BTB REIT (TSX:BTB) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below.

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The full earnings call is available at https://app.webinar.net/RBvgnLXnNyX

Summary

BTB.UN reported a portfolio of 6 million square feet across 74 properties, with an asset value of $1.3 billion.

The company is shifting focus from office to industrial properties, acquiring three industrial properties in Alberta and selling an office property in Quebec City.

Occupancy rate stands at nearly 92%, with 206,000 square feet in new leases and renewals signed in Q1.

Rental revenue decreased by 7.1% compared to the same quarter last year, partly due to a lease cancellation payment affecting prior year results.

Net Operating Income (NOI) and Cash NOI both decreased by over 10%, driven by tenant departures and free rent granted to new tenants.

FFO and AFFO per unit decreased compared to the previous year, with a payout ratio of 87.2% for the quarter.

The company is exploring opportunistic acquisitions, particularly in the industrial sector, while maintaining a strategic presence in retail.

BTB.UN is considering an at-the-market equity program for potential future capital needs, emphasizing it is not due to immediate financial requirements.

Full Transcript

OPERATOR

Good morning, My name is Julie and I will be your conference call facilitator today. At this time I would like to welcome everyone to the BTB Real estate investment trust 2026 first quarter conference call for which management will discuss the quarter ended March 31, 2026. All lines have been placed on mute to prevent any background noise. Should you wish to follow the presentation in greater detail, Management has made a presentation available on BTB's website at www.btbreit.com. investor presentations quarterly Meeting Presentation after the speaker's remarks, there will be a question and answer period reserved exclusively for analysts. If you'd like to ask a question during this time, please press STAR followed by the number one on your telephone keypad. Before turning the meeting over to management, please be advised that some of the statements that may be made during this call may be forward looking in nature. Such statements involve numerous factors and assumptions and are subject to inherent risks and uncertainties both general and specific, which gives rise to the possibility that predictions, forecasts, projections and other forwarding statements will not be achieved. Several important factors could cause BTB Real Estate Investment Trust's actual results to differ materially from the expectations expressed or implied by such forward looking statements. These risks, uncertainties and other factors that could influence actual results are described in BTB Real Estate Investment Trust Management Discussion and Analysis and in its Annual information form which were filed on Cedar plus and on BTB's website at www.btbreit.com under investors reports I would now like to remind everyone that this conference call is being. Thank you. I would now like to turn the conference over to Mr. Michel Léonard, President and Chief Executive Officer, accompanied today by Mr. Martin Lefebvre, Vice President and Chief Financial Officer, Mr. Charles de Revillard, Vice President of Finance and Ms. Stephanie Léonard, Principal Director of Leasing. Mr. Léonard, you may begin your conference.

Michel Léonard

Thank you, Julie. Good morning everybody. We're pleased to present our Q1 results for the year 2026. Our portfolio stands at 6 million square feet with 74 properties with a total asset value of $1.3 billion. We're continuing on our investment activity selling certain properties, mostly office properties, order to redeploy the capital into industrial properties. So during the first quarter we did acquire three industrial properties located in Leduc, a suburb of Edmonton in Alberta. Basically 143,000 square feet. And these three properties are going to generate. We forecast that they will generate $2.5 million of NOI on an annualized basis. We do continue our densification activities on different properties. We did dispose, as I mentioned, of a property located in Quebec City for $11.7 million. The purchaser was one of our tenants of the property and on an annualized basis this property was to generate $928,000 of NOI. Subsequent event regarding our activity, we did purchase a 50% interest that we did not own. So now we own 100% interest in the property located at 7 and 9 Montclair Boulevard, Montreal. Obviously, we purchased the 50% from our partner for $7 million and this property is expected to generate an additional $500,000 of annualized net operating income. So the positive effect of the dispositions and acquisitions that we did conclude is $2.1 million on an annualized basis, or roughly $1.6 million for the year. So we saw our real estate portfolio regarding the suburban office segment reduced since 2021 from 51% to now 41%.

