ON OUR WAY
TO A BILLION
Annual report 2012
ON OUR WAY TO A BILLION TABLE OF CONTENT
4
6
11
53
97
MESSAGE TO UNITHOLDERS
CORPORATE PROFILE
MANAGEMENT DISCUSSION AND ANALYSIS
CONSOLIDATED FINANCIAL STATEMENTS
CORPORATE INFORMATION
98
UNITHOLDER INFORMATION
MESSAGE TO UNITHOLDERS
Dear investors,
BTB continued to grow profitably in 2012 and ended the year with a 141% increase of net income, an increase of
105% in our recurring funds from operations, an increase of 55% in the distributable income, an increase of 65% in
its recurring adjusted funds from operations and an increase of 22% in BTB’s net operating income.
We saw a return to a payout ratio of less than 100%. Indeed, for the year 2012, our payout ratio stood at 98%
(compared to 112% for the year 2011) and was 91% for the fourth quarter of 2012. This ratio shows an important
improvement in the profitability of BTB.
During the same year, BTB significantly reduced its mortgage financing costs. The average interest rate fell from
5.27% to 4.69%. This reduction was mainly caused by replacing the mortgages that were maturing in 2012, more
specifically refinancing two large mortgages of a total principal amount of $41M. We anticipate that these refinan-
cing will provide an annual savings of interest expense of more than $800,000. In 2013, the Fund will renew or
replace mortgages of a total principal amount of approximately $40M and the average contractual interest rate of
these mortgages is 5.89%. We therefore expect a further reduction in interest costs related to these mortgages
maturing in the second half of 2013.
BTB has acquired 10 properties and an additional 50% participation in a building located in Quebec City. The total
value of BTB’s acquisitions in 2012 is $126.8M and these acquisitions added 958,000 square feet of leasable area
to the Fund. The total value of its assets is now over $504M and the Fund currently owns more than 4.3 million
square feet. We are focussed on growing profitably our asset base and, in the coming years, our goal is to reach a
billion dollars of total asset value.
At the end of 2012, BTB’s unitholders’ equity totaled more than $124M (an increase of 63% as compared to
2011). This equity is based on the fair market value appraisal of BTB’s properties and its excellent performance.
Based on the number of outstanding units in circulation at the end of the year (23.8 million units), the book value of
BTB’s units is $5.24 per unit compared to a recent trading price of $4.60 (closing price on March 21st, 2013),
suggesting an interesting potential gain for unitholders.
We thank you for your trust.
Michel Léonard
President, CEO and Trustee
Jocelyn Proteau
Chairman of the Board of Trustees
4
5
CORPORATE PROFILE
Evolution of the number of Properties
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6
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*
2006-2009: Amounts presented in accordance with Canadian GAAP before the changeover to
International Financial Reporting Standards (“IFRS”)
2010-2012: Presented in accordance with International Financial Reporting Standards (“IFRS”)
*
Includes our properties in Trois-Rivieres
7
,
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,
,
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,
,
,
,
,
*
2006-2009: Amounts presented in accordance with Canadian GAAP before the changeover to
International Financial Reporting Standards (“IFRS”)
2010-2012: Presented in accordance with International Financial Reporting Standards (“IFRS”)
,
,
,
,
,
,
,
,
,
,
,
,
*
2006-2009: Amounts presented in accordance with Canadian GAAP before the changeover to
International Financial Reporting Standards (“IFRS”)
2010-2012: Presented in accordance with International Financial Reporting Standards (“IFRS”)
8
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9
MANAGEMENT
DISCUSSION AND
ANALYSIS
Year ended December 31, 2012
MANAGEMENTDISCUSSION AND ANALYSIS TABLE OF CONTENTS
INTRODUCTION
FORWARD-LOOKING STATEMENTS CAVEAT
NON-IFRS FINANCIAL MEASURES
HIGHLIGHTS OF FISCAL 2012
THE TRUST
OBJECTIVES AND BUSINESS STRATEGIES
ADOPTION OF IFRS
HIGHLIGHTS AND SELECTED FINANCIAL INFORMATION
REAL ESTATE PORTFOLIO
PERFORMANCE INDICATORS
OPERATING RESULTS
DISTRIBUTABLE INCOME AND DISTRIBUTIONS
FUNDS FROM OPERATIONS (FFO)
ADJUSTED FUNDS FROM OPERATIONS (AFFO)
SEGMENTED INFORMATION
COMPARATIVE SUMMARY OF QUARTERLY RESULTS
FINANCIAL POSITION
REAL ESTATE PORTFOLIO
REAL ESTATE OPERATIONS
CAPITAL RESOURCES
INCOME TAXES
TAXATION OF UNITHOLDERS
IMPACT OF ADOPTING IFRS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
NEW ACCOUNTING POLICIES
RISKS AND UNCERTAINTIES
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER
FINANCIAL REPORTING
13
13
14
14
15
16
16
16
17
18
18
24
26
27
28
29
29
30
32
34
41
42
42
42
46
48
51
INTRODUCTION
The purpose of this Management Discussion and Analysis is to allow the reader to evaluate the operating results
of BTB Real Estate Investment Trust («BTB» or the «Trust») for the year ended December 31, 2012, as well as its
financial position on that date. The report also presents the Trust’s business strategies and the risk exposure it
faces. This MD&A dated March 21, 2013 should be read together with the audited annual consolidated financial
statements and accompanying notes for the years ended December 31, 2012 and 2011. It discusses any signifi-
cant information available up to the date of this MD&A. The Trust’s annual consolidated financial statements were
prepared in accordance with International Financial Reporting Standards («IFRS»), as issued by the International
Accounting Standards Board («IASB»). Unless otherwise indicated, all amounts are in thousands of Canadian
dollars, except for per unit and per square foot amounts. Per unit amounts are calculated using the weighted
average number of Trust units outstanding for the periods and fiscal years ended December 31, 2012 and 2011.
They have been restated to take into account the unit consolidation that took place on June 7, 2012 at a ratio
of five pre-consolidation units for one post-consolidation unit. Additional information about the Trust, including the
2012 Annual Information Form, is available on the Canadian Security Administrators («CSA») website at www.sedar.
com and on our website at www.btbreit.com.
The Audit Committee and the Trust’s Board of Trustees have approved the contents of this Annual Management
Discussion and Analysis and the annual financial statements.
FORWARD-LOOKING
STATEMENTS CAVEAT
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 MD&A, other filings with Canadian regulators,
reports to unitholders and other communications. These forward-looking statements 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 condi-
tions 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 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 this Annual 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.
13
NON-IFRS FINANCIAL MEASURES
Net operating income, distributable income, funds from operations («FFO») and adjusted funds from operations
(«AFFO») are non-IFRS performance measures and do not have standardized meanings prescribed by IFRS. They 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 MD&A.
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 November 2012.
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.
HIGHLIGHTS OF FISCAL 2012
Increase:
•
•
•
•
•
141% in net income
105% in recurring FFO
55% in distributable recurring income
65% in recurring AFFO
22.1% in net operating income
Improvement:
•
•
from 5.27% to 4.69% (58 basis points) average contractual interest rate on mortgage loans.
of payout ratio from 112.1% to 98.1% for the year and from 105.2% to 91% for the quarter.
Listing on the Toronto Stock Exchange in June 2012 and a unit consolidation at a ratio of five pre-consolidation for
one post-consolidation unit.
Property acquisitions
During the year, the Trust acquired ten properties, including five industrial buildings, three office buildings and two
commercial buildings, as well as an additional 50% interest in a Quebec City office complex. For a total cost of
$126.8 million, these acquisitions added 958,000 square feet to the Trust’s leasable area, including 418,000
square feet in Ontario and 540,000 in Quebec.
14
Financing activities
In addition to arranging and fully using a $15 million acquisition line of credit, the Trust carried out the following
financing transactions:
•
•
•
•
Seven new first- and second-ranking mortgage financings, totalling $51 million, at rates ranging from
3.18% to 5.50%, on certain acquisitions during the year.
Assumption of four mortgages totalling $28 million, at rates ranging from 4.75% to 6.80%, on certain
acquisitions during the year.
Refinancing of two mortgage loans in the amount of $41 million by a new $43 million financing at 4.11%,
generating annual savings of more than $800.
Two unit issues for a total of 8,848,150 units and gross proceeds of $37.7 million, which were allocated
to the acquisition and investment program and BTB’s general requirements.
THE TRUST
BTB is an unincorporated open-ended real estate trust formed and governed under the laws of the Province of
Québec pursuant to a trust agreement. BTB began its real estate operations on October 3, 2006 and to date, it
has acquired and owns 66 commercial and industrial properties in primary and secondary markets. BTB has now
become an important real estate owner in geographical markets east of Ottawa. The units and Series B, C, D and E
convertible debentures are traded on the Toronto Stock Exchange under the symbols «BTB.UN,» «BTB.DB.B,» «BTB.
DB.C,» «BTB.DB.D» and «BTB.DB.E», respectively.
Most of the Trust’s properties are managed internally, with 46 of the Trust’s 66 properties entirely managed by the
Trust’s employees. Management’s objective is to resume, when favourable circumstances prevail, internal manage-
ment of the Trust’s properties upon the expiry of agreements between the Trust and its external managers, thereby
achieving savings in management and operating fees through centralized and improved property management.
The following table provides the total acquisitions of the Trust since its inception:
Number of properties
Leasable area
(sq. ft.)
Assets acquired at cost
(thousands of $)
As at December 31, 2012(1)
Subsequent acquisition(2)
Total to date
65
1
66
4,341,197
15,186
4,356,383
476,549
2,500
479,049
(1)
These figures include a 50% interest in a 17,114 square foot building in a Montréal suburb, a 75% interest in a
140,907 square foot building in Québec City and a 50% interest in two buildings totalling 74,941 square feet in
Gatineau, Québec.
(2)
These figures include a 50% interest in this building.
BTB’s management is entirely internalized since April 1, 2009 and no service agreements or asset management
agreements are in force between BTB and its officers. The Trust therefore ensures that the interests of management
and of its employees are aligned with those of the unitholders.
15
OBJECTIVES AND BUSINESS
STRATEGIES
BTB’s primary objective is to maximize returns to unitholders. Returns include cash distributions and long-term
appreciation in the value of units. More specifically, the objectives are as follows:
(i) Generate stable monthly cash distributions that are reliable and fiscally beneficial to unitholders.
(ii) Grow the Trust’s assets through internal growth and accretive acquisition strategies in order to increase distri-
butable income and therefore fund distributions.
(iii) Optimize the value of its assets through dynamic management of its properties in order to maximize the
long-term value of its units.
Strategically, BTB has purchased and seeks to purchase properties with low vacancy rates, good lessee quality,
superior locations, low lease turnover potential and properties that are well maintained and require a minimum of
future capital expenditures.
ADOPTION OF IFRS
Since January 1, 2011, the Trust is required to present its interim and annual financial statements in accordance
with International Financial Reporting Standards (“IFRS”), with comparative IFRS figures. IFRS are based on a
conceptual framework similar to Canadian GAAP; however, significant differences exist in the recognition, measure-
ment, presentation and disclosure for certain accounting items. The adoption of IFRS had a material impact on the
consolidated statements of financial position (formerly called the balance sheet) and comprehensive income
(formerly called the statement of income), but had no impact on the net cash flows reported by BTB. Before the
adoption of IFRS, the Trust’s financial statements were prepared in accordance with Canadian generally accepted
accounting principles («GAAP»).
HIGHLIGHTS AND SELECTED
FINANCIAL INFORMATION
Since the beginning of its real estate operations in October 2006, the Trust has acquired 66 properties generating,
on an annualized basis, revenues of more than $60 million.
The following table presents highlights and selected financial information for the quarters and the years ended
December 31, 2012 and 2011:
16
Periods ended December 31
(in thousands of dollars, except ratios and per unit data) Reference
Quarter
Year
2012
2011
2012
2011
Financial information
Rental income
Net operating income
Net income
Recurring distributable income
Distributions
Recurring funds from operations (FFO)
Recurring adjusted funds from operations (AFFO)
Investment properties
Total assets
Mortgage loans payable
Convertible debentures
Debt ratio – excluding convertible debentures
Unitholders’ equity
Financial information per unit
Weighted average number of units outstanding
(in thousands)
Net income
Distributable income – recurring
Distributions
Payout ratio
Recurring FFO
Recurring AFFO
Tax on distributions
Revenue
Tax deferral
Operational information
Number of properties
Leasable area (in thousands of sq. ft.)
Occupancy rate
Development
Property under development
Estimated leasable area (in thousands of sq.ft.)
Page 19
Page 20
Page 20
Page 24
Page 25
Page 25
Page 26
Page 27
Page 29
Page 29
Page 37
Page 38
Page 39
13,316
10,995
7,551
5,603
2,273
2,068
1,975
1,905
5,432
746
1,414
1,488
938
1,127
48,118
26,996
17,967
7,805
7,656
6,493
6,449
41,459
22,112
7,450
5,026
5,631
3,165
3,911
488,521
343,383
504,927
358,938
296,523
212,145
54,272
61.6%
124,778
52,938
59.3%
76,640
Page 39
19,723
14,802
18,669
13,699
28.4¢
11.5¢
10.0¢
91.0%
10.0¢
9.7¢
5.0¢
10.1¢
10.0¢
105.2%
6.3¢
7.6¢
Page 20
Page 24
Page 25
Page 25
Page 26
Page 27
Page 42
Page 42
Page 31
Page 31
Page 32
96.2¢
41.8¢
40.0¢
98.1%
34.8¢
34.5¢
0%
100%
65
4,341
91.7%
---
---
54.4¢
36.7¢
40.0¢
112.1%
23.1¢
28.6¢
0%
100%
54
3,272
91.1%
1
141
REAL ESTATE PORTFOLIO
BTB owns 66 properties at a total acquisition cost of approximately $479 million and representing a total leasable
area of more than 4.3 million square feet. A concise description of the properties owned can be found in the Trust’s
2012 Annual Information Form available at www.sedar.com. A concise description of the properties acquired in
2012 and to date can be found on pages 28 and following of this MD&A.
17
PERFORMANCE INDICATORS
The following indicators are used to measure the financial performance of BTB:
• Net operating income of the same-property portfolio, which provides an indication of the profitability of existing
portfolio operations and BTB’s ability to increase its revenues and reduce its operating costs;
•
•
•
•
•
•
Distributable income per unit, which enables investors to determine the stability of distributions;
Funds from operations («FFO») per unit, which provide an indication of BTB’s ability to generate cash flow;
Adjusted funds from operations («AFFO») per unit, which takes into account rental fees and capital expen-
ditures and which may vary substantially from one year to the next;
The debt-equity ratio, which is used to assess BTB’s financial integrity and its capacity for additional acquisitions;
The interest coverage ratio, which is used to measure BTB’s ability to use operating results to pay interest
on its debt;
The occupancy rate, which provides an indication of the optimization of rental space and the potential reve-
nue gain from the Trust’s property portfolio.
More detailed definitions and analyses of each of these indicators are provided in the appropriate sections.
OPERATING RESULTS
The table below summarizes financial results for the quarters and years ended December 31, 2012 and 2011. The
table should be read in conjunction with our consolidated financial statements and the notes thereto.
Periods ended December 31
(in thousands of dollars)
Reference
2012
2011
2012
2011
Quarter
Year
Rental income
Operating expenses
Net operating income
Financial income
Financial expenses
Trust administration expenses
Page 19
Page 20
Page 20
Page 21
Page 23
Fair value adjustment on investment properties
Page 23
Net income and comprehensive income
Page 24
Same-property portfolio
13,316
10,995
5,765
7,551
(36)
3,824
924
(2,764)
5,603
48,118
21,122
26,996
41,459
19,347
22,112
5,563
5,432
8,662
725
(14)
(141)
(120)
13,362
20,664
3,519
(4,687)
(7,711)
746
17,967
2,766
(8,648)
7,450
The same-property portfolio includes all the properties owned by BTB as at January 1, 2011, but does not include
the financial spin-offs of disposals, acquisitions and developments completed in 2011 and 2012.
18
Rental income
BTB actively acquired properties in 2011 and 2012. Due to this acquisition activity as well as internal growth from
the same-property portfolio, recurring rental income for the fourth quarter and fiscal 2012 increased by $2,566 or
23.9% and $6,904 or 16.8%, respectively.
Rental income includes all amounts earned from tenants related to lease agreements, including basic rent and
other service charges for parking and storage, operating expenses and realty tax recoveries, and straight-line rent
adjustments.
BTB accounts for rent step-ups incrementally over the term of the non-cancellable lease. In the fourth quarter and
for fiscal 2012, straight-line rent adjustments of $281 (2011: $51) and $661 (2011: $498), respectively, were
recorded.
In the fourth quarter and for fiscal 2012, BTB recorded amortization of $355 (2011: $228) and $1,240 (2011:
$864), respectively, as a reduction in rental income, which represents amortization of lease incentives afforded to
lessees.
Periods ended December 31
(in thousands of dollars)
Rental income on the basis of in-place leases
Straight-line rental income adjustment
Amortization of lease incentives
Quarter
Year
2012
13,390
281
(355)
2011
11,172
51
(228)
2012
48,697
661
(1,240)
48,118
2011
41,825
498
(864)
41,459
Rental income from investment properties
13,316
10,995
Recurring income from the same-property portfolio increased 2.7% in the fourth quarter ended December 31,
2012 and 1.5% in fiscal 2012.
Periods ended December 31
(in thousands of dollars)
Same-property portfolio
Non-recurring items (1)
Recurring same-property portfolio
10,690
10,408
Acquisitions, disposals and development
2,626
342
Quarter
2012
2011
∆%
2012
Year
2011
10,690
10,653
---
(245)
0.3
N/A
2.7
N/A
41,309
40,936
---
(245)
41,309
40,691
6,809
523
∆%
0.9
N/A
1.5
N/A
Recurring rental income
13,316
10,750
23.9
48,118
41,214
16.8
(1)
Non-recurring partial recovery of retroactive Québec Sales Tax (QST) charges on energy expenses.
19
Operating expenses
The increase in recurring operating expenses of 16.1% between the fourth quarter of 2011 and the fourth quarter
of 2012, and 12.7% for fiscal 2012 compared to last year, was mainly due to fiscal 2011 and 2012 acquisitions.
Operating expenses of the same-property portfolio increased 1.0% during the quarter and 3.4% over the year.
Periods ended December 31
(in thousands of dollars)
Same-property portfolio
Non-recurring items
Recurring same-property portfolio 1)
Acquisitions, disposals and development
Recurring operating expenses
Quarter
2011
5,499
---
(598)
4,901
64
4,965
2012
4,952
4,952
813
5,765
∆%
2012
Year
2011
(9.9)
19,217
19,190
N/A
1.0
N/A
---
(598)
19,217
18,592
1,905
157
∆%
0.1
N/A
3.4
N/A
16.1
21,122
18,749
12.7
(1)
Retroactive Québec Sales Tax (QST) charges on energy expenses
The table below shows the breakdown of operating expenses for the periods ended December 31, 2012 and 2011:
Periods ended December 31
(in thousands of dollars)
Operating expenses
- Operating costs
- Property taxes and public utilities
Total operating expenses
% of rental income
Quarter
Year
2012
2011
2012
2011
2,225
3,540
5,765
1,964
3,599
5,563
7,710
13,412
21,122
6,955
12,392
19,347
43.3
50.6
43.9
46.7
Operating expenses are expenses directly related to real estate operations and are generally charged back to
lessees as provided for in the contractual terms of the leases. Operating expenses include property taxes and
public utilities, costs related to indoor and outdoor maintenance, heating, ventilation and air conditioning, elevators,
insurance, janitorial services and management and operating fees. The amount of operating expenses that BTB
can recover from its lessees depends on the occupancy rate of the properties and the nature of the existing leases
containing clauses regarding the recovery of expenses. BTB pays particular attention to compliance with existing
leases and the recovery of its properties’ operating expenses.
Net operating income
Recurring net operating income increased 30.5% for the fourth quarter of 2012 compared to 2011 and 20.2%
for fiscal 2012 compared to 2011. Recurring operating income of the same-property portfolio was up 4.2% for
the quarter compared to the fourth quarter of 2011 and stable for fiscal 2012 compared to 2011. Recurring net
operating income was 56.7% of recurring rental income for the quarter ended December 31, 2012 (2011: 53.8%)
and 56.1% for fiscal 2012 (2011: 54.5%), an increase over the same periods of the previous year. These increases
were mainly due to the nature of acquisitions completed by the Trust in the last four quarters, which primarily consist
of single-tenant industrial properties with “triple net” leases under which operating expenses are paid directly by the
tenants rather than being charged back to them by the Trust.
