BTB Real Estate Investment Trust T.BTB.DB.H

Proposals for upcoming AGM - Proposal 2

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From the Open Letter...

Proposal 2
Change in focus to reward management for long-term performance instead of short-term performance

RESOLVED that the Governance and Human Resource committee (‘GHR’) will set compensation policies emphasizing quantitative long-term targets (‘LTT’) instead of short-term targets (‘STT’). LTT will be measured over a minimum of five years. Leadership compensation subject to LTT achievement shall be minimum three times larger than that subject to STT achievements. ‘At-risk’ compensation, defined as total compensation potential excluding base salary, shall be minimum two times larger than base salary. Aside from base salaries, no component of compensation shall vest before five years have passed from its grant date, and no distribution shall be paid on unvested compensation. LTT and STT will (i) be disclosed publicly before the start of measurement periods, (ii) be modified only with unitholder approval and (iii) implemented without materially affecting total potential leadership compensation vs. 2022 (e.g. CAD$1,330,031 for BTB CEO - ‘Leonard’).
 

Rationale:

GHR policies encourage short-term thinking and the situation is worsening:

1. When current GHR leadership took over in 2016, restricted units (‘RU’) fully vested only 3 years after grant. This was relaxed in 2022 and further still in 2023, with two-thirds of RU awards now vesting less than 2 years after grant;

2. In 2023, GHR added a new plan awarding ‘Performance RU’.

   1. a)  Related changes together gave Leonard an extra 25% of base salary as potential variable compensation;

   2. b)  This change did not require unitholder approval, while the Weird Proposal (see below) did;

   3. c)  The sole target that Leonard needed to meet for full payout under this plan was “Relative total return [...] compared to a group of specified REITs”. This return was assessed over a year or less against an undisclosed comparator group;

   Appendix C (available here - https://tinyurl.com/yxsna7eh) highlights GHR’s belief that Leonard should be rewarded, when after BTB units underperformed the S&P/TSX Capped REIT total return index (the ‘Index’) in almost all relevant long-term horizons, their negative total return over the single year of 2022 was better than the Index’.

The situation did not need to worsen, since it already was inadequate, as presented in Appendix D (available here - https://tinyurl.com/w4zrjfda):

1. Targets are changed every year;

2. In the rare cases when targets are disclosed, they are either: (i) qualitative and/or unverifiable or (ii) quantitative but the performance thresholds and/or achievements are not disclosed;

3. Long-term plan targets have relied on measurements over shorter horizons than the short-term plan;

BTB Leadership ‘at-risk’ pay is too low compared to peers as shown in Appendix E (available here -

https://tinyurl.com/3famnjhk) and needs urgent adjustment.

Management’s short-term mindset was clear when (i) Peter Picciola was let go only nine months after being hired because ‘growth’ was suddenly deemed unimportant and (ii) close to 50% of BTB unitholders voted against last June’s proposal to amend the Employee Unit Plan (‘Weird Proposal’). This last effort spent precious resources for an irrelevant management pay increase as shown in Appendix F (available here - https://tinyurl.com/2s43ycj6).