Michel Léonard

We saw our industrial weight increase from 22% to 38% and necessity base going down from 27 to 21%. Regarding our geographic diversification, a little bit of increase underweight in Edmonton as a result of the recent acquisitions. So as I mentioned, the fair value of our investment in Properties is $1.2 million and the difference between 1.2 and 1.3 are other assets of the REIT. Our occupancy rate stands at almost 92% and we did conclude renewals and new leases for 206,000 square feet in Q1. And regarding our leasing activity, I'll ask Tiffany to brief you on the activity.

Stephanie Léonard

Good morning everyone. Just as a reminder for those of you following online, we're currently on page eight of our presentation. So our total leasing activity, which is the combination of new leases and lease renewals, totaled, as Michelle mentioned, 206,000 square feet for the quarter, of which 40,000 square feet are attributed to new leases and 166,000 square feet to lease renewals. Our most noteworthy transaction for the quarter was concluded with the Hub Sports center in Edmonton, Alberta in our industrial segment, representing roughly 33,000 square feet.

Stephanie Léonard

During our last conference call, I noted that three vacancies were the principal reasons for our decrease in occupancy rate. With this transaction, we have successfully filled one of the targeted vacancies in our portfolio. And to remind you, this was a space which we had elected to terminate the lease of the tenant that was previously occupying due to the recurring default under their lease. In terms of our lease renewals, our total activity for the quarter amounted to 165,000 square feet, representing a 93.5% lease renewal rate for the quarter out of our noteworthy transactions we renewed important leases with Groupe Touchette and in our industrial

Stephanie Léonard

segment located in Saskatoon for about 101,000 square feet, with Desjardins in our suburban office segment located in Quebec city for roughly 22,000 square feet. And I'd just like to note that Desjardins renewed their entire space with us and did not downsize their Quebec City footprint with us and finally with the LCBO for roughly 7,000 square feet in our suburban office segment located in Ottawa in terms of our rental spread. So for the quarter we achieved a 7.2% average increase in our lease renewal rate across all segments and most specifically a 7.6% increase in our industrial segment, 5.3% in our suburban office segment and 10.9% in our

Stephanie Léonard

retail based segment. Our committed occupancy rate at the end of the quarter stood at 91.8% which was a 70 basis point decrease since Q1 2025. So the comparable quarter, but I would like to note that it is a 50 basis point increase since the end of the fourth quarter last year. This was a rather quick quarter, short and sweet, but on this note I'll turn it over to Marc Hendry for a financial review.

