BTB Real Estate Investment Trust (TSE:BTB.UN) reported lower first-quarter revenue and cash flow metrics as planned tenant departures, free rent and a tenant rent reduction weighed on results, while management continued to reposition the portfolio toward industrial properties.
President and Chief Executive Officer Michel Léonard said BTB ended the quarter with a portfolio of 74 properties totaling 6 million square feet and total assets of CAD 1.3 billion. He said the REIT is continuing to sell certain properties, “mostly office properties,” and redeploy capital into industrial assets.
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During the first quarter ended March 31, 2026, BTB acquired three industrial properties in Leduc, Alberta, a suburb of Edmonton, totaling about 143,000 square feet. Léonard said the properties are expected to generate CAD 2.5 million of annualized net operating income. The REIT also sold a Quebec City property for CAD 11.7 million to one of the property’s tenants; that asset had been expected to generate CAD 928,000 of annualized NOI.
After the quarter, BTB purchased the remaining 50% interest it did not already own in a property at 7 and 9 Montclair Boulevard for CAD 7 million. Léonard said the transaction is expected to add CAD 500,000 of annualized NOI. Overall, he said the acquisitions and dispositions completed are expected to have a positive annualized NOI impact of CAD 2.1 million, or roughly CAD 1.6 million for the year.
Portfolio Mix Continues Shift Toward Industrial
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Léonard said BTB’s suburban office weighting has declined from 51% in 2021 to 41%, while its industrial weighting has increased from 22% to 38%. Necessity-based retail decreased from 27% to 21%. The company also saw a modest increase in its Edmonton weighting following the Leduc acquisitions.
Management reiterated that BTB is working toward a long-term goal of having 60% of its portfolio in industrial properties. In response to a question from CIBC Capital Markets analyst Tal Woolley about whether retail’s improving market perception could affect BTB’s allocation strategy, Léonard said the REIT remains opportunistic.
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“If we were able to acquire a retail property accretively, we would still acquire that retail property as long as it is accretive,” Léonard said. He added that BTB has seen interest from groups seeking to buy its retail properties and described the segment as one where the REIT owns “very desirable properties.”
However, Léonard said the retail opportunity does not change the REIT’s industrial objective. “That’s not to deter from our goal of being holding 60% of our portfolio in the industrial segment,” he said, adding that the strategy implies reducing office exposure in favor of industrial while remaining opportunistic in retail.
Leasing Activity Totals 206,000 Square Feet
Principal Director of Leasing Stéphanie Léonard said total leasing activity for the quarter was 206,000 square feet, including 40,000 square feet of new leases and 166,000 square feet of renewals. The most notable new lease was with Hub Sports Centre in Edmonton, Alberta, representing roughly 33,000 square feet in the industrial segment.
She said that transaction filled one of the key vacancies management had previously identified. The space had become available after BTB elected to terminate the prior tenant’s lease due to recurring defaults.
BTB achieved a 93.5% lease renewal rate for the quarter. Major renewals included:
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Groupe Touchette for about 101,000 square feet in the industrial segment in Saskatoon;
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Desjardins for 22,000 square feet in the suburban office segment in Quebec City;
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LCBO for roughly 7,000 square feet in the suburban office segment in Ottawa.
Stéphanie Léonard noted that Desjardins renewed its entire space and did not reduce its Quebec City footprint with BTB. Across the portfolio, renewal rental spreads increased by an average of 7.2%, including 7.6% in industrial, 5.3% in suburban office and 10.9% in necessity-based retail.
Committed occupancy stood at 91.8% at quarter-end, down 70 basis points from the first quarter of 2025 but up 50 basis points from the end of the fourth quarter of 2025.
Revenue, NOI and AFFO Decline
Vice President and Chief Financial Officer Marc-André Lefebvre said first-quarter rental revenue was CAD 32 million, down 7.1% from the same quarter last year. He said the comparison was affected by a partial lease cancellation payment from a tenant that boosted NOI by CAD 1 million in the first quarter of 2025. Excluding that payment, rental revenue would have declined 4.3%.
NOI and cash NOI decreased 10.3% and 10.2%, respectively, compared with the prior-year quarter. Lefebvre said the decline was mainly driven by a CAD 1.3 million impact from planned tenant departures that have not yet been replaced, free rent granted to new tenants and a rent reduction provided to Lion Electric. Dispositions completed in 2025 had a net negative impact of CAD 200,000, partially offset by acquisitions completed at the end of the quarter.
Cash same-property NOI fell 9.2% year over year. Lefebvre said the industrial segment was affected by the planned departure at the end of the third quarter of 2025 of a tenant occupying more than 24,000 square feet in Edmonton, which has not yet been replaced, as well as the impact of a new lease negotiated with a group of investors that purchased Lion Electric. Office results were affected by the prior-year lease cancellation payment and planned tenant departures in Ottawa.
Adjusted funds from operations per unit were CAD 0.099, down CAD 0.012 from the same quarter last year. Adjusted AFFO per unit was CAD 0.086, down CAD 0.017. Lefebvre said the AFFO decline reflected a CAD 2.1 million decrease in cash NOI, partly offset by a CAD 300,000 decrease in administration expenses.
BTB maintained its quarterly distribution at CAD 0.075 per unit, or CAD 0.30 annualized. The adjusted AFFO payout ratio was 87.2%, up 14.5 percentage points from the prior-year quarter due to the decline in AFFO.
Balance Sheet and Liquidity
Lefebvre said the value of BTB’s investment properties and the weighted average capitalization rate remained stable at CAD 1.2 billion and 6.7%, respectively, compared with year-end 2025. The REIT ended the quarter with a total debt ratio of 58%. Its mortgage portfolio had a weighted average term of 2.2 years and an average interest rate of 4.41%.
BTB had CAD 1.4 million in cash and CAD 22.3 million available under its credit facilities at quarter-end, for total liquidity of CAD 23.7 million.
Asked by National Bank Financial analyst Matt Kornack about free rent, Lefebvre said CAD 800,000 was granted to tenants in the first quarter. Stéphanie Léonard said free rent currently depends on tenancy type and is generally tied to pre-occupancy periods, which the REIT seeks to recover by extending lease terms. She said incentives are not comparable to periods two to three years ago, when longer free-rent periods were being offered.
Management Sees Leasing Interest, Plans Opportunistic Capital Tool
On occupancy trends, Stéphanie Léonard said the market is “at a really good spot” for BTB’s properties and that the REIT is seeing interest in vacancies. She said lead times remain an issue, particularly for larger or more complex negotiations.
Regarding an Ottawa vacancy at the Walkley property, she said BTB is trying to capitalize on federal government demand as departments seek more space in connection with return-to-office mandates.
Management also discussed BTB’s planned at-the-market equity program. Michel Léonard said the program is being put in place as an additional tool, not because BTB needs capital for daily operations. He said it could be used opportunistically for a small acquisition requiring rapid capital, and is not intended to replace bought-deal financings.
In closing remarks, Michel Léonard said BTB has properties on the market that it is seeking to sell in order to redeploy capital into industrial assets and, potentially, opportunistic retail investments. He said the REIT intends to continue repositioning the portfolio toward its industrial weighting goal.
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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The article “BTB Real Estate Investment Trust Q1 Earnings Call Highlights” was originally published by MarketBeat.
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