BTB Real Estate Investment Trust
Annual Report 2013
Space for
growth
Profile
BTB is a real estate investment trust listed on the Toronto Stock Exchange.
BTB owns and manages a portfolio of 69 commercial, industrial and office
properties totalling approximately 4.6 million square feet, predominantly
situated in and around Montréal, Québec City and Ottawa.
Since the Trust’s inception in 2006, its assets have experienced an average
annual growth of $100 million and its total assets now stand at $546 million,
making it the second largest real estate investment trust in Québec.
BTB’s primary objective is to maximize total return for unitholders by:
• generating stable monthly cash distributions that are reliable and fiscally beneficial;
• growing the Trust’s assets through internal growth and acquisition strategies
in order to increase distributable income and therefore fund distributions;
• managing assets internally in a centralized and controlled way, thereby reducing
operating fees, management fees and rental costs;
• optimize the value of assets through dynamic and responsible management
of its properties in order to maximize the long-term value of its units.
Table of contents
1 Highlights
12 Message from the Chairman
of the Board of Trustees
14 Message from the President
and Chief Executive Officer
17 Executive Team
19 Our Properties
21 Management Discussion and Analysis
81 Audited Consolidated Financial Statements
125 Corporate Information
126 Unitholder Information
2
BTB Rapport annuel 2013
Highlights
62%
32%
31%
Increase in distributable income
Increase in rental income
Increase in net operating income
$546M
Total assets
69
4.6M
92%
Number of properties
Number of square feet
Occupancy rate
Evolution of operating revenues
at December 31st, 2013
Evolution of net operating income
at December 31st, 2013
(in thousands of dollars)
(in thousands of dollars)
2008
2009
2010
201 1
201 2
201 3
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
27,906
30,325
34,595
41 ,459
48,1 1 8
63,435
2008
2009
2010
201 1
201 2
201 3
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
15,971
17,509
19,357
22,122
26,996
35,336
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
BTB Annual Report 2013
1
Highlights
1001 Sherbrooke Street East, Montreal
50 St-Charles Street West, Longueuil
Evolution of yearly distribution payments
at December 31st
Evolution of leasable area
at December 31st
(in thousands of dollars)
(in thousands square feet)
2008
2009
2010
201 1
201 2
201 3
15,000
12,000
9,000
6,000
3,000
0
3,888
3,813
2,684
5,026
7,805
12, 610
2008
2009
2010
201 1
201 2
201 3
2,269
2,236
2,866
3,272
4,341
4,580
5,000
4,000
3,000
2,000
1,000
0
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
BTB Annual Report 2013
2
Highlights
Édifice Lombard, 915 Pierre-Bertrand Blvd, Quebec
1400-1440 Antonio-Barbeau Street, Montreal
Breakdown of portfolio by geographical region
at December 31st, 2013
Breakdown by asset type
at December 31st, 2013
(per leasable area)
(per leasable area)
Greater Quebec city area
Island of Montreal
Toronto region
Ottawa region
South shore of Montreal
Laval / North shore of Montreal
Sherbrooke
Total
26%
21%
4%
16%
15%
12%
6%
100%
Mixed-use
Office
Retail
Industrial
Total
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21%
32%
14%
33%
100%
BTB Annual Report 2013
3
6
BTB Rapport annuel 2013 Highlights
“Behind our success are highly
competent men and women who,
through their commitment,
have made us into a major property
owner in eastern Canada.”
Michel Léonard
President and Chief Executive Officer
Previous page: 1001 Sherbrooke Street East, Montreal
BTB Annual Report 2013
5
Highlights
Since the Trust’s inception in 2006,
its assets have experienced
average annual growth of $100 million
and total assets now stand at
$546 million, making it the second
largest real estate investment
trust in Québec.
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BTB Annual Report 2013
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9
BTB Rapport annuel 2013 10
BTB Rapport annuel 2013 Highlights
In 2013, BTB’s seasoned team iden-
tified opportunities leading to the
acquisition of four industrial properties
and one commercial property.
At a total cost of $30 million, these
acquisitions added 257,000 square
feet to our leasable area.
Previous page: 1400-1440 Antonio-Barbeau Street, Montreal. Photo: Courtesy of Lufa Farms Inc.
BTB Annual Report 2013
9
Highlights
BTB owns and manages a portfolio
of 69 commercial, industrial and
office properties totalling approxima-
tely 4.6 million square feet of
leasable area, predominantly in and
around Montréal, Québec City
and Ottawa.
245 Stafford Road West, Ottawa
Next page from top to bottom: Place d’affaires Lebourgneuf, Phase II, 6700 Pierre-Bertrand Blvd,
Quebec – 5810 Sherbrooke Street East, Montreal
BTB Annual Report 2013
10
13
BTB Rapport annuel 2013 Message from the Chairman
of the Board of Trustees
“These performance indicators
reflect the quality and efficiency
of BTB’s team.”
Staying
the course
Again in 2013, BTB delivered a strong performance. The Trust pursued its strategy and targeted
acquisitions in its geographical areas and meet its criteria favoring stable and sustainable financial
performance for investors.
BTB now owns 4.6 million square feet of properties and its total assets now stands at more than
$546 million, making it the second largest real estate investment trust in the province of Québec.
At the end of the last fiscal year, distributions to unitholders totaled $10.4 million, an increase of 36%
compared to our 2012 results, and our payout ratio was below 83%, a 16% improvement over 2012.
BTB’s unitholders’ equity totals more than $153 million. Based on the number of units outstanding
at December 31, 2013 (28.3 million), the book value of BTB’s units is $5.39 per unit. These performance
indicators reflect the quality and efficiency of BTB’s team. The members of the Board of Trustees join
me in recognizing the contribution of the team, whose vision and extensive experience have created even
more value for our unitholders.
The Trust continues to prioritize good relationships with its clientele of more than 650 tenants.
Its properties are well maintained and functional and have an occupancy rate of 92%. Through ongoing
attention to client needs, BTB has built productive long-term relationships with its tenants.
BTB Annual Report 2013
12
Message from the Chairman of the Board of Trustees
With year after year of sustained growth, BTB continues to expand and is steadily moving towards
its goal of $1 billion of total assets within the next four years, without losing sight of its objective of
growing profitably.
We wish to thank our unitholders for their confidence and I confirm that we will continue to create
value for them.
All members of the BTB team—trustees, officers and employees—work together to grow our
business, which started from scratch in 2006, and has since become a major player in the Canadian
real estate landscape.
Jocelyn Proteau
Chairman of the Board of Trustees
BTB Annual Report 2013
13
Message from the President
and Chief Executive Officer
“We are proud to announce an overall improve-
ment in BTB’s results and performance
indicators, resulting in an appreciable 62%
increase of net income.”
Growing
together
The strength of BTB’s team shone through once again in 2013. Behind our success are highly
competent men and women who, through their commitment, have propelled us into a major property owner
in eastern Canada.
Performance and growth are the core of our actions and our results prove it. Always mindful of
unitholders’ interests and true to our values of integrity, respect and service quality, we surpassed our goals
and reached total revenues of $64 million. Also we are proud to announce an overall improvement
in BTB’s results and performance indicators, resulting in an appreciable 62% increase of net income,
a significant improvement over 2012. Compared to last year, our rental income and net operating
income were up by 32% and by 31%, respectively.
Throughout the fiscal year, distributable income exceeded distributions with a payout ratio
of 82% for the year, attesting to our improvement of profitability. Funds from operations increased 79%
and adjusted funds from operations grew by 62%.
Responsible debt management
The upward pressure of Canadian and U.S. long-term interest rates in 2013 prompted a closer look
at our debt management strategy. Although the securities market of Canadian real estate companies and
trusts were not immune to this volatility, I am proud to announce that at year-end, BTB ranked among
the five best real estate entities in Canada for the performance of its units.
Our investors will be pleased to hear that the anticipated rate hikes will not materially impact on
BTB’s short-term results. During the coming year, we will renew more than $60 million in mortgages
maturing in 2014. We already begun negotiations to refinance these loans and are confident we will
reduce significantly the interest expense related to these loans. By way of example, in February 2014, we
finalized a refinancing of a $29 million mortgage at a rate of 3.34% for a 5-year term. This refinancing
will translate into annual interest savings of more than $500,000 over the next five years. We anticipate
the remainder of the refinancings for 2014 will also contribute to reduce our interest expense.
BTB Annual Report 2013
14
Message from the President and Chief Executive Officer
Strategic acquisitions
The key to our success is our ability to critically assess opportunities and confidently plan our
strategy for the future. In 2013, BTB’s seasoned team identified opportunities leading to the acquisition
of four industrial properties and one commercial property. At a total cost of $30 million, these acquisitions
added 257,000 square feet to our total leasable area. Throughout the year, we continued to seek property
acquisition opportunities based on strict criteria, in line with our acquisition policy.
We understand that smart and strategic growth will ensure a strong future for BTB. I have tremendous
confidence in our team of principled and responsible professionals who, since our inception in 2006,
have demonstrated vision and leadership. I also wish to acknowledge the invaluable contribution of the
members of our Board of Trustees, who guide our actions and support our development initiatives.
We are fully equipped to pursue our goal to achieve $1 billion in assets within the next few years.
Working to develop BTB’s future means growing together.
Michel Léonard
President and CEO
BTB Annual Report 2013
15
“Our goal is to achieve $1 billion in
assets by 2018. There are tremendous
opportunities for growth and we are
going to tap into them.”
Michel Léonard
President and Chief Executive Officer
BTB Rapport annuel 2013 Executive Team
From left to right: Frédéric Seigneur, Dominic Gilbert,
Michel Léonard et Benoit Cyr.
Michel Léonard
President and Chief Executive Officer
Benoit Cyr, CPA, CA, MBA
Vice President and Chief Financial Officer
Dominic Gilbert, B.A.A.
