canadian / TeamCommonSense / JosephM1 / garyreins / Pammi Bir, can anyone of you please explain what you seem to know already on this topic: How did BTB's industrial portfolio increase in value so much in 2023?
Please don't hate the messenger, but consider the below facts before you respond:
Industrial Portfolio Fair Value
A-
2022: stated to be $345mn (p. 69 of 2022 Annual Report)
B-
2023: stated to be $440mn (p. 44 of 2023 Annual Report)
So the portfolio's value increased by a delta of X = B - A over 2023
Or X = $440mn - $345mn = $95mn
Now the company says that
C-
$26.3 of that would be a transfer of 2 flex-properties from the office to the industrial segment (p. 44 of 2023 Annual Report)
D-
$36.3mn of that would be purchases made during the 2023 year of previously un-owned industrial properties, including one building in Mirabel worth $29mn of that (p. 100 of 2023 Annual Report)
Now this leaves a delta of
Y = X - C - D
or Y = $95mn - $26.3mn - $36.3mn = $32.4mn
This delta deserves an explanation because it implies that the industrial portfolio held by BTB (worth $345mn end of 2022), increased in value by 9.4% (Y / A) in 2023, a crazy amount considering:
1-
the weakness in the Montreal industrial real estate sector over the year (Colliers report), which could mean that the Mirabel property purchased by BTB in February 2023, would have actually dropped in value by the end of 2023
2-
the increase in cap rates used by BTB when valuing its properties, including the industrial portfolio
3-
the company indicating that the industrial portfolio was already basically 100% leased end of 2022, therefore no value increase from reduced vacancy could have contributed to the surprising increase in value
4-
the marginal sub 9% increase in FV of the fully leased Saskatchewan ca. $45mn industrial portfolio over TWO years