20
Periods ended December 31
(in thousands of dollars)
Same-property portfolio
Non-recurring items (1)
Recurring net operating income
Acquisitions, disposals and development
Recurring net operating income
% of recurring rental income
2012
5,738
---
5,738
1,813
7,551
56.7
Quarter
2011
5,154
353
5,507
278
5,785
53.8
∆%
2012
Year
2011
11.3
22,092
21,746
N/A
4.2
N/A
---
353
22,092
22,099
4,904
367
∆%
1.6
N/A
0.0
N/A
30.5
26,996
22,466
20.2
56.1
54.5
(1)
Non-recurring Québec Sales Tax (QST) charges on energy expenses, less partial recoveries.
Recurring net operating income is reduced by non-cash rental income adjustments. Before adjustments, recurring
net operating income was as follows:
Periods ended December 31
(in thousands of dollars)
Recurring net operating income
Straight-line rental income adjustments
Adjustment related to amortization of lease
incentives
Recurring net operating income, net of
rental income adjustments
2012
7,551
(281)
Quarter
2011
5,785
∆%
30.5
2012
Year
2011
26,996
22,466
(51)
451.0
(661)
(498)
∆%
20.2
32.7
355
228
55.7
1,240
844
46.9
7,625
56.9%
5,962
53.4%
27.9
27,575
22,812
20.9
56.6%
54.5%
Although net operating income is not a financial measure recognized under IFRS, it is used in the real estate industry
to measure operational performance. BTB defines it as operating income before financial revenues and financial
expenses, Trust administration expenses and fair value adjustment of properties. This definition may differ from that
of other issuers and accordingly, BTB’s net operating income may not be comparable to the net operating income
of other issuers.
Financial expenses
Financial expenses arise from the following loans and financings:
• Mortgage loans payable contracted or assumed totalling approximately $296 million as at December 31,
2012, compared to $213 million as at December 31, 2011. The increase resulted from the financing or
assumption of mortgage loans payable on acquisitions completed and the refinancing of certain properties
during the last 12 months.
•
•
•
Series B, C and D convertible debentures issued in a total amount of $59 million ($59 million as at
December 31, 2011).
Operating and acquisition lines of credit used as needed, which allowed primarily for the acquisition of accre-
tive properties during the fourth quarter.
Financing costs on mortgages, convertible debentures and other loans netted against the related debt and
amortized on an effective interest basis over the expected life of the debt.
21
Periods ended December 31
(in thousands of dollars)
Interest expense on mortgage loans payable
Interest expense on debentures
Interest expense on acquisition lines of credit
Interest expense on operating lines of credit and other interest
expenses
Interest expense
Accretion of effective interest
Accretion of non-derivative liability component of convertible
debentures
Financial expenses before following items:
Fair value adjustment on warrants
Quarter
Year
2012
3,195
1,154
88
25
2011
2,709
1,155
---
5
4,462
3,869
440
155
5,057
---
377
132
4,378
165
2012
11,822
4,622
88
106
16,638
1,412
2011
10,515
4,437
356
5
15,313
1,528
598
731
18,648
17,572
43
13
Fair value adjustment on derivative financial instruments (de-
benture conversion options)
(1,233)
4,119
(5,329)
3,079
Financial expenses
3,824
8,662
13,362
20,664
Before recognition of fair value adjustments on debenture conversion options and warrants, financial expenses
increased by $679 during the fourth quarter of 2012 compared to the same quarter in 2011 and $1,076 for
fiscal 2012, due to the financing and assumption of mortgages on property acquisitions and the issuance of Series
D convertible debentures in July 2011. However, these increases were limited by the refinancing of matured loans
at more advantageous rates than outstanding loans and the repayment of Series A debentures in October 2011.
As shown by the following table, interest expense on mortgage loans payable in the same-property portfolio de-
creased by 7.6% in the fourth quarter and 2.8% for fiscal 2012 compared to the same period of 2011, due to the
refinancing of loans that matured in the last few quarters at more advantageous rates. However, the decrease was
limited by increased financing on certain properties.
Periods ended December 31
(in thousands of dollars)
Same-property portfolio
Acquisitions and development
2012
2,426
769
3,195
Quarter
2011
2,626
83
2,709
2012
Year
2011
10,054
10,342
1,768
173
∆%
(7.6)
N/A
17.9
11,822
10,515
∆%
(2.8)
N/A
12.4
Financial expenses can be allocated among interest expenses amounting to $4,462 for the quarter and $16,638
for the year ($3,869 and $15,313 in 2011, respectively) and non-monetary items. Non-monetary items include fair
value adjustments on derivative financial instruments and warrants in net credit positions of $1,233 for the quarter
and $5,286 for the year (debit positions of $4,284 and $3,092, respectively, in 2011). Fair values fluctuate from
one period to another. These adjustments result from changes in the value of the Trust’s units on stock exchanges
during the periods concerned and changes in the value of conversion options and warrants compared with the
amounts recorded at the end of previous periods.
As at December 31, 2012, the average weighted contractual rate of interest on mortgage loans payable was
4.69%, down 58 basis points from December 31, 2011 and 44 basis points from the previous quarter. These
decreases resulted from favourable interest rates on mortgage financing for properties acquired during fiscal 2011
and on refinancings carried out. For 17 consecutive quarters, the weighted average interest rate has remained
stable or declined. Interest rates on first-ranking mortgage financings range from 3.18% to 6.80%. A single second-
ranking mortgage financing in the amount of $2.2 million bears interest at 8.5%.
22
Trust administration expenses
Trust administration expenses include administrative costs such as payroll expenses and professional fees associa-
ted with executive and administrative staff, the compensation plan for trustees, legal and auditing services, expenses
related to listed fund status, insurance costs, office expenses and bad debts and related legal fees. They also include
amortization of the head office building and property, plant and equipment, unit-based compensation, and a monetary
item that affects the volatility of administrative expenses from period to period.
Periods ended December 31
(in thousands of dollars)
Recurring administrative expenses
Toronto Stock Exchange listing fees
Amortization
Unit-based compensation
Trust administration expenses
Quarter
Year
2012
929
---
25
(30)
924
2011
694
---
21
10
725
2012
3,280
225
90
(76)
2011
2,617
---
84
65
3,519
2,766
Since June 7, 2012, the Trust’s units and debentures have been listed on the Toronto Stock Exchange. Listing fees
and other expenses related to the graduation are assessed at $225 and considered non-recurring.
Fair value adjustment on investment properties
Under IAS 40, the Trust accounts for its investment properties at fair value and recognizes the gain or loss arising
from a change in the fair value in profit or loss for the period in which it arises.
The fair value of investment properties is determined using the discounted cash flow method or the capitalized net
operating income method, which are generally accepted valuation methods.
Management receives quarterly capitalization rate and discount rate data from external chartered valuators and
independent experts. The capitalization rate reports provide a range of rates for various geographic regions and for
various types and qualities of properties within each region. The Trust utilizes capitalization and discount rates within
ranges provided by external valuators. To the extent that the externally-provided capitalization rate ranges change
from one reporting period to the next; or should another rate within the provided ranges be more appropriate than
the rate previously used, the fair value of the investment properties would increase or decrease accordingly.
Yearly independent external valuations are done on a rotating three-year cycle. In addition, the portfolio’s ten largest
properties are independently appraised each year. Management determined that an increase in value of $2,764 for
the quarter ($4,687 in 2011) and $7,711 for the year ($8,648 in 2011) was required in order to adequately reflect
the fair value of the portfolio held. BTB has estimated that a 0.10% variation in the capitalization rate applied to the
overall portfolio would change the fair value of the investment properties by approximately $6.5 million.
The following table highlights the significant assumptions used in the modeling process for both internal and external
appraisals:
As at December 31, 2012
Capitalization rate
Commercial
Office
7.00% - 12.00% 6.50% - 10.50%
Industrial
7.00% - 9.75%
General purpose
7.25% - 8.75%
Terminal capitalization rate
7.25% - 8.75%
6.50% - 9.50%
7.00% - 11.50%
7.50% - 9.25%
Discount rate
7.25% - 9.75%
7.50% - 9.25%
7.00% - 10.75%
8.25% - 9.00%
As at December 31, 2011
Capitalization rate
Commercial
7.25% - 10.25%
Office
6.75% - 9.75%
Industrial
7.50% - 10.25%
General purpose
7.50% - 9.00%
Terminal capitalization rate
7.75% - 10.50%
6.75% - 9.50%
7.75% - 10.50%
7.75% - 9.25%
Discount rate
7.50% - 10.25%
7.75% - 9.25%
8.00% - 11.25%
8.00% - 9.75%
23
The weighted average capitalization rate for the entire portfolio as at December 31, 2012 was 7.55% (2011:
7.82%), down 16 basis points since September 30, 2012, and 27 basis points from a year earlier.
Net income and comprehensive income
BTB generated net income of $5.6 million for the fourth quarter of 2012, up $4.9 million from the fourth quarter of
2011 and $18.0 million for fiscal 2012 compared to $7.5 million in 2011.
Periods ended December 31
(in thousands of dollars, except per unit data)
Net income and comprehensive income
Per unit
Quarter
Year
2012
5,603
28.4¢
2011
746
5.0¢
2012
17,967
96.2¢
2011
7,450
54.4¢
DISTRIBUTABLE INCOME AND
DISTRIBUTIONS
The notion of “distributable income” does not constitute financial information as defined by IFRS. It is, however, a mea-
surement that is frequently used by investors in real estate trusts. In our opinion, distributable income is an effective
tool for assessing the Trust’s performance.
We define distributable income as net income determined under IFRS, before unrealized fair value adjustments,
transaction costs incurred upon business combinations, rental revenue arising from the recognition of leases on a
straight-line basis, the amortization of lease incentives, the accretion of effective interest and certain other non-cash
items.
The following table shows the calculation of distributable income:
Periods ended December 31
(in thousands of dollars)
Net income and comprehensive income (IFRS)
Quarter
Year
2012
5,603
2011
746
2012
17,967
2011
7,450
- Fair value adjustment on investment properties
(2,764)
(4,687)
(7,711)
(8,648)
+ Amortization of an investment property and other property and
28
equipment
± Unit-based compensation expense
+ Accretion of the liability component of convertible debentures
± Fair value adjustment on warrants
(30)
155
---
21
10
132
165
97
(76)
598
43
89
65
731
13
± Fair value adjustments on conversion options of convertible
(1,233)
4,119
(5,329)
3,079
debentures
+ Amortization of lease incentive
- Straight-line rental income adjustment
+ Accretion of effective interest
Distributable income
Non-recurring items
355
(281)
440
228
(51)
378
2,273
1,061
1,240
(661)
1,412
7,580
864
(498)
1,528
4,673
- Toronto Stock Exchange listing fees
- Net retroactive sales tax charges on energy expenses
Recurring distributable income
---
---
2,273
---
225
---
353
1,414
---
7,805
353
5,026
24
The Canadian Securities Administrators (CSA) requires the Trust to reconcile distributable income (non-IFRS mea-
sure) and cash flows from operating activities presented in the financial statements. The following table shows the
reconciliation:
Periods ended December 31
(in thousands of dollars)
Cash flows from operating activities (IFRS)
+ Toronto Stock Exchange listing fees
+ Net retroactive sales tax charges on energy expenses
+ Financial revenues
+ Net change in working capital items
- Interest expense on mortgage loans payable
- Interest expense on convertible debentures
- Interest expense on acquisition line of credit
- Other interest expenses
Recurring distributable income
Distributions and per unit data
Quarter
2012
8,491
225
---
141
15,586
(11,822)
(4,622)
(87)
(107)
7,805
2011
17,934
---
353
120
1,932
(10,461)
(4,437)
(356)
(59)
5,026
Periods ended December 31
Quarter
Year
(in thousands of dollars, except for per unit data)
2012
2011
2012
2011
Distributions
Distributions to unitholders
Distributions reinvested under the distribution reinvestment plan
Total distributions to unitholders
Per unit data
Recurring distributable income
Distribution per unit
Distribution ratio (1)
1,895
173
2,068
11.5¢
10.0¢
1,435
53
1,488
10.1¢
10.0¢
91.0%
105.2%
7,074
582
7,656
41.8¢
40.0¢
98.1%
5,578
53
5,631
36.7¢
40.0¢
112.1%
(1)
The distribution ratio corresponds to distributions divided by recurring distributable income.
Recurring distributable income for the fourth quarter increased by $859, from $1,414 to $2,273, between 2011
and 2012. Recurring distributable income for fiscal 2012 was $7,805, up $2,779 from fiscal 2011. Recurring dis-
tributable income per unit for the fourth quarter of fiscal 2012 stood at 11.5¢ per unit compared to 10.1¢ in 2011
and 41.8¢ compared to 36.7¢ for fiscal 2011.
Distributions to unitholders totalled 10¢ per issued unit for each quarter presented.
The distribution ratio was 91.0% in the fourth quarter of 2012 compared to 105.2% in the fourth quarter of 2011,
and 98.1% compared to 112.1% for the year, reflecting a surplus of distributable income over distributions for the
quarter of 2012 and for the year.
25
FUNDS FROM OPERATIONS (FFO)
The notion of funds from operations («FFO») does not constitute financial and accounting information as defined by
IFRS. It is, however, a measurement that is frequently used by real estate companies and real estate investment
trusts. The Canadian Real Property Association of Canada (“REALpac”) amended its White Paper on Funds from
Operations in 2010 to reflect the impact of IFRS. The following is a list of some of the new adjustments to net income,
calculated according to IFRS, which are non-cash items that create volatility:
•
•
•
•
•
Fair value adjustment on investment properties;
Amortization of properties that continue to be recognized at acquisition cost (Trust’s head office);
Amortization of lease incentives;
Fair value adjustment on conversion instrument for convertible debentures;
Fair value adjustment on warrants.
Our calculation method is consistent with the method recommended by REALpac, but may differ from measures
used by other real estate investment trusts. Consequently, this method may not be comparable to methods used by
other issuers.
In order to fairly measure FFO, the Trust can present in the reconciliation unusual and non-recurring items which
could affect results for the quarters and years in question. For the second quarter of 2012, the Trust incurred non-
recurring expenses of $225 related to the Toronto Stock Exchange listing. In the fourth quarter of 2011, the Trust
incurred retroactive net sales tax expenses on energy expenses amounting to $353.
The following table provides a reconciliation of net income and comprehensive income established according to IFRS
and recurring FFO for the quarters and years ended December 31, 2012 and 2011:
- Fair value adjustment on investment properties
(2,764)
(4,687)
Periods ended December 31
(in thousands of dollars, except for per unit data)
Net income and comprehensive income (IFRS)
+ Amortization of an investment property
+ Amortization of lease incentives
+ Fair value adjustments on conversion options of
convertible debentures
+ Fair value adjustment on warrants
FFO
+ Toronto Stock Exchange listing fees
+ Net retroactive sales tax charges on energy expenses
Recurring FFO
Per unit data
- FFO
- Recurring FFO
Quarter
Year
2012
2011
2012
5,603
2011
746
14
355
14
228
17,967
(7,711)
58
1,240
(1,233)
4,119
(5,329)
1,975
---
---
---
1,975
10.0¢
10.0¢
165
585
---
353
938
4.0¢
6.3¢
43
6,268
225
---
6,493
33.6¢
34.8¢
7,450
(8,648)
54
864
3,079
13
2,812
---
353
3,165
20.5¢
23.1¢
Recurring FFO increased by close to 110.5% for the fourth quarter of 2012 and 105.2% for the year compared with
2011, mainly as a result of acquisitions of income-producing properties and a decrease in the average mortgage
loan interest rate. Recurring FFO per unit for the fourth quarter amounted to 10.0¢ in 2012 compared to 6.3¢ in
2011 and 34.8¢ per unit for fiscal 2012 compared to 23.1¢ in 2011, representing respective increases of 58.7%
for the fourth quarter and 50.6% for the year.
26
ADJUSTED FUNDS FROM
OPERATIONS (AFFO)
The notion of adjusted funds from operations («AFFO») is widely used by real estate companies and real estate
investment trusts. It is an additional measure to assess the Trust’s performance and its ability to maintain and
increase distributions in the long term. However, AFFO is not a financial or accounting measure prescribed by IFRS.
The method of computing may differ from those used by other companies or real estate investment trusts and may
not be used for comparison purposes.
BTB defines AFFO as its FFO, adjusted to take into account other non-cash items that impact comprehensive income
and do not enter into the calculation of FFO, including:
•
•
•
•
•
Straight-line rental income adjustment;
Accretion of effective interest following amortization of financing expenses;
Accretion of the liability component of convertible debentures;
Amortization of other property, plant and equipment;
Unit-based compensation expenses.
The Trust deducts a provision for unrecoverable capital expenses in calculating AFFO. The Trust allocates significant
amounts to the regular maintenance of its properties in an attempt to reduce capital expenses as much as possible.
The allocation for unrecoverable capital expenses is calculated on the basis of 1.3% of rental revenues.
The Trust also deducts a provision for rental fees in the amount of approximately 20¢ per square foot on an annua-
lized basis. Even though quarterly rental fee disbursements vary significantly from one quarter to another, manage-
ment considers that this provision fairly presents, in the long term, the average disbursements that the Trust will
undertake. These disbursements consist of inducements paid or granted when leases are signed, and of brokerage
commissions.
The following table provides a reconciliation of recurring FFO and recurring AFFO for the quarters and years ended
December 31, 2012 and 2011:
Periods ended December 31
(in thousands of dollars, except for per unit data)
Recurring FFO
- Straight-line rental income adjustment
+ Accretion of effective interest
+ Accretion of the liability component of convertible deben-
tures
+ Amortization of property and equipment
+ Unit-based compensation expenses
- Reserve for non-recoverable capital expenses
- Reserve for rental fees
Recurring AFFO
Per unit data
Recurring AFFO
Quarter
Year
2012
1,975
(281)
440
155
14
(30)
(173)
(195)
1,905
2011
938
(51)
377
132
7
10
(142)
(144)
1,127
2012
6,493
(661)
1,412
598
39
(76)
(626)
(730)
6,449
2011
3,165
(498)
1,528
731
30
65
(538)
(572)
3,911
9.7¢
7.6¢
34.5¢
28.6¢
27
The increase of 69% in AFFO for the fourth quarter of 2012 compared with the fourth quarter of 2011 and 65%
for fiscal 2012 compared with fiscal 2011 is due to acquisitions of income-producing properties and a drop in the
average mortgage loan interest rate. AFFO per unit amounted to 9.7¢ compared with 7.6¢ in 2011 for the fourth
quarter and 34.5¢ compared with 28.6¢ for the year. The increase in recurring AFFO per unit takes into account
the dilution resulting from capital contributions in February and December 2012, but does not yet reflect the full use
of funds from accretive acquisitions completed during the periods.
SEGMENTED INFORMATION
The Trust’s operations are derived from four categories of properties, located in Québec and in Ontario. The following
tables present each category’s contribution to revenues and net operating income for the periods ended December
31, 2012 and 2011.
Three-month period ended
December 31, 2012
(in thousands of dollars)
Investment properties
Rental income from properties
Net operating income
Year ended
December 31, 2012
(in thousands of dollars)
Commercial
Office
Industrial
General purpose
Total
$
98,608
2,093
1,496
%
20.2
15.7
19.8
$
200,092
6,606
3,214
%
41.0
49.6
42.6
$
79,236
1,928
1,528
%
16.2
14.5
20.2
$
110,585
2,689
1,313
%
22.6
20.2
17.4
$
488,521
13,316
7,551
Commercial
Office
Industrial
General purpose
Total
Rental income from properties
Net operating income
$
7,898
5,360
%
16.4
19.9
$
23,584
11,418
%
49.0
42.3
$
6,841
5,517
%
14.2
20.4
$
9,795
4,701
%
20.4
17.4
$
48,118
26,996
Three-month period ended
December 31, 2011
(in thousands of dollars)
Commercial
Office
Industrial
General purpose
Total
Investment properties
70,175
20.4
152,600
44.4
53,269
15.5
67,339
19.6
343,383
$
%
$
%
$
%
$
%
$
Investment properties under
development
Rental income from properties
Net operating income
Year ended
December 31, 2011
(in thousands of dollars)
---
1,956
1,284
---
17.8
23.6
3,933
5,539
2,403
100.0
50.4
44.3
---
980
705
---
8.9
13.0
---
2,520
1,040
---
22.9
19.1
3,933
10,995
5,432
Commercial
Office
Industrial
General purpose
Total
Rental income from properties
Net operating income
$
7,630
4,988
%
18.4
22.6
$
20,857
9,987
%
50.3
45.1
$
3,493
2,565
%
8.4
11.6
$
9,479
4,572
%
22.9
20.7
$
41,459
22,112
28
COMPARATIVE SUMMARY OF
QUARTERLY RESULTS
2012
2012
2012
2012
2011
2011
2011
2011
(in thousands of dollars,
except for per unit data)
Q-4
Q-3
Q-2
Q-1
Q-4
Q-3
Q-2
Rental income
13,316
12,080
11,723
10,999
10,995
10,503
10,215
Net operating income
Net income (loss)
Net income (loss) per unit
Recurring funds from
operations (FFO)
Recurring FFO per unit
Recurring adjusted funds
from operations (AFFO)
Recurring AFFO per unit
7,551
5,603
28.4¢
1,975
10.0¢
1,905
9.7¢
7,016
3,429
18.0¢
1,941
10.1¢
1,903
10.0¢
6,708
4,963
26.0¢
1,710
9.0¢
1,739
9.1¢
5,721
3,972
23.9¢
867
5.2¢
899
5.4¢
5,432
746
5.0¢
938
6.5¢
1,136
7.5¢
5,861
4,503
30.5¢
936
6.5¢
1,070
7.0¢
5,760
3,237
22.0¢
1,000
6.8¢
1,312
8.9¢
Q-1
9,746
5,099
(1,036)
(9.9)¢
291
2.8¢
412
3.9¢
FINANCIAL POSITION
The table below presents a summary of assets, liabilities and unitholders’ equity as at December 31, 2012 and
December 31, 2011. It should be read in conjunction with the Trust’s audited annual financial statements.