Vice President, Property Management
Frédéric Seigneur
Vice President, Leasing
BTB Annual Report 2013
17
20
BTB Rapport annuel 2013 Our Properties
Portfolio listing
Island of Montreal
7205-7235 St-Jacques Street West, Montreal(3)
1400-1440 Antonio-Barbeau Street, Montreal
5810 and 5878-5882 Sherbrooke Street East, Montreal(3)
7001-7035 St-Laurent Blvd., Montreal
2212-2226 Dollard Street, Montreal
1001 Sherbrooke Street East, Montreal
2153-2155 Crescent Street, Montreal
Quebec City Area
Place d’Affaires Lebourgneuf, Phase I
6655 Pierre-Bertrand Blvd., Quebec
Centre d’affaires Le Mesnil
1170 Lebourgneuf Blvd, Quebec
Complexe Lebourgneuf
825 Lebourgneuf Blvd, Quebec
Place d’affaires Lebourgneuf, Phase II
550-560 Henri-Bourassa Blvd, Montreal
6700 Pierre-Bertrand Blvd, Quebec
3627-3645 des Sources Blvd., Dollard-des-Ormeaux
Édifice Lombard
3761-3781 des Sources Blvd., Dollard-des-Ormeaux
11600-11800 De Salaberry Blvd, Dollard-des-Ormeaux(5)
1863-1865 Trans-Canada Highway, Dorval
1325 Hymus Blvd, Dorval
5600 Côte-de-Liesse, Mont-Royal
4105 Sartelon Street, St-Laurent
909-915 Pierre-Bertrand Blvd, Quebec
Complexe Lebourgneuf, Phase II
815 Lebourgneuf Blvd, Quebec(1)
Edifice Brinks
191 D’Amsterdam Street, St-Augustin-de-Desmaures
1100 and 1108-1136 St-Joseph Blvd, Drummondville
208-244 Migneron Street and 3400-3410
Complexe de Léry
Griffith Street, St-Laurent
7777 Trans-Canada Highway, St-Laurent
2265-2665-2673 et 2681 Côte Saint-Charles, Saint-Lazare
Laval/North Shore
2900 Jacques-Bureau Street, Laval
1125-1135 St-Martin Blvd. West, Laval
2004-2016 René-Laennec Blvd., Laval
4535 Louis B. Mayer Street, Laval
3695 Des Laurentides (Highway-15), Laval
81-83 Turgeon Street, Ste-Thérèse
5791 Laurier Blvd., Terrebonne(2)
2175 Des Entreprises Blvd, Terrebonne
505 Des Forges Street and 1500 Royale Street,
Trois-Rivières(3)
665-669 Thibeau Blvd, Trois-Rivières
3885 Harvey Blvd, Saguenay
Promenades St-Noël
100 1st Street West, Thetford Mines
Sherbrooke
2865-2885 De Portland Blvd., Sherbrooke
1635-1645 King Street East and 150-170 Duplessis Road,
Sherbrooke(4)
1640-1650 and 1645 King Street West, Sherbrooke(3)
Les terrasses 777
2205-2225 Des Entreprises Blvd, Terrebonne
747-805 King Street East, Sherbrooke
South Shore of Montreal
4890-4898 Taschereau Blvd., Brossard
2340 Lapinière Blvd, Brossard
100 Montarville Blvd., Boucherville
204 De Montarville Blvd, Boucherville
32 St-Charles Street West, Longueuil
50 St-Charles Street West, Longueuil
85, St-Charles Street West, Longueuil
3036-3094 De Chambly Road, Longueuil(3)
2111 Fernand-Lafontaine Blvd, Longueuil
2350 Chemin du Lac, Longueuil
1400 Marie-Victorin Street, St-Bruno
Halles St-Jean
145 St-Joseph Blvd, St-Jean-sur-Richelieu
Le Bougainvillier
315-325 MacDonald Street, St-Jean-sur-Richelieu
30-66 Jacques-Cartier Blvd Nord, Sherbrooke
3705 Industrial Blvd, Sherbrooke
2059 René-Patenaude Street, Magog
GTA
311 Ingersoll Street, Ingersoll
Ottawa Area
80 Aberdeen Street, Ottawa
245 Stafford Road West, Ottawa
1-9 and 10 Brewer Hunt Way and 21-31 Richardson Side Rd, Ottawa
7 and 9 Montclair Blvd, Gatineau(2)(3)
705 Boundary Road, Cornwall
725 Boundary Road, Cornwall
805 Boundary Road, Cornwall
2901 and 2905 Marleau Avenue, Cornwall(3)
(1) BTB has a 75% interest in that property.
(2) BTB has a 50% interest in that property.
(3) Comprises two income-producing properties.
(4) Comprises three income-producing properties
(5) Comprises four income-producing properties
BTB Annual Report 2013
19
Management Discussion and Analysis
Quarter ended December 31, 2013
23
BTB Rapport annuel 2013 Management Discussion and Analysis
Table of Contents
23
23
24
25
25
26
27
28
29
29
30
31
39
42
43
45
46
47
48
49
52
61
61
62
63
72
74
79
Introduction
Forward-Looking Statements Caveat
Non-IFRS Financial Measures
The Trust
Objectives and Business Strategies
Highlights of the Fourth Quarter 2013
Highlights of Fiscal 2013
Selected Financial Information
Selected Annual 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
Use of proceeds of public offerings - fiscal 2013
Income Taxes
Taxation of Unitholders
Summary of Significant Accounting Policies and Estimates
New Accounting Policies
Risks and Uncertainties
Disclosure Controls and Procedures and Internal
Control over Financial Reporting
BTB Annual Report 2013
22
Management Discussion and Analysis
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, 2013, 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 25, 2014 should be read
together with the audited annual consolidated financial statements and accompanying notes for the
years ended December 31, 2013 and 2012. It discusses any significant information available up to the
date of this MD&A. The Trust’s consolidated annual 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 the years ended December 31,
2013 and 2012. 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 2013 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.
BTB Annual Report 2013
23
Management Discussion and Analysis
By their very nature, forward-looking statements involve numerous factors and assumptions, and are
subject to inherent risks and uncertainties, both general and specific, which give rise to the possibility
that predictions, forecasts, projections and other forward-looking statements will not be achieved. We
caution readers not to place undue reliance on these statements as a number of important factors
could cause our actual results to differ materially from the expectations expressed in such forward-
looking statements. These factors include general economic conditions in Canada and elsewhere, the
effects of competition in the markets where we operate, the impact of changes in laws and regulations,
including tax laws, successful execution of our strategy, our ability to complete and integrate strategic
acquisitions successfully, potential dilution, our ability to attract and retain key employees and
executives, the financial position of lessees, our ability to refinance our debts upon maturity 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, except as required under applicable securities regulations.
Non-IFRS Financial Measures
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. These
measures and net operating income 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.
BTB Annual Report 2013
24
Management Discussion and Analysis
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 69 commercial, offices 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 C, D and E convertible debentures are traded on the Toronto
Stock Exchange under the symbols “BTB.UN”, “BTB.DB.C”, “BTB.DB.D” and “BTB.DB.E”, respectively.
Most of the Trust’s properties are managed internally, with 51 of the Trust’s 69 properties held to date
entirely managed by the Trust’s employees. Management’s objective is to resume, when favourable
circumstances prevail, internal management 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 a summary of the property portfolio:
As at December 31, 2013(1)
Number of
properties
69
Leasable area
(sq. ft.)
4,580,271
Fair value
(thousands of $)
529,432
(1) These figures include a 50% interest in a 17,114 square-foot building in a Montréal suburb, a 75% interest in a 140,870
square-foot building in Québec City and a 50% interest in two buildings totalling 74,941 square feet in Gatineau, Québec.
BTB’s management is entirely internalized 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.
Objectives and Business Strategies
BTB’s primary objective is to maximize total returns to unitholders. Returns include cash distributions
and long-term appreciation in the value of units.
(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 distributable 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.
BTB Annual Report 2013
25
Management Discussion and Analysis
Highlights of the Fourth Quarter 2013
Increase
23% in rental income
20% in net operating income
58% in distributable income and 10% in distributable income per unit
77% in funds from operations (FFO) and 23% in FFO per unit
60% in adjusted funds from operations (AFFO) and 11% in AFFO per unit
Improvement
of its payout ratio from 91.0% to 78.9%
of its occupancy rate from 91.7% to 91.9%
of its average contractual interest rate on mortgages from 4.57% to 4.44%
Leasing activities
Strong leasing activity during the quarter with the conclusion of renewals for 125,000 square feet that
had expired with a 9.8% increase in the average lease rate and the signing of leases with new tenants
totalling 46,000 square feet, bringing the occupancy rate to almost 92%.
Investing activities
On October 30, 2013, the Trust acquired two industrial properties located in Longueuil, Québec and
Sherbrooke, Québec and an office building located in Longueuil, Québec. The three buildings totaled
109,000 square feet in rentable area and are fully-leased to the engineering firm S.M. Group Inc. The
total purchase price was $14 million.
On December 1, 2013, the Trust acquired a residual 50% interest in a retail complex in Saint-Lazare,
Québec for $2.5 million. BTB already owned a 50% interest in this complex, which is fully-leased to
tenants that include Sobeys, Tim Horton and A&W.
Financing activities
Arrangement of a first-ranking mortgage financing in the amount of $9.1 million, bearing interest at an
annual rate of 3.95% for a 5-year term, on three properties acquired on October 30, 2013.
Assumption of a mortgage in the amount of $1.9 million, bearing interest at 3.93% and maturing in
October 2016, on the property located in Saint-Lazare, Québec.
Subsequent to year end
Refinancing of two mortgage loans with outstanding balance totalling $25 million, at 5.74%, on seven
properties by concluding six new loans totalling $26.4 million at a rate of 3.34% for a 5-year term,
generating annual savings on interests expenses of more than $0.5 million.
BTB Annual Report 2013
26
Management Discussion and Analysis
Highlights of Fiscal 2013
Increase
32% in rental income
31% in net operating income
62% in distributable income and 17% in distributable income per unit
79% in funds from operations (FFO) and 30% in FFO per unit
68% in adjusted funds from operations (AFFO) and 18% in AFFO per unit
Improvement
in payout ratio from 98.1% to 82.6%
in occupancy rate from 91.7% to 91.9%
in average contractual interest rate on mortgages from 4.69% to 4.44%
BTB Annual Report 2013
27
Management Discussion and Analysis
Selected Financial Information
Since the beginning of its real estate operations in October 2006, the Trust has acquired and owns
69 properties generating, on an annualized basis, revenues of more than $64 million.
The following table presents highlights and selected financial information for the quarters and years
ended December 31, 2013 and 2012:
Periods ended December 31
(in thousands of dollars, except for ratios and per unit data)
Reference
Financial information
Rental income
Net operating income
Net operating income of same-property portfolio
Net income & comprehensive income
Recurring distributable income
Distributions
Recurring funds from operations (FFO)
Recurring adjusted funds from operations (AFFO)
Total assets
Investment properties
Mortgage loans payable
Convertible debentures
Debt ratio – excluding convertible debentures
Weighted average interest rate on mortgage debt
Unitholders’ equity
Market capitalization
Financial information per unit
Units outstanding (000)
Weighted average number of units outstanding (000)
Net income and comprehensive income
Recurring distributable income
Payout ratio
Cash payout ratio
Recurring FFO
Recurring AFFO
Unitholders’ equity
Tax on distributions
Revenue
Tax deferral
Operational information
Number of properties
Leasable area (thousands of sq. ft.)
Occupancy rate
Increase in average lease renewal rate
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Page 36
Page 58
Page 59
Page 39
Page 41
Page 41
Page 41
Page 42
Page 44
Page 62
Page 62
Page 48
Page 48
Page 50
Page 49
Quarter
2013
$
16,348
9,061
6,340
7,732
3,581
2,827
3,490
3,049
2012
$
13,316
7,551
6,314
5,603
2,273
2,068
1,975
1,905
28,292
27.3¢
12.7¢
78.9%
70.7%
12.3¢
10.8¢
19,723
28.4¢
11.5¢
91.0%
83.4%
10.0¢
9.7¢
9.8%
7.8%
Year
2013
$
63,435
35,336
25,052
18,349
12,610
10,412
11,632
10,462
546,559
529,432
313,816
63,929
57.4%
4.44%
152,592
126,332
28,326
25,736
71.3¢
49.0¢
82.6%
75.3%
45.2¢
40.7¢
5.39
2012
$
48,118
26,996
24,457
17,967
7,805
7,656
6,493
6,224
504,927
488,521
296,523
54,272
61.6%
4.69%
124,778
101,353
23,792
18,669
96.2¢
41.8¢
98.1%
90.6%
34.8¢
34.5¢
5.24
0.0%
100.0%
0.0%
100.0%
69
4,580
91.9%
7.7%
65
4,341
91.7%
6.9%
BTB Annual Report 2013
28
Management Discussion and Analysis
Selected Annual Information
Years ended December 31
(in thousands of dollars, except for ratios and per unit data)
Rental income
Net operating income(1)
Fair value adjustment on investment properties
Net income
FFO(2)
AFFO(3)
Distributions
Total assets
Long-term debt
Financial information per unit
Net income
FFO(2)
AFFO(3)
Distribution
Payout ratio(4)
2013
$
63,435
35,336
8,375
18,349
11,632
10,447
10,412
546,559
377,745
71.3¢
45.2¢
40.6¢
40.0¢
82.6%
2012
$
48,118
26,996
7,711
17,967
6,493
6,499
7,656
504,927
350,795
96.2¢
34.8¢
34.5¢
40.0¢
98.1%
2011
$
41,459
22,112
8,648
7,450
3,165
3,911
5,631
358,938
265,083
54.4¢
23.1¢
28.6¢
40.0¢
112.1%
(1) Defined as rental income from investment properties less operating expenses.