Marc Hendry

Thank you Stephanie. Good morning everyone. So for the first quarter rental revenue stood at $32 million. That's a decrease of 7.1%, except compared to the same quarter last year. The decrease is partially caused by a partial lease cancellation payment from a tenant which positively affected the NOI by $1 million in the first quarter of last year. In 2025, excluding that payment, the decrease would have been 4.3% compared to the same quarter last year. In terms of NOI and cash NOI, they both decreased by 10.3% and 10.2% respectively, again compared to the same quarter last year. The decrease was mainly driven by a $1.3 million impact from planned tenant departures that have not yet been replaced, free rent granted to new tenants and the rent reduction provided to Lion Electric dispositions completed throughout 2025 also had a net negative impact of $200,000. This was partially offset by acquisitions completed at the end of the quarter which will contribute more meaningfully to future quarters. Excluding the said lease cancellation payment previously described, the decrease would have been 5.5% for both NOI and cash NOI compared to the same quarter last year. Looking now at organic growth cash same property NOI decreased by 9.2% for the quarter compared to the same period last year. The quarterly decrease is driven by both industrial and office segments. First, the industrial segment was impacted by a planned departure at the end of Q3 2025 of a tenant occupying over 24,000 square feet in Edmonton and that tenant has not been yet replaced and the impact of the new lease negotiated with a group of investors who purchased Lyon Electric. Second, the decrease in the office segment is due to the previously mentioned lease cancellation payment and the planned departures of tenants in Ottawa at the end of the third quarter of 2025 not yet fully replaced Excluding the lease cancellation payment, cash SPNOI would have decreased by 4.4% compared to the same quarter last year. FFO-adjusted per unit was 9.9 cents for the quarter, a decrease of 1.2 cents compared to the same quarter last year. This reduction was mainly driven by the previously explained decrease in NOI. Now looking at AFFO. AFFO-adjusted per unit was 8.6 cents for the quarter, a decrease of 1.7 cents compared to the same quarter last year. The decrease is explained by the previously outlined decrease in cash NOI of $2.1 million and is partially offset by a decrease in administration expenses of $300,000. Excluding the lease cancellation payment previously described, FFO and AFFO-adjusted per unit would have decreased by 0.1 cents or 1% and 0.6 cents or 6.5% respectively, again compared to the same quarter last year. We maintain our distribution to unit holders at 7.5 cents per unit for the quarter, which represents 7.5 cents per unit for the quarter, which represents an annualized distribution of $0.30 per unit. The FFO the AFFO-adjusted Payout ratio was 87.2% for the quarter, an increase of 14.5% from the same quarter last year. That was driven by the decrease in affo. The value of our investment properties and the weighted average cap rate for the entire portfolio remains stable at 1.2 billion and 6.7% respectively. That's compared to year end 2025 as previously mentioned by Michel. Overall, the two acquisitions and the disposition that we completed will have a net contribution of 2.1 million to NOI on an annualized basis. We concluded the quarter with a total debt ratio of 58%. The weighted average term and average interest rate on our mortgage portfolio were 2.2 years and 4.41% return respectively. Finally, at the end of the quarter we held 1.4 million in cash and 22.3 million was available under our credit facilities for total liquidity of $23.7 million. So this completes our presentation and we will now open the call to questions.

OPERATOR

Thank you. This is the conference operator. At this time, I would like to remind everyone that the analyst may now ask their question by pressing STAR followed by the number one on your telephone keypad. Again, if you'd like to ask a question, please press STAR one. One moment, please, while we compile the Q and A roster. Your first question comes from Matt Karnak from National Bank Capital Markets. Please go ahead.

Matt Karnak (Analyst at National Bank Capital Markets)

Hi, guys. Good morning. Just quickly on the retention rate, it was significantly better and pretty high this quarter. Is that a reflection of a change in the nature of the demand? Is it the nature of the tenancies that were maturing, or is it a nature of your approach to kind of renewals at this point?

Stephanie Léonard

I think it's. Matt, it's a combination of all factors that you mentioned. I think sometimes the renewal rate isn't always indicative of not necessarily what's going on in our portfolio. Sometimes we do terminate leases to then upswing tenancies within the portfolio. So we have to keep that in mind, of course, as well. Within this quarter, we have booked accounted for a significant portion. That counted for a big portion. But we always do. I think we always try to retain our clients when we can. But in previous quarters, what we have done is we have terminated leases to make sure we could get better NOI within our properties as well.

Matt Karnak (Analyst at National Bank Capital Markets)

Makes sense. And then on the free rent front, can you give me a sense of the kind of how big that is and how it rolls off over the course of 2026? And are you giving free rent on new leases at this point? I'm just trying to figure out how our NOI will swing accordingly as those arrangements fall off or. Come on.

Marc Hendry

Hey, Matt. So I'll give you the number for the. For Q1, and I'll let Stephanie comment for the rest of the year. But for Q1, free rent was $800,000. So that was granted to tenants.