(in thousands of dollars)
Assets
Investment properties
Property under development
Other assets
totAl Assets
liAbilities
Mortgage loans payable
Convertible debentures
Acquisition line of credit
Other liabilities
totAl liAbilities
equity
Unitholders’ equity
totAl liAbilities And equity
December 31,
2012
December 31,
2011
488,521
---
16,406
504,927
296,523
54,272
14,825
14,529
380,149
124,778
504,927
343,383
3,933
11,622
358,938
212,145
52,938
---
17,215
282,298
76,640
358,938
The main changes to the statement of financial position as at December 31, 2012 compared to the statement of
financial position as at December 31, 2011 primarily reflect investment property acquisitions during 2012, the
issuance of units in February 2012 and December 2012 and mortgage financings and refinancings concluded in
2012.
29
REAL ESTATE PORTFOLIO
Over the years, BTB has fuelled its growth through high-quality property acquisitions based on strict selection criteria,
while maintaining an appropriate allocation among four activity segments: office, commercial, industrial and general-
purpose properties.
Entry into operation
Since its first lessees have arrived, Complexe Lebourgneuf Phase 2 is now considered an investment property. To
date, 118,221 square feet of leasable space of a total of 140,907 square feet is either occupied or has received
a firm lease offer, resulting in an occupancy rate of 83.9%. The Trust has a 75% interest in this building, whose
construction was completed in December 2011. The building was officially inaugurated on March 28, 2012.
Disposal of a building
On March 20, 2012, the Trust sold a building located on Laurentian Boulevard in Montréal because it no longer met
the Trust’s investment criteria. Its historical cost was $1.4 million and the sale resulted in proceeds of disposition of
$1.3 million. The decline in value had already been reflected in the financial statements of prior periods.
Property acquisitions during the second quarter
In April 2012, the Trust acquired three industrial buildings for a total purchase price of $14.7 million:
•
•
•
•
4535 Louis B. Mayer, Laval, Québec – This industrial building, of a leasable area of 41,000 square
feet, is located near highways 13, 15 and 440, within about 10 minutes of the Montréal International
Airport. The property is fully leased to Société Strongco GP Inc. (TSX: SQP), a company specializing in
the sale, leasing and repair of heavy equipment and machinery.
7777 Trans-Canada Highway, Saint-Laurent, Québec – Located in one of the largest industrial parks on
the Island of Montréal along the Trans-Canada Highway, this property has a leasable area of 73,000
square feet. The building is leased on a long-term basis by Plastifab, a subsidiary of PFP Corporation
(TSX: PFP), which specializes in the manufacture of moulded polystyrene products.
208-244 Migneron, Saint-Laurent, Québec – This industrial building is located in the heart of the Saint-
Laurent borough’s industrial park just a few minutes from the Trans-Canada Highway and Côte-de-Liesse
Road, and has a total leasable area of 52,100 square feet. The property is leased to several lessees, of
which the main ones are ClickTouch Amérique Inc., a manufacturer specializing in the custom design and
manufacture of membrane keypads and CPT Canada Power Technology, Canada’s largest distributor of
air-cooled engines and supplies.
In May 2012, the Trust acquired an office building for $14.1 million located at 80 Aberdeen, Ottawa, Onta-
rio near Highway 417. This office building of a leasable area of 53,933 square feet is fully leased. Its main
lessee is the City of Ottawa, which occupies 54% of the building.
Property acquisitions during the third quarter
On September 24, 2012, the Trust acquired an additional 50% interest in Complexe Lebourgneuf Phase 2 for a
purchase price of $12.1 million.
30
Property acquisitions during the fourth quarter
On October 15, 2012, the Trust acquired an office building located at 245 Stafford West in Ottawa, Ontario for a
purchase price of $6.6 million. The 31,757-square-foot building is fully leased. The main tenants are TD Bank and
the LCBO.
On November 1, 2012, the Trust acquired a 50% interest in two commercial retail and office buildings located at
7-9 Montclair in Gatineau, Québec, for $6.1 million. The properties cover a total of 74,941 square feet and are fully
leased. The tenants are a “Houston” chain restaurant, a “L’Aubainerie” store and federal government offices.
On November 5, 2012, the Trust acquired an industrial building located at 311 Ingersoll in Ingersoll, Ontario for a
purchase price of $10.5 million. The 200,615-square-foot property is fully leased to a single tenant, a subsidiary of
an American multinational.
On December 21, 2012, the Trust acquired the following properties:
•
•
•
1 to 9 and 10 Brewer Hunt Way in Ottawa (Kanata), Ontario – Acquired for a price of $18.9 million, this
campus-style office complex of five interlinked buildings has approximately 132,067 square feet of leasable
area. The buildings are fully leased to several tenants including Flextronics (36.9%) (NASDAQ: FLEX) and
Optelian (29.5%).
11600 to 11800 De Salaberry Blvd., Dollard-des-Ormeaux, Québec – This mall known as “Marché de
l’Ouest” was purchased for $27 million. With approximately 128,737 square feet of leasable area, the mall
is a prominent food centre in Montréal’s West Island. The occupancy rate is 99.7% and the main tenants
include IGA (Sobeys), Dollarama (TSX: DOL.TO), Bulk Barn and a Madisons restaurant.
315-325 MacDonald, Saint-Jean-sur-Richelieu, Québec – This $16.9 million property is mainly rented to
retail and office tenants on the ground floor, and office tenants on the second and third floors. The property
has a leasable area of approximately 170,074 square feet and a 97.8% occupancy rate. Its largest tenants
include Saint-Jean-sur-Richelieu City Hall, the city’s police station, and the Government of Québec. These
tenants generate 60% of the property’s gross revenue.
The following table provides summary information about the real estate portfolio:
(in thousands of dollars)
Investment properties (at fair value)
Property under development
Others assets at unamortized value
Gross book value of the Trust
Number of properties
Leasable area (in thousands of sq. ft.)
December 31,
2012
December 31,
2011
488,521
---
16,868
505,389
65
4,341
343,383
3,933
11,987
359,303
54
3,272
Summary by operating segment as at December 31, 2012
Office
Commercial
Industrial
General purpose
Total
Number of proper-
ties
Leasable area
(sq.ft.)
21
14
16
14
65
1,400,181
650,613
1,312,953
977,451
4,341,197
%
32.3
15.0
30.2
27.5
100
31
Subsequent acquisitions
On February 19, 2013, the Trust acquired a 50% interest in a retail complex property located in Saint-Lazare, Qué-
bec, with 15,186 square feet of leasable area, for a purchase price of $2.5 million. Tenants include a Tim Hortons,
an A&W and a Sobey’s convenience store.
REAL ESTATE OPERATIONS
Leasing activities
The following table summarizes changes in available leasable area during the periods ended December 31, 2012,
except for Complexe Lebourgneuf Phase 2:
In square feet
Available leasable area at beginning of period
Available leasable area purchased (sold)
Leasable area of expired leases
Leasable area of leases terminated before term
Leasable area of expired and renewed leases
Leasable area of new leases signed
Other
Available leasable area at end of period
Quarter
312,669
3,603
92,511
1,876
(49,698)
(20,798)
(2,900)
337,263
Year
291,688
(12,837)
350,426
54,213
(262,774)
(89,251)
5,798
337,263
The Trust’s leasing operations were significant during the fourth quarter of 2012. More than 70,000 square feet
were signed with new lessees or renewed during the quarter. During 2012, more than 250,000 square feet were
signed with new lessees or renewed.
The average rate of expired and renewed leases rose 7.76% during the fourth quarter and 6.91% for the year.
The first lessees have arrived at Phase 2 of Complexe Lebourgneuf and the official inauguration was held on March
28, 2012. It has an area of 140,907 square feet, and 118,221 square feet are now occupied or have received a
firm leasing offer. The Trust holds a 75% interest in this property.
Occupancy rates
The following table provides occupancy rates by sector based on firm lease agreements signed as at the date of this report.
Sector of activity
Office
Commercial
Industrial
General purpose
Total portfolio
December 31,
2012
September 30,
2012
June 30,
2012
March 31,
2012
December 31,
2011
86.4%
93.8%
93.8%
94.9%
91.7%
86.7%
92.8%
94.5%
89.5%
90.5%
88.1%
92.4%
94.2%
90.6%
91.0%
89.0%
92.3%
93.2%
90.4%
91.0%
89.4%
89.9%
93.2%
92.1%
91.1%
The overall occupancy rate is up by 0.6% since December 31, 2011 and 1.2% since September 30, 2012. It stands
at 91.7%.
32
The increase in the occupancy rate is due to strong leasing activity in recent months and recent acquisitions with an
occupancy rate higher than the overall rate of the portfolio then in place.
Only the office sector has an occupancy rate lower than the portfolio’s overall rate. The bankruptcy of a major tenant
in Complexe Lebourgneuf Phase 1 and the status of Complexe Lebourgneuf Phase 2, which is still being developed,
partially explain the low occupancy rate in this sector. Management is aware of the situation and has taken steps to
improve this performance indicator. In addition, as a result of strong rental activity in the Lebourgneuf area and a
buoyant real estate market in the Québec City area, the Trust is confident that Complexe Lebourgneuf will achieve a
stable short-term leasing situation, which will improve the occupancy rate in this activity sector.
Lease maturity
The following table shows the lease maturity profile for the coming years:
2013
2014
2015
2016
2017
2018
Office
Leasable area (sq. ft.)
115,284
143,376
216,514
166,096
162,225
100,738
Average lease rate/square foot ($)
% of office portfolio
Commercial
Leasable area (sq. ft.)
11.58
8.23%
13.54
10.24%
13.63
14.85
12.59
15.46%
11.86%
11.59%
12.12
7.19%
37,351
54,815
47,419
45,515
20,778
101,261
Average lease rate/square foot ($)
% of commercial portfolio
Industrial
12.57
5.74%
10.84
8.43%
Leasable area (sq. ft.)
34,115
130,933
Average lease rate/square foot ($)
% of industrial portfolio
General purpose
Leasable area (sq. ft.)
6.48
2.60%
3.76
9.97%
14.02
7.29%
4,325
5.45
0.33%
10.34
7.00%
19.28
3.19%
11.70
15.56%
60,013
554,539
4.64
11.27
4.57%
42.24%
0.00%
---
---
46,874
66,387
75,101
145,975
49,503
83,071
Average lease rate/square foot ($)
% of general purpose portfolio
10.46
4.80%
15.68
6.79%
8.65
7.68%
9.20
14.93%
13.28
5.06%
11.83
8.50%
Total portfolio
Leasable area (sq. ft.)
233,624
395,511
343,359
417,599
787,045
285,070
Average lease rate/square foot ($)
% of portfolio
10.77
5.38%
10.29
9.11%
12.49
7.91%
11.87
9.62%
7.21
18.13%
11.89
6.57%
Top 10 lessees
As at December 31, 2012, BTB managed more than 700 leases, with an average area of 6,000 square feet. The
three largest lessees are Société immobilière du Québec (SIQ), the «Epicia» group and Melco Doors and Windows
Corp., accounting respectively for 4.6%, 2.8% and 2.3% of revenues, generated by a number of leases whose matu-
rities are spread over time. Approximately 29% of the Trust’s total revenues are generated by leases entered into
with government agencies (federal, provincial and municipal) and public companies, ensuring stable and high-quality
cash flows for the Trust’s operating activities.
33
The following table shows the contribution of the Trust’s top 10 lessees as a percentage of revenues as at December
31, 2012:
Client
Société immobilière du Québec (SIQ)
Epicia group
Melco Doors & Windows Corp.
Germain Larivière Inc.
Groupe Aro Inc.
Commission de la Santé et de la Sécurité du Travail (CSST)
Hydro-Québec
Canada Post Corporation
Canadian Tire
Cornwall Warehousing Ltd.
% of revenue
Leased area
(square feet)
4.6
2.8
2.3
2.3
1.9
1.9
1.8
1.7
1.5
1.4
123,239
87,190
214,000
101,194
40,825
46,435
37,364
61,623
56,025
157,879
CAPITAL RESOURCES
Long-term debt
The following table shows the balances of BTB’s indebtedness as at December 31, 2012, including mortgage loans
payable and convertible debentures, based on year of maturity and corresponding weighted average contractual
interest rates:
Year of maturity
Balance of convertible
debentures ($)
Balance of mortgages pay-
able ($)
Weighted average contrac-
tual interest rate (%)
2013
2014
2015
2016
2017
2018
2019 and thereafter
Total
13,020(1)
---
---
23,000
---
23,000
---
59,020
40,455
68,396
15,514
66,064
65,969
12,508
27,308
296,214
5.89
5.32
5.60
5.12
4.25
6.04
4.95
5.21
(1)
February 2013 in the amount of $23,000.
Will be redeemed on March 31, 2013, from the proceeds of the issuance of convertible debentures series E issued in
As at December 31, 2012, the weighted average contractual interest rate of the Trust’s long-term debt stood at
5.21%, i.e. 4.69% for mortgages payable and 7.82% for convertible debentures. The average maturity of mortgage
loans is 4.51 years.
34
Mortgage loans payable
As at December 31, 2012, the Trust’s mortgage loans payable amounted to $296.2 million compared to $213.0
million as at December 31, 2011, before deferred financing costs and valuation adjustments, an increase of $83.2
million due to acquisitions and refinancings in the last four quarters.
As at December 31, 2012, the weighted average interest rate was 4.69%, compared to 5.27% for mortgage loans
on the books as at December 31, 2011, a drop of 58 basis points. Of the balance of $296.2 million in loans as at
December 31, 2012, $280.3 million bear interest at fixed rates, with the remaining $15.9 million bearing interest
at floating rates. The latter consist of a $2.4 million loan that is in the process of being renewed and the $13.5 million
construction loan for Complexe Lebourgneuf Phase 2.
BTB attempts to spread the terms of its mortgages over many years in order to mitigate the risk associated with
renewing them. The following table summarizes changes in mortage loan payable during fiscal 2012:
(in thousands of dollars)
Balance at beginning of period
Mortgage loans contracted or assumed
Balance repaid at maturity
Monthly principal repayments
Balance as at December 31, 2012
N.B.: Before unamortized financing costs.
Quarter
239,581
99,973
(41,051)
(2,289)
296,214
Year to date
212,998
130,351
(41,051)
(6,084)
296,214
All of the Trust’s properties were mortgaged as at December 31, 2012. Unamortized loan financing costs totalled
$1,802 and are amortized under the effective interest method over the term of the loans.
The following table, as at December 31, 2012, shows future mortgage loan repayments for the next few years:
Years ended December 31 (in thousands of dollars)
Maturity
Principal repayment
Balance at maturity
2013
2014
2015
2016
2017
2018
2019 and thereafter
Total
7,659
6,526
5,539
5,048
2,662
974
19,226
47,634
39,741
65,935
14,121
57,412
57,527
10,687
3,157
248,580
Plus: Valuation adjustments on assumed loans
Less: Unamortized financing costs
Balance as at December 31, 2012
Total
47,400
72,461
19,660
62,460
60,189
11,661
22,383
296,214
2,111
(1,802)
296,523
(%) of total
16.0
24.5
6.6
21.1
20.3
3.9
7.6
100.0
35
Financings completed
The Trust renegotiated the renewal of an acquisitions line of credit totalling $15 million on more favourable terms.
This credit line had been fully used on December 31, 2012.
As a result of acquisitions completed at the end of the quarter, the Trust assumed or contracted the following mor-
tgage loans:
•
•
•
•
•
•
•
•
•
On October 15, 2012, new $4.3 million loan, 3.25%, maturing in 2017, on the property located in Ottawa,
Ontario.
On October 31, 2012, refinancing of two loans totalling $41 million and bearing interest at 6.17% by a new
$43 million loan, 4.11%, maturing in 2017, on seven properties already owned by the Trust. The loan will
generate annual savings of more than $0.8 million.
On November 1, 2012, new $4.2 million loan, 3.18%, maturing in 2017, on the property located in Gati-
neau, Québec.
On November 5, 2012, assumption of a $6.6 million loan, 6.14%, maturing in 2014, on the property loca-
ted in Ingersoll, Ontario.
On December 21, 2012, new $11.4 million loan, 3.63%, maturing in 2018, on the property located on
Brewer Hunt Way in Ottawa, Ontario.
On December 21, 2012, assumption of a $7.4 million loan, 6.80%, maturing in April 2024, on the property
located on De Salaberry Blvd. in Dollard-des-Ormeaux, Québec.
On December 21, 2012, new second-ranking $8.6 million loan in the form of balance of sale, 4.5%, matu-
ring on February 28, 2013, on the property located on De Salaberry Blvd. in Dollard-des-Ormeaux. This loan
was fully refinanced with the first-ranking lender on February 28, 2013 with a second-ranking loan, $8.6
million, 4.91%, maturing in April 2024.
On December 21, 2012, assumption of a $7.3 million loan, 5.63%, maturing in June 2016, on the property
located on MacDonald Blvd., St-Jean-sur-Richelieu.
On December 21, 2012, new $2.75 million second-ranking loan in the form of balance of sale price, 4.5%,
maturing on February 28, 2013, on the property located on MacDonald Blvd., St-Jean-sur-Richelieu. This
loan was fully refinanced in February 2013 with a $2.75 million second-ranking mortgage loan, 5.5%,
maturing in June 2016.
Convertible debentures
(a) Series B
In March 2008, the Trust issued Series B subordinated unsecured convertible debentures in the amount of $13 mil-
lion. Interest is at the rate of 8.5% and is payable semi-annually. The debentures mature on March 31, 2013. Subject
to certain terms and conditions, the debentures are convertible at the option of the holder at any time no later than
March 31, 2013. The conversion price per unit is of $11.50 (the «Series B conversion price»). As at December 31,
2012, the closing market price of BTB units was $4.26.
The debentures are also redeemable at the discretion of the Trust, subject to certain terms and conditions, as of
March 31, 2012, at a price equal to the principal amount thereof plus accrued and unpaid interest provided that the
current market price of the units is at least 125% of the Series B conversion price.
36
The Trust may, at its option and subject to certain conditions, elect to satisfy its obligation to pay the principal amount
of the Series B debentures by issuing freely tradable units to Series B debenture holders.
On the date of issuance, the debentures were recorded as a $12.3 million non-derivative liability component and a
$0.7 million financial derivative instrument component.
(b) Series C
In January 2011, the Trust issued Series C subordinated, convertible, unsecured debentures bearing 8% interest, in
the amount of $23 million. Interest is payable semi-annually and the debentures mature on January 31, 2016. The
debentures are convertible at the option of the holder at any time no later than January 31, 2016, subject to certain
conditions. The conversion price is $5.00 per unit (the «Series C conversion price»). As at December 31, 2012, the
closing market price of BTB units was $4.26.
As of January 31, 2014, but before January 31, 2015, under certain conditions, the debentures will be redeemable
by the Trust at a redemption price equal to their principal amount plus accrued, unpaid interest, provided that the
unit market price is at least 125% of the Series C conversion price and as of January 31, 2015, but before January
31, 2016, to a price equal to their principal amount plus accrued, unpaid interest.
The Trust may, at its option and subject to certain conditions, elect to satisfy its obligation to pay the principal amount
of the Series C debentures by issuing freely tradable units to Series C debenture holders.
On the date of issuance, the debentures were recorded as a $21.6 million non-derivative liability component and a
$1.4 million financial derivative instrument component.
(c) Series D
In July 2011, the Trust issued Series D subordinated, convertible, unsecured debentures, bearing 7.25% interest,
in the amount of $23 million. Interest is payable semi-annually and the debentures mature on July 31, 2018. The
debentures are convertible at the option of the holder at any time no later than July 31, 2018, subject to certain
conditions. The conversion price is $6.10 per unit (the «Series D conversion price»). As at December 31, 2012, the
closing market price of BTB units was $4.26.