(2) See “Funds from operations” on page 24 for a definition and reconciliation to net income.
(3) See “Ajusted Funds from operations” on page 25 for a definition and reconciliation to FFO and net income.
(4) Distributable distributions divided by distributable income.
Real Estate Portfolio
BTB owns 69 properties which have a fair value of $529 million representing a total leasable area of
approximately 4.6 million square feet. A concise description of the properties owned can be found in
the Trust’s 2013 Annual Information Form available at www.sedar.com.
BTB Annual Report 2013
29
Management Discussion and Analysis
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 expenditures 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 using its operating revenues;
The occupancy rate, which provides an indication of the optimization of rental space and the
potential revenue gain from the Trust’s property portfolio.
More detailed definitions and analyses of each of these indicators are provided in the appropriate
sections.
BTB Annual Report 2013
30
Management Discussion and Analysis
Operating Results
The table below summarizes financial results for the quarters and years ended December 31, 2013 and
2012. The table should be read in conjunction with our annual consolidated financial statements and
the notes thereto.
Periods ended December 31
(in thousands of dollars, except for ratios and per unit data)
Rental income
Operating expenses
Net operating income
Financial income
Financial expenses
Trust administration expenses
Expenses for abandoned projects
Fair value adjustment on investment properties
Net income and comprehensive income
Reference
Page 31
Page 32
Page 33
Page 35
Page 37
Page 37
Page 37
Page 39
Quarter
Year
2013
$
16,348
7,287
9,061
(19)
5,018
824
26
(4,520)
7,732
2012
$
13,316
5,765
7,551
(36)
3,824
924
—
(2,764)
5,603
2013
$
63,435
28,099
35,336
(105)
21,634
3,715
118
(8,375)
18,349
2012
$
48,118
21,122
26,996
(141)
13,362
3,511
8
(7,711)
17,967
Same-property portfolio
The same-property portfolio includes all the properties owned by BTB as at January 1, 2012, but does
not include the financial spin-offs of disposals, acquisitions and developments completed in 2012 and
2013.
Rental income
BTB actively acquired properties in 2012 and 2013. Due to this acquisition activity as well as internal
growth from the same-property portfolio, rental income for the fourth quarter and fiscal 2013 increased
by $3,032 or 22.8% and $15,317 or 31.8%, respectively.
Rental income includes all amounts earned from tenants related to lease agreements, including basic
rent and other service charges for parking and storage, lease termination revenues, 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 fiscal 2013, straight-line rent adjustments of $327 (2012: $281) and $866 (2012: $661),
respectively, were recorded.
BTB Annual Report 2013
31
Management Discussion and Analysis
In the fourth quarter and fiscal 2013, BTB recorded amortization of $407 (2012: $355) and $1,480
(2012: $1,240), respectively, as a reduction in rental income, which represents amortization of lease
incentives afforded to lessees.
The following table provides a reconciliation of rental income on the basis of in-place leases and rental
income from investment properties.
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
Rental income from investment properties
Quarter
Year
2013
$
16,428
327
(407)
16,348
2012
$
13,390
281
(355)
13,316
2013
$
64,049
866
(1,480)
63,435
2012
$
48,697
661
(1,240)
48,118
Income from the same-property portfolio increased 1.3% in the fourth quarter ended December 31,
2013 and 3.2% in fiscal 2013, as shown in the table below.
Periods ended December 31
(in thousands of dollars)
Same-property portfolio
Acquisitions, disposals and development
Rental income
2013
$
11,603
4,745
16,348
Quarter
2012
$
11,453
1,863
13,316
%
1.3
n/a
22.8
2013
$
45,793
17,642
63,435
Year
2012
$
44,382
3,736
48,118
%
3.2
n/a
31.8
During the fourth quarter of 2013, the “1863-1865 Transcanadienne” property in Dorval became
partially vacant. It will become fully vacant in the first quarter of 2014 following management’s decision
to redevelop and repurpose this industrial property. Investments of approximately $1 million are
planned and the property will be presented as a property under redevelopment as of January 1, 2014.
After extracting this property from the same-property portfolio, rental income from the same-property
portfolio would have increased 1.7% for the fourth quarter and 3.3% for fiscal 2013.
Operating expenses
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
BTB Annual Report 2013
32
Management Discussion and Analysis
expenses. BTB pays particular attention to compliance with existing leases and the recovery of its
properties’ operating expenses.
The increase in operating expenses of 26.4% between the fourth quarter of 2012 and the fourth quarter
of 2013, and 33.0% for fiscal 2013 compared to the previous year, was mainly due to 2012 and 2013
acquisitions. Operating expenses of the same-property portfolio increased 2.4% during the quarter and
4.1% for the year, as shown in the table below.
Periods ended December 31
(in thousands of dollars)
Same-property portfolio
Acquisitions, disposals and development
Operating expenses
Quarter
2012
$
5,140
625
5,765
2013
$
5,263
2,024
7,287
%
2.4
n/a
26.4
2013
$
20,741
7,358
28,099
Year
2012
$
19,926
1,196
21,122
%
4.1
n/a
33.0
The table below shows the breakdown of operating expenses for the periods ended December 31,
2013 and 2012:
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
2013
$
2,837
4,450
7,287
44.6
2012
$
2,225
3,540
5,765
43.3
2013
$
10,370
17,729
28,099
44.3
2012
$
7,710
13,412
21,122
43.9
The nature of acquisitions completed by the Trust at the end of 2012 explains the percentage increase
in operating expenses in relation to rental income. In December 2012, the Trust acquired two properties
with a higher rate of operating expenses as a percentage of rental income than the portfolio average,
which contributed to the increase in the ratio of 1.3% for the quarter and 0.4% for the cumulative
period.
Net operating income
Net operating income increased 20.0% for the fourth quarter of 2013 compared to 2012 and 30.9% for
fiscal 2013 compared to 2012. Net operating income of the same-property portfolio was up 0.4% for the
fourth quarter of 2013 compared to the fourth quarter of 2012 and 2.4% for fiscal 2013 compared to
2012. As mentioned above, management decided to redevelop and repurpose the “1863-1865
Transcanadienne” property in Dorval. As of the first quarter of 2014, this property will be presented as a
property under redevelopment. After extracting this property from the same-property portfolio, net
BTB Annual Report 2013
33
Management Discussion and Analysis
operating income from the same-property portfolio would have increased 1.3% for the fourth quarter
and 2.7% for fiscal 2013. Net operating income was 55.4% of rental income for the quarter ended
December 31, 2013 (2012: 56.7%), and 55.7% for fiscal 2013 (2012: 56.1%).
Periods ended December 31
(in thousands of dollars)
Same-property portfolio
Acquisitions, disposals and development
Net operating income
% of rental income
Quarter
2012
$
6,314
1,237
7,551
56.7
2013
$
6,340
2,721
9,061
55.4
%
0.4
n/a
20.0
2013
$
25,052
10,284
35,336
55.7
Year
2012
$
24,457
2,539
26,996
56.1
%
2.4
n/a
30.9
Net operating income is reduced by non-cash rental income adjustments. Before adjustments, net
operating income was as follows:
Periods ended December 31
(in thousands of dollars)
Net operating income
Straight-line rental income adjustments
Adjustment related to amortization of lease
Quarter
2012
$
7,551
(281)
2013
$
9,061
(327)
%
20.0
n/a
2013
$
35,336
(866)
Year
2012
$
26,996
(661)
%
30.9
n/a
incentives
407
355
n/a
1,480
1,240
n/a
Net operating income plus or less rental
income adjustments
9,141
7,625
19.9
35,950
27,575
30.4
% of rental income on the basis of in-
place leases
55.6
56.9
56.1
56.6
Net operating income is used in the real estate industry to measure operational performance. BTB
defines it as rental income from properties, less operating expenses of investment 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.
BTB Annual Report 2013
34
Management Discussion and Analysis
Financial expenses
Financial expenses arise from the following loans and financings:
Mortgage loans payable contracted or assumed totalling approximately $314 million as at
December 31, 2013, compared to $296 million as at December 31, 2012. 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, D and E convertible debentures. Series E debentures in the amount of $23 million
were issued on February 20, 2013. Series B debentures in the amount of $13 million were repaid
on March 31, 2013.
Operating and acquisition lines of credit used as needed, which allowed primarily for the
acquisition of accretive properties during fiscal 2013. The acquisition line of credit in an authorized
amount of $15 million was repaid in full on July 30, 2013 and was not used in the last quarter of
2013.
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.
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 expenses
Accretion of effective interest
Accretion of non-derivative liability component of convertible
debentures
Financial expenses before following items:
Fair value adjustment on warrants
Fair value adjustment on derivative financial instruments
(debenture conversion options and interest rate swaps)
Financial expenses
Quarter
Year
2013
$
3,517
1,274
—
18
4,809
223
132
5,164
—
2012
$
3,195
1,154
88
25
4,462
440
155
5,057
—
(146)
5,018
(1,233)
3,824
2013
$
13,861
5,146
767
54
19,828
1,142
551
21,521
—
113
21,634
2012
$
11,822
4,622
88
106
16,638
1,412
598
18,648
43
(5,329)
13,362
BTB Annual Report 2013
35
Management Discussion and Analysis
Before recognition of fair value adjustments on derivative financial instruments (debenture conversion
options, warrants and interest rate swaps), financial expenses increased by $107 during the fourth
quarter of 2013 compared to the same quarter in 2012, and by $2,873 for fiscal 2013, due to the
financing and assumption of mortgages on acquired properties and the issuance of Series E
convertible debentures in February 2013. The issuance of Series E debentures on February 20, 2013
was used to repay Series B debentures in the amount of $13 million on March 31, 2013. During the first
quarter of 2013, the Trust incurred 40 days of double interest expenses on convertible debentures
between the time of the Series E issuance and Series B repayment. This expense, net of interest
income, is estimated at $107.
As shown by the following table, interest expense on mortgage loans payable in the same-property
portfolio decreased by 14.7% in the fourth quarter of 2013 and 12.3% for fiscal 2013 compared to the
same period of 2012, due to the refinancing of loans that matured in the last eight quarters at more
advantageous rates, despite increased financing on certain properties.
Periods ended December 31
(in thousands of dollars)
Same-property portfolio
Acquisitions and development
Quarter
2012
$
2,842
353
3,195
2013
$
2,425
1,092
3,517
%
(14.7)
n/a
10.1
2013
$
9,748
4,113
13,861
Year
2012
$
11,117
705
11,822
%
(12.3)
n/a
17.2
Financial expenses can be allocated among interest expenses amounting to $4,809 for the quarter
($4,462 in 2012) and $19,828 for the year ($16,638 in 2012) and non-monetary items. Non-monetary
items include fair value adjustments on derivative financial instruments and warrants in net credit
positions of $146 for the quarter ($1,233 in 2012) and $113 for the year (credit position of $5,329 in
2012). 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, 2013, the average weighted contractual rate of interest on mortgage loans payable
was 4.44%, down 13 basis points from September 30, 2013 and 25 basis points from December 31,
2012. These decreases resulted from favourable interest rates on mortgage financing for properties
acquired during fiscal 2012 and 2013 and on refinancings carried out. For 21 consecutive quarters, the
weighted average interest rate has remained stable or declined. Interest rates on first-ranking mortgage
financings range from 2.55% to 6.80% as at December 31, 2013.
