Q2 2020 Conference Call Presentation - BTB Real Estate Investment Trust (TSX: BTB.UN) August 14, 2020 - BTB Reit
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Q2 2020 Conference Call Presentation BTB Real Estate Investment Trust (TSX: BTB.UN) August 14, 2020
NON-IFRS MEASURES
BTB consolidated financial statements are prepared in accordance with IFRS. Consistent with BTB management framework, management uses certain financial
measures to assess BTB financial performance, which are not generally accepted accounting principles (GAAP) under IFRS.
The following measures, net operating income (NOI), net operating income of the same-property portfolio (SPNOI), funds from operations (FFO), adjusted funds from
operations (AFFO), adjusted net income and comprehensive income and net property income and per unit information, if applicable, are non-IFRS performance
measures and do not have standardized meanings prescribed by IFRS.
These measures are used by BTB to improve the investing public’s understanding of operating results and the Trust’s performance. IFRS are International Financial
Reporting Standards defined and issued by the IASB, in effect as at the date of this presentation. These measures cannot be compared to similar measures used by
other issuers. However, BTB presents its FFO in accordance with the Real Property Association of Canada (REALPAC) White Paper on Funds from Operations, as revised
in February 2019. Securities regulations require that these measures be clearly defined, that they be readily comparable to the most similar IFRS measures, and that
they not be assigned greater weight than IFRS measures.
FORWARD-LOOKING STATEMENTS
From time to time, we make written or oral forward-looking statements within the meaning of applicable Canadian securities legislation. We may make forward-looking
statements in this document, in other filings with Canadian regulators, in reports to unitholders and in other communications. These forward-looking statements may
include statements regarding our future objectives, strategies to achieve our objectives, as well as statements with respect to our beliefs, outlooks, plans, objectives,
expectations, forecasts, estimates and intentions. The words “may,” “could,” “should,” “outlook,” “believe,” “plan,” “forecast,” “estimate,” “expect,” “propose,” and the
use of the conditional and similar words and expressions are intended to identify forward looking statements.
By their very nature, forward-looking statements involve numerous factors and assumptions, and are subject to inherent risks and uncertainties, both general and
specific, which give rise to the possibility that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution readers not to
place undue reliance on these statements as a number of important factors could cause our actual results to differ materially from the expectations expressed in such
forward-looking statements. These factors include general economic conditions in Canada and elsewhere, the effects of competition in the markets where we operate,
the impact of changes in laws and regulations, including tax laws, successful execution of our strategy, our ability to complete and integrate strategic acquisitions
successfully, potential dilution, our ability to attract and retain key employees and executives, the financial position of lessees, our ability to refinance our debts upon
maturity, our ability to renew leases coming to maturity, and to lease vacant space, our ability to complete developments on plan and on schedule and to raise capital
to finance our growth, as well as changes in interest rates. We caution that the foregoing list of important factors likely to affect future results is not exhaustive. When
relying on forward-looking statements to make decisions with respect to BTB, investors and others should carefully consider these factors and other facts and
uncertainties. Additional information about these factors can be found in the “Risks and Uncertainties” section of the MD&A.
BTB cannot assure investors that actual results will be consistent with any forward-looking statements and BTB assumes no obligation to update or revise such
forward-looking statements to reflect new events or circumstances, except as required under applicable securities regulations.
2
QUARTERLY HIGHLIGHTS
MICHEL LÉONARD
PRESIDENT & CEO
1405-1411 Crescent Street & 1327-1333 Saint-Catherine Street West, Montréal
3
Q2 2020 Operational Highlights
Focus of the team as we navigate through the COVID-19 crisis
Resilience of the portfolio through solid collection results
Retail segment predominantly tenanted by value-oriented
and grocery-anchored national retailers (no enclosed malls)
Limited exposure to retail bankruptcies
Made specific adjustments to the fair values of 2 properties and
an additional allowance for bad debt that affected our payout ratios
Distribution adjusted to preserve our liquidities and to ensure
the Trust’s future activities
4 50 Saint-Charles Street West, Longueuil
Q2 2020 Operational Highlights
92.9% +1.8%
Committed Occupancy NOI Growth
(Revenue +2.8%)
97.7% 7.5¢
Q2 Rent Collections FFO / Unit
(Payout 114%)
307K sq.ft. 58.6%
YTD Renewals Total debt ratio
3761–3781 Sources Boulevard, Dollard-Des-Ormeaux
5
Navigating through COVID-19
Covid-19 Task Force
In the early stages, BTB implemented a COVID-19 Task Force composed of different levels
of management from different departments in order to:
Analyze the different requests of rent abatement that were sent by our clients
Establish internal protocols to minimize the impact on operations
Establish a clear channel of communication with our clients
Establish a protocol for rent and AR collections
Analyze the different market risks and forces which can influence BTB's tenant base
Administer the CECRA Program
Rent Deferral Program
BTB quickly established a rent deferral program for its tenants in order to mitigate the risks
associated with short payments of rent or full rent abatements. Each tenant request was
analyzed on an individual basis by the COVID-19 Committee.
