BTB Real Estate Investment Trust Q2 Earnings Call Highlights

Key Points

• BTB is shifting toward industrial real estate: Industrial assets now represent 38% of the portfolio, up from 23% in 2021, while suburban office has declined to 41%. Management plans to sell roughly C$100 million or more of office properties through 2027 and redeploy proceeds into industrial assets.
• Second-quarter results improved: Rental revenue rose 4.5% year over year to C$31.9 million, NOI increased 10.5%, and adjusted FFO per unit grew nearly 17% to C$0.097. The distribution remained C$0.075 per unit, with the AFFO payout ratio improving to 76.5%.
• Leasing and portfolio activity remained active: Occupancy edged up to 91.3%, renewal spreads averaged 4.6% and reached 10.5% for industrial properties. BTB completed C$38.5 million of acquisitions in the first half of 2026 and subsequently sold a Trois-Rivières property for C$20 million.

BTB Real Estate Investment Trust TSE: BTB.UN reported higher second-quarter rental revenue and operating income as it continued to shift its portfolio toward industrial assets while pursuing sales of office properties.

President and Chief Executive Officer Michel Léonard said the trust remained active in acquiring industrial real estate, disposing of office assets and pursuing density opportunities at properties in Montreal and Ottawa. BTB also established an at-the-market equity program approved by the Toronto Stock Exchange on May 14, though Léonard said the program had not been used as of the call.

The trust published its third ESG report in June. Léonard said BTB strengthened environmental data collection during 2025 and added 13 BOMA BEST sustainability certifications across its portfolio.

Portfolio activity and industrial focus

During the first six months of 2026, BTB completed C$38.5 million in acquisitions expected to contribute approximately C$3 million of annualized net operating income. One transaction involved the purchase of the remaining 50% interest in the property at 7 & 9 Montclair Boulevard in Gatineau for C$7 million. The acquisition is expected to add about C$500,000 in annualized NOI.

Léonard said the Gatineau purchase was driven by concerns over the former partner’s management of the property. BTB ultimately intends to market the property for sale when conditions are appropriate, he said.

Subsequent to the quarter, BTB sold a property in Trois-Rivières for C$20 million, excluding transaction fees and adjustments. The sale closed Aug. 4. The property was 80% occupied, according to Léonard.

The trust’s industrial exposure has increased materially since 2021, when industrial represented 23% of the portfolio. Industrial now accounts for 38% of the portfolio, while suburban office has declined to 41% from 47% and necessity-based retail has fallen to 21% from 30%.

Looking ahead, Léonard said BTB aims to sell roughly C$100 million or more of office assets from the current period through the end of 2027, potentially supplemented by selected retail properties, and redeploy the proceeds into industrial properties. He said demand for office and certain retail assets has improved, though office capitalization rates in Ottawa remain high.

Leasing activity and occupancy

BTB’s occupancy rate increased 10 basis points sequentially to 91.3%. During the quarter, the trust completed approximately 378,000 square feet of leasing activity, including about 79,000 square feet of new leases and 299,000 square feet of renewals.

Principal Director of Leasing Stéphanie Léonard said BTB signed a 19,000-square-foot lease with ProGym in Saint-Bruno-de-Montarville and a 14,444-square-foot lease with Noibu Technologies in Ottawa. Both transactions involved replacing tenants, meaning they did not provide direct positive absorption to occupancy.

Other activity included expansions by SFL Wealth Management in Quebec City and M&P in Laval. BTB renewed a 50,000-square-foot lease with difuze Inc. in Montreal for 10 years and a 20,000-square-foot lease with BMO Nesbitt Burns in Ottawa for five years. The trust also renewed 157,000 square feet of leases with maturities in 2027 and later years.

BTB reported an average rental spread of 4.6% on renewals across its portfolio. Industrial renewal spreads were 10.5%, necessity-based retail spreads were 7%, and suburban office spreads were 2.9%.

Management said the trust is negotiating to lease all or part of a 132,000-square-foot vacancy at 3695 des Laurentides in Laval, which represents a 2.2% impact on portfolio occupancy. Léonard said two prospective tenants were facing deadlines to make commitments by the end of September or October, while another prospect was considering the entire building. Discussions for the space involved rents above C$11 per square foot, compared with less than C$8 net paid by the prior tenant.

Retail remained the trust’s most stable segment, with occupancy of 98.9%, Stéphanie Léonard said. She added that industrial leasing momentum improved over the summer and that office leasing requirements remained active.

Second-quarter financial results

Vice President and Chief Financial Officer Marc-André Lefebvre said second-quarter rental revenue rose 4.5% year over year to C$31.9 million. The increase was primarily attributable to a non-cash straight-line lease adjustment that had reduced revenue by C$1.8 million in the prior-year quarter.

Net operating income increased 10.5% from a year earlier, also aided by the straight-line lease adjustment. Cash same-property NOI was stable in the quarter, but declined 4.8% for the first six months of the year. Lefebvre attributed the year-to-date decline to factors including a C$1 million partial lease-cancellation payment recognized in the first quarter of 2025, free rent provided to new tenants, planned tenant departures and a C$400,000 rent reduction granted to The Lion Electric Company.

• FFO adjusted per unit was C$0.097, up nearly 17% year over year.
• AFFO adjusted per unit was C$0.098, up 3% from the prior-year period.
• The quarterly distribution was maintained at C$0.075 per unit, or C$0.30 annualized.
• The AFFO-adjusted payout ratio improved to 76.5% from the prior-year quarter.

BTB’s investment-property portfolio was valued at approximately C$1.2 billion at quarter-end, essentially unchanged from the prior quarter. The weighted average capitalization rate was 6.7%, while the total leverage ratio was 58.1%. The mortgage portfolio had a weighted average term of 2.2 years and an average interest rate of 4.4%.

At June 30, the trust had C$0.6 million of cash and C$14.8 million available under credit facilities.

About BTB Real Estate Investment Trust (TSE:BTB.UN)

BTB is a real estate investment trust listed on the Toronto Stock Exchange. BTB invests in industrial, suburban office and necessity-based retail properties across Canada for the benefit of their investors. As of today, BTB owns and manages 72 properties, representing a total leasable area of approximately 6 million square feet. People and their stories are at the heart of our success.

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