BTB Annual Report 2013
36
Management Discussion and Analysis
Trust administration expenses
Trust administration expenses include administrative costs such as payroll expenses and professional
fees associated with executive and administrative staff, the compensation plan for trustees, legal and
auditing services, expenses related to listed fund status, insurance costs and office expenses. These
administrative expenses were down 8.0% for the fourth quarter of 2013 compared to the same period in
2012 and 2.2% for the year. Lastly, Trust administration expenses include amortization of the head
office building and property, plant and equipment, unit-based compensation, a non-monetary item that
affects the volatility of administrative expenses from period to period, bad debts and related legal fees.
Periods ended December 31
(in thousands of dollars)
Administrative expenses
Amortization
Unit-based compensation
Trust administration expenses before following item:
Bad debts and related legal fees
Trust administration expenses
Quarter
2013
2012
$
738
30
47
815
9
824
$
802
25
(30)
797
127
924
Year
2013
$
3,146
114
90
3,350
365
3,715
2012
$
3,217
90
(76)
3,231
280
3,511
Expenses for abandoned projects
The Trust incurred analysis and due diligence expenses for property acquisition projects. Based on the
results of these analyses, the Trust decided not to go through with the acquisitions. Expenses of $118
(2012: $8) were incurred in fiscal 2013.
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, the
capitalized net operating income method or the comparable 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.
BTB Annual Report 2013
37
Management Discussion and Analysis
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.
As part of recent or potential refinancings, the Trust subjected the applicable properties to independent
external valuations. As a result, management determined that an increase in value of $4,520 for the
quarter ($2,764 in 2012) and $8,375 for the year (2012: $7,711) was required in order to adequately
reflect the fair value of the portfolio held. BTB has estimated that a 0.25% variation in the overall
discount rate applied to the overall portfolio would change the fair value of the investment properties by
approximately $10.1 million.
The following tables highlight the significant assumptions used in the modeling process for both internal
and external appraisals:
As at December 31, 2013
Capitalization rate
Terminal capitalization rate
Discount rate
As at December 31, 2012
Capitalization rate
Terminal capitalization rate
Discount rate
Commercial
Office
Industrial General purpose
6.25% - 10.00%
6.50% - 8.25%
7.25% - 9.00%
6.75% - 10.25%
6.50% - 9.25%
7.50% - 9.75%
6.50% - 10.50%
7.00% - 10.50%
7.25% - 10.75%
7.00% - 8.25%
7.25% - 8.50%
8.25% - 9.25%
7.00% - 12.00%
7.25% - 8.75 %
7.25% - 9.75%
6.50% - 10.50%
6.50% - 9.50%
7.50% - 9.25%
7.00% - 9.75%
7.00% - 11.50%
7.00% - 10.75%
7.25% - 8.75%
7.50% - 9.25%
8.25% - 9.00%
The weighted average capitalization rate for the entire portfolio as at December 31, 2013 was 7.51%
(2012: 7.55%), down three basis points since September 30, 2013, and down four basis points from a
year earlier.
BTB Annual Report 2013
38
Management Discussion and Analysis
Net income and comprehensive income
BTB generated net income of $7.7 million for the fourth quarter of 2013 and $18.3 million for the year,
up $2.1 million from the fourth quarter of 2012 and $0.4 million for the year.
Periods ended December 31
(in thousands of dollars, except for per unit data)
Net income and comprehensive income
Per unit
Quarter
Year
2013
$
7,732
27.3¢
2012
$
5,603
28.4¢
2013
$
18,349
71.3¢
2012
$
17,967
96.2¢
Net income and comprehensive income fluctuate from one quarter and year to another based on
certain highly volatile monetary items. Consequently, the fair value of financial instruments and the fair
value of the property portfolio fluctuate based on the stock market volatility of BTB units, the forward
interest rate curve and the discount rate. The following table presents income and comprehensive
income before these volatile non-monetary items.
Periods ended December 31
(in thousands of dollars, except for per unit data)
Net income and comprehensive income
Volatile non-monetary items
Net income and comprehensive income before volatile non-
monetary items
Per unit
Quarter
Year
2013
$
7,732
(4,666)
3,066
10.8¢
2012
$
5,603
(3,997)
1,606
8.1¢
2013
$
18,349
(8,262)
10,087
39.2¢
2012
$
17,967
(12,997)
4,970
26.6¢
This table shows an increase of more than 33% in quarterly net income per unit before above-
mentioned items and more than 47% for the year.
Distributable Income and Distributions
The notion of “distributable income” does not constitute financial information as defined by IFRS. It is,
however, a measurement 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.
BTB Annual Report 2013
39
Management Discussion and Analysis
The following table shows the calculation of distributable income:
Periods ended December 31
(in thousands of dollars)
Net income and comprehensive income (IFRS)
- Fair value adjustment on investment properties
+ Amortization of an investment property and other property
and equipment
± Unit-based compensation expense
+ Accretion of the liability component of convertible
debentures
± Fair value adjustment on warrants
± Fair value adjustment on derivative financial instruments
+ Amortization of lease incentives
- Straight-line rental income adjustment
+ Accretion of effective interest
Distributable income
Non-recurring item
Toronto Stock Exchange listing fees
Recurring distributable income
Quarter
Year
2013
$
7,732
(4,520)
33
47
132
—
(146)
407
(327)
223
3,581
—
3,581
2012
$
5,603
(2,764)
28
(30)
155
—
(1,233)
355
(281)
440
2,273
—
2,273
2013
$
18,349
(8,375)
126
90
551
—
113
1,480
(866)
1,142
12,610
—
12,610
2012
$
17,967
(7,711)
97
(76)
598
43
(5,329)
1,240
(661)
1,412
7,580
225
7,805
The following table shows the reconciliation of distributable income (non-IFRS measure) and cash
flows from operating activities presented in the financial statements:
Periods ended December 31
(in thousands of dollars)
Cash flows from operating activities (IFRS)
+ Financial revenues
Net change in operational items
- Interest expense on mortgage loans payable
- Interest expense on convertible debentures
- Interest expense on acquisition line of credit
- Other interest expenses
Distributable income
Year
2013
$
32,168
105
165
(13,861)
(5,146)
(776)
(45)
12,610
2012
$
20,426
141
3,651
(11,822)
(4,622)
(87)
(107)
7,580
BTB Annual Report 2013
40
Management Discussion and Analysis
Distributions and per unit data
Periods ended December 31
(in thousands of dollars, except for per unit data)
Distributions
Cash distributions
Distributions reinvested under the distribution reinvestment
plan
Total distributions to unitholders
Percentage of reinvested distributions
Per unit data
Recurring distributable income
Distribution
Payout ratio (1)
Cash distribution ratio(2)
Quarter
2013
$
2012
$
Year
2013
$
2012
$
2,531
1,895
9,490
7,074
296
2,827
10.5%
12.7¢
10.0¢
78.9%
70.7%
173
2,068
8.4%
11.5¢
10.0¢
91.0%
83.4%
922
10,412
8.9%
49.0¢
40.0¢
82.6%
75.3%
582
7,656
7.6%
41.8¢
40.0¢
98.1%
90.6%
(1) The payout ratio corresponds to total distributions divided by recurring distributable income.
(2) The cash distribution ratio corresponds to cash distributions divided by recurring distributable income.
Recurring distributable income for the fourth quarter increased by $1,308, from $2,273 to $3,581,
between 2012 and 2013. Recurring distributable income for fiscal 2013 stood at $12,610, up $4,805
from 2012. Recurring distributable income per unit for the fourth quarter of 2013 stood at 12.7¢ per unit
compared to 11.5¢ in 2012, and 49.0¢ for fiscal 2013 compared to 41.8¢ for fiscal 2012.
Distributions to unitholders totalled 10.0¢ per issued unit for each quarter presented or 40.0¢ for the
cumulative period.
The payout ratio for recurring distributable income was 78.9% in the fourth quarter of 2013 compared to
91.0% in the fourth quarter of 2012 and 82.6% for fiscal 2013, compared to 98.1% in 2012, reflecting a
surplus of distributable income over distributions in the last two years. In fiscal 2013, 8.9% of the
distributions (2012: 7.6%) were reinvested under the distribution reinvestment plan implemented by
BTB in 2011. More than $0.9 million (2012: $0.6 million) of the Trust’s cash was thereby preserved
through unit conversions.
BTB Annual Report 2013
41
Management Discussion and Analysis
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 derivative financial instruments
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.
The following table provides a reconciliation of net income and comprehensive income established
according to IFRS and FFO for the quarters and years ended December 31, 2013 and 2012:
Periods ended December 31
(in thousands of dollars, except for per unit data)
Net income and comprehensive income (IFRS)
- Fair value adjustment on investment properties
+ Amortization of a property recognized at cost
+ Amortization of lease incentives
+ Fair value adjustment on derivative financial instruments
+ Fair value adjustment on warrants
FFO
Non-recurring item
Toronto Stock Exchange listing fees
Recurring FFO
Per unit data
FFO
Recurring FFO
Quarter
Year
2013
$
7,732
(4,520)
17
407
(146)
—
3,490
—
3,490
12.3¢
12.3¢
2012
$
5,603
(2,764)
14
355
(1,233)
—
1,975
—
1,975
10.0¢
10.0¢
2013
$
18,349
(8,375)
65
1,480
113
—
11,632
—
11,632
45.2¢
45.2¢
2012
$
17,967
(7,711)
58
1,240
(5,329)
43
6,268
225
6,493
33.6¢
34.8¢
BTB Annual Report 2013
42
Management Discussion and Analysis
Recurring FFO increased by 76.7% for the fourth quarter of 2013 and 79.1% for the year compared
with 2012, 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 12.3¢ in
2013 compared to 10.0¢ in 2012, a 23% increase.
For the year, recurring FFO stood at $11,632 or 45.2¢ per unit for 2013 compared to $6,493 or 34.8¢
per unit in 2012, a per-unit increase of 29.9%.
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. Since 2013, the allocation for unrecoverable capital expenses is
calculated on the basis of 2% of rental revenues. During fiscal 2012, the allocation was done based on
1.3% of income, explaining why the increase in FFO and AFFO per unit was smaller than for the other
performance indicators in 2013.
The Trust also deducts a provision for rental fees in the amount of approximately 20¢ per square foot
on an annualized basis. Even though quarterly rental fee disbursements vary significantly from one
quarter to another, management 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.
BTB Annual Report 2013
43
Management Discussion and Analysis
The following table provides a reconciliation of FFO and AFFO for the quarters and years ended
December 31, 2013 and 2012:
Periods ended December 31
(in thousands of dollars, except for per unit data)
FFO
- Straight-line rental income adjustment
+ Accretion of effective interest
+ Accretion of the liability component of convertible
debentures
+ Amortization of other property and equipment
± Unit-based compensation expenses
- Reserve for non-recoverable capital expenses
- Reserve for rental fees
AFFO
Non-recurring item
Toronto Stock Exchange listing fees
Recurring AFFO
Per unit data
AFFO
Recurring AFFO
Quarter
Year
2013
$
3,490
(327)
223
132
17
47
(323)
(210)
2012
$
1,975
(281)
440
155
14
(30)
(173)
(195)
2013
$
11,632
(866)
1,142
551
62
90
(1,264)
(885)
2012
$
6,268
(661)
1,412
598
39
(76)
(626)
(730)
3,049
1,905
10,462
6,224
—
3,049
10.8¢
10.8¢
—
1,905
9.7¢
9.7¢
—
10,462
40.7¢
40.7¢
225
6,449
33.3¢
34.5¢
The increase of 60.1% in recurring AFFO for the fourth quarter of 2013 compared with the fourth
quarter of 2012 and of 62.2% for fiscal 2013 compared to fiscal 2012 is due to acquisitions of income-
producing properties and a drop in the average mortgage loan interest rate. Recurring AFFO per unit
amounted to 10.8¢ compared with 9.7¢ in 2012 for the fourth quarter, an 11.3% increase.