Stephanie Léonard

I think to answer the other part of your question, I think it really does depend on the type of tenancy. We are seeing some free rent in terms of pre-occupancy periods, which we usually recuperate on the term. That's what we usually try to do. So if we're going to give free rent, we're trying to extend the term a further three months to be able to recoup that on the back end. So it really does depend. I can't say that there will be no free rent that will be given because it's just, it's a market, a, it's a, it's a market incentive. However, we aren't, as of today, we aren't seeing any free rent incentives in terms of what we were doing maybe two to three years ago. That we were giving 18 months of free rent that has, that ship has sailed so far. So I would stick it basically with just regular preoccupancy and recouping that at the end of the term.

Matt Karnak (Analyst at National Bank Capital Markets)

Okay, so if I think about just how that cadence occurs, does that 800,000 get smaller over the next few quarters or should we expect that it kind of remains stable?

Stephanie Léonard

I would expect that it remains stable just, just to keep it at those levels. Since we're, we don't. I can't necessarily forecast that it would go down or go up. I would keep it stable right now.

Matt Karnak (Analyst at National Bank Capital Markets)

Okay. And then it was a lovely January and February in central and eastern Canada. Was there any impact on, on margins or recoveries? Just given the amount of snow that we had in that period, that would maybe have hit this quarter from an NOI standpoint on the. I know some of your, most of your leases are recoverable now, but there's maybe some gross leases left as well.

Michel Léonard

No, it's. I call it business as usual. You know, we still heated the properties and so on and the demand was still there. I understand what you mean. And yes, we do recuperate almost all of those expenses.

Matt Karnak (Analyst at National Bank Capital Markets)

Okay. And then G and A looked quite low again. I don't know if that's. Should we use this as a proxy for a new run rate or was there anything one time in the quarter in terms of timing on expenses there?

Marc Hendry

So yeah, there is a difference of 300k with last year. However, I would use a run rate of maybe per quarter, a saving of 100k for the year. So all in all, total 400k of savings versus last year in terms of GNA.

Matt Karnak (Analyst at National Bank Capital Markets)

And then last one for me, just on the occupancy trend going forward in some of those spaces that you're looking to lease. Can you give us a sense how you see this year unfolding in terms of interest on vacant space and any potential non renewals in the portfolio that you'd foresee?

Stephanie Léonard

I think right now the market is at a really good spot in terms of the positioning of our properties. We're seeing interest within our vacancies. I'm going to say the biggest issue right now I think is just lead time in terms of negotiation. I know I've said this in the past, but some of negotiations are extremely tedious. Like we have a, we have a vacancy under negotiation. I think it's been a couple, I mean almost a year now that we've been negotiating. So it really depends again the bigger the clients we negotiate with, the more complex it is and the more lead time it takes. I know during the Last quarter during Q4, we did mention we had a vacancy coming up in Ottawa on our Walkley property. I think everyone has heard the news that the federal government is mobilizing. Not necessarily quickly, but they're mobilizing. They need more space. They've let go a lot of their spaces and now with their back-to-work mandate, they don't have enough seats for all of their employees. So what we're trying to do for that specific property is capitalize on the federal government demand and we are trying to put forward a proposal towards to them so we could stimulate interest before they start looking at the market more.

Matt Karnak (Analyst at National Bank Capital Markets)

Perfect that that makes sense and appreciate the update. All right, pleasure.

OPERATOR

This is the conference operator again. If analysts would like to ask a question, please press star and the number one, your next question comes from Paul Woolley from cibc. Please go ahead.

Paul Woolley (Analyst at CIBC)

Hey, good morning everybody. You know, the asset classes, you know, continue to evolve and it's great to see, you know, you're continuing to increase your penetration in the portfolio of industrial properties with the acquisitions in Alberta. I'm just wondering though, when you sort of like sit back and look at the business, you know, we're seeing other asset classes like retail get a little, maybe get a little bit more respect than they've gotten in the past. Have you thought at all about shifting from that 50% target for industrial or. Yeah, I'm just wondering if the last couple years have made you sort of rethink what your long term allocation should be to each asset class.