As of July 31, 2014, but before July 31, 2016, under certain conditions, the debentures will be redeemable by the
Trust at a redemption price equal to their initial principal amount plus accrued, unpaid interest, provided that the unit
market price is at least 125% of the Series D conversion price and, as of July 31, 2016, but before July 31, 2018,
to a price equal to their principal amount plus accrued, unpaid interest.
The Trust may, at its option and subject to certain conditions, elect to satisfy its obligation to pay the principal amount
of the Series D debentures by issuing freely tradable units to Series D debenture holders.
On the date of issuance, the debentures were recorded as a $21.3 million non-derivative liability component and a
$1.7 million financial derivative instrument component.
As at December 31, 2012, none of the three series met the conditions necessary for an authorized redemption.
Contractual interest rate
Effective interest rate
Date of issuance
Unit conversion price
Date of interest payment
Series B
8.5%
11.15%
Series C
8%
9.78%
Series D
7.25%
8.47%
March 2008
January 2011
July 2011
$11.50
$5.00
March 31
and September 30
January 31
and July 31
$6.10
January 31
and July 31
Total
Maturity date
March 2013
January 2016
July 2018
Balance as at December 31, 2012
12,913
20,990
20,369
54,272
37
Subsequent issuance – Series E debentures
On February 20, 2013 and February 28, 2013, to exercise the over-allotment option, BTB issued Series E 6.90%
convertible unsecured subordinated debentures in the amount of $23,000,000. The interest will be payable semi-
annually and the debentures mature on March 31, 2020. The debentures are convertible at the option of the holder
at any time, no later than March 31, 2020, subject to certain conditions. The conversion price will be $6.15 per unit.
Bank loans – Operating credit facility
BTB has an operating credit facility of $2 million with a Canadian chartered bank. This credit facility is guaranteed by
a collateral mortgage on two properties and bears interest at the bank’s prime rate, plus 1%. As at December 31,
2012, the credit facility had not been used.
Bank loans – Acquisition credit facility
BTB has an acquisition credit facility of $15 million with a capital corporation. The credit facility is secured by a first-
and second-ranking mortgage on certain properties. As at December 31, 2012, the credit facility had been fully
used.
Debt ratio
The following table presents the Trust’s debt ratios as at December 31, 2012 and 2011.
(in thousands of dollars)
Mortgage loans payable (1)
Acquisition credit facility(1)
Convertible debentures (1)
Total long-term debt
Gross book value of the Trust
Debt ratio (excluding convertible debentures)
Total debt ratio
(1) Gross amounts
December 31, 2012
December 31, 2011
296,214
15,000
59,020
370,234
505,389
61.6%
73.3%
212,998
---
59,020
272,018
359,303
59.3%
75.7%
According to the table above, the debt ratio excluding the convertible debentures as at December 31, 2012,
amounted to 61.6% compared to 59.3% as at December 31, 2011. The increase reflects recent acquisitions with
debt ratios higher than the portfolio average and use of the acquisition line of credit in the amount of $15,000. The
Trust seeks to finance its acquisitions with debt ratios of 60% to 70% because the cost of mortgage financings is
lower than the Trust’s capital cost. After including the convertible debentures, the ratio stood at 73.3% compared
to 75.7% one year earlier.
Under the terms of its trust agreement, the Trust cannot contract a mortgage loan if, after having contracted the
said loan, the total debt exceeds 75% of the gross carrying amount of the Trust. When establishing this calculation,
the convertible debentures are not considered in the calculation of total indebtedness. Moreover, also under its trust
agreement, in case of default with respect to this condition, the Trust has 12 months from the date of recognizing
this default to perform the transactions necessary to remedy the situation.
38
Interest coverage ratio
The Trust calculates its interest coverage ratio by dividing net operating income by interest expense net of interest
income. The interest coverage ratio is used to assess BTB’s ability to pay interest on its debt using its operating reve-
nues. For the quarter ended December 31, 2012, the interest coverage ratio stood at 1.71, up 30 points from the
fourth quarter of 2011, and at 1.64 for fiscal 2012, up 18 points from 2011, showing the Trust’s financial strength
and abililty to cover the cost of its debt.
Periods ended December 31, 2012
(in thousands of dollars, except for the ratios)
Net operating income
Interest expense, net of interest income
Interest coverage ratio
Unitholders’ equity
Unitholders’ equity consists of the following:
(in thousands of dollars)
Trust units
Cumulative profit (loss)
Cumulative distributions to unitholders
Consolidation
Quarter
Year
2012
2011
7,551
4,426
1.71
5,432
3,855
1.41
2012
26,996
16,497
1.64
2011
22,112
15,193
1.46
December 31, 2012
December 31, 2011
137,330
2,331
(14,883)
124,778
99,503
(15,636)
(7,227)
76,640
On June 7, 2012, the Trust consolidated its outstanding units at a ratio of five pre-consolidation units for one post-
consolidation unit. Prior period comparative figures were adjusted accordingly.
Distribution reinvestment plan
On October 1, 2011, the Trust implemented a distribution reinvestment plan under which unitholders may elect
to receive distributions in units, with a 5% discount on their market value. Under the program, 40,206 units were
issued during the last quarter and 132,857 during fiscal 2012.
The following table summarizes units issued and the weighted number of units for the specified periods:
Periods ended December 31
(in # of units)
Quarter
Cumulative
2012
2011
2012
2011
Units outstanding, beginning of period
19,153,591
14,797,945
14,810,790
10,338,345
Units issued
Public placement and warrants exercised
4,598,000
---
8,848,150
4,459,600
Distribution reinvestment plan
40,206
12,845
132,857
12,845
Units outstanding, end of period
23,791,797
14,810,790
23,791,797
14,810,790
Weighted average number of units
outstanding
19,723,581
14,801,635
18,668,871
13,698,715
39
Unit options
The Trust may grant options to its trustees, senior officers, investor relations consultants and technical consultants.
The maximum number of units reserved for issuance under the unit option plan may not exceed 10% of the total
number of issued and outstanding units. The trustees have and will set the exercise price at the time that an option
is granted under the plan, which exercise price shall not be less than the quoted market price of the units, as deter-
mined under a related agreement. The options have a maximum term of five years from the date of grant.
Details of unit options granted during the reporting periods are as follows:
Quarters ended December 31
2012
2011
Outstanding, beginning of quarter
Granted
Expired
Outstanding, end of quarter
Options vested since December 31
Weighted average remaining term to expiry
(years)
Unit options
551,000
---
(324,000)
227,000
227,000
Weighted aver-
age exercise
price ($)
10.20
---
13.77
5.07
5.07
1.59
Unit options
557,000
108,000
(114,000)
551,000
546,000
Weighted aver-
age exercise
price ($)
11.30
4.55
10.20
10.20
10.25
1.33
The purpose of granting unit options is to encourage the holder to acquire an ownership interest that increases over
time and provides a financial incentive for the holder to consider the long-term interests of BTB and its unitholders.
Options also serve as non-cash compensation, thus preserving the cash resources of BTB during its early years.
Deferred unit compensation plan
The Trust has implemented a deferred unit compensation plan for trustees and certain officers. Under the program,
beneficiaries may elect to receive their compensation in cash, deferred units or a combination of both.
The following table summarizes deferred units issued during the year:
Years ended December 31
(in # of units)
Deferred units outstanding, beginning of period
Deferred units issued
Distributions converted to deferred units
Deferred units outstanding, end of period
Subscription warrants
2012
---
15,264
717
15,981
2011
---
---
---
---
At the time of disbursement of the acquisition line of credit, the Trust granted Firm Capital Mortgage Fund a
disbursement fee of 500,000 warrants to purchase units of the Trust. Each warrant entitled its owner to purchase
one unit of the Trust at a price of $3.822 per unit until September 1, 2012 and until May 31, 2013 if the loan is
renewed. These warrants, which were exercised in March 2012, provided cash of $1.9 million.
Years ended December 31
Outstanding, beginning of year
Warrants granted
Warrants exercised
Outstanding, end of year
40
Number
500,000
---
(500,000)
---
2012
2011
Exercise price
Number
Exercise price
3,822
---
3,822
---
---
500,000
---
500,000
---
3.822
---
3.822
Off-balance sheet arrangements and contractual commitments
BTB does not have any off-balance sheet arrangements that have or are likely to have an impact on its operating
results or financial position, specifically its cash position and sources of financing.
The Trust has no contractual commitments other than those arising from long-term debt.
During the year ended December 31, 2012, BTB complied with all of its loan commitments and was not in default
with any covenant at the balance sheet date.
INCOME TAXES
The Trust is taxed as a mutual fund trust for Canadian income tax purposes. The trustees intend to distribute
or allocate all of the taxable income to its unitholders and to deduct these distributions for income tax purposes.
Accordingly, prior to September 12, 2007, no provision for income taxes was recorded in the consolidated financial
statements.
On September 12, 2007, amendments to the Income Tax Act (Canada) were proposed, which modified the tax
treatment of certain income trusts and limited partnerships that are specified investment flow-through trusts or
partnerships («SIFTs»). On February 6, 2009, the Minister of Finance of Canada introduced legislation including cer-
tain measures previously announced and modifying the tax treatment applicable to SIFTs, which came into force on
March 12, 2009. Pursuant to these measures, beginning on January 1, 2011, certain distributions from a SIFT that
are related to the earnings arising from a business carried on in Canada by such SIFT will no longer be deductible
from its income and will therefore be taxable in the hands of such SIFT at a rate generally similar to the combined
provincial and federal tax rates applicable to the earnings of a corporate entity. The allocations or distributions of
income and of capital gains subject to the SIFT rules will be similar to the tax treatment of a taxable dividend from a
taxable Canadian corporation in the hands of the beneficiaries or partners of the SIFT.
Real estate investment trusts that satisfy specified conditions (the «REIT Exception») are excluded from the SIFT
definition and will therefore not be subject to the SIFT rules. In order to qualify for the REIT Exception in respect of a
taxation year (i) the REIT must, at no time in that taxation year, hold non-portfolio property other than «qualified REIT
properties» (as defined in the Income Tax Act (Canada)); (ii) not less than 95% of the REIT’s revenues for that taxation
year must be derived from rent from real or immovable properties, interest, capital gains from dispositions of real
or immovable properties, dividends and royalties; (iii) not less than 75% of the REIT’s revenues for that taxation year
must be derived from rent from real or immovable properties located in Canada; and (iv) the REIT must, throughout
the taxation year, hold real or immovable properties located in Canada, cash and certain government guaranteed
debt or other bonds guaranteed by the Canadian government with a total fair market value that is not less than 75%
of the REIT’s equity value.
As at December 31, 2012, BTB met all of these conditions and qualified as a REIT. As a result, the SIFT trust tax
rules do not apply to BTB. BTB’s management intends to take the necessary steps to meet the conditions for the
REIT Exception on an on-going basis in the future.
41
TAXATION OF UNITHOLDERS
For Canadian unitholders, distributions for taxation purposes are qualified as follows:
Years ended December 31
Taxable as other income
Tax deferred
Total
2012
---
100%
100%
2011
---
100%
100%
IMPACT OF ADOPTING IFRS
Since January 1, 2011, the Trust is required to present its interim and annual financial statements in accordance
with International Financial Reporting Standards (“IFRS”), with comparative IFRS figures. IFRS are based on a concep-
tual framework similar to Canadian GAAP; however, significant differences exist in the recognition, measurement,
presentation and disclosure for certain accounting items. The adoption of IFRS had a material impact on the conso-
lidated statements of financial position (formerly called the balance sheet) and comprehensive income (formerly
called the statement of income). The Trust prepared an opening statement of financial position as at January 1,
2010 (changeover date) in accordance with IFRS, restated all 2010 operations based on the new standards and
converted the balance sheet as at December 31, 2010 to an IFRS statement of financial position. Details and
explanations concerning these conversions were presented in the first quarter 2011 MD&A dated June 14, 2011.
The reconciliation between Canadian GAAP and IFRS for unitholders’ equity as at December 31, 2010 and the
reconciliation of net income for the year ended December 31, 2010 between Canadian GAAP and IFRS were
recorded in the management discussion and analysis of December 31, 2011, dated March 28, 2012. Before the
adoption of IFRS, the Trust’s financial statements were prepared in accordance with Canadian generally accepted
accounting principles («GAAP»).
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES AND
ESTIMATES
BTB’s significant accounting policies are described in Notes 2 and 3 to the financial statements as at December
31, 2012 and the reader is invited to refer to these financial statements. Management believes that the accounting
methods most affected by estimates and by management’s discretionary decisions during the preparation of finan-
cial statements are outlined below:
42
a) Basis of preparation
BTB’s consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards («IFRS») applicable to the preparation of financial statements. The accounting policies and application
methods thereof have been consistently applied throughout each of the years presented in these consolidated finan-
cial statements.
b) Basis of presentation
Consolidation
These consolidated financial statements include the accounts of BTB and its wholly-owned subsidiaries and its
proportionate share of the assets, liabilities, revenues and expenses of the property it co-owns.
Use of estimates
The preparation of financial statements in accordance with IFRS requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities in the financial statements. Those esti-
mates and assumptions also affect the disclosure of contingencies at the date of the financial statements and
the reported amounts of revenues and expenses during the year. Actual results that could differ materially from
those estimates are described below:
•
Investment property
Investment property is recorded at fair value at the balance sheet date. Fair value is determined using both
management’s internal measurements and valuations from independent real estate appraisers, perfor-
med in accordance with recognized valuation techniques. The techniques used include the capitalized net
operating income method and the discounted cash flow method, including estimates of capitalization rates
and future net operating income as well as estimates of discount rates and future cash flows applicable to
investment property, respectively.
Management’s internal fair value measurements rely on internal financial information and are corrobora-
ted by capitalization rates obtained from independent experts. However, internal measurements and values
obtained from independent appraisers are both subject to significant judgments, estimates and assump-
tions about market conditions at the balance sheet date.
•
Financial instruments
Financial instruments must be initially measured at fair value. BTB must also estimate and disclose the
fair value of certain financial instruments for information purposes in the financial statements presented
for subsequent periods. When fair value cannot be derived from active markets, it is determined using
valuation techniques, namely the discounted cash flow method. If possible, data related to these models
are derived from observable markets, and if not, judgment is required to determine fair value. Judgments
take into account liquidity risk, credit risk and volatility. Any changes in assumptions related to these factors
could modify the reported fair value of financial instruments.
•
Convertible debentures
BTB’s management must estimate, if applicable, the fair value of the conversion option included in conver-
tible debentures presented as liability. Should this estimate be inappropriate, it will have an impact on the
interest expense recognized in the financial statements for the periods subsequent to their issuance.
43
•
Business combinations
Business combinations are accounted for using the acquisition method. The cost of a business combination
is the value, at the acquisition date, of the assets transferred, liabilities incurred and Unitholders’ equity ins-
truments issued in exchange for control of the acquired business. When the cost of a business combination
exceeds the fair value of the assets acquired and liabilities assumed, such excess is recorded as goodwill.
Transaction-related costs, as well as costs related to the acquisition of real estate assets, are expensed
as incurred.
BTB accounts for investment property acquisitions in accordance with IFRS 3, “Business Combinations”
(“IFRS 3”), only when it considers that a business has been acquired. Under IFRS 3, a business is defined
as an integrated set of activities and assets conducted and managed for the purpose of providing a direct
return to investors in the form of lower costs or other economic benefits. If the acquisition does not cor-
respond to this definition, a group of assets is deemed to have been acquired. If goodwill is present, the
acquisition is presumed to be a business. Judgment is therefore used by management in determining if the
acquisition qualifies as a business combination under IFRS 3 or as an asset acquisition.
Generally, when BTB acquires a property or property portfolio (and not a legal entity) without taking on the
management of personnel or acquiring an operational platform, it categorizes the acquisition as an asset
acquisition.
•
Unit options
The compensation expense related to unit options is measured at fair value and is amortized based on the
graded vesting method using the Black-Scholes model. This model requires management to make many
estimates on various data, such as expected life, volatility, the weighted average dividend yield of distribu-
tions, the weighted average risk-free interest rate and the expected forfeiture rate. Any changes to certain
assumptions could have an impact on the compensation expense related to unit options recognized in the
financial statements.
•
Investment property
Investment property is immovable property held by the Trust to earn rentals or for capital appreciation, or
both, rather than for use in the production or supply of goods and services or for administrative purposes,
or for sale in the ordinary course of business. Investment properties include income properties, properties
under development and land held for future development if necessary.
BTB presents its investment property based on the fair value model. Fair value is the amount for which the
properties could be exchanged between knowledgeable, willing parties in an arm’s length transaction. Any
change in the fair value is recognized in income for the period in which it arises. The fair value of investment
property shall reflect market conditions at the end of the reporting period. Fair value is time-specific as of
a given date. As market conditions could change, the amount presented as fair value could be incorrect or
inadequate at another date. The fair value of investment property is based on measurements derived from
management’s estimates or from independent appraisers, plus capital expenditures made since the most
recent appraisal. Management regularly reviews appraisals of its investment property between the apprai-
sal dates in order to determine whether the related assumptions, such as net operating income and capi-
talization rates, still apply. These assumptions are compared to market data issued by independent experts.
When increases or decreases are required, BTB adjusts the carrying amount of its investment property.
44
Capitalization of costs
BTB capitalizes into investment property the costs incurred to increase their capacity, replace certain compo-
nents and make improvements after the acquisition date. The Trust also capitalizes major maintenance and re-
pair expenses providing benefits that will last far beyond the end of the reporting period. When BTB determines
that the acquisition of an investment property is an asset acquisition, the Trust capitalizes all costs that are
directly related to the acquisition of the property, as well as all expenses incurred to carry out the transaction.
Concerning properties under development and re-development and land held for future development, the Trust
capitalizes all direct costs incurred for their acquisition, layout and construction. Such capitalized costs also
include borrowing costs that are directly attributable to the property concerned. BTB begins capitalizing bor-
rowing costs when it incurs expenditures for the properties in question and it undertakes activities that are
necessary to prepare these properties for their intended use. BTB ceases capitalizing borrowing costs when
the asset is ready for management’s intended use.
Restricted cash
Restricted cash mainly includes amounts which are held in interest-bearing reserve accounts and are expected
to be utilized over the coming years to fund certain expenses related to investments, as well as supplementary
amounts drawn by financial institutions to cover the payment of realty taxes for certain investment properties.
Revenue recognition
Management has determined that all leases concluded between BTB and its tenants are operating leases. Mini-
mum lease payments are recognized using the straight-line method over the term of the related leases, and the
excess of payments recognized over amounts payable is recorded on BTB’s Consolidated Balance Sheet under
investment property. Leases generally provide for the tenants’ payment of maintenance expenses of common
elements, realty taxes and other operating costs, such payment being recognized as operating revenues in the
period when the right to payment vests. Percentage leases are recognized when the minimum sales level has
been reached pursuant to the related leases. Lease cancellation fees are recognized when they are due. Finally,
incidental income is recognized when services are rendered.
Cash and cash equivalents
Cash and cash equivalents consist of cash and investments that are readily convertible into a known amount
of cash, that are not subject to a significant risk of change in value and that have original maturities of three
months or less. Bank borrowings are considered to be a financing activity.
Deferred financing costs
Issue costs incurred to obtain term loan financing, typically through mortgage loans, convertible debentures,
are applied against the borrowings and are amortized using the effective interest rate method over the term of
the related debt.
Leasing costs
Leasehold improvements, incurred directly by BTB or through an allowance to tenants, as well as initial direct
costs, mostly brokerage fees incurred to negotiate or prepare leases, are not amortized.
Tenant inducements, mostly the payment of a monetary allowance to tenants and the granting of free occu-
pancy periods, are recognized in profit or loss and are subsequently amortized on a straight-line basis over the
related lease term.
All these costs are added to the carrying amount of investment property as they are incurred.
45
Income taxes
BTB is considered a mutual fund trust for income tax purposes. In exercising their discretionary power
regarding distributions under the Contract of Trust, the trustees intend to distribute or designate all taxable
income directly earned by BTB to unitholders and to deduct such distributions and designations for income tax
purposes. Therefore, no provision for income taxes is required for the Trust.
Incentive plan based on equity securities
BTB has an incentive plan based on equity securities in order to attract, retain and motivate those who act as
service providers. This plan does not provide for any cash settlements.
Unit purchase options
The Trust recognizes compensation expense on unit options granted, based on their fair value, which is
calculated using an option valuation model. The compensation expense is amortized using the graded ves-
ting method.
Deferred units
The Trust recognizes compensation expense on deferred unit options granted, based on their fair value on
the date of the grant. The fair value of restricted units represents the market value of BTB units on the date
of the grant. The compensation expense is amortized using the graded vesting method.
