.

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 per cent, representing a 49-basis-point increase compared with the prior quarter and a 99-basis-point increase compared with the same period in 2022. The increase in the average renewal rate for the quarter was 14.3 per cent and 9.2 per cent 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.

Financial highlights:

• Revenue: Rental revenue stood at $31.9-million for the current quarter, which represents an increase of 1.4 per cent compared with the same quarter of 2022. For the year 2023, rental revenue totalled $127.8-million, which represents an increase of 7.0 per cent compared with the same period in 2022.
• Net operating income: NOI totalled $19.3-million for the current quarter, which represents an increase of 3.4 per cent compared with the same quarter of 2022. For the year 2023, NOI totalled $75.4-million, which represents an increase of 7.0 per cent compared with the same period in 2022.
• Net income and comprehensive income: Net income and comprehensive income totalled $1.7-million for the quarter, compared with $1.8-million for the same period in 2022. For the year 2023, net income and comprehensive income totalled $36.6-million, compared with $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 with a loss of $8.2-million for the year 2022).
• Same-property NOI (1): For the quarter, same-property NOI increased by 6.6 per cent compared with the same period in 2022 and for the year 2023 increased by 2.1 per cent compared with the same period last year. The increase is primarily due to increase in renewal rates of 21.4 per cent 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 per cent for the quarter.
• Funds from operations (FFO) adjusted per unit (1): FFO was 11.1 cents per unit for the quarter, compared with 11.8 cents per unit for the same period in 2022, representing a decrease of 0.7 cent per unit. For the year 2023, FFO adjusted was 45.1 cents per unit, compared with 45.4 cents per unit for the same period in 2022, representing a decrease of 0.3 cent 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; an NOI increase of $1.4-million was 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 cent due to 3.2 million additional weighted average number of units outstanding reducing the per-unit value compared with the same period in 2022.
• FFO adjusted payout ratio (1): FFO was 67.2 per cent for the quarter, compared with 63.6 per cent for the same period in 2022. For the year 2023, the FFO adjusted payout ratio was 66.5 per cent, compared with 66.1 per cent for the same period in 2022.
• Adjusted funds from operations (AFFO) adjusted per unit (1): AFFO as 10.3 cents per unit for the quarter, compared with 10.0 cents per unit for the same period in 2022, representing an increase of 0.3 cent per unit. For the year 2023, AFFO adjusted per unit was 40.5 cents per unit, compared with 40.9 cents per unit for the same period in 2022, representing a decrease of 0.4 cent per unit compared with the same period in 2022. Despite an increase of AFFO adjusted for the year of $800,000, 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): AFFO was 72.6 per cent for the quarter, compared with 74.9 per cent for the same period in 2022. For the year 2023, the AFFO adjusted payout ratio was 74.1 per cent, compared with 73.3 per cent for the same period in 2022.

Balance sheet and liquidity highlights:

• Investment properties: Seventy-five per cent 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 three 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 per cent, recording an increase of eight basis points compared with Dec. 31, 2022. The REIT ended the quarter with a mortgage debt ratio (1) of 52.2 per cent, a decrease of 202 basis points compared with Dec. 31, 2022.
• Liquidity position: The REIT held $900,000 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 Dec. 31, 2023:

• Total number of properties: 77 (includes a property in Edmonton reclassified as a finance lease and not included in fair value);
• 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 Dec. 31, 2023).

Subsequent event

On Feb. 26, 2024, the Toronto Stock Exchange 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 Feb. 26, 2024, to Feb. 25, 2025, representing approximately 7 per cent of the trust's outstanding units and of its public float. As of Dec. 31, 2023, no units have been repurchased for cancellation under the NCIB.

Quarterly call information

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

Date:  Tuesday, Feb. 27, 2024

Time:  9 a.m. Eastern Time

Dial-in:  local at 1-416-764-8688; toll-free in North America at 1-888-390-0546

Visual:  A presentation will be uploaded on BTB's website prior to the call.

The media and all interested parties may attend the call-in listening mode only. Conference call operators will co-ordinate the question-and-answer period (from analysts only) and will instruct participants regarding the procedures during the call.

The audio recording of the conference call will be available via playback until March 5, 2024, by dialling 1-416-764-8677 (local) or 1-888-390-0541 (toll-free) and by entering access code 669743 followed by the pound key.

About BTB Real Estate Investment Trust

BTB is a real estate investment trust listed on the Toronto Stock Exchange. BTB REIT invests in industrial, off-downtown core office and necessity-based retail properties across Canada for the benefit of its investors. As of today, BTB owns and manages 77 properties, representing a total leasable area of approximately 6.1 million square feet.

Non-IFRS financial measures

Certain terms used in this news release are listed and defined in the table hereafter, including any per-unit information if applicable, are not measures recognized by IFRS and do not have standardized meanings prescribed by IFRS. Such measures may differ from similar computations as reported by similar entities and, accordingly, may not be comparable with similar measures.

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