Most of the rent deferral requests and applications for the CECRA program were for the retail
segment.
6 7150 Alexander Fleming Street, St-Laurent
Rent Collection
Portfolio resilience showing strong collections
Q2 Rents Deferred rent CECRA subsidies
Total
Collected Payments to be collected
Office 93.7 % 2.1 % 2.1 % 97.9%
BTB'S
COMPETITIVE
Retail 76.2 % 5.3 % 7.8 % 89.3%
ADVANTAGES
No enclosed malls
Industrial 96.7 % 2.8 % - 99.5%
Portfolio
diversification with
good exposure to
Mixed-Use 97.1 % 1.0 % 1.5 % 99.6% industrial & office
markets
Total Q2 Rent
89.6 % 3.8 % 3.4 % 96.8% Largest tenants are
Collections
investment grade
Core market
Confirmed in July additional 12.5% grant from Quebec government (equivalent to 0.85% for a total of 97.7%) presence
Factoring both government subsidies the estimated loss is $275K for the second quarter
2018 repositioning
Tenant bankruptcies or tenants seeking protection had limited impact on our portfolio: 1) Aubainerie in Gatineau; strategy shows its
2) Reitmans (1 closing & 4 will stay in operation); 3) Sportium (1 store closing Jan 31st, 2021); 4) Dunn’s (1 store closed) strength
7
Implementing measures to manage
cash during the crisis
Monthly interest payment postponements, capital payment waivers
or both with our major mortgage lenders
Municipal tax payment deferrals offered by a few municipalities
Reduction of capital expenditures and tenant improvements
Efforts by the Trustees, the senior management and the employees
to defer part of the variable compensation to post-COVID
Board of Trustees reduced the distribution payable to unitholders
by 28.6%, beginning with the May 2020 distribution
1465-1495 Saint-Bruno Blvd
‘‘Méga Centre Saint-Bruno’’, St-Bruno
8
Leasing and Renewal Strategy
Lease renewal flow as at the end of Q2 2020
Lease Renewals
Sq.ft. Q2 YTD
2020 44,166 144,836
2021+ 26,320 162,420
Total 70,486 307,256
67.1% of the leases maturing in Q1 and Q2 2020 have been renewed.
256,503 sq.ft. are currently under negotiation across all the business segments (incl. 2021 renewals).
Out of the leases under negotiation, 66,769 sq.ft. are specific to the retail segment & we haven’t
received a notice of non-renewal to date.
83,000+ sq.ft. of leasable area expiring in 2021 was already renewed in July (total 245,420 sq.ft. YTD).
New Leases
26,391 sq.ft. of vacant spaces were leased during Q2 and 51,386 sq.ft. were leased for the cumulative
period of Q1 and Q2.
374,604 sq.ft. available to lease by the end of Q2 with limited impact on the occupancy rate
(down 20bps vs Q2 2019 & up 50bps vs Q1 2020 following the sale of 1001 Sherbrooke East).
Average rental rate of expired and renewed leases during Q2 decreased by 1.4% (office +3.1%, retail
+8.7%, and mixed use -10.2% due to a specific lease renewal). For the cumulative six-month period,
the average rate of expired and renewed leases increased by 2.3%.
9 2611 Queensview Drive, Ottawa
Capital Allocation
Pursuing our portfolio strategy and mitigating risks on specific assets
10.2% 1.4%
Mixed-use Development
1 property
2020 Acquisitions
6 properties
92.1% Occ. (-1.1% vs ’19) 0.1M SF
0.6M SF (Flat vs ’19)
22.6% 38.9%
5.3M sq.ft.
2611 Queensview Drive,
Ottawa (ON) Office
Industrial 29 properties
Acquisition date: February 2020 16 properties 90.8% Occ.