Per unit calculations
Basic net income per unit is calculated based on the weighted average number of units outstanding for the year.
The calculation of net income per unit on a diluted basis considers the potential exercise of outstanding unit
options and the potential issuance of units under convertible debentures, if dilutive.
Segment information
Segment information is presented in accordance with IFRS 8, which recommends presenting and disclosing
segment information in accordance with information that is regularly assessed by the chief operating decision
makers in order to determine the performance of each segment.
NEW ACCOUNTING POLICIES
The following paragraphs present accounting standards that apply to BTB but that have not yet been adopted:
IFRS 9 – “Financial Instruments”
In November 2009, the IASB issued IFRS 9, “Financial Instruments: Classification and Measurement,” a new stan-
dard on the classification and measurement of financial instruments, which will replace IAS 39, “Financial Instru-
ments: Recognition and Measurement.” IFRS 9 presents two measurement categories: amortized cost and fair
value. All equity instruments are measured at fair value. Debt instruments are measured at amortized cost only if
they are held in order to collect contractual cash f lows and if the cash flows are solely payments of principal and
interest. Otherwise, they are held at fair value through profit or loss.
Requirements for financial liabilities were added in October 2010 and most of them were carried forward unchan-
ged from IAS 39, except for the fair value changes attributable to the credit risk of financial liabilities designated at
fair value through profit or loss, which should usually be included in comprehensive income.
46
This new standard is effective for annual periods beginning on or after January 1, 2015, and early adoption is permit-
ted. BTB is currently evaluating the impact that this new standard will have on its financial statements.
In May 2011, the IASB issued the following standards: IFRS 10, “Consolidated Financial Statements,” IFRS 11, “Joint
Arrangements,” IFRS 12, “Disclosure of Interests in Other Entities,” IAS 27, “Separate Financial Statements,” IFRS
13, “Fair Value Measurement,” and the amended IAS 28, “Investments in Associates and Joint Ventures.” Each of the
new standards is effective for annual periods beginning on or after January 1, 2013, with early adoption permitted.
The following is a brief summary of the new standards:
IFRS 10 – “Consolidated Financial Statements”
IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee. Under
existing IFRS, consolidation is required when an entity has the power to govern the financial and operating policies
of an entity so as to obtain benefits from its activities. IFRS 10 replaces SIC-12, “Consolidation—Special Purpose
Entities” and parts of IAS 27, “Consolidated and Separate Financial Statements.” BTB does not expect the adoption
of this new standard to have any impact on its consolidated financial statements.
IFRS 11 – “Joint Arrangements”
IFRS 11 requires a venturer to classify its interest in a joint arrangement as a joint venture or joint operation. Joint
ventures will be accounted for using the equity method of accounting, whereas for a joint operation, the venturer will
recognize its share of the assets, liabilities, revenue and expenses of the joint operation. Under existing IFRS, entities
may elect to account for interests in joint ventures using proportionate consolidation or the equity method. IFRS 11
supersedes IAS 31, “Interests in Joint Ventures,” and SIC-13, “Jointly Controlled Entities—Non-monetary Contribu-
tions by Venturers.” BTB does not expect the adoption of this new standard to have any impact on its consolidated
financial statements.
IFRS 12 – “Disclosure of Interests in Other Entities”
IFRS 12 establishes disclosure requirements for interests in other entities, such as joint arrangements, associates,
special purpose entities and off-balance sheet instruments. The standard carries forward existing disclosures and
also introduces significant additional disclosure requirements that address the nature of, and risks associated with,
an entity’s interests in other entities. BTB does not expect the adoption of this new standard to have any impact on
its consolidated financial statements.
IFRS 13 – “Fair Value Measurement”
IFRS 13 is a comprehensive standard on fair value measurement and disclosure requirements for use across all
IFRS standards. The new standard clarifies that fair value is the price that would be received to sell an asset, or
paid to transfer a liability in an orderly transaction between market participants, at the measurement date. It also
establishes disclosures about fair value measurement. Under existing IFRS, guidance on measuring and disclosing
fair value is dispersed among the specific standards requiring fair value measurements and in many cases does not
reflect a clear measurement basis or consistent disclosures. BTB will add the required information as of the first
quarter of 2013.
Amendments to other standards
In addition, there have been amendments to existing standards, including IAS 27, “Consolidated and Separate Finan-
cial Statements,” and IAS 28, “Investments in Associates and Joint Ventures.” IAS 27 addresses accounting for
subsidiaries, jointly controlled entities and associates in separate financial statements. IAS 28 has been amended to
include joint ventures in its scope and to address the changes in IFRS 10, IFRS 11, IFRS 12 and IFRS 13. BTB does
not expect the adoption of this new standard to have any impact on its consolidated financial statements.
47
RISKS AND UNCERTAINTIES
Like all real estate entities, the BTB REIT is exposed, in the normal course of business, to various risk factors that may
have an impact on its capacity to attain its strategic objectives. Accordingly, unitholders should consider the following
risks and uncertainties when assessing the Trust’s outlook in terms of investment potential.
BTB has not identified any significant changes to the risks and uncertainties to which it is exposed in its business.
Access to capital and debt financing, and current global financial conditions
The real estate industry is capital-intensive. BTB will require access to capital to maintain its properties, as well as to
fund its growth strategy and significant capital expenditures from time to time. There can be no assurance that BTB
will have access to sufficient capital (including debt financing) on terms favorable to BTB for future property acqui-
sitions and developments, including for the financing or refinancing of properties, for funding operating expenses or
for other purposes. In addition, BTB may not be able to borrow funds under its credit facilities due to limitations on
BTB’s ability to incur debt set forth in the Contract of Trust. Failure by BTB to access required capital could adversely
impact BTB’s financial position and results of operations and reduce the amount of cash available for distributions.
Recent market events and conditions, including disruptions in international and regional credit markets and in other
financial systems and deteriorating global economic conditions, could impede BTB’s access to capital (including debt
financing) or increase the cost of such capital. Failure to raise capital in a timely manner or under favourable terms
could have a material adverse effect on BTB’s financial position and results of operations, including on its acquisition
and development program.
Debt financing
BTB has and will continue to have substantial outstanding consolidated borrowings comprised primarily of hypothecs,
property mortgages, debentures, and borrowings under its acquisition and operating credit facilities. BTB intends
to finance its growth strategy, including acquisitions and developments, through a combination of its working capital
and liquidity resources, including cash f lows from operations, additional borrowings and public or private sales of
equity or debt securities. BTB may not be able to refinance its existing debt or renegotiate the terms of repayment at
favourable rates. In addition, the terms of BTB’s indebtedness in general contain customary provisions that, upon an
event of default, result in accelerated repayment of the amounts owed and that restrict the distributions that may be
made by BTB. Therefore, upon an event of default under such borrowings or an inability to renew same at maturity,
BTB’s ability to make distributions will be adversely affected.
A portion of BTB’s cash flows is dedicated to servicing its debt, and there can be no assurance that BTB will continue
to generate sufficient cash flows from operations to meet required interest or principal payments, such that it could
be required to seek renegotiation of such payments or obtain additional financing, including equity or debt financing.
BTB is exposed to debt financing risks, including the risk that the existing hypothecary borrowings secured by its
properties cannot be refinanced or that the terms of such refinancing will not be as favourable as the terms of the
existing loans. In order to minimize this risk, BTB tries to appropriately structure the timing of the renewal of signifi-
cant tenant leases on its respective properties in relation to the times at which the hypothecary borrowings on such
properties become due for refinancing.
Ownership of immovable property
All immovable property investments are subject to risk exposures. Such investments are affected by general eco-
nomic conditions, local real estate markets, demand for leased premises, competition from other vacant premises,
municipal valuations and assessments, and various other factors.
48
The value of immovable property and improvements thereto may also depend on the solvency and financial stability
of tenants and the economic environment in which they operate. BTB’s income and distributable income would be
adversely affected if one or more major tenants or a significant number of tenants were unable to meet their lease
obligations or if a significant portion of vacant space in the properties in which BTB has an interest cannot be leased
on economically favorable lease terms. In the event of default by a tenant, delays or limitations may be experienced
in enforcing BTB’s rights as a lessor and substantial costs may be incurred to protect BTB’s investment. The ability
to rent unleased space in the properties in which BTB has an interest will be affected by many factors, including the
level of general economic activity and competition for tenants by other properties. Costs may need to be incurred
to make improvements or repairs to property as required by a new tenant. The failure to rent unleased space on a
timely basis or at all or at rents that are equivalent to or higher than current rents would likely have an adverse effect
on BTB’s financial position and the value of its properties.
Certain significant expenditures, including property taxes, maintenance costs, hypothecary payments, insurance
costs and related charges must be made throughout the period of ownership of immovable property regardless of
whether the property is producing any income. If BTB is unable to meet mortgage payments on a property, a loss
could be sustained as a result of the mortgage creditor’s exercise of its hypothecary remedies.
Immovable property investments tend to be relatively illiquid, with the degree of liquidity generally fluctuating in rela-
tionship with the demand for and the perceived desirability of such investments. Such illiquidity may tend to limit
BTB’s ability to make changes to its portfolio promptly in response to changing economic or investment conditions. If
BTB were to be required to liquidate its immovable property investments, the proceeds to BTB might be significantly
less than the aggregate carrying value of its properties.
Leases for BTB’s properties, including those of significant tenants, will mature from time to time over the short and
long term. There can be no assurance that BTB will be able to renew any or all of the leases upon maturity or that
rental rate increases will occur or be achieved upon any such renewals. The failure to renew leases or achieve rental
rate increases may adversely impact BTB’s financial position and results of operations and decrease the amount of
cash available for distribution.
Competition
BTB competes for suitable immovable property investments with individuals, corporations and institutions (both
Canadian and foreign) which are presently seeking or which may seek in the future immovable property investments
similar to those desired by BTB. Many of those investors have greater financial resources than BTB, or operate wit-
hout the investment or operating restrictions of BTB or under more flexible conditions.
An increase in the availability of investment funds and heightened interest in immovable property investments could
increase competition for immovable property investments, thereby increasing the purchase prices of such invest-
ments and reducing their yield.
In addition, numerous property developers, managers and owners compete with BTB in seeking tenants. The exis-
tence of competing developers, managers and owners and competition for the BTB’s tenants could have an adverse
effect on the BTB’s ability to lease space in its properties and on the rents charged, and could adversely affect the
BTB’s revenues and, consequently, its ability to meet its debt obligations.
Acquisitions
BTB’s business plan focuses on growth by identifying suitable acquisition opportunities, pursuing such opportunities,
completing acquisitions and effectively operating and leasing such properties. If BTB is unable to manage its growth
effectively, this could adversely impact BTB’s financial position and results of operations, and decrease the amount
of cash available for distribution. There can be no assurance as to the pace of growth through property acquisitions
or that BTB will be able to acquire assets on an accretive basis, and as such there can be no assurance that distri-
butions to unitholders will increase in the future.
49
Development program
Information regarding our re-development projects, development costs, capitalization rates and expected returns
are subject to change, which may be material, as assumptions regarding items including, but not limited to, tenant
rents, building sizes, leasable areas, and project completion timelines and costs are updated periodically based on
revised plans, our cost tendering process, continuing tenant negotiations, demand for leasable space in our markets,
our ability to obtain the required building permits, ongoing discussions with municipalities and successful property
re-zonings. There can be no assurance that any assumptions in this regard will materialize as expected and changes
could have a material adverse effect on our development program, asset values and financial performance.
Recruitment and retention of employees and executives
Competition for qualified employees and executives is intense. If BTB is unable to attract and retain qualified and
capable employees and executives, the conduct of its activities may be adversely affected.
Government regulation
BTB and its properties are subject to various government statutes and regulations. Any change in such statutes or
regulations that is adverse to BTB and its properties could affect BTB’s operating results and financial performance.
In addition, environmental and ecological legislation and policies have become increasingly important in recent de-
cades. Under various laws, BTB could become liable for the costs of removal or remediation of certain hazardous or
toxic substances released on or in its properties or disposed of at other locations, or for the costs of other remedial
or preventive work. The failure to remove or remediate such substances, or to effect such remedial or preventive
work, if any, may adversely affect an owner’s ability to sell such real estate or to borrow using such real estate as
collateral, and could potentially also result in claims against the owner by private plaintiffs or governmental agencies.
Notwithstanding the above, BTB is not aware of any material non-compliance, liability or other claim in connection
with any of its properties, nor is BTB aware of any environmental condition with respect to any of its properties that
it believes would involve material expenditure by BTB.
Limit on activities
In order to maintain its status as a «mutual fund trust» under the Income Tax Act, BTB cannot carry on most active
business activities and is limited in the types of investments it may make. The Contract of Trust contains restrictions
to this effect.
Tax-related risks
Legislation (the «SIFT Rules») relating to the income taxation of publicly listed or traded trusts (such as income trusts
and Real Estate Investment Trusts) and partnerships changes the manner in which certain flow-through entities and
the distributions from such entities are taxed. Under the SIFT Rules, certain publicly listed or traded flow-through
trusts and partnerships referred to as «specified investment flow-through» or «SIFT» trusts and partnerships are
taxed in a manner similar to the taxation of corporations, and investors in SIFTs are taxed in a manner similar to
shareholders of a corporation.
The new taxation regime introduced by the SIFT Rules is not applicable to funds that qualify for the exemption under
the SIFT Rules applicable to certain Real Estate Investment Trusts (the «REIT Exemption»). The stated intention of the
Minister of Finance (Canada) in introducing the REIT Exemption is to exempt certain Real Estate Investment Trusts
from taxation as SIFTs in recognition of «the unique history and role of collective real estate investment vehicles.» If
the Trust fails to qualify for the REIT Exemption, it will be subject to certain tax consequences including taxation in a
manner similar to corporations and taxation of certain distributions in a manner similar to taxable dividends from a
taxable Canadian corporation.
50
In order to qualify for the REIT Exemption in respect of a taxation year (i) the REIT must, at no time in that taxation
year, hold non-portfolio property other than «qualified REIT properties»; (ii) not less than 90% of the REIT’s gross reve-
nues for that taxation year must be derived from (a) rent from real or immovable properties, (b) interest, (c) capital
gains from dispositions of “real or immovable properties” or “eligible resale properties,” (d) dividends or (e) royalties;
(iii) not less than 75% of the REIT’s gross revenues for that taxation year must be derived from (a) rent from real
or immovable properties, (b) interest from mortgages or hypothecs on real or immovable properties, and (c) capital
gains from the disposition of real or immovable properties; and (iv) the REIT must, throughout the year, hold “real or
immovable properties,” debt from a Canadian company represented by a banker’s acceptance, cash, or generally a
Canadian government debt instrument or one from another government agency with a total fair market value that is
not less than 75% of the REIT’s equity value at that time.
As at December 31, 2012, based on a review of BTB’s assets and revenues from its regular business activities,
management believes the Trust currently meets all the conditions to qualify for the REIT Exemption, both under the
REIT Exemption as currently enacted and under proposed amendments to the SIFT rules. Accordingly, management
does not expect the SIFT tax rules to apply to BTB.
Management intends to conduct the REIT’s business so that it continues to qualify for the REIT Exemption at all times
after 2012. However, as the requirements of the REIT Exemption include complex revenue and asset tests, no assu-
rance can be given that the REIT will in fact qualify for the REIT Exemption at all times.
DISCLOSURE CONTROLS AND
PROCEDURES AND INTERNAL
CONTROL OVER FINANCIAL
REPORTING
The President and Chief Executive Officer and the Executive Vice-President and Chief Financial Officer of BTB are
responsible for establishing and maintaining disclosure controls and procedures («DC&P») and internal control over
financial reporting («ICFR»), as those terms are defined in Canadian Securities Administrators Multilateral Instru-
ment 52-109.
Evaluations are performed regularly to assess the effectiveness of DC&P, including this MD&A and the financial sta-
tements. Based on these evaluations, the President and Chief Executive Officer and the Executive Vice-President and
Chief Financial Officer of BTB concluded that the DC&P were effective as at the end of the year ended December 31,
2012, and, more specifically, that the current controls and procedures provide reasonable assurance that material
information about the Trust, including its consolidated subsidiaries, is made known to them during the period in which
these filings are being prepared.
Evaluations are also performed to assess the effectiveness of ICFR. Based on those evaluations, the President and
Chief Executive Officer and the Executive Vice President and Chief Financial Officer of the Trust concluded that ICFR
was effective as at the end of the period ended December 31, 2012, and, more specifically, that the financial repor-
ting is reliable and that the financial statements have been prepared for financial reporting purposes in accordance
with IFRS.
During fiscal 2012, no changes were made in internal control over financial reporting that materially affected, or are
likely to materially affect, internal control over financial reporting.
51
CONSOLIDATED
FINANCIAL STATEMENTS
For the years ended December 31,
2012 and 2011
CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements
For the years ended December 31, 2012 and 2011
CONSOLIDATED FINANCIAL STATEMENTS
Independent auditors’ report
Management’s responsibility for financial
reporting
Consolidated Statements of Financial Position
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Unitholders’ Equity
Consolidated Statements of Cash Flows
55
57
58
59
60
61
62
Notes to Consolidated Financial Statements
54
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
KPMG LLP
600 de Maisonneuve Blvd. West
Suite 1500
Tour KPMG
Montréal (Québec) H3A 0A3
Telephone
Fax
Internet
(514) 840-2100
(514) 840-2187
www.kpmg.ca
INDEPENDENT AUDITORS’ REPORT
To the unitholders of BTB Real Estate Investment Trust
We have audited the accompanying consolidated financial statements of BTB Real Estate Investment
Trust, which comprise the consolidated statements of financial position as at December 31, 2012 and
December 31, 2011, the consolidated statements of comprehensive income, changes in unitholders’
equity and cash flows for the years then ended, and notes, comprising a summary of significant
accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Canadian generally accepted auditing standards.
Those standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on our judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, we consider internal control relevant
to the entity’s preparation and fair presentation of the consolidated financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating
the
consolidated financial statements.
the overall presentation of
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to
provide a basis for our audit opinion.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
Page 2
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
consolidated financial position of BTB Real Estate Investment Trust as at December 31, 2012 and
December 31, 2011, and its consolidated financial performance and its consolidated cash flows for
the years then ended, in accordance with International Financial Reporting Standards.
March 21, 2013
Montréal, Canada
*FCPA auditor, FCA, public accountancy permit No. A106087
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL
REPORTING
The accompanying consolidated financial statements of BTB Real Estate Investment Trust («BTB») were prepared
by management, which is responsible for the integrity and fairness of the information presented, including the many
amounts that must of necessity be based on estimates and judgments. These consolidated financial statements
were prepared in accordance with International Financial Reporting Standards («IFRS»).
Financial information appearing throughout our MD&A is consistent with these consolidated financial statements.
In discharging our responsibility for the integrity and fairness of the consolidated financial statements and for the
accounting systems from which they are derived, we maintain the necessary system of internal controls designed to
ensure that transactions are authorized, assets are safeguarded and proper records are maintained.
As at December 31, 2012, the President and Chief Executive Officer and the Vice President and Chief Financial Offi-
cer of BTB had an evaluation carried out, under their direct supervision, of the effectiveness of the controls and pro-
cedures used for the preparation of filings, as defined in Multilateral Instrument 52-109 of the Canadian Securities
Administrators. Based on that evaluation, they concluded that the disclosure controls and procedures were effective.
The Board of Trustees oversees management’s responsibility for financial reporting through an Audit Committee,
which is composed entirely of Trustees who are not members of BTB’s management or personnel. This Committee
reviews our consolidated financial statements and recommends them to the Board for approval. Other key responsi-
bilities of the Audit Committee include reviewing our existing internal control procedures and planned revisions to
those procedures, and advising the trustees on auditing matters and financial reporting issues.
KPMG s.r.l./S.E.N.C.R.L., independent auditors appointed by the unitholders of BTB upon the recommendation of the
Board, have performed an independent audit of the Consolidated Financial Statements as at December 31, 2012
and 2011 and their report follows. The auditors have full and unrestricted access to the Audit Committee to discuss
their audit and related findings.
Michel Leonard
President and Chief Executive Officer
Benoit Cyr, CPA, CA
Vice President and Chief Financial Officer
Montreal, March 21st 2013
57
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) Consolidated Statements of Financial Position
For the years ended December 31, 2012 and 2011
(in thousands of CAD dollars)
ASSETS
Non-current Assets
Investment properties
Non-current assets
Investment properties under development
Property and equipment
Restricted cash
Current assets
Other assets
Receivables
Cash and cash equivalents
LIABILITIES AND UNITHOLDERS’ EQUITY
Non-current liabilities
Mortgage loans payable
Convertible debentures
Bank loans
Derivative financial instruments
Unit-based compensation and warrants
Current liabilities
Trade and other payables
Distributions payable to unitholders
7
8
9
10
11
12
13
14
13
15
Unitholders’ equity
16
See accompanying notes to consolidated financial statements.