Michel Léonard

That's a very, very good questions question. I think that overall what we've always stated is the fact that we, you know, we're still opportunistic in looking at the market and if we were able to acquire a retail property accretively, we would still acquire that retail property as long as it is accretive. We've seen a lot of interest in groups soliciting us to sell our retail. So we know that there's a lot of interest and we know that overall it is a category that is really where we have a lot of interested parties within that category. But I think that the key word is opportunistic. And we're holding very decent properties as far as retail and very desirable properties. And just think about the development that we did last year where we delivered a property to winners Homesense. And we're continuing our activity in that center in order to cancel certain leases at expiration or not renew certain leases from, let's call it mom and pop operators in order to replace these tenancy by national tenants within this center. So that's part of our strategy in order to obviously enhance value and also increase rents. And so as a result, you know, we're looking very, you know, positively in the retail segment. But that's not to deter from our goal of being 60, holding 60% of our portfolio in the industrial segment. So that means intrinsically is the fact that we're reducing office to favor industrial and then remaining very opportunistic on the retail front.

Paul Woolley (Analyst at CIBC)

In terms of what's on the market for industrial right now, do you think that growth is still sort of going to be on small portfolios going forward or individual properties? Or are you seeing any sort of industrial portfolios at they're being marketed that, you know, would, that would be within your financial capabilities.

Michel Léonard

When you say financial capability, you talk about the accretion, I presume, and just more size, I guess is maybe what I'm thinking. Okay, well, on a pure size basis, you know, there's a property on the market in Montreal right now. It's 1.6 million square feet. I think it may be a little bit too big for us, but overall, you know, we're, you know, whether it's 300,000 square feet, we would jump on it as long as it's accretive. So it's in the acquisition of properties that would be 40, 50, 100,000 square feet. It's not something that it's out of the realm for us and it is definitely part of our process. You know, and when we were, when, you know, a few years ago we were smaller, we were buying smaller properties. Now we're larger, so we're buying larger properties. And obviously when you're looking at larger properties, the tendency becomes more and more important within the evaluation of the acquisition.

Paul Woolley (Analyst at CIBC)

Okay, and I guess my third question sort of relates to the last one is just, you know, you in the press release noted that, you know, you're interested in starting an at the market equity program. Do you have any immediate needs for using that or is this more of a, you know, precautionary? Not precautionary is not the right word, but you know, like you're trying to be prepared for potentially something in the near future that would require equity funding.

Michel Léonard

Yeah, it's more the latter. So we'll use the ATM on a opportunistic basis when we feel the. Yeah. That the issue price is at the right level. But to confirm, we're putting it in place. But we don't need it in order to generate capital for btb. It is a tool that would be part of our tool chest in order or toolbox in order to, you know, if we have a small acquisition that would be. That would require us to raise capital, you know, rapidly, we would use it. But this is not to replace bought deals that we've been constantly using over the last few years. So it is just part of the tools that we can use. And it's not to raise capital because we would be in a position where we need capital in order to sustain our daily needs.

Paul Woolley (Analyst at CIBC)

Okay, that's great. Thank you very much, everyone.

OPERATOR

At this time, there are no further questions. Please go ahead, Mr. Leonard.

Michel Léonard

Well, thank you very much for joining us today. The first quarter, as you saw, a little bit boring, except for an acquisition, a disposition, and after the quarter, the acquisition of a 50% interest that will positively generate additional NOI for BTB. So last year we did dispose, did not acquire. So we have properties on the market right now that we're trying to dispose in order to generate the capital to redeploy an industrial and as I mentioned, and perhaps opportunistically into the retail segment. But overall we like to transact, we like to reposition the portfolio in order to get to our goal of being a 60%, so far, a 60% weight into the industrial segment. So with this, thank you very much for your presence today and looking forward to seeing you or listening to you again for our Q2 results. Thank you.

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