Purchase price: $21.8 million 93.6% Occ. (-2.0% vs ’19)
1.2M SF (-0.3M vs ’19)
64 Properties (+2.8% vs ’19)
Property type : Office 2.1M SF (-0.1M vs ’19)
$895M
2020 Dispositions
26.4%
Retail
12 properties
5600 ch. de la Côte-de- 311 Ingersoll St. South, 1001 Sherbrooke St. East,
95.6% Occ. (-2.6% vs ’19)
Liesse, Montréal (QC) London (ON) Montréal (QC) 1.4M SF (Flat vs Q2’19)
Disposition date: March 2020 Disposition date: January 2020 Disposition date: June 2020
Sale price: $9.3 million Sale price: $13.3 million Sale price: $21.6 million
Property type : Industrial Property type : Industrial Property type : Office
Q2
10FINANCIAL OVERVIEW
MATHIEU BOLTÉ
VICE PRESIDENT
& CFO
825 Lebourgneuf ‘‘Complexe Lebourgneuf Phase I’’, Québec
112020 Second Quarter Financial Results
Q2’20 COVID-19 Q2’20 Adj Q2’19 ∆ ∆ Adj
Revenues $23.1M $0.9M ❶ $24.0M $22.4M + $0.7M + $1.6M
NOI $12.4M $0.5M ❷ $12.9M $12.2M + $0.2M + $0.7M
Net income $(1.1)M $5.2M ❸ $4.1M $3.3M - $4.4M + $0.8m
Recurring FFO per unit 7.5¢ 2.5¢ 10.0¢ 9.5¢ - 2.0¢ + 0.5¢
Payout ratio on FFO 114% -29% 85% 111% + 3% - 26%
Recurring AFFO per unit 6.7¢ 2.5¢ 9.2¢ 8.5¢ - 1.8¢ + 0.7¢
Payout ratio on AFFO 127% -35% 92% 123% + 4% - 31%
Wtd avg units o/s (000) 63,115 57,294
❶ $0.5M base rent; $0.4M 25% loss CECRA program
❷ $0.9M revenues; -$0.4M benefits for not operating at full capacity
❸ $0.5M NOI; $1.1M additional allowance for expected credit losses; $3.6M fair value adjustment on investment properties
12Operating Revenues & NOI
Operating Revenues ($M) Net Operating Income ($M)
+2.8%
+1.8%
22,4 23,1 12,2 12,4
Q2 2019 Q2 2020 Q2 2019 Q2 2020
YTD +6.5%
YTD +8.3% (NOI % from 52.7% in 2019 to 53.7% in 2020)
Latest acquisitions strong performance (Pitfield, St-Hilaire, St-Bruno,
Queensview). Net of sales +$1.7M. • 100 bps YTD productivity from cost management
Same-property -5.0% (YTD -1.9%) Portfolio growth & capital recycling strong performance +$1.0M
CECRA Program -$0.4M
Same-property -7.1% (YTD -1.8%) mainly impacted by the
Tenant bankruptcies related write-offs -$0.5M revenues related to CECRA program & some tenant bankruptcies
13Recurring FFO & AFFO
FFO ($M) AFFO ($M)
9.5¢/u.
8.5¢/u.
7.5¢/u.
6.7¢/u.
-13.5%
-13.2%
5,45
4,71 4,88
4,24
Q2 2019 Q2 2020 Q2 2019 Q2 2020
Payout ratio from 110.5% in Q2 2019 to 113.9% in Q2 2020 Payout ratio from 123.2% in Q2 2019 to 126.6% in Q2 2020
FFO of 7.5¢/u., 2.0¢/u. lower than 2019, considering: AFFO of 6.7¢/u., 1.8¢/u. lower than the prior year, considering:
0.4¢/u. CECRA program 0.4¢/u. CECRA program
1.8¢/u. allowance for expected credit losses 1.8¢/u. allowance for expected credit losses
Excluding the 2 elements, run rate of 10.0¢/u. and payout of 85% Excluding the 2 elements, run rate of 9.2¢/u. and payout of 92%
14Capitalization as of Q2 2020
Weighted Avg. Weighted Avg.
Net Debt Breakdown ($M) Amount
Interest Rate Term
5.6% 1.7%
Convertible Bank borrowings Mortgages payable $497 3.75% (1) 4.8 yrs
debentures ($15M)
($51M)
Convertible debentures $51 6.60% 2.3 yrs
Acquisition credit facility $15 Prime + 3.25%
($19M Capacity)
Total debt $563 4.02% (2)
55.0%
Mortgages
($497M)
$904M 37.7%
Unitholders’ equity
($341M)
Cash and restricted cash (23)
Net debt $540
Gross book value $923
Net debt / GBV 58.6% (3)
(Incl. convertible debentures)
1. From 3.71% in Q1 2020 and 3.93% in Q2 2019
2. Weighted average interest rate for the mortgages and the debentures
3. From 59.3% in Q1 2020 and 61.4% in Q2 2019
15Debt Maturities
Well–spread debt maturities to mitigate renewal risks as of Q2 2020
250
200
150
$M
223
100 24
Mortgage payable
27
50
84
60 61
33 36 Convertible debentures
0
Available Q2 2020 2021 2022 2023 2024 2025 +
Liquidity
Debenture
Maturity December 2020: On-going discussions to complete refinancing by year-end
Mortgages
$60M maturing in 2nd half of 2020 with $28M completed in July and $32M
to be refinanced in due course
16CLOSING REMARKS
MICHEL LÉONARD
PRESIDENT & CEO
11590-11800 De Salaberry Boulevard – ‘‘Marché de l’Ouest’’ Dollard-Des-Ormeaux
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