Notes
2012
2011
4, 5, 6
488,521
343,383
---
2,163
1,857
3,933
2,087
---
492,541
349,403
5,036
2,744
4,606
12,386
504,927
296,523
54,272
14,825
927
22
3,520
2,568
3,447
9,535
358,938
212,145
52,938
---
6,256
363
366,569
271,702
12,788
792
13,580
380,149
124,778
504,927
10,100
496
10,596
282,298
76,640
358,938
Approved by the Board on March 21th, 2013:
! "
58
Michel Léonard, Trustee
Jocelyn Proteau, Trustee
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2012 and 2011
"
(in thousands of CAD dollars)
Notes
2012
2011
Operating revenues:
Rental revenues from properties
17
48,118
41,459
Operating expenses:
Property taxes and public utilities
Other operating costs
13,412
7,710
12,392
6,955
21,122
19,347
Net operating income
26,996
22,112
Finance costs
Net adjustment to fair value of derivative financial instruments
Net financing costs
Trust administration expenses
18
18,507
(5,286)
13,221
3,519
17,452
3,092
20,544
2,766
Net income (loss) before the following item
10,256
(1,198)
Increase to fair value of investment properties
7,711
8,648
Net income being total comprehensive income for the
period
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
17,967
7,450
#"
59
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
!
Consolidated Statements of Changes in Unitholders’ Equity
For the years ended December 31, 2012 and 2011
(in thousands of CAD dollars)
BTB REAL ESTATE INVESTMENT TRUST
Consolidated Statements of Changes in Unitholders’ Equity
For the years ended December 31, 2012 and 2011
(in thousands of CAD dollars)
Notes
Unitholders’
contributions
Balance at January 1st, 2012
Issuance of units
16
Distributions to unitholders
Comprehensive income
Balance as at December 31,
2012
99,503
37,827
---
---
Cumulative
comprehensive
income (loss)
(15,636)
---
---
17,967
Cumulative
distributions
(7,227)
---
(7,656)
---
Total
76,640
37,827
(7,656)
17,967
137,330
2,331
(14,883)
124,778
Notes
Unitholders’
contributions
Balance at January 1st, 2011
Issuance of units
16
Distributions to unitholders
Comprehensive income
Balance as at December 31,
2011
80,679
18,824
---
---
Cumulative
comprehensive
income (loss)
(23,086)
---
---
7,450
Cumulative
distributions
(1,596)
---
(5,631)
---
Total
55,997
18,824
(5,631)
7,450
99,503
(15,636)
(7,227)
76,640
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
" !
60
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
!
Consolidated Statements of Cash Flows
BTB REAL ESTATE INVESTMENT TRUST
Consolidated Statements of Cash Flows
(in thousands of CAD dollars)
(in thousands of CAD dollars)
Operating activities
Net income for the period
Adjustment for :
Increase to fair value of investment properties
Depreciation of property and equipment
Net financing costs
Unit-based compensation
Straight-line lease adjustment
Lease incentive amortization
Net change in non-cash working capital items
Net cash from operating activities
Investing activities
Additions to property and equipment
Additions to investment properties
Net proceeds from disposal of investment property
Additions to investment properties under development
Net cash used in investing activities
Financing activities
Net proceeds from issue of units
Net proceeds from issue of convertible debentures
Mortgage loans, net of financing costs
Repayment of mortgage loans
Bank loans, net of financing costs
Repayment of bank loans
Repayment of convertible debentures
Net distributions to unitholders
Additions to restricted cash
Interest paid
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
Notes
2012
2011
8
18
15
17
17
8
5
6
7
16
13
14
9
17,967
(7,711)
97
13,221
(76)
(661)
1,240
24,077
(3,651)
20,426
(173)
(89,103)
1,266
(383)
(88,393)
36,938
---
89,533
(47,135)
14,790
---
---
(6,778)
(1,857)
(16,365)
69,126
1,159
3,447
4,606
7,450
(8,648)
89
20,544
65
(498)
864
19,866
(1,932)
17,934
(116)
(34,543)
---
(3,341)
(38,000)
18,771
42,863
64,759
(49,659)
---
(22,850)
(12,883)
(5,428)
---
(13,935)
21,638
1,572
1,875
3,447
" !
61
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
1. REPORTING ENTITY:
BTB real estate Investment Trust (the “Trust” or “BTB”) is an unincorporated open-ended real estate investment
trust formed and governed under the Civil code of Quebec pursuant to a trust agreement and is domiciled in Canada.
The address of the Trust’s registered office is 2155, Crescent street, Montreal (Quebec), Canada. The consolidated
financial statements of the Trust for the years ended December 31, 2012 and December 31, 2011 comprise the
Trust and its wholly owned subsidiaries (together referred to as the “Trust”) and the Trust’s interest in jointly controlled
entities and jointly controlled assets.
2. BASIS OF PREPARATION:
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”).
These consolidated financial statements were approved by the Board of Directors on March 21th, 2013.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following
material items in the statement of financial position:
• Investment properties are measured at fair value;
• Derivative financial instruments and warrants are measured at fair value; and
• Unit-based compensation is measured using a fair value-based method of accounting
(c) Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is the Trust’s functional
currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand,
except per unit amounts.
(d) Use of estimates and judgments
The preparation of consolidated financial statements in conformity with IFRS requires management to make
judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of
the consolidated financial statements and reported amounts of revenues and expenses during the reporting
period. Estimates and assumptions are continuously evaluated and are based on management’s experience and
other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
Information about significant areas of estimation, uncertainty and critical judgments in applying accounting
policies that have the most significant effect on the amounts recognized in the consolidated financial statements
are as follows:
62
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
2. BASIS OF PREPARATION (CONTINUED):
(d) Use of estimates and judgments (continued)
(i) Judgments
The key judgments made in applying accounting policies that have the most significant effect on the amounts
recognized in these consolidated financial statements are as follows:
Business combinations
The Trust acquires entities that own real estate. At the time of acquisition, the Trust considers whether the
acquisition represents the acquisition of a business, i.e., where an integrated set of activities is acquired in
addition to the investment property. More specifically, the following criteria are considered:
•
The extent to which significant inputs and processes are acquired and in particular the extent of
ancillary services provided by the acquiree
•
The number of investment properties owned by the acquiree
• Whether the acquiree has allocated its own staff to manage the investment property and/or to
deploy any processes
An acquisition of a business is accounted for as a business combination under IFRS 3 Business Combinations.
When the acquisition of subsidiaries does not represent a business, it is accounted for as an acquisition
of assets and liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired based
upon their relative fair values.
Operating lease contracts – Trust as lessor
The Trust enters into commercial property leases on its investment properties. The Trust has determined,
based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant
risks and rewards of ownership of these properties and therefore accounts for the leases as operating
leases.
(ii) Use of estimates
The key estimates made in applying accounting policies that have the most significant effect on the amounts
recognized in these consolidated financial statements are as follows:
63
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 2. BASIS OF PREPARATION (CONTINUED):
(d) Use of estimates and judgments (continued)
(ii) Use of estimates (continued)
Valuation of property
Investment properties and investment properties under development are stated at fair value at each
reporting date. Gains or losses arising from changes in the fair values are included in profit or loss
in the period in which they arise. Fair value is determined by management using internally generated
valuation models and by independent real estate valuation experts using recognized valuation tech-
niques. These techniques comprise both the Discounted Cash Flow Method and the Direct Capitalization
method. In some cases, the fair values are determined based on recent real estate transactions with
similar characteristics and location to those of the Trust’s investment properties.
The determination of the fair value of investment properties requires the use of estimates such as
future cash flows from assets (including lease income and cost, future revenue streams, capital values
of fixtures and fittings, any environmental matters and the overall repair and condition of the property)
and discount rates applicable to those cash flows. In addition, development risks (such as construction
and leasing risks) are also taken into consideration when determining the fair value of investment
properties under construction. These estimates are based on local market conditions existing at the
reporting date.
The significant methods and assumptions used by management and the valuators in estimating the fair
value of investment properties are set out below:
Techniques used for valuing investment property
The Direct Capitalization method converts anticipated future cash flow benefits in the form of rental
income into present value. This approach requires estimation of future cash inflows and application of
investor yield or return requirements.
The Discounted Cash Flow method involves the projection of a series of periodic cash flows either to
an operating investment property or a development investment property. To this projected cash flow
series, an appropriate, market-derived discount rate is applied to establish an indication of the present
value of the income stream associated with the investment property. The calculated periodic cash flow
is typically estimated as gross income less vacancy and collection losses and less operating expenses/
outgoings. A series of periodic net operating incomes, along with an estimate of the reversion/
terminal/exit value anticipated at the end of the projection period, are discounted to present value. The
aggregate of the net present values equals the fair value of the investment property.
The Comparable method involves the comparison of the Trust’s investment properties to similar
investment properties that have transacted within a recent time frame from which a fair value is
estimated based on the price per square foot of these comparable sales.
64
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 2. BASIS OF PREPARATION (CONTINUED):
(d) Use of estimates and judgments (continued)
(ii) Use of estimates (continued)
Derivative financial instruments
Derivative instruments, including embedded derivatives, are recorded on the consolidated statement of
financial position at fair value. Subsequent to initial recognition, these derivatives are measured at fair value.
The fair value of derivative instruments is based on forward rates considering the market price, rate of
interest and volatility and takes into account the credit risk of the financial instrument. Changes in estimated
fair value at each reporting date are included in the profit and loss. Embedded derivatives are separated
from the host contract and accounted for separately if the economic characteristics and risks of the host
contract and the embedded derivative are not closely related.
Unit options
The Trust has a unit option plan for the benefit of management. The plan does not provide for cash settlement.
The Trust recognizes compensation expense on unit options granted, based on their fair value, which is
calculated using the Black-Scholes model. The compensation expense is amortized using the graded ves-
ting method. The valuation model requires management to make estimates on various data, such as the
expected life, volatility, the average dividend yield of distributions and the average risk-free interest rate.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these consolidated
financial statements.
(a) Basis of consolidation
(i) Business combinations
The Trust measures goodwill as the fair value of the consideration transferred including the recognized
amount of any non-controlling interest in the acquiree, less the net recognized amount (generally fair value)
of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. When the
excess is negative, a bargain purchase gain is recognized immediately in profit or loss.
The Trust elects on a transaction-by-transaction basis whether to measure non-controlling interest at its
fair value, or at its proportionate share of the recognized amount of the identifiable net assets, at the acquisition
date. Transaction costs, other than those associated with the issue of debt or equity securities, that the
Trust incurs in connection with a business combination are expensed as incurred.
65
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a) Basis of consolidation (continued)
(ii) Subsidiaries
Subsidiaries are entities controlled by the Trust. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases.
(iii) Jointly controlled assets
Jointly controlled assets involve the venturers having joint control, and often joint ownership, of assets
dedicated to the joint venture. These joint ventures do not involve the establishment of a corporation,
partnership or other entity, or a financial structure that is separate from the venturers themselves. Each
venturer has control over its share of future economic benefits through its share of the jointly controlled
asset. The consolidated financial statements include the Trust’s proportionate share of the jointly controlled
assets, liabilities, revenue and expenses with items of a similar nature on a line-by-line basis, from the date
that joint control commences until the date that joint control ceases.
(iv) Jointly controlled entities
Joint ventures are those entities over whose activities the Trust has joint control, established by contractual
agreement. The consolidated financial statements include the Trust’s proportionate share of the entities’
assets, liabilities, revenue and expenses with items of a similar nature on a line-by-line basis, from the date
that joint control commences until the date that joint control ceases.
(b) Financial instruments
(i) Non-derivative financial assets
The Trust derecognizes a financial asset when the contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction
in which substantially all the risks and rewards of ownership of the financial asset are transferred.
The Trust has the following non-derivative financial assets:
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an
active market. Such assets are recognized initially at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition loans and receivables are measured at amortized cost using the
effective interest method, less any impairment losses.
Loans and receivables comprise receivables, other receivables and cash and cash equivalents.
66
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Financial instruments (continued)
(i) Non-derivative financial assets (continued)
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and term deposits with original maturities of three
months or less.
(ii) Non-derivative financial liabilities
The Trust derecognizes a financial liability when its contractual obligations are discharged or cancelled, or
expire.
The Trust classifies non-derivative financial liabilities into the other financial liabilities category. Such financial
liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent
to initial recognition, these financial liabilities are measured at amortized cost using the effective interest
method.
Non-derivative financial liabilities comprise bank loans, mortgage loans payable, convertible debentures,
distributions payable to unitholders and trade and other payables.
(iii) Trust units
Trust units are redeemable at the option of the holder and, therefore, are considered puttable instruments.
Puttable instruments are required to be accounted for as financial liabilities, except where certain
conditions are met in accordance with lAS 32 Financial Instruments: Presentation, in which case, the
puttable instruments may be presented as equity.
BTB’s trust units meet the conditions of lAS 32 and are therefore presented as equity.
(iv) Convertible debentures
The convertible debentures, which are considered financial liabilities, are convertible into trust units of the
Trust. Since BTB’s trust units meet the definition of a financial liability, the conversion options are considered
embedded derivatives.
(v) Derivative financial instruments
Derivative financial instruments are recognized initially at fair value; attributable transaction costs are
recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair
value, and changes therein are recognized immediately in profit or loss.
67
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) Investment property
Investment property is property held either to earn rental income or for capital appreciation or for both, but not
for sale in ordinary course of business, use in the production or supply of goods or services or for administrative
purposes. Investment property is measured at cost on initial recognition and subsequently at fair value with any
change therein recognized in profit or loss.
Cost includes expenditures that are directly attributable to the acquisition of the investment property.
The Trust makes payments to agents for services in connection with negotiating lease contracts with the Trust’s
lessees. These leasing fees are capitalized within the carrying amount of the related investment property and
then considered in the fair value adjustment of the investment property at the next reporting period.
Should the use of a property change and be reclassified as property and equipment, its fair value at the date of
reclassification would become its cost for subsequent accounting.
(d) Investment property under development
Investment property under development is measured at cost on initial recognition and subsequently at fair
value with any change therein recognized in profit or loss to the extent that fair value is reliably determinable.
To the extent that fair value is not reliably determinable, the property is carried at cost until either the fair value
becomes reliably determinable or construction is completed, whichever is earlier.
Cost includes expenditures that are directly attributable to the acquisition, the layout and the construction of the
asset. The cost of a self-constructed asset includes the cost of materials, direct labour, and any other directly
attributable costs during the development of the asset.
(e) Property and equipment
(i) Recognition and measurement
Property and equipment is measured at cost less accumulated depreciation and accumulated impairment
losses in accordance with the cost model.
When parts of an item of property and equipment have different useful lives, they are accounted for as
separate items (major components) of property and equipment.
Gains and losses on disposal of an item of property and equipment are determined by comparing the
proceeds from disposal with the carrying amount of property and equipment, and are recognized within
profit or loss on a net basis.
68
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Property and equipment (continued)
(ii) Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, less its residual value.
Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each
part of an item of property and equipment, since this most closely reflects the expected pattern of consumption
of the future economic benefits embodied in the asset.
The estimated useful lives for the current and comparative periods are as follows:
Owner-occupied building
Equipment, furniture and fixtures
Rolling stock
40 years
2 - 12 years
2 - 4 years
Depreciation methods, useful lives and residual values are reviewed at each annual reporting date and
adjusted when appropriate.
(iii) Impairment
The carrying amount of the Trust’s property and equipment is reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable
amount is estimated. The recoverable amount of an asset is the greater of its value in use and its fair value
less costs to sell. An impairment loss is recognized if the carrying amount of an asset exceeds its estimated
recoverable amount. Impairment losses are recognized in profit or loss.
(f) Leases
All existing rental leases related to the Trust’s investment properties have been assessed as operating leases.
The tenants have a unilateral right to terminate within the statutory period.
(g) Provisions
Provisions are recognized when the Trust has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate can be made of the amount of the obligation. Where the Trust expects some
or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset. The expense relating
to any provision is presented in net earnings, net of any reimbursement. If the effect of the time value of money
is material, provisions are discounted using a current rate that reflects the risks specific to the liability. Where
discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
69
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Revenue recognition
Rental revenue from property includes rents from tenants under leases, realty taxes and operating cost recoveries,
lease cancellation fees and incidental income. Rental revenue is recognized when service has been rendered
and the amount of expected consideration can be reliably estimated.
The Trust commences revenue recognition on its leases based on a number of factors. In most cases, reve-
nue recognition under a lease begins when the tenant takes possession of, or controls, the physical use of the
leased property. Generally, this occurs on the lease commencement date, or when the Trust is required to make
additions to the leased property in the form of tenant improvements, upon substantial completion of the addi-
tions. Certain leases provide for tenant occupancy during periods for which no rent is due (“free rent period”) or
where minimum rent payments change during the term of the lease. Accordingly, rental revenue is recognized
in comprehensive income on a straight-line basis over the term of the lease unless another systematic basis
is more representative of the time pattern in which user’s benefit derived from the leased asset is diminished.
These amounts are accounted for as amortization of straight-line lease adjustments within investment properties.
Lease incentives which are mostly payments of monetary allowances to tenants, are amortized over the lease
term as a reduction of rental revenue. The lease term is the non-cancellable period of the lease together with
any further extension for which the tenant has the option to continue the lease, where, at the inception of the
lease, the Trust is reasonably certain that the tenant will exercise that option. Lease incentives and amortization
of lease incentives are recognized as adjustments to the carrying amount of investment properties.
Cancellation fees or premiums received to terminate leases are recognized in profit and loss when they arise.
(i) Government grants
Government grants are recognized initially as deferred income at fair value when there is reasonable assurance
that they will be received and the Trust will comply with the conditions associated with the grant. Grants that
compensate the Trust for expenses incurred are recognized in profit or loss on a systematic basis in the same
periods in which the expenses are recognized. Grants that compensate the Trust for the cost of an asset are
deducted from the carrying amount of the asset.
(j) Earnings per unit
The Trust presents basic earnings per unit data for its Trust units. Basic earnings per unit are calculated by
dividing the profit or loss attributable to unit holders of the Trust by the weighted average number of units
outstanding during the period, adjusted for own units held.
70
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) Finance income and finance costs
Finance income comprises interest income on funds invested. Interest income is recognized as it accrues in
profit or loss, using the effective interest method.
Finance costs comprise interest on mortgage loans payable, convertible debenture, bank loans and others,
accretion of the non-derivative liability component of convertible debentures, accretion of effective interest on
mortgage loans payable, bank loans and convertible debentures and finance income.
Net financing costs comprise finance costs and changes in the fair value of derivative financial instruments.
(l) Operating segment
An operating segment is a component of the Trust that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the
Trust’s other components. All operating segments’ operating results are reviewed regularly by the Trust’s Chief
Executive officer (‘’CEO’’) to make decisions about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is available. Segment results that are reported to the
CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
(m) Unit-based compensation
Unit option plan
The Trust uses the fair value-based method of accounting for its unit-based awards, under which compensation
expense is measured at grant date and recognized over the vesting period. The units are considered financial
liabilities and the awards are also considered financial liabilities and measured at fair-value at each reporting
period and the change in the fair value is recognized as compensation expense in profit and loss.
Deferred unit compensation plan for trustees and certain executive officers
Compensation costs related to the unit compensation plan for trustees and certain executive officers are
recognized at the time they are granted. These units are initially measured at fair value based on the trading
price of the Trust’s unit, and are revalued at the end of each reporting period, until settlement. Any changes in
fair value are recognized in profit or loss.
(n) Warrants
Since all the units are considered liabilities, the warrants are measured at fair-value at each reporting period
and the change in the fair value is recognized in profit or loss. The warrants are presented as liabilities.
71
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o) Income taxes
BTB is a mutual fund trust and a Real Estate Investment Trust (‘’REIT’’) pursuant to the Income Tax Act (Canada).
Under current tax legislation, a REIT is entitled to deduct distributions of taxable income such that, it is not liable
to pay income tax provided that its taxable income is fully distributed to unitholders. BTB has reviewed the pros-
cribed conditions under the Income Tax Act (Canada) and has determined that it qualifies as a REIT for the year.
BTB intends to continue to qualify as a REIT and to make distributions not less than the amount necessary to
ensure that BTB will not be liable to pay income taxes. Accordingly, no current or deferred income taxes have
been recorded in the consolidated financial statements.
(p) New standards and interpretations not yet adopted
A number of new standards, and amendments to standards and interpretations, are not yet effective for the
year ended December 31, 2012, and have not been applied in preparing these consolidated financial state-
ments. The extent of the impact of these standards has not been determined, except when otherwise indicated.
