RBC Initial Comments
May 8, 2023
BTB Real Estate Investment Trust
Q1 results ahead, renewal spreads remain robust
TSX: BTB.UN | CAD 3.18 | Sector Perform | Price Target CAD 4.00
Sentiment: Positive
BTB REIT’s reported Q1/23 FFOPU of $0.117 was ahead of Street consensus of $0.110 and RBC estimate of $0.110, and vs. $0.107 last year (+9% YoY). Thematically, organic growth and occupancy remained stable/flat in Q1, with the delta to our estimates driven mainly by slightly higher NOI and lower interest expense. Elsewhere, the tilt toward industrial properties continued in Q1 with a $28 million acquisition in Quebec, as well as a smaller purchase ($7.4 million) in Edmonton completed in May.
Conference call: Tuesday, May 9, at 9 a.m. ET (1-888-390-0546). Replay: 1-888-390-0541 (access code: 518570)
Key Points:
• SP NOI flat: +0.1% YoY in Q1/23, with retail (+12.8%) offset by industrial (-4.8%) and office (-3.0%).
• Total committed occupancy stable at 93.2% (flat QoQ, +10 bps YoY). Retail at 95.9% (-230 bps QoQ, +90 bps YoY), office 87.5% (+80 bps QoQ, -180 bps YoY), and industrial 100% (flat QoQ, +100 bps YoY). In-place occupancy sits at 92.6% (-10 bps from 92.7% in Q4/22).
• Renewal leasing spreads of +13.9% in Q1/23 were driven by strength in retail.
• Capital allocation: As previously announced, in February 2023 BTB acquired a Class A industrial property in Mirabel, Quebec for $28 million ($158/psf). Subsequent to quarter-end, the REIT announced the acquisition of an 83,300 sf industrial property in Edmonton for $7.4 million ($88/psf).
• IFRS BVPU: $5.42 (flat QoQ, +3% YoY). IFRS cap rate at 6.49% (+1 bps QoQ, +21 bps YoY), vs. our 6.95% NAV cap rate and current 7.6% implied cap.
• Leverage: 58.9% D/GBV (+60 bps QoQ, +20 bps YoY).
• Available liquidity stood at $24.6 million ($1.7 million of cash, $22.9 million credit lines), down from $40.5 million as of Q4/22.