For the year, 2013 recurring AFFO totalled $10,462, or 40.7¢ per unit, compared to $6,449 or 34.5¢ per
unit, a per-unit increase of 18.0%.
BTB Annual Report 2013
44
Management Discussion and Analysis
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
quarters and years ended December 31, 2013 and 2012.
Periods ended December 31
(in thousands of dollars)
Commercial
$
%
Office
$
%
Industrial
$
%
General
purpose
$
%
Quarter ended in 2013
Investment properties
Rental income from properties
Net operating income
101,675
3,006
1,850
Quarter ended in 2012
Investment properties
Rental income from properties
Net operating income
98,608
2,093
1,496
19.2
18.4
20.4
20.2
15.7
19.8
208,793
6,919
3,309
200,092
6,606
3,214
39.4
42.3
36.5
41.0
49.6
42.6
100,561
2,333
1,937
79,236
1,928
1,528
19.0
14.3
21.4
16.2
14.5
20.2
118,403
4,090
1,965
110,585
2,689
1,313
22.4
25.0
21.7
22.6
20.2
17.4
Year ended in 2013
Total
$
529,432
16,348
9,061
488,521
13,316
7,551
Rental income from properties
Net operating income
11,684
7,163
18.4
20.3
27,007
13,058
42.6
37.0
8,855
7,324
14.0
20.7
15,889
7,791
25.0
22.0
63,435
35,336
Year ended in 2012
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
BTB Annual Report 2013
45
Management Discussion and Analysis
Comparative Summary of Quarterly Results
(in thousands of dollars, except for per unit data)
Rental income
Net operating income
Net income and comprehensive income
Net income per unit
Distributable recurring income
Distributable recurring income per unit
Recurring funds from operations (FFO)
Recurring FFO per unit
Recurring adjusted funds from
operations (AFFO)
Recurring AFFO per unit
Distributions
Distributions per unit
2013
Q-4
$
16,348
9,061
7,732
27.3¢
3,581
12.7¢
3,490
12.3¢
3,049
10.8¢
2,827
10¢
2013
Q-3
$
15,452
8,760
5,660
21.0¢
3,202
11.9¢
2,836
10.5¢
2,668
10.0¢
2,821
10¢
2013
Q-2
$
15,820
8,975
1,616
6.8¢
3,110
13.0¢
2,857
12.0¢
2,569
10.8¢
2,324
10¢
2013
Q-1
$
15,815
8,540
3,342
14.0¢
2,718
11.4¢
2,450
10.3¢
2,182
9.2¢
2,380
10¢
2012
Q-4
$
13,316
7,551
5,603
28.4¢
2,273
11.5¢
1,975
10.0¢
1,905
9.7¢
2,069
10¢
2012
Q-3
$
12,080
7,016
3,429
18.0¢
2,245
11.7¢
1,941
10.1¢
1,903
10.0¢
1,912
10¢
2012
Q-2
$
11,723
6,708
4,963
26.0¢
2,071
10.8¢
1,710
9.0¢
1,739
9.1¢
1,916
10¢
2012
Q-1
$
10,999
5,721
3,972
23.8¢
1,211
7.3¢
867
5.2¢
898
5.4¢
1,759
10¢
BTB Annual Report 2013
46
Management Discussion and Analysis
Financial Position
The table below presents a summary of assets, liabilities and unitholders’ equity as at December 31,
2013 and 2012. It should be read in conjunction with the Trust’s audited annual financial statements.
Periods ended December 31
(in thousands of dollars)
Assets
Investment properties
Other assets
Total assets
Liabilities
Mortgage loans payable
Convertible debentures
Acquisition credit facility
Derivative financial instruments
Other liabilities
Total liabilities
Equity
Unitholders’ equity
Total liabilities and equity
2013
$
529,432
17,127
546,559
313,816
63,929
—
1,472
14,750
393,967
152,592
546,559
2012
$
488,521
16,406
504,927
296,523
54,272
14,825
927
13,602
380,149
124,778
504,927
The main changes to the statement of financial position as at December 31, 2013 compared to the
statement of financial position as at December 31, 2012 primarily reflect investment property
acquisitions during fiscal 2013 and the issuance of units in July 2013, convertible debentures in
February 2013 and mortgage financings and refinancings concluded in 2013.
BTB Annual Report 2013
47
Management Discussion and Analysis
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.
Property acquisitions in 2013
In February 2013, the Trust acquired a 50% interest in a 15,186-square-foot retail complex in Saint-
Lazare, Quebec, for a purchase price of $2.6 million. The tenants include Tim Hortons, A&W and a
Sobeys convenience store.
In March 2013, the Trust acquired an industrial property with a leasable area of approximately
132,665 square feet for a purchase price of $11 million, excluding transaction costs. The property is
located at the intersection of Highways 15 and 440, about ten minutes from Montreal International
Airport, and is fully leased to Pharmetics.
In October 2013, the Trust acquired two industrial properties and an office property totalling
approximately 109,000 square feet of leasable area for a total purchase price of $14 million, including a
$1.3 million contractual commitment to perform reconstruction work. Two of the properties are located
on the south shore of Montreal and the third is in the area of Sherbrooke, Quebec. These properties
are fully leased to the engineering firm The S.M. Group Inc.
In December 2013, the Trust acquired the residual 50% interest in the retail complex located in Saint-
Lazare, Québec for a purchase price of $2.6 million.
Disposal of a property in 2013
In May 2013, the Trust disposed of a general-purpose property located at 2220 Lapinière, Longueuil,
for a net consideration of $2,300. The property no longer met the Trust’s investment criteria.
The following table provides summary information about the real estate portfolio:
Periods ended December 31
(in thousands of dollars)
Investment properties (at fair value)
Other assets at unamortized value
Gross book value of the Trust
Number of properties
Leasable area (in thousands of sq. ft.)
2013
$
529,432
17,715
547,147
69
4,580
2012
$
488,521
16,868
505,389
65
4,341
BTB Annual Report 2013
48
Management Discussion and Analysis
Summary by operating segment as at December 31, 2013
Periods ended December 31, 2013
(in square feet)
Office
Commercial
Industrial
General purpose
Total
Number
of properties
Leasable area
(sq.ft.)
22
14
19
14
69
1,446,352
651,688
1,506,973
975,258
4,580,271
%
31.6
14.2
32.9
21.3
100.0
Real Estate Operations
Leasing activities
The following table summarizes changes in available leasable area during the periods ended
December 31, 2013.
Periods ended December 31, 2013
(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
369,760
—
163,023
5,280
(124,828)
(46,021)
(48)
367,166
Year
359,949
(4,597)
330,889
90,360
(234,301)
(173,648)
(1,486)
367,166
The Trust’s leasing operations were significant during the fourth quarter of 2013. Almost
171,000 square feet were signed with new lessees or renewed during the quarter. During fiscal 2013,
approximately 447,000 square feet were signed or renewed at generally more advantageous conditions
than previously.
The average rate of expired and renewed leases rose 9.8% during the fourth quarter and 7.7% over the
year.
BTB Annual Report 2013
49
Management Discussion and Analysis
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,
2013
September 30,
2013
June 30,
2013
March 31,
2012
December 31,
2012
%
87.4
94.2
94.4
93.0
91.9
%
87.2
93.8
93.9
93.4
91.7
%
86.8
93.1
93.9
94.3
91.6
%
86.9
94.4
94.3
94.4
92.1
%
86.4
93.8
93.8
94.9
91.7
The overall occupancy rate is up by 0.2% since both September 30, 3013 and December 31, 2012. It
stands at 91.9%. The occupancy rate increased in all sectors of activity except “General purpose”
properties.
Lease maturity
The following table shows the lease maturity profile for the next few years:
Periods ended December 31
Office
2014
2015
2016
2017
2018
2019
Leasable area (sq. ft.)
Average lease rate/square foot ($)
% of office portfolio
133,892
13.53
9.26
219,208
13.52
15.16
163,662
15.02
11.32
Commercial
Leasable area (sq. ft.)
Average lease rate/square foot ($)
% of commercial portfolio
Industrial
Leasable area (sq. ft.)
Average lease rate/square foot ($)
% of industrial portfolio
General purpose
Leasable area (sq. ft.)
Average lease rate/square foot ($)
% of general purpose portfolio
Total portfolio
Leasable area (sq. ft.)
Average lease rate/square foot ($)
% of total portfolio
66,564
9.31
10.21
147,984
3.84
9.82
104,292
12.84
10.69
452,732
9.58
9.88
36,594
12.11
5.62
4,325
5.55
0.29
91,087
10.82
9.34
351,214
12.58
7.67
49,878
10.69
7.65
64,013
11.05
4.25
148,781
9.25
15.26
426,334
11.91
9.31
160,663
12.45
11.11
26,475
17.42
4.06
554,539
4.66
36.80
50,921
14.40
5.22
792,598
7.29
17.30
133,679
12.10
9.24
113,905
14.08
17.48
—
—
—
100,437
12.40
10.30
348,021
12.83
7.60
147,471
13.01
10.20
109,638
12.00
16.82
24,500
4.00
1.63
62,759
12.06
6.44
344,368
11.87
7.52
BTB Annual Report 2013
50
Management Discussion and Analysis
Top 10 lessees
As at December 31, 2013, BTB managed close to 700 leases, with an average area of approximately
6,000 square feet. The three largest lessees are Société québécoise des infrastructures (SQI), the
Groupe Épicia inc. and Atis, Portes et Fenêtres Corp., accounting respectively for 3.9%, 2.2% and
2.0% of revenues, generated by a number of leases whose maturities 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.
The following table shows the contribution of the Trust’s top 10 lessees as a percentage of revenues as
at December 31, 2013:
Client
Société québécoise des infrastructures (SQI)
Groupe Épicia inc.
Atis. Portes et Fenêtres Corp.
Germain Larivière Inc.
Sobeys Québec Inc.
City of Ottawa
Commission de la Santé et de la Sécurité du Travail (CSST)
Flextronics
Groupe Aro Inc.
CSSS Lucille-Teasdale
% of revenue
Leased area
(square feet)
3.9
2.2
2.0
1.7
1.6
1.6
1.5
1.5
1.5
1.4
139,785
87,175
219,725
101,194
44,988
29,768
46,421
48,731
40,825
26,900
BTB Annual Report 2013
51
Management Discussion and Analysis
Capital Resources
Long-term debt
The following table shows the balances of BTB’s indebtedness as at December 31, 2013, including
mortgage loans payable and convertible debentures, based on year of maturity and corresponding
weighted average contractual interest rates:
Year of maturity
2014
2015
2016
2017
2018
2019 and thereafter
Total
Balance of
convertible
debentures
$
—
—
23,000
—
23,000
23,000
69,000
Balance of
mortgages payable
Weighted average
contractual interest
rate
$
61,777
21,503
77,624
64,316
41,259
47,694
314,173
%
5.21
4.11
4.80
4.25
4.66
5.47
4.84
As at December 31, 2013, the weighted average contractual interest rate of the Trust’s long-term debt
stood at 4.84%, i.e. 4.44% for mortgages payable and 7.38% for convertible debentures. The average
maturity of mortgage loans is 4.4 years.