(i) IFRS 9, (Financial Instruments)
IFRS 9 replaces the guidance in IAS 39, Financial Instruments — Recognition and Measurement, on the
classification and measurement of financial instruments and is effective for annual periods beginning on or
after January 1, 2015, with early adoption permitted.
(ii) IFRS 10, (Consolidated Financial Statements), IFRS 11, Joint Arrangements,
IFRS 12, Disclosure of Interests in Other Entities, IAS 27, Separate Financial
Statements,
IAS 28,
Investments in Associates and Joint Ventures.
IFRS 13, Fair Value Measurement, and amended
Each of these new standards is effective for annual periods beginning on or after January 1, 2013, with early
adoption permitted. The following is a brief summary of these new standards:
IFRS 10, Consolidated Financial Statements, requires an entity to consolidate an investee when it is exposed,
or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee. Under existing IFRS, consolidation is required when an entity has
the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
IFRS 10 replaces SIC 12, Consolidation — Special Purpose Entities, and parts of IAS 27, Consolidated and
Separate Financial Statements. The impact of this new standard is considered not to be significant as the
Trust does not expect any change to the entities included in the consolidated financial statements.
72
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 3. Significant accounting policies (continued)
(p) New standards and interpretations not yet adopted (continued)
(iii) IFRS 10, (Consolidated Financial Statements), IFRS 11, Joint Arrangements,
IFRS 12, Disclosure of Interests in Other Entities, IAS 27, Separate Financial
Statements,
IAS 28,
Investments in Associates and Joint Ventures (continued).
IFRS 13, Fair Value Measurement, and amended
IFRS 11, Joint Arrangements, requires a venturer to classify its interest in a joint arrangement as a joint
venture or joint operations. Joint ventures will be accounted for using the equity method of accounting
whereas for a joint operation, the venturer will recognize its share of the assets, liabilities, revenue and
expenses of the joint operation. Under existing IFRS, entities have the choice to proportionately consolidate
or equity account for interests in joint ventures. IFRS 11 supersedes IAS 31, Interests in Joint Ventures,
and SIC 13, Jointly Controlled Entities — Non-monetary Contributions by Venturers. The impact of this new
standard is considered not to be significant as the Trust’s interest in joint arrangements will be classified as
joint operations and will therefore be accounted for using the proportionate consolidation method.
IFRS 12, Disclosure of Interests in Other Entities, establishes disclosure requirements for interests in other
entities, such as joint arrangements, associates, special purpose vehicles and off-balance sheet vehicles.
The standard carries forward existing disclosures and also introduces significant additional disclosure
requirements that address the nature of, and risks associated with, an entity’s interests in other entities.
Adoption of this standard will not materially impact the consolidated financial statements other than disclosure.
IFRS 13, Fair Value Measurement, is a comprehensive standard for fair value measurement and disclosure
requirements for use across all IFRS standards. The new standard clarifies that fair value is the price
that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between
market participants, at the measurement date. It also establishes disclosures about fair value measurement.
Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific
standards requiring fair value measurements and in many cases does not reflect a clear measurement
basis or consistent disclosures. The Trust does not expect that this standard will result in a material impact
to the consolidated financial statements.
(iv) Amendments to Other Standards
There have been amendments to existing standards, including IAS 27, Separate Financial Statements, and
IAS 28, Investments in Associates and Joint Ventures. IAS 27 addresses accounting for subsidiaries, jointly
controlled entities and associates in non-consolidated financial statements. IAS 28 has been amended to
include joint ventures in its scope and to address the changes in IFRS 10 - 12 as explained above.
73
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 4. INVESTMENT PROPERTIES
For the years ended Decembre 31,
Balance beginning of period
Acquisition of investment properties (note 5)
Disposal of investment property (note 6)
Capital expenditures
Government grant
Capitalized leasing fees
Capitalized lease incentives
Lease incentives amortization
Straight-line lease adjustment
Net transfer from investment properties under
development
Increase to fair value of investment properties
Balance end of the period
2012
343,383
128,446
(1,266)
3,378
---
678
2,454
(1,240)
661
4,316
7,711
488,521
2011
283,095
47,765
---
2,084
(135)
510
1,782
(864)
498
---
8,648
343,383
The fair value is determined annually on the basis of valuations made by independent external appraisers having
appropriate professional qualifications, using recognized valuation techniques, comprising both the Discounted Cash
Flow and the Direct Capitalization methods for a subset of the Trust investment properties comprised of the ten
most significant investment properties and approximately 1/3 of the remaining investment properties. The selection
of investment properties subject to external valuation is determined by management based on its assessment of
circumstances that in its view, may impact the value of particular individual investment property. The fair value of the
remaining investment properties is determined by management using internally generated valuation models.
(a) External Valuation
At December 31, 2012 external appraisals were obtained for investment properties with an aggregate fair
value of $361,021 (December 31, 2011 - $216,940).
(c) Internal Valuation
At December 31, 2012 management’s valuation models were used for investment properties with an aggre-
gate fair value of $127,500 (December 31, 2011 - $126,443).
74
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
4. INVESTMENT PROPERTIES (CONTINUED)
In its determination of fair value, management utilizes capitalization rate data from external knowledgeable property
valuators. The data provides a range of rates for various geographic regions and for various types and qualities of
properties within each region. To the extent that the externally provided capitalization rate ranges change from one
reporting period to the next; or should another rate within the provided ranges be more appropriate than the rate
previously used, the fair value of the investment properties would increase or decrease accordingly.
The following table highlights the significant assumptions used in the modeling process for both internal and external
appraisals:
As at December 31, 2012
Capitalization rate
Terminal capitalization rate
Discount rate
As at December 31, 2011
Capitalization rate
Terminal capitalization rate
Discount rate
Commercial
Office
Industrial
General purpose
7.00% - 12.00%
6.50% - 10.50%
7.00% - 9.75%
7.25% - 8.75%
7.25% - 8.75%
6.50% - 9.50%
7.00% - 11.50%
7.50% - 9.25%
7.25% - 9.75%
7.50% - 9.25%
7.00% - 10.75%
8.25% - 9.00%
Commercial
Office
Industrial
General purpose
7.25% - 10.25%
6.75% - 9.75%
7.50% - 10.25%
7.50% - 9.00%
7.75% - 10.50%
6.75% - 9.50%
7.75% - 10.50%
7.75% - 9.25%
7.50% - 10.25%
7.75% - 9.25%
8.00% - 11.25%
8.00% - 9.75%
5. ACQUISITIONS
(a) 2012 Asset acquisitions
In December 2012, the Trust acquired a general purpose building located in the city of Saint-Jean-sur-Richelieu
for a purchase price of $17,025, $7,630 through the assumption of a mortgage loan, $2,384 through the
assumption of trade and other payables and $7,011 in cash.
In December 2012, the Trust acquired a general purpose building located in the city of Ottawa for a purchase
price of $18,286, $345 through the assumption of trade and other payables and $17,941 in cash.
In December 2012, the Trust acquired a commercial building located in the city of Dollard-des-Ormeaux for a
purchase price of $27,260, $8,809 through the assumption of a mortgage loan, $8,767 through the assumption
of trade and other payables and $9,684 in cash.
In November 2012, the Trust acquired an industrial building located in the town of Ingersoll for a purchase price
of $10,532, $6,774 through the assumption of a mortgage loan, $53 through the assumption of trade and
other payables and $3,705 in cash.
75
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
5. ACQUISITIONS (CONTINUED)
(a) 2012 Asset acquisitions (Continued)
In October 2012, the Trust acquired a 50% interest in a general purpose building located in the city of Gatineau
for a purchase price of $6,050, $629 through the assumption of trade and other payables and $5,421 in cash.
In October 2012, the Trust acquired an office building located in the city of Ottawa for a purchase price of
$6,580, $60 through the assumption of trade and other payables and $6,520 in cash.
In September 2012, the Trust acquired a supplemental 50% interest in Complexe Lebourgneuf Phase II Inc., a
joint venture which owns and operates an office building located in Québec City for a purchase price of $12,089,
$6,384 through the assumption of a mortgage loan, $1,830 through the assumption of trade and other
payables and $3,875 in cash.
In May 2012, the Trust acquired an office building located in the city of Ottawa for a purchase price of $14,100,
$212 through the assumption of trade and other payables and $13,888 in cash.
In April 2012, the Trust acquired three industrial buildings located in the cities of St-Laurent and Laval for a
purchase price of $14,700, $152 through the assumption of trade and other payables and $14,548 in cash.
In addition to the purchase price, transaction costs of $1,824 were incurred for these acquisitions.
The relative fair value of the assets and liabilities recognized in the consolidated statement of financial position
on the date of the acquisition during 2012 were as follow:
Fair value recognized on acquisition
Investment properties, including transaction costs
Mortgage loans payable
Trade and other payables, including transaction costs
Total cash consideration paid
(b) 2011 Asset acquisitions
128,446
(29,597)
(16,256)
82,593
In December 2011, the Trust acquired an industrial building located in the city of Dorval for a purchase price
of $5,500, including $2,689 through the assumption of a mortgage loan, $7 through the assumption of trade
and other payables and $2,804 in cash.
In December 2011, the Trust acquired an industrial building located in Ville Mont-Royal for a purchase price of
$7,550 in cash.
In October 2011, the Trust acquired two industrial buildings located in the city of Terrebonne for a purchase
price of $12,225, $226 through the assumption of trade and other payables and $11,999 in cash.
In August 2011, the Trust acquired a 50% interest in a commercial building located in the city of Terrebonne for
a purchase price of $2,190, $1,167 through the assumption of a mortgage loan and $1,023 in cash.
76
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 5. ACQUISITIONS (CONTINUED)
(b) 2011 Asset acquisitions (Continued)
In April 2011, the Trust acquired the remaining 50% interest in a commercial building located in Québec City
for a purchase price of $19,350, $12,424 through the assumption of a mortgage loan and $6,926 in cash.
In addition to the purchase price, transaction costs of $950 were incurred for these acquisitions.
The relative fair value of the assets and liabilities recognized in the consolidated statement of financial position
on the date of the acquisition during 2011 were as follow:
Fair value recognized on acquisition
Investment properties, including transaction costs
Mortgage loans payable
Trade and other payables, including transaction costs
Total cash consideration paid
6. DISPOSAL
47,765
(16,280)
(1,183)
30,302
In March 2012, the Trust disposed of a commercial building located in the city of Montréal for net proceeds of
$1,266. The gross proceeds of $1,272 have been provided as a guarantee of the existing mortgage loan which is
for multiple buildings still held.
7. INVESTMENT PROPERTIES UNDER DEVELOPMENT
For the years ended December 31,
Balance beginning of period
Capital expenditures
Net transfer to investment properties
Balance end of period
2012
3,933
383
(4,316)
---
2011
592
3,341
---
3,933
In January 2012, the Trust has completed the development of lands adjacent to an existing investment property
located in Québec City. The Trust had a 25% interest in this jointly controlled entity. Subsequent of the transfer from
Investment Properties Under Development to Investment Properties, the Trust has increased its participation in this
jointly controlled entity to 75%.
77
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
8. PROPERTY AND EQUIPMENT
Owner-
occupied
land
Owner-
occupied
building
Equipment,
furniture
and fixtures
Rolling
stock
Total
Cost
Balance at
December 31, 2010
Additions
Disposals
Balance at
December 31, 2011
Additions
Balance at
December 31, 2012
494
---
---
494
---
494
1,656
59
---
1,715
9
1,724
184
57
(112)
129
105
234
---
---
---
---
59
59
Accumulated Depreciation
Balance at December 31, 2010
Depreciation for the year
Disposals
Balance at December 31, 2011
Depreciation for the year
Balance at December 31, 2012
Owner-
occupied
building
Equipment,
furniture
and fixtures
Rolling
stock
132
55
---
187
58
245
80
34
(50)
64
32
96
---
---
---
---
7
7
Owner-
occupied
land
Owner-
occupied
building
Equipment,
furniture
and fixtures
Rolling
stock
2,334
116
(112)
2,338
173
2,511
Total
212
89
(50)
251
97
348
Total
Net book value
At December 31, 2011
At December 31, 2012
494
494
1,528
1,479
65
138
---
52
2,087
2,163
78
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 9. RESTRICTED CASH
Restricted cash consists of an amount of $1,272 provided in guarantee of the existing mortgage loan on the building
disposed in March 2012 (see note 6) and an amount of $585 provided in guarantee of a mortgage loan.
10. OTHERS ASSETS
Prepaid expenses
Deposits
11. RECEIVABLES
Rents receivable
Provision for doubtful accounts
Total
December 31, 2012
December 31, 2011
3,605
1,431
5,036
3,173
347
3,520
December 31, 2012
December 31, 2011
3,015
(271)
2,744
2,720
(152)
2,568
12. MORTGAGE LOANS PAYABLE
Mortgage loans payable are secured by immovable hypothecs on investment properties having a fair value of approxi-
mately $484,641 as at December 31, 2012 (December 31, 2011 – $337,183).
December 31, 2012
December 31, 2011
Fixed rate mortgage loans payable
Floating rate mortgage loans payable
Unamortized fair market value assumption ad-
justments
Unamortized financing costs
Mortgage loans payable
Weighted average interest rate
Weighted average term to maturity (years)
Annual rates ranging
280,313
15,901
2,111
(1,802)
296,523
4.69%
209,848
3,150
197
(1,150)
212,145
5.27%
4.51
3.18% - 8.50%
2.74
3.50% - 8.50%
79
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 12. MORTGAGE LOANS PAYABLE (CONTINUED)
As at December 31, 2012, mortgage loan scheduled repayments are as follows:
2013
2014
2015
2016
2017
Thereafter
Unamortized fair market value assumption adjustments
Unamortized financing costs
Scheduled
Repayments
7,659
6,526
5,539
5,048
2,662
20,200
Principal
maturity
39,741
65,935
14,121
57,412
57,527
13,844
Total
47,400
72,461
19,660
62,460
60,189
34,044
47,634
248,580
296,214
2,111
(1,802)
296,523
13. CONVERTIBLE DEBENTURES
As at December 31, 2012, the Trust had three series of subordinated convertible debentures outstanding.
Capital
Interest rates
Unit conversion price
Interest
payments
Maturity
Series B 13,020
Series C 23,000
Series D 23,000
Coupon
Effective
8.50%
8.00%
7.25%
11.15%
9.78%
8.47%
$11.50
$5.00
$6.10
Semi-annual
Semi-annual
Semi-annual
March 2013
January 2016
July 2018
The components of the subordinated convertible debentures on the issue date were allocated as follows:
Non-derivative liability component
Conversion option liability component
Series B
12,339
681
13,020
Series C
21,592
1,408
23,000
Series D
21,346
1,654
23,000
80
The accretion of the non-derivative liability component of the subordinated convertible debentures, which increases
as of the initial allocation on the issuance date to the final amount repayable, is recorded under finance costs. The
conversion option liability component is measured at fair value.
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
13. CONVERTIBLE DEBENTURES (CONTINUED)
December 31, 2012
Non-derivative liability component upon
issuance
Accretion of non-derivative liability component
Unamortized financing costs
Non-derivative liability component
Conversion option liability component at fair
value
Series B
Series C
Series D
Total
12,339
21,592
21,346
55,277
639
12,978
(65)
477
22,069
(1,079)
270
21,616
1,386
56,663
(1,247)
(2,391)
12,913
20,990
20,369
54,272
---
598
329
927
December 31, 2011
Non-derivative liability component upon
issuance
Accretion of non-derivative liability component
Unamortized financing costs
Non-derivative liability component
Conversion option liability component at fair
value
Series B
Series B
Series C
Series D
Total
12,339
21,592
21,346
55,277
479
12,818
(324)
225
21,817
(1,368)
83
21,429
787
56,064
(1,434)
(3,126)
12,494
20,449
19,995
52,938
---
3,307
2,949
6,256
In March 2008, the Trust issued Series B subordinated convertible, redeemable, unsecured debentures, bearing
8.5% interest payable semi-annually and maturing in March 2013, in the amount of $13,020. The debentures are
convertible at the holder’s option at any time before March 2013, at a conversion price of $11.50 per unit («Series
B Conversion Price»).
As of March 31, 2012, but before March 31, 2013, under certain conditions, the debentures may be redeemed
by the Trust, in whole or in part at any time and for a redemption price equal to the principal amount thereof plus
accrued and unpaid interest, provided that the average weighted price based on the volume of units traded on the
Toronto Stock Exchange during a period of 20 consecutive trading days ending on the fifth trading day prior to the
date on which an advance notice of redemption is given is at least 125% of the conversion price.
At the Trust’s option, Series B debentures may be redeemed in Trust units at maturity or redemption.
81
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 13. CONVERTIBLE DEBENTURES (CONTINUED)
Series C
In January 2011, the Trust issued Series C subordinated convertible, redeemable, unsecured debentures bearing
8% interest payable semi-annually and maturing in January 2016, in the amount of $23,000. The debentures are
convertible at the holder’s option at any time before January 2016, at a conversion price of $5.00 per unit («Series
C Conversion Price»).
These debentures are not redeemable before January 31, 2014, except in the case of a change in control. As of
January 31, 2014, but before January 31, 2015, under certain conditions, the debentures will be redeemable by the
Trust at a redemption price equal to their principal amount plus accrued, unpaid interest, provided that the average
weighted price based on the volume of units traded on the Toronto Stock Exchange during a period of 20 consecutive
trading days ending on the fifth trading day prior to the date on which an advanced notice of redemption is given (the
“current market price”) is at least 125% of the conversion price. As of January 31, 2015, but before January 31,
2016, under certain conditions, the debentures will be redeemed by the Trust, in whole or in part at any time and
for a redemption price equal to the principal amount thereof plus accrued and unpaid interest. The Trust may, under
certain conditions, elect to satisfy its obligation to pay the principal amount of the debentures that are to be redee-
med or that have matured by issuing a number of units obtained by dividing the principal amount of the debentures
by 95% of the current market price on the date of redemption or maturity.
Series D
In July 2011, the Trust issued Series D subordinated convertible, redeemable, unsecured debentures bearing
7.25% interest payable semi-annually and maturing in July 2018, in the amount of $23,000. The debentures are
convertible at the holder’s option at any time before July 2018, at a conversion price of $6.10 per unit («Series D
Conversion Price»).
These debentures are not redeemable before July 31, 2014, except in the case of a change in control. As of July
31, 2014, but before July 31, 2016, under certain conditions, the debentures will be redeemable by the Trust at a
redemption price equal to their principal amount plus accrued, unpaid interest, provided that the average weighted
price based on the volume of units traded on the Toronto Stock Exchange during a period of 20 consecutive trading
days ending on the fifth trading day prior to the date on which an advanced notice of redemption is given (the “current
market price”) is at least 125% of the conversion price. As of July 31, 2016, but before July 31, 2018, under certain
conditions, the debentures will be redeemed by the Trust, in whole or in part at any time and for a redemption price
equal to the principal amount thereof plus accrued and unpaid interest. The Trust may, under certain conditions,
elect to satisfy its obligation to pay the principal amount of the debentures that are to be redeemed or that have
matured by issuing a number of units obtained by dividing the principal amount of the debentures by 95% of the
current market price on the date of redemption or maturity.
82
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 14. BANK LOANS
The Trust has access to an acquisition line of credit in the amount of $15,000 maturing in November 2013. The line
of credit is guaranteed by mortgages against properties held by the Trust.
As at December 31, 2012, $15,000 was drawn under the acquisition line of credit (December 31, 2011 - $Nil).
The Trust also has access to an operating credit facility for a maximum amount of $2,000. This facility bears interest
at a rate of 1% above the prime rate. This credit facility is secured by an immoveable hypothec on two properties
having a value of $4,224. As at December 31, 2012 and 2011, no amount was due under the credit facility.
15. UNIT-BASED COMPENSATION AND WARRANTS
(a) Unit-based compensation
Unit option plan
The Trust may grant options to its trustees, senior officers, investor relations consultants, and technical consultants.
The maximum number of units reserved for issuance under the unit option plan is limited to 10% of the total
number of issued and outstanding units. The trustees set the exercise price at the time that the units are
granted under the plan; the exercise price may not be less than the discounted market price of the units as
determined under the policies of the Toronto Stock Exchange on the date of grant. The options have a minimum
term of five years as of the grant date and vest over a period of up to 18 months.
