BTB Real Estate Investment Trust T.BTB.UN

Question - Rise in Value of Industrial Portfolio FY22->FY23

[b919191]

So on October 15th, I asked the board of trustees of BTB to explain the significant implied increase in fair value of the company's industrial portfolio from FY22 to FY23.

The company indicates:

A- on page 14 of its 2022 Annual Report, the Industrial property portfolio is indicated to represent 30% of the total portfolio that year

B- on page 101 in note 4 of the 2023 Annual Report, that the total change in fair value in 2023 of its Industrial Property portfolio was stated to be $32.5mn




Now this increase in fair value, represents 9.3% over the 2022 value (30%x$1,164,881=$349,465), which is quite strange considering that:

1-
Weighted Capitalization rates used by the company for its Industrial portfolio went up from 5.75% end of FY22 to 6.09% end of 2023 (capitalization rates move in the inverse direction as the underlying value, so this is a headwind).

2- 
Colliers Montreal (a major geographic exposure for BTB's portfolio) indicates that from FY22 to FY23, industrial market rents stayed flat and that asset transactions fell by ca. 50%, typically not a good indicator for value. This report is available at this link: 

https://www.collierscanada.com/download-article?itemId=cdf055bd-ad04-42b1-984a-fc2c915e1e94

on this page

https://www.collierscanada.com/en-ca/research/montreal-industrial-market-report-2023-q4




Since the company will not answer me, I was wondering if a REIT expert reading this bullboard would have any ideas as to how this portfolio's value increased so much.

The company claims that its portfolio is continuously valued by 'independent' appraisors, and as we know at the same time, the employment by BTB of the CEO's daughter in a senior role is not considered to be worthy of disclosure in regulatory filings like the Management Information Circular, so obviously the word 'independent' could mean different things to different people.

Any clue what's going on? By all means, check my maths, I could have made a mistake

[b919191]

Just in case, folks would highlight that the Industrial NOI increased substantially (p.116 of the 2023 Annual Report). That's true, however 1- Office NOI dropped by 7.5% in 2023 2- Office cap rates (pa. 100) went up by 26bps to 7.01% from 2022 to 2023 Yet the Office portfolio fair value only dropped by 4.8%, shouldn't the actual Office fair value drop be more like a 10% (2x the reported

[b919191]

Yeah so I found the answer, page 44, thanks to some smart folks   "In line with the Trust’s strategy to increase it’s industrial footprint, the proportional fair value of industrial properties increased from 29.6% to 36.4% compared to the same period last year, due to the acquisitions of industrial properties totalling $36.3 million concluded since the said period, a net increase of

[b919191]

So it looks to me like something is going on with the Saskatchewan portfolio. In 2021, BTB bought the following 4 properties with a total combined leasable area of 223,472sqft. (all of them in December 2021, so at the very end of the year) 3542 Millar Avenue 318 - 68th Street 3911 Millar Avenue 3927 and 3931 Wanuskewin BTB would have spent a total of $41mn to buy these properties

[b919191]

scrap that, looks like it was a typo corrected in the 2023 annual report.

[b919191]

still, its really weird... Saskatchewan went from 41.1 in 2021 to 44.6 in 2023 (assuming the 2023 AR has no typo) so this implies that the 100% leased industrial properties in Saskatchewan, went up in value by 8.5% over 2 years, and the Colliers Industrial market reports indicate that that market saw industrial rents going up something like 2-5% from FY22 to FY23, so if those top of the line

[b919191]

And just to be clear, BTB only purchased 2 industrial properties in 2023 (actually only 2 in total, including office and retail) and these 2 properties were purchased with a combined value at purchase of $36mn including one in Mirabel in February 2023 just outside Montreal, representing 80% of that... so how would that Mirabel property have increased in value so much in less than a year, from