Mortgage loans payable
As at December 31, 2013, the Trust’s mortgage loans payable amounted to $314.2 million compared to
$296.2 million as at December 31, 2012, before deferred financing costs and valuation adjustments, an
increase of $18.0 million due to acquisitions and refinancings in the last four quarters.
As at December 31, 2013, the weighted average interest rate was 4.44%, compared to 4.69% for
mortgage loans on the books as at December 31, 2012, a drop of 25 basis points. Except for a
$1.4 million loan as at December 31, 2013, all other mortgages payable bear interest at fixed rates or
are coupled with an interest rate swap.
BTB spreads the terms of its mortgages over many years in order to mitigate the risk associated with
renewing them.
BTB Annual Report 2013
52
Management Discussion and Analysis
The following table summarizes changes in mortgage loans payable during the fourth quarter and fiscal
2013:
(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, 2013
N.B.: Before unamortized financing costs and valuation adjustments.
Quarter
302,368
34,177
(20,195)
(2,177)
314,173
Year
296,214
60,567
(34,260)
(8,348)
314,173
All of the Trust’s properties were mortgaged as at December 31, 2013. Unamortized loan financing
costs totalled $1,999 and are amortized under the effective interest method over the term of the loans.
The following table, as at December 31, 2013, shows future mortgage loan repayments for the next few
years:
Year ended December 31
(in thousands of dollars)
Maturity
2014
2015
2016
2017
2018
2019 and thereafter
Total
Principal
repayment
$
Balance at
maturity
$
Total
$
(%) of total
%
8,260
7,567
6,864
4,173
2,309
21,226
50,399
60,731
20,362
70,038
57,527
35,493
19,623
68,991
27,929
76,902
61,700
37,802
40,849
263,774
314,173
22.0
8.9
24.5
19.6
12.0
13.0
100
+ Valuation adjustments on assumed loans
- Unamortized financing costs
Balance as at December 31, 2013
1,642
(1,999)
313,816
BTB Annual Report 2013
53
Management Discussion and Analysis
Financings completed
As a result of acquisitions completed recently and refinancings, the Trust assumed or contracted the
following mortgage loans:
Arrangement of a second-ranking mortgage financing in the amount of $8.6 million on a
commercial property acquired in December 2012, at a rate of 4.91% for an 11-year term.
Arrangement of a second-ranking mortgage financing in the amount of $2.75 million on a
commercial and office property acquired in December 2012, at a rate of 5.45% for a 40-month
term.
Assumption of a first-ranking mortgage financing in the amount of $1.6 million on a retail complex
acquired in February 2013, at a rate of 3.93% for a 44-month term.
Arrangement of a first-ranking mortgage financing in the amount of $7.15 million on an industrial
building acquired in March 2013, at a rate of 4.02% for a 5-year term.
As part of refinancings, increase in two first-ranking mortgages on three retail properties,
generating a cash inflow of $4.8 million and a rate decrease of approximately 150 basis points on
these loans.
Refinancing of a construction loan bearing interest at a floating rate as a first-ranking mortgage
financing in the amount of $15.4 million, divided into three tranches of approximately $5 million,
at a weighted average rate of 3.3% for 2-, 3- and 5-year terms.
Arrangement of a first-ranking mortgage financing in the amount of $9.1 million on three industrial
properties acquired in October 2013, at a rate of 3.95% for a 5-year term.
Subsequent to the reporting date, refinancing of two mortgage loans on seven properties totalling
approximately $25 million, bearing interest at an average rate of 5.74% through the arrangement
of six mortgage loans totalling $26.4 million at a rate of 3.34%. This refinancing will generate
substantial savings on interest expenses of more than $0.5 million per year.
Convertible debentures
(a) Series B
In March 2008, the Trust issued Series B convertible, unsecured, subordinated debentures in the
amount of $13 million. Interest is at the rate of 8.5% and is payable semi-annually. The debentures
matured and were repaid on March 31, 2013.
(b) Series C
In January 2011, the Trust issued Series C convertible, unsecured, subordinated 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, 2013, the closing market price of BTB units was
$4.46.
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, at a price equal to their principal amount plus accrued,
unpaid interest.
BTB Annual Report 2013
54
Management Discussion and Analysis
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 derivative financial instrument component.
(c) Series D
In July 2011, the Trust issued Series D convertible, unsecured, subordinated 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, 2013, the closing market price of BTB units was $4.46.
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, at 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 derivative financial instrument component.
(d) Series E
In February 2013, the Trust issued Series E convertible, unsecured, subordinated debentures, bearing
6.90% interest, in the amount of $23 million. Interest is 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 is $6.15 per unit (the
"Series E conversion price"). As at December 31, 2013, the closing market price of BTB units was
$4.46.
As of March 31, 2016, but before March 31, 2018, 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 E conversion price
and, as of March 31, 2018, but before March 31, 2020, to a price equal to their principal amount plus
accrued, unpaid interest.
BTB Annual Report 2013
55
Management Discussion and Analysis
The Trust may, at its option and subject to certain conditions, elect to satisfy its obligation to pay the
principal amount of the Series E debentures by issuing freely tradable units to Series E debenture
holders.
On the date of issuance, the debentures were recorded as a $22.7 million non-derivative liability
component and a $0.3 million derivative financial instrument component.
The net proceeds from issue in the amount of $21.8 million were used as planned, i.e. $13 million
allocated to the repayment of Series B debentures maturing on March 31, 2013 and the remainder to
property acquisitions.
As at December 31, 2013, none of the three series met the conditions necessary for an authorized
redemption.
Contractual interest rate
Effective interest rate
Date of issuance
Per-unit conversion price
Date of interest payment
Maturity date
Series C
Series D
Series E
Total
8%
9.78%
January 2011
$5.00
January 31 and
July 31
January 2016
7.25%
8.47%
July 2011
$6.10
January 31 and
July 31
July 2018
6.90%
7.90%
February 2013
$6.15
March 31 and
September 30
March 31, 2020
Balance as at December 31, 2013
21,586
20,754
21,589
63,929
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, 2013, a total of $1.045 million was outstanding related to this credit facility.
Bank loans – Acquisition credit facility
The Trust’s acquisition line of credit in the amount of $15,000 has matured in November 2013.
BTB Annual Report 2013
56
Management Discussion and Analysis
Debt ratio
The following table presents the Trust’s debt ratios as at December 31, 2013 and 2012.
As at December 31
(in thousands of dollars)
Mortgage loans payable (1)
Convertible debentures (1)
Acquisition credit facility
Total long-term debt
Gross book value of the Trust
Debt ratio (excluding convertible debentures)
Total debt ratio
(1) Gross amounts
2013
$
314,173
69,000
—
383,173
547,147
57.6%
70.0%
2012
$
296,214
59,020
15,000
370,234
505,389
61.6%
73.3%
According to the table above, the debt ratio excluding the convertible debentures as at December 31,
2013, amounted to 57.6% compared to 61.6% as at December 31, 2012. The Trust seeks to finance its
acquisitions with debt ratios of 60% to 70% because the cost of mortgage financings is lower than the
capital cost of the Trust’s equity. After including the convertible debentures, the ratio stood at 70.0%
compared to 73.3% 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.
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 revenues. For the quarter ended December 31, 2013, the interest coverage ratio
stood at 1.89, up 18 points from the fourth quarter of 2012 and at 1.79, up 15 points for fiscal 2013
compared to fiscal 2012, showing the Trust’s financial strength and ability to cover the cost of its debt.
Periods ended December 31
(in thousands of dollars, except for the ratios)
Net operating income
Interest expense, net of interest income
Interest coverage ratio
Quarter
Year
2013
$
9,061
4,790
1.89
2012
$
7,551
4,426
1.71
2013
$
35,336
19,723
1.79
2012
$
26,996
16,497
1.64
BTB Annual Report 2013
57
Management Discussion and Analysis
Unitholders’ equity
Unitholders’ equity consists of the following:
As at December 31
(in thousands of dollars)
Trust units
Cumulative profit
Cumulative distributions to unitholders
2013
$
157,207
20,680
(25,295)
152,592
2012
$
137,330
2,331
(14,883)
124,778
Unit issue
On July 29, 2013, the Trust completed an issue of 4,328,600 units, including the over-allotment option
of 15%, at an issue price of $4.65 per unit, for net proceeds of approximately $19 million. As specified
in the prospectus dated July 22, 2013, $15 million were immediately used to reimburse the acquisition
line of credit, and the residual amount was kept for future acquisitions of real estate properties.
Consolidation
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,
66,682 units were issued during the last quarter (2012: 40,206 units) and 205,141 units were issued
during the year (2012: 132,857).
BTB Annual Report 2013
58
Management Discussion and Analysis
The following table summarizes units issued and the weighted number of units for the specified
periods:
Periods ended December 31
(in number of units)
Units outstanding, beginning of period
Units issued
Public placement and warrants exercised
Distribution reinvestment plan
Units outstanding, end of period
Weighted average number of units outstanding
Quarter
2013
$
2012
$
Year
2013
$
2012
$
28,258,856
19,153,591
23,791,797
14,810,790
—
66,682
28,325,538
28,291,857
4,598,000
40,206
23,791,797
19,723,581
4,328,600
205,141
28,325,538
25,735,696
8,848,150
132,857
23,791,797
18,668,871
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 determined 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:
Years ended December 31
Outstanding, beginning of year
Expired
Outstanding, end of year
Options vested as at December 31
Weighted average remaining term to expiry (years)
Unit options
227,000
(129,000)
98,000
98,000
2013
Weighted average
exercise price
$
5.07
5.55
4.51
4.51
1.48
Unit options
551,000
(324,000)
227,000
227,000
2012
Weighted average
exercise price
$
10.20
13.77
5.07
5.07
1.59
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.
BTB Annual Report 2013
59
Management Discussion and Analysis
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 fourth quarter and fiscal 2013:
Periods ended December 31
(in number of units)
Deferred units outstanding, beginning of period
Deferred units issued
Distributions converted to deferred units
Deferred units outstanding, end of quarter
Quarter
Year
2013
$
26,206
3,075
490
29,771
2012
$
—
15,264
717
15,981
2013
$
15,981
11,948
1,842
29,771
2012
$
—
15,264
717
15,981
Employee unit purchase plan
The Trust offers an optional employee unit purchase plan to all its employees. Under this plan, the
employees may contribute, each year, pursuant to a maximum of 3% to 7% of their base salary
depending of their years of experience with the Trust. For each two units purchased by an employee,
the Trust shall issue one unit from treasury. As at December 31, 2013, the liability related to the plan
was $33, representing a total of 7,456 units to issue. The related expenses recorded in profit and loss
amount to $33 for the year ended December 31, 2013. The units have been issued after year-end.
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.
During the quarter ended December 31, 2013, BTB complied with all of its loan commitments and was
not in default with any covenant at the balance sheet date.
BTB Annual Report 2013
60
Management Discussion and Analysis
Use of proceeds of public offerings - fiscal 2013
Prospectus
February 2013
Series E debentures –
$23 million
July 2013
3,764,000 units at $4.65
per unit
Anticipated Use
Actual Use
Variation
Repayment of Series B debentures and/or partial
repayment of acquisition line of credit and/or future
property acquisitions
Repayment of Series B
debentures
Property acquisitions
Repayment of acquisition line of credit and/or
future property acquisitions
Repayment of acquisition line
of credit
Property acquisitions
NIL
NIL
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.
A special tax regime applies to trusts that are considered specified investment flow-through (SIFT)
entities as well as those individuals who invest in SIFT entities. Under this regime, SIFT entities must
generally pay taxes on their income at rates that are close to those of companies. In short, a SIFT
entity is an entity (including a trust) that resides in Canada, whose investments are listed on a stock
exchange or other public market and that holds one or more non-portfolio properties.