Unit-based compensation expense and the assumptions used in the calculation thereof using the Black &
Scholes option valuation model are as follows:
For the years ended December 31
Unit-based compensation expense
Liability recognized for unit-based compensation
Unit options granted
Unit option holding period (years)
Volatility rate
Distribution yield
Risk-free interest rate
2012
(76)
22
---
---
---
---
---
2011
65
98
108,000
4-5
46.5%
9.0%
1.0% -1.3%
83
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
15. UNIT-BASED COMPENSATION AND WARRANTS
(CONTINUED)
(a) Unit-based compensation (continued)
The following tables present relevant information on options and changes in the balances during the year:
Grant date
September 8, 2008
March 25, 2011
June 22, 2011
July 11, 2011
Number of units
119,000
10,000
88,000
10,000
227,000
Maturity date
September 8, 2013
March 21, 2016
May 26, 2015
July 11, 2016
Exercise price
$ 5.55
$ 4.60
$ 4.50
$ 4.75
Outstanding, beginning of period
Granted
Forfeited/Cancelled
Outstanding, end of period
Options vested
Weighted average remaining life (years)
December 31, 2012
December 31, 2011
Units options
551,000
---
(324,000)
227,000
227,000
Weighted
average
exercise price
$ 10.20
---
$13.77
$ 5.07
$ 5.07
1.59
Units options
557,000
108,000
(114,000)
551,000
546,000
Weighted
average
exercise price
$11.30
$4.55
$ 10.20
$ 10.20
$ 10.25
1.33
Deferred unit compensation plan for trustees and certain executive officers
The Trust offers a deferred unit compensation plan for its trustees and certain executive officers. Under this plan,
the trustees and certain executive officers may elect to receive as compensation either cash, deferred units, or a
combination of both.
The following table present changes in the balances during the year:
Outstanding, beginning of period
Trustees’ compensation
Distributions paid in units
Outstanding, end of period
84
December 31, 2012
---
15,264
717
15,981
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
15. UNIT-BASED COMPENSATION AND WARRANTS
(CONTINUED)
(a) Unit-based compensation (continued)
As at December 31, 2012, the liability related to the plan was $75. The related expenses recorded in profit and
loss amount to $75 for the year ended December 31, 2012. No amount was paid under this plan for the year
ended December 31, 2012.
(b) Warrants
In March 2012, all the 500,000 outstanding warrants were exercised at a price of $3.822 per unit, for
proceeds of $1,911.
The warrants had a fair value of $307 before being exercised (December 31, 2011 – $265). The related
expenses recorded in profit and loss amount to $42 for the year ended December 31, 2012 (December 31,
2011 - $13).
16. TRUSTS UNITS ISSUED AND OUTSTANDING
BTB is authorized to issue an unlimited number of trust units. Each trust unit represents a single vote at any meeting
of unitholders and entitles the unitholder to receive a pro rata share of all distributions. The unitholders have the
right to require BTB to redeem their trust units on demand. Upon receipt of the redemption notice, all rights to and
under the trust units tendered for redemption are surrendered and the holder thereof is entitled to receive a price
per trust unit («Redemption Price»), as determined by a market formula. The Redemption Price is to be paid in a
ccordance with the conditions provided for in the Declaration of Trust. BTB trust units are considered liability
instruments under IFRS because the units are redeemable at the option of the holder, however they are presented
as equity at December 31, 2012 and 2011 in accordance with IAS 32.
In December 2012, the Trust completed a public issue of 4,598,000 units for total net proceeds of $18,914.
In June 2012, the Trust completed a five to one unit consolidation. All references to unit and per unit amounts in
the consolidated financial statements and accompanying notes to the consolidated financial statements have been
retroactively restated to reflect the five to one unit consolidation
In February 2012, the Trust completed a public issue of 3,750,150 units, including the over-allotment option, for
total net proceeds of $16,113.
In April 2011, the Trust completed a public issue of 4,459,600 units, including the over-allotment option, for total
net proceeds of $18,771.
85
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 16. TRUSTS UNITS ISSUED AND OUTSTANDING
(CONTINUED)
Trust units issued and outstanding are as follows:
For the years ended December 31,
2012
2011
Units
value ($)
Units
value ($)
Units outstanding, beginning of period
Issue pursuant to a public issue
14,810,790
8,348,150
99,503
37,252
10,338,345
4,459,600
80,679
20,068
Unit issue costs
23,158,940
136,755
14,797,945
100,747
(2,225)
(1,297)
Issue pursuant to the distribution
reinvestment plan
Issue pursuant to the exercice of warrants
Units outstanding, end of period
132,857
582
12,845
53
500,000
23,791,797
2,218
137,330
---
14,810,790
---
99,503
Distribution reinvestment plan
BTB offers a distribution reinvestment plan for its trust unitholders. Participation in the plan is optional and under
the terms of the plan, cash distributions on trust unit are used to purchase additional trust units. The trust units are
issued from BTB’s treasury at an average market price based on the last five trading days before the distribution
date, with a discount of 5%.
17. RENTAL REVENUES FROM PROPERTIES
For the year ended December 31,
Rental income contractually due from tenants
Lease incentive amortization
Straight-line lease adjustment
2012
48,697
(1,240)
661
48,118
2011
41,825
(864)
498
41,459
86
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 18. NET FINANCING COSTS
For the year ended December 31,
Financial income
Interest on mortgage loans payable
Interest on convertible debentures
Interest on bank loans
Other interest expense
Accretion of non-derivative liability component of convertible debentures
Accretion of effective interest on mortgage loans payable, convertible
debentures and bank loan
Net adjustment to fair value of derivative financial instruments
2012
(141)
11,822
4,622
87
107
598
1,412
(5,286)
2011
(120)
10,461
4,437
356
59
731
1,528
3,092
13,221
20,544
19. OPERATING LEASE INCOME
The Trust as lessor has entered into leases on its property portfolio. Future minimum base rentals receivable under
non-cancellable operating leases as at December 31, 2012 are as follows:
Within one year
Over one year but within five years
Over five years
December 31, 2012
37,519
110,193
55,432
203,144
87
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
20. EARNINGS PER UNIT
BTB’s trust units are required to be accounted for as financial liabilities and, therefore, are not equity instruments for
which a profit or loss per unit is required to be presented. Accordingly, the Trust does not report a profit or loss per
unit figure on its consolidated statements of income and comprehensive income. However, for disclosure purposes
only, the Trust has determined basic earnings per unit using the same basis that would apply in accordance with lAS
33 Earnings Per Share, as if BTB’s trust units been presented as equity.
Net earnings per unit are calculated based on the weighted average number of shares outstanding as follows:
For the year ended December 31,
Net income
2012
17,967
2011
7,450
Weighted average number of units outstanding - basic
18,668,871
13,698,715
Earnings per unit - basic
0.96
0.54
21. CAPITAL MANAGEMENT
The Trust’s capital consists of contributions by unitholders, convertible debentures, mortgage loans and bank loans,
excluding issuance costs. In managing its capital, the Trust’s objectives are to ensure that it has adequate resources
for its operation and development, while maximizing returns for unitholders while maintaining a balance between
debt and equity.
The Trust manages its capital structure based on changes in its operations, the economic climate and the availability
of capital.
December 31, 2012
December 31, 2011
296,214
59,020
15,000
370,234
124,778
495,012
212,998
59,020
---
272,018
76,640
348,658
The Trust’s capital is as follows:
Mortgage loans payable(1)
Convertible debentures(1)
Bank loans(1)
Unitholders’ equity
(1)
Excluding issue costs
88
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 21. CAPITAL MANAGEMENT (CONTINUED)
The trust agreement states that the Trust cannot incur a new debt if such debt would cause the Trust’s total debt, exclu-
ding convertible debentures, to exceed 75% of the gross carrying amount of its investment properties and other assets.
December 31, 2012
December 31, 2011
73.3%
61.6%
75.7%
59.3%
Total debt / gross asset value ratio
Debt (2) / gross asset value ratio
(2)
Excluding convertible debentures
Financial risk management
The Trust has exposure to the following risks from its use of financial instruments:
•
•
•
•
credit risk
interest rate risk
liquidity risk
fair value risk
This note presents information about the Trust’s exposure to each of the above risks, the Trust’s objectives, policies
and processes for measuring and managing risk, and the Trust’s management of capital. Further quantitative disclosures
are included throughout these consolidated financial statements.
(a) Credit risk
Credit risk arises from the possibility that tenants may experience financial difficulty and be unable to fulfill their
lease commitments. The Trust mitigates this risk by varying its tenant mix and staggering lease terms; avoiding
dependence on a single tenant for a significant portion of the Trust’s operating revenues and conducting credit
assessments for all major new tenants. The Trust analyzes its trade receivable on a regular basis and records
a provision for doubtful accounts when there is a significant risk of non-recovery. As at December 31, 2012,
overdue rent receivable amounted to $953 (December 31, 2011 - $653), of which a provision for doubtful
account of $271 (December 31, 2011 - $152) has been recorded. Management fully expects to recover
the amounts not provisioned as all lease agreements are signed, and they are in continuous discussions for
collections with the tenants.
The Trust places its cash and cash equivalent investments with Canadian financial institutions with high credit
ratings. Credit ratings are actively monitored and these financial institutions are expected to meet their obligation.
89
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
21. CAPITAL MANAGEMENT (CONTINUED)
(b) Interest rate risk
Interest rate risk reflects the risk of changes in the fair value or future cash flows of a financial instrument
because of fluctuations in market interest rates.
Except for two mortgage loans outstanding of $15,901 and the acquisition line of credit outstanding of
$15,000 as at December 31, 2012, all other mortgage loans payable and convertible debentures bear interest
at fixed rates, accordingly 100-basis point increase or decrease in the average interest rate for the fiscal year,
assuming that all other variables remain constant, would have an impact of approximately $309 on the Trust’s
comprehensive income for the year ended December 31, 2012.
(c) Liquidity risk
Liquidity risk is managed by:
• maximizing cash flows from operations;
•
•
•
adopting an investment property acquisition and improvement program that takes account of available
liquidity;
using credit facilities on the market;
staggering mortgage loan maturities;
• maximizing the value of investment properties, thus increasing mortgage financing on renewal of loans; and
•
issuing debt securities or Fund units on the financial markets.
Management believes that the Trust will be able to obtain the financing required to make the payments coming
due in the next year. However, there is a risk that changes affecting market conditions and access to financing may
invalidate this assumption.
Some mortgage loans include subjective and restrictive covenant clauses under which the Trust must comply with
financial conditions and ratios.
As at December 31, 2012, the Trust was in compliance with all the covenants to which it was subject.
The Trust’s cash position is regularly monitored by management. The following are contractual maturities of finan-
cial liabilities, including estimated interest payments:
90
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 21. CAPITAL MANAGEMENT (CONTINUED)
(c) Liquidity risk (continued)
As at December 31, 2012
Estimated payment schedule
Carrying
amount
Total
contractual
cash flows
2013
2014
2015
2016
2017
2018 and
thereafter
12,788
12,788
12,788
792
14,825
792
792
16,031
16,031
---
---
---
---
---
---
---
---
---
---
350,795
419,307
76,441 85,176
30,486
93,522
65,219
68,463
379,200
448,918 106,052 85,176 30,486 93,522 65,219
68,463
As at December 31, 2011
Estimated payment schedule
Carrying
amount
Total
contractual
cash flows
2012
2013
2014
2015
2016
2017 and
thereafter
10,100
10,100
10,100
---
---
---
---
---
496
496
496
265,083
319,190
76,482 51,736 51,251
22,247
80,454
37,020
275,679
329,786
87,078 51,736 51,251 22,247 80,454
37,020
Trade and other
payables
Distributions payable
to unitholders
Bank loans
Mortgage loans
payable and
convertible
debentures
Trade and other
payables
Distributions payable
to unitholders
Mortgage loans
payable and
convertible
debentures
91
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
21. CAPITAL MANAGEMENT (CONTINUED)
(d) Fair value risk
The fair value of the Trust receivables, trade and other payables and distributions payable to unitholders,
approximated their carrying amount as at December 31, 2012 because of their short-term maturity.
The fair value of mortgage loans was calculated by discounting cash flows from financial obligations using
the year end market rate for various loans with similar risk and credit profiles. Using these assumptions, the
estimated fair value of mortgage loans on December 31, 2012 amounted to $300,046 (December 31, 2011
- $216,657).
The fair value of debentures, including their conversion features, was determined with reference to year end
quoted market price. Using these values, the fair values of debentures, including the conversion features, on
December 31, 2012 amounted to $59,882 (December 31, 2011 - $56,820).
The fair value of bank loans was calculated by discounting cash flows from financial obligations using the year
end market rate. Using these assumptions, the estimated fair value of bank loans on December 31, 2012
amounted to $15 030.
The Trust uses a fair value hierarchy to categorize the type of valuation techniques from which fair value are
derived. The different levels of the hierarchy are; quoted market prices (Level 1), internal models using obser-
vable market information as inputs (Level 2) and internal models without observable market information as
inputs (Level 3).The fair value of conversion option liabilities were estimated using internal models using observable
market information as inputs (Level 2). Using these models, the estimated fair value of conversion option liabilities
on December 31, 2012 amounted to $927 (December 31, 2011 - $6,256).
A sensitivity analysis has been performed for the fair value of conversion option liabilities. The table below
summarize the results obtained:
Conversion option liability
Fair value
Variation in unit price at year end
+0.05$
- 0.05$
927
975
830
92
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 22. SUBSIDIARIES, JOINTLY CONTROLLED ASSETS AND
JOINTLY CONTROLLED ENTITIES
The principal entities included in the Trust’s consolidated financial statements are as follows:
Entity
BTB Real Estate Investment Trust (“BTB REIT”)
BTB, Fiducie d’acquisitions et d’exploitation (“BTB
FA&E”)
Type
Trust
Trust
Gestion immobilière BTB Inc.
Corporation immobilière Cagim (“CIC”)
Corporation
Corporation
Relationship
Parent
100% owned by BTB REIT
100% owned by BTB FA&E
100% owned by BTB FA&E
Lombard SEC
Limited Partnership
99.9% owned by BTB FA&E
Place d’affaire Lebourgneuf Phase II, SENC (“PAL II”) General Partnership
99.9% owned by BTB FA&E
Société immobilière Cagim, SEC
Limited Partnership
70.4% owned by BTB FA&E
0.1% owned by CIC
0.1% owned by CIC
29.5% owned by PAL II
0.1% owned by CIC
Complexe Lebourgneuf Phase II Inc.
Corporation
75% owned by BTB FA&E
(a) Jointly controlled entities
The Trust has an investment in a joint venture that is a jointly controlled entity. This joint venture holds a single
commercial property and a related mortgage. As at December 31, 2012, the Trust has an interest of 75%
(December 31, 2011 – 25%) in the following jointly controlled property holding entity: Complexe Lebourgneuf
Phase II Inc.
(b) Jointly controlled assets
The Trust, via two of its nominee entities, has an interest in two properties that are subject to joint control
and accordingly, the Trust has recorded its proportionate share of the related assets, liabilities, revenue and
expenses of these properties. As at December 31, 2012, the Trust has an interest of 50% in the following
jointly controlled asset: Immeuble BTB/Laplaine and Huntington/BTB Montclair (December 31, 2011 – 50%
in Immeuble BTB/Laplaine).
93
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
22. SUBSIDIARIES, JOINTLY CONTROLLED ASSETS AND
JOINTLY CONTROLLED ENTITIES (CONTINUED)
(b) Jointly controlled assets (continued)
The consolidated financial statements include the Trust’s proportionate share of the assets, liabilities, revenues
and expenses of these three joint ventures.
December 31, 2012
December 31, 2011
Assets:
Non-current
Current
Liabilities:
Non-current
Current
Revenues
Expenses
43,458
2,129
29,779
2,374
4,572
1,888
19,050
544
10,294
3,904
164
32
23. OPERATING SEGMENTS
For investment properties, discrete financial information is provided to the Chief Executive Officer (‘’CEO’’) on an
aggregated investment property basis. The information provided is net rentals (including gross rent and property
expenses), valuations gains/losses and the net value of investment properties. The individual investment properties
are aggregated into segments with similar economic characteristics. The CEO considers that this is best achieved
by aggregating into commercial, office, industrial and general purpose segments.
Consequently the Trust is considered to have four reportable operating segments, as follows:
•
•
•
•
Commercial segment
Office segment
Industrial segment
General purpose
94
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts)
23. OPERATING SEGMENTS (CONTINUED)
December 31, 2012
Commercial
Office
Industrial
General
purpose
Total
Investment properties
Rental revenue from
properties
Net operating income
98,608
200,092
79,236
110,585
488,521
7,898
5,360
23,584
11,418
6,841
5,517
9,795
4,701
48,118
26,996
December 31, 2011
Commercial
Office
Industrial
General
purpose
Total
Investment properties
Investment properties
under development
Rental revenue from
properties
Net operating income
70,175
152,600
53,269
67,339
343,383
---
3,933
---
---
3,933
7,630
4,988
20,857
9,987
3,493
2,565
9,479
4,572
41,459
22,112
24. COMPENSATION OF KEY MANAGEMENT
PERSONNEL AND TRUSTEES
Key management personnel and trustees compensation is as follows:
For the year ended December 31,
Salaries and short-term benefits
Unit-based compensation
Total
2012
1,527
(21)
1,506
2011
1,312
101
1,413
Key management personnel are comprised of the Company’s executive officers.
25. COMMITMENTS
The Trust currently has one investment property under firm contract, where conditions have been waived that, if
completed, represents $11,000 of acquisition. It is expected that the transaction will close during the first or second
quarters of 2013.
95
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) 26. SUBSEQUENT EVENTS
In February 2013, the Trust acquired a 50% interest in a retail building located in the city of Saint-Lazare for a
purchase price of $2,500.
In February 2013, the Trust completed a public issue of Series E subordinated convertible, redeemable, unsecured
debentures bearing 6.90% interest payable semi-annually and maturing in March 2020, in the amount of $23,000,
including an over-allotment option, for total estimated net proceeds of $21,780.
27. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to the current year’s presentation.
96
BTB REAL ESTATE INVESTMENT TRUSTNotes to Consolidated Financial StatementsFor the years ended December 31, 2012 and 2011 (in thousands of CAD dollars, except per unit amounts) CORPORATE INFORMATION
Board of Trustees
Jocelyn Proteau (2)
President of the Board of Trustees
BTB Real Estate Investment Trust
Corporate director
Luc Lachapelle (1)(3)
Secretary of the Board of Trustees
BTB Real Estate Investment Trust
President and Chief Executive Officer
Corlac Immobilier Inc.
Michel Leonard
President and Chief Executive Officer
BTB Real Estate Investment Trust
Normand Beauchamp (2) (3)
President and Chief Executive Officer
Capital NDSL inc.
Executive Team
Claude Garcia (1) (3)
Corporate director
Jean-Pierre Janson (2)
Executive Vice-President
Partenaires Financiers Richardson Limited
Richard Lord (1) (2)
Corporate director
Fernand Perreault (1) (3)
Corporate director
Peter Polatos (3)
President
Gestion AMTB inc.
(1) Member of the Audit Committee
(2) Member of the Human Resources and Governance Committee
(3) Member of the Investment Committee
Michel Leonard
President and Chief Executive Officer
Daniel G. Oana
Vice-President, Leasing
Benoit Cyr, CPA, CA
Vice-President and Chief Financial Officer
Georges A. Renaud, FRI, CPM
Vice-President, Property management
97
UNITHOLDER INFORMATION
Head office
Auditors
BTB Real Estate Investment Trust
2155, Crescent, suite 300
Montréal (Québec)
H3G 2C1
KPMG s.r.l. /S.E.N.C.R.L.
600 De Maisonneuve West Blvd., suite 1500
H3A 0A3
Montreal, QC
T 514 286 0188
F 514 286 0011
Web site: www.btbreit.com
Listing
The units and convertible debentures of BTB Real
Estate Investment Trust are listed on the Toronto
Stock Exchange under the trading symbols:
« BTB.UN », « BTB.DB.B », « BTB.DB.C », « BTB.DB.D, »
« BTB.DB.E »
Legal counsel
De Grandpré Chait
1000, De la Gauchetière West, suite 2900
Montreal, QC
H3B 4W5
Annual meeting of unitholders
June 12th, 2012
11: 00 a.m.
VIP Center
1 000 de la Gauchetière
Montreal, QC
H3B 4W5
Transfer Agent
Computershare trust company of Canada
1500, rue University, suite 700
Montreal (Québec)
Canada
H3A 3S8
T 514-982-7555
T Toll free: 1-800-564-6253
F 514 982-7850
E service@computershare.com
Taxability of distributions
In 2012, for all Canadian unitholders, the distributions
are fiscally treated as follow:
•
•
Other revenues : 0%
Fiscal Deferral : 100%
Unitholder distribution reinvestment
plan
BTB Real Estate Investment trust offers a distribution
reinvestment plan to unitholders whereby the participants
may elect to have their monthly cash distribution rein-
vested in additional units of BTB at a price based on the
weighted average price for BTB’s Units on the Toronto
Stock Exchange for the five trading days immediately
preceding the distribution date, discounted by 5%.
For further information about the DRIP, please refer to the
Investors rebtion section of our website at www.btbreit.com
or contact the Plan agent: Computershare Trust Com-
pany of Canada.
98