However, for a given taxation year, BTB is not considered a SIFT entity and is therefore not subject to
SIFT rules if, during that year, it constitutes a real estate investment trust (REIT).
Generally, to qualify as a REIT, a trust must be resident in Canada and meet the following conditions all
year long: i) the total fair market value of all the ”non-portfolio properties“ that are “qualified REIT
properties” held by the trust is at least 90% of the total fair market value at that time of all the “non-
portfolio assets” held by the trust ii) not less than 90% of its “gross REIT revenue” for the taxation year
is from one or more of the following sources: rent from “real or immovable properties,” interest,
dispositions of “real or immovable properties” that are capital properties, dividends, royalties and
dispositions of “eligible resale properties” iii) not less than 75% of its “gross REIT revenue” for the
taxation year comes from one or more of the following sources: rent from “real or immovable
properties,” interest from mortgages on “real or immovable properties,” and dispositions of “real or
immovable properties” that are capital properties iv) at each time in the taxation year, an amount that is
equal to 75% or more of the equity value of the trust at that time, is the amount that is the total fair
market value of all properties held by the trust, each of which is “real or immovable property” which is a
capital property, an “eligible resale property,” an indebtedness of a Canadian corporation represented
by a banker’s acceptance, cash or, generally, an amount receivable from the Government of Canada or
from certain other public agencies; and v) the investments that are made therein are, at any time in the
taxation year, listed or traded on a stock exchange or other public market.
BTB Annual Report 2013
61
Management Discussion and Analysis
As at December 31, 2013, 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.
Nonetheless, there is no guarantee that BTB will continue to meet all the required conditions to be
eligible for the REIT exception for 2014 or any other subsequent year.
Taxation of Unitholders
For Canadian unitholders, distributions for taxation purposes are qualified as follows:
Periods ended December 31
Taxable as other income
Tax deferred
Total
2013
%
—
100
100
2012
%
—
100
100
BTB Annual Report 2013
62
Management Discussion and Analysis
Summary of Significant Accounting Policies and Estimates
BTB’s significant accounting policies are described in Notes 2 and 3 to the audited annual consolidated
financial statements for the year ended December 31, 2013 and the reader is invited to refer to these
financial statements.
(a) Functional and presentation currency
The consolidated financial statements are presented in Canadian dollars, which is BTB's functional
currency. All financial information presented in Canadian dollars has been rounded to the nearest
thousand, except per unit amounts.
(b) 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:
(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.
Whether the acquiree has allocated its own staff to manage the investment property
and/or to deploy any processes.
The number of investment properties owned by the acquiree.
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.
BTB Annual Report 2013
63
Management Discussion and Analysis
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:
Valuation of investment properties
Investment properties 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 techniques. These models and
techniques comprise both the Discounted Cash Flow Method and the Direct Capitalization
method. In some cases, the fair values are determined using the Comparable method which is
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
expenditures of fixtures and fittings, any environmental matters and the overall repair and
condition of the property) and discount rates applicable to those cash flows. 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 properties
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
estimated 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.
BTB Annual Report 2013
64
Management Discussion and Analysis
Derivative financial instruments
Derivative financial instruments, including embedded derivatives, are recognized 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 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 vesting method. The valuation model requires management to make
estimates for the expected life, volatility, the average dividend yield of distributions and the
average risk-free interest rate.
(c) Basis of consolidation
(i) Business combinations
Business combinations are accounted for using the acquisition method. Accordingly, the
consideration transferred for the acquisition of a business is the fair value of the assets
transferred, and any debt and trust units issued by the Trust on the date control of the acquired
entity is obtained. Acquisition-related costs, other than those associated with the issue of debt or
trust units, are expensed as incurred. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are generally measured initially at their fair values at
the acquisition date. 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.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Trust. Control exists when the Trust has the existing
rights that give it the current ability to direct the activities that significantly affect the entities’
returns. The financial statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control ceases.
BTB Annual Report 2013
65
Management Discussion and Analysis
(iii) Joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the assets, and obligations for the liabilities, relating to the
arrangement. Those parties are called joint operators. The consolidated financial statements
include the Trust’s proportionate share of the joint operations’ 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.
(d) Financial instruments
Financial assets and liabilities are recognized when the Trust becomes party to the contractual
provisions of the financial instrument. Financial assets and financial liabilities are initially recognized at
fair value, and their subsequent measurement is dependent on their classification as described below.
The classification depends on the purpose for which the financial instruments were acquired or issued,
their characteristics and the Trust’s designation of such instruments.
(i) 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 restricted cash, receivables and cash and cash equivalents.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and term deposits with original maturities of
three months or less.
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 amounts provided in guarantee of mortgage loans.
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.
(ii) Non-derivative financial liabilities
The Trust classifies non-derivative financial liabilities into the other financial liabilities category.
Such financial liabilities are recognized initially at fair value less 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 mortgage loans payable, convertible debentures, bank
loans, trade and other payables and distributions payable to unitholders.
BTB Annual Report 2013
66
Management Discussion and Analysis
The Trust derecognizes a financial liability when its contractual obligations are discharged or
cancelled, or expire.
(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
(“IAS 32”), 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
and redemption 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.
(e) 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. The Trust capitalizes
into investment property the costs incurred to increase their capacity, replace certain components and
make improvements after the acquisition date. The Trust also capitalizes major maintenance and repair
expenses providing benefits that will last far beyond the end of the reporting period. Investment
property includes income properties, properties under development and land held for future
development if necessary.
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.
(f) 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.
BTB Annual Report 2013
67
Management Discussion and Analysis
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.
(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 - 5 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.
(g) 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.
(h) 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.
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Management Discussion and Analysis
(i) 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,
revenue 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 additions. 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. Any deferred amounts related to the
straight-line lease adjustments are recognized within investment properties. 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.
Lease incentives which are mostly leasehold improvements and 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.
(j) 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.
(k) 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.
(l) 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 debentures, bank loans and
others, accretion of the non-derivative liability component of convertible debentures, accretion of
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Management Discussion and Analysis
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.
(m) 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.
(n) Unit-based compensation
(i) 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.
(ii) Deferred unit compensation plan for trustees and certain executive officers
Compensation costs related to the deferred 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 as compensation
expense in profit or loss.
(iii) Employee unit purchase plan
Compensation costs related to the employee unit purchase plan 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 settlement date. Any changes in fair value are recognized as
compensation expense in profit or loss.
(o) 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.
(p) 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
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Management Discussion and Analysis
unitholders. BTB has reviewed the proscribed 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.
(q) Fair value measurement
The Trust measures financial instruments, such as derivatives, and non-financial assets,such as
investment properties, at fair value at each reporting date. 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 under current market conditions. The fair value measurement is based on the
presumption that the transaction to sell the asset or transfer the liability takes place either:
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or
liability.
The principal or the most advantageous market must be accessible by the Trust. The fair value of an
asset or a liability is measured using the assumptions that market participants would use when pricing
the asset or liability assuming that market participants act in their economic best interests. A fair value
measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market
participant that would use the asset in its highest and best use.
The Trust uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximizing the use of relevant observable inputs and
minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or
disclosed in the financial statements are categorized within the fair value hierarchy, described as
follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or
liabilities
Level 2 – Valuation techniques for which the lowest level input that is significant to the
fair value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the
fair value measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Trust
determines whether transfers have occurred between Levels in the hierarchy by reassessing
categorization (based on the lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Trust has determined classes of assets and liabilities on
the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value
hierarchy as explained above.
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Management Discussion and Analysis
New Accounting Policies
The following paragraphs present new accounting standards that apply to BTB for the year ended
December 31, 2013 as well as the new accounting standards and interpretations that are not yet
effective for the year ended December 31, 2013.
(a) New standards adopted for year ended December 31, 2013
In 2011, the IASB issued IFRS 13, Fair Value Measurement (“IFRS 13”), which establishes a single
framework for the fair value measurement and disclosure of financial and non-financial assets and
liabilities. The new standard unifies the definition of fair value and also introduces new concepts
including ‘highest and best use’ and ‘principle markets’ for non-financial assets and liabilities. There are
additional disclosure requirements, including increased fair value disclosure for financial instruments for
interim and annual financial statements and increased disclosures for non-financial assets and liabilities
for annual financial statements. The Trust implemented this standard prospectively in the first quarter of
2013. There were no measurement impacts on the Trust’s condensed consolidated interim financial
statements as a result of the adoption of IFRS 13. The Trust has included the additional disclosures
required by this standard in notes 4 and 14 to the annual consolidated financial statements.
In 2013, the Trust adopted IFRS 10, Consolidated Financial Statements and IFRS 12, Disclosure of
Interests in Other Entities. The application of these standards had no impact on the Trust’s
consolidated financial statements. The Trust has included the additional disclosures required by this
standard in note 23 to the annual consolidated financial statements.
In 2013, the Trust also adopted IFRS 11, Joint Arrangements (“IFRS 11”). IFRS 11 replaces IAS 31,
Interests in Joint Ventures. Under IFRS 11, the Trust classifies its interests in joint arrangements as
either joint operations or joint ventures depending on the Trust’s rights to the assets and obligations for
the liabilities of the arrangements. When making this assessment, the Trust considers the structure of
the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements
and other facts and circumstances
The Trust’s interests in joint arrangements have been classified as joint operations. Notwithstanding the
reclassification, the investments continue to be recognized by including the Trust’s share of any assets,
liabilities, revenue and expenses incurred jointly and therefore the application of this standard had no
impact on the Trust’s consolidated financial statements.
(b) 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, 2013, and have not been applied in preparing these consolidated
financial statements.
IFRS 9, Financial Instruments (“IFRS 9”)
(i)
IFRS 9 as issued reflects the IASB’s work to date on the replacement of IAS 39, Financial
Instruments: Recognition and Measurement (“IAS 39”), and applies to the classification and
measurement of financial assets and financial liabilities as defined in IAS 39. In November 2013,
the IASB issued a new version of IFRS 9 (IFRS 9 (2013)) which includes the new hedge
accounting requirements and some related amendments to IAS 39 and IFRS 7, Financial
Instruments: Disclosures. IFRS 9 (2013) does not have a mandatory effective date. The impact of
BTB Annual Report 2013
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Management Discussion and Analysis
this ongoing project will be assessed by the Trust as remaining phases of the project are
completed.
(ii) Amendments to IAS 32, Financial Instruments: Presentation – Offsetting Financial
Assets and Financial Liabilities (“IAS 32”)
In December 2011, the IASB issued certain amendments to IAS 32, which establishes disclosure
requirements that are intended to help clarify for financial statement users the effect or potential
effect of offsetting arrangements on a company’s financial position. These amendments are
effective for the Trust’s annual period beginning on January 1, 2014. The Trust has determined
that the adoption of these amendments will not have a material impact on its consolidated financial
statements.
(iii) IFRIC 21, Levies (“IFRIC 21”)
IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers
payment occurs, as identified by the relevant legislation. The IFRIC 21 does not apply to
accounting for income taxes, fines and penalties or for the acquisition of assets from governments.
IFRIC 21 is effective for annual periods beginning on or after January 1, 2014. The extent of the
impact of adoption of the amendments has not yet been determined.
BTB Annual Report 2013
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Management Discussion and Analysis
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 acquisitions 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.
New 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.
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Management Discussion and Analysis
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 significant 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 economic conditions, local real estate markets, demand for leased premises, competition from
other vacant premises, municipal valuations and assessments, and various other factors.
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 relationship 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.
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Management Discussion and Analysis
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 without 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 investments and reducing their yield.
In addition, numerous property developers, managers and owners compete with BTB in seeking
tenants. The existence 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 distributions to unitholders will increase in
the future.
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.
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Management Discussion and Analysis
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 decades. 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 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"). 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.
In order to qualify for the REIT Exemption in respect of a taxation year, the REIT must meet the
following conditions: i) the total fair market value of all the ”non-portfolio properties“ that are “qualified
REIT properties” held by the trust is always at least 90% of the total fair market value at that time of all
the “non-portfolio assets” held by the trust; (ii) not less than 90% of the REIT’s gross revenues for that
year come from one or more of the following sources: rent from “real or immovable properties,” interest,
dispositions of “real or immovable properties” that are capital properties, dividends, royalties and
dispositions of “eligible resale properties,” (iii) not less than 75% of the REIT’s gross revenues for that
year must come from one or more of the following sources: rent from “real or immovable properties,”
interest from mortgages on “real or immovable properties” and dispositions of “real or immovable
properties” that are capital properties; (iv) the REIT must, throughout the year, hold properties, each of
which is a “real or immovable property” which is a capital property, an “eligible resale property,” debt
from a Canadian company represented by a banker’s acceptance, cash, or generally a Canadian
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Management Discussion and Analysis
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; and v) the investments that are made
therein are, at any time in the taxation year, listed or traded on a stock exchange or other public
market.
As at December 31, 2013, 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. 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. However, as the requirements of the REIT Exemption include complex revenue
and asset tests, no assurance can be given that the REIT will in fact qualify for the REIT Exemption at
all times.
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Management Discussion and Analysis
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 Instrument 52-109.
Evaluations are performed regularly to assess the effectiveness of DC&P, including this MD&A and the
financial statements. 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, 2013 and 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 reporting is reliable and that the financial statements have
been prepared for financial reporting purposes in accordance with IFRS.
During the fourth quarter of 2013, no changes were made in internal control over financial reporting that
materially affected, or are likely to materially affect, internal control over financial reporting.
BTB Annual Report 2013
79
Audited Consolidated Financial Statements
Year ended December 31, 2013
25
BTB Rapport annuel 2013 Consolidated Financial Statements
Table of Contents
Independent Auditor’s Report
83 Management’s responsibility for Financial Reporting
84
86 Consolidated Statements of Financial Positions
87 Consolidated Statements of Comprehensive Income
88 Consolidated Statements of Changes in Unitholders’ Equity
89 Consolidated Statements of Cash Flows
90 Notes to Consolidated Financial Statements
BTB Annual Report 2013
82
Consolidated Financial Statements
BTB Real Estate Investment Trust
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, 2013, the President and Chief Executive Officer and the Vice President and Chief
Financial Officer of BTB had an evaluation carried out, under their direct supervision, of the effectiveness
of the controls and procedures 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 responsibilities 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, 2013 and 2012 and their report follows. The auditors have full and
unrestricted access to the Audit Committee to discuss their audit and related findings.
Michel Léonard
President and Chief Executive Officer
Benoit Cyr, CPA, CA, MBA
Vice President and Chief Financial Officer
Montreal, March 25th 2014
BTB Annual Report 2013
83
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 AUDITOR’S 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, 2013 and
December 31, 2012, 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 overall presentation of the consolidated
financial statements.
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, 2013 and
December 31, 2012, and its consolidated financial performance and its consolidated cash flows for
the years then ended in accordance with International Financial Reporting Standards.
March 25, 2014
Montréal, Canada
*FCPA auditor, FCA, public accountancy permit No. A106087
Consolidated Financial Statements
BTB Real Estate Investment Trust
Consolidated Statements of Financial Position
As at December 31, 2013 and 2012
(Audited - in thousands of CAD dollars)
ASSETS
Investment properties
Property and equipment
Derivative financial instrument
Restricted cash
Other assets
Receivables
Cash and cash equivalents
Total assets
LIABILITIES AND UNITHOLDERS’ EQUITY
Mortgage loans payable
Convertible debentures
Bank loans
Derivative financial instruments
Unit-based compensation
Trade and other payables
Distributions payable to unitholders
Total liabilities
Unitholders’ equity
See accompanying notes to consolidated financial statements.
Approved by the Board on March 25, 2014
Notes
4, 5, 6
7
14
8
9
10
11
12
13
14
15
2013
$
529,432
2,384
251
5,832
3,671
2,459
2,530
546,559
313,816
63,929
1,045
1,723
187
12,324
943
393,967
152,592
546,559
2012
$
488,521
2,163
—
1,857
5,036
2,744
4,606
504,927
296,523
54,272
14,825
927
22
12,788
792
380,149
124,778
504,927
Michel Léonard, Trustee
Jocelyn Proteau, Trustee
BTB Annual Report 2013
86
Consolidated Financial Statements
BTB Real Estate Investment Trust
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars)
Operating revenues
Rental revenues from properties
17
63,435
48,118
Notes
2013
$
2012
$
Operating expenses
Property taxes and public utilities
Other operating costs
Net operating income
Finance costs
Net adjustment to fair value
of derivative financial instruments
Net financing costs
Trust administration expenses
18
Net income before the following item
Increase in fair value of investment properties
Net income being total comprehensive
income for the year
See accompanying notes to consolidated financial statements.
17,729
10,370
13,412
7,710
28,099
21,122
35,336
26,996
21,416
18,507
113
(5,286)
21,529
3,833
13,221
3,519
9,974
10,256
8,375
7,711
18,349
17,967
BTB Annual Report 2013
87
Consolidated Financial Statements
BTB Real Estate Investment Trust
Consolidated Statements of Changes in Unitholders’ Equity
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars)
Notes
Unitholder’s
contributions
Cumulative
distributions
Cumulative
comprehensive
income (loss)
Balance at January 1, 2013
Issuance of units
Distributions to unitholders
Comprehensive income
Balance as at December 31, 2013
16
Balance at January 1, 2012
Issuance of units
Distribution to unitholders
Comprehensive income
Balance as at December 31, 2012
See accompanying notes to consolidated financial statements.
137,330
19,877
—
—
157,207
99,503
37,827
—
—
137,330
(14,883)
—
(10,412)
—
(25,295)
(7,227)
—
(7,656)
—
(14,883)
2,331
—
—
18,349
20,680
(15,636)
—
—
17,967
2,331
Total
124,778
19,877
(10,412)
18,349
152,592
76,640
37,827
(7,656)
17,967
124,778
BTB Annual Report 2013
88
Consolidated Financial Statements
BTB Real Estate Investment Trust
Consolidated Statements of Cash Flows
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars)
Notes
7
17
17
18
4, 5
6
7
8
Operating activities
Net income for the year
Adjustment for:
Increase in fair value of investment properties
Depreciation of property and equipment
Unit-based compensation
Straight-line lease adjustment
Lease incentive amortization
Net financing costs
Net change in non-cash operating items
Net cash from operating activities
Investing activities
Additions to investment properties
Net proceeds from disposal
of investment properties
Additions to property and equipment
Additions to investment properties
under development
Net cash used in investing activities
Financing activities
Mortgage loans, net of financing costs
Repayment of mortgage loans
Bank loans, net of financing costs
Repayment of bank loans
Net proceeds from issue of convertible debentures
Repayment of convertible debentures
Net proceeds from issue of units
Net distributions to unitholders
Additions to restricted cash
Interest paid
Net cash (used in) from financing activities
Net (decrease) increase in cash
and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
See accompanying notes to consolidated financial statements.
BTB Annual Report 2013
89
2013
$
2012
$
18,349
17,967
(8,375)
126
90
(866)
1,480
21,529
32,333
(165)
32,168
(7,711)
97
(76)
(661)
1,240
13,221
24,077
(3,651)
20,426
(30,928)
(89,103)
2,300
(347)
1,266
(173)
—
(383)
(28,975)
(88,393)
56,600
(42,607)
—
(13,963)
21,756
(13,020)
18,996
(9,382)
(3,975)
(19,674)
(5,269)
(2,076)
4,606
2,530
89,533
(47,135)
14,790
—
—
—
36,938
(6,778)
(1,857)
(16,365)
69,126
1,159
3,447
4,606
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
1. Reporting Entity
BTB Real Estate Investment Trust (“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 BTB’s registered office is 2155, Crescent street, Montreal, Quebec, Canada. The
consolidated financial statements of BTB for the years ended December 31, 2013 and 2012 comprise
BTB and its wholly owned subsidiaries (together referred to as the “Trust”) and the Trust’s interest in joint
operations.
2. Basis of Preparation
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
These consolidated financial statements were approved by the Board of Directors on March 25, 2014.
(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 are measured at fair value;
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 BTB'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:
(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:
BTB Annual Report 2013
90
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
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.
Whether the acquiree has allocated its own staff to manage the investment property
and/or to deploy any processes.
The number of investment properties owned by the acquiree.
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:
Valuation of investment properties
Investment properties 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 techniques. These models and techniques
comprise both the Discounted Cash Flow Method and the Direct Capitalization method. In some
cases, the fair values are determined using the Comparable method which is 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
expenditures of fixtures and fittings, any environmental matters and the overall repair and condition
of the property) and discount rates applicable to those cash flows. These estimates are based on
local market conditions existing at the reporting date.
BTB Annual Report 2013
91
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
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 properties
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 estimated 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.
Derivative financial instruments
Derivative financial instruments, including embedded derivatives, are recognized 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
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 vesting method. The valuation model requires management to make estimates for
the expected life, volatility, the average dividend yield of distributions and the average risk-free
interest rate.
(e) Change in accounting policy
In 2011, the IASB issued IFRS 13, Fair Value Measurement (“IFRS 13”), which establishes a single
framework for the fair value measurement and disclosure of financial and non-financial assets and
liabilities. The new standard unifies the definition of fair value and also introduces new concepts including
BTB Annual Report 2013
92
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
‘highest and best use’ and ‘principle markets’ for non-financial assets and liabilities. There are additional
disclosure requirements, including increased fair value disclosure for financial instruments for interim and
annual financial statements and increased disclosures for non-financial assets and liabilities for annual
financial statements. The Trust implemented this standard prospectively in the first quarter of 2013. There
were no measurement impacts on the Trust’s consolidated financial statements as a result of the adoption
of IFRS 13. The Trust has included the additional disclosures required by this standard in notes 4 and 14.
In 2013, the Trust adopted IFRS 10, Consolidated Financial Statements and IFRS 12, Disclosure of
Interests in Other Entities. The application of these standards had no impact on the Trust’s consolidated
financial statements. The Trust has included the additional disclosures required by this standard in note
23.
In 2013, the Trust also adopted IFRS 11, Joint Arrangements (“IFRS 11”). IFRS 11 replaces IAS 31,
Interests in Joint Ventures. Under IFRS 11, the Trust classifies its interests in joint arrangements as either
joint operations or joint ventures depending on the Trust’s rights to the assets, and obligations for the
liabilities, of the arrangements. When making this assessment, the Trust considers the structure of the
arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and
other facts and circumstances
The Trust’s interests in joint arrangements have been classified as joint operations. Notwithstanding the
reclassification, the investments continue to be recognized by including the Trust’s share of any assets,
liabilities, revenue and expenses incurred jointly and therefore the application of this standard had no
impact on the Trust’s consolidated financial statements.
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
Business combinations are accounted for using the acquisition method. Accordingly, the
consideration transferred for the acquisition of a business is the fair value of the assets transferred,
and any debt and trust units issued by the Trust on the date control of the acquired entity is
obtained. Acquisition-related costs, other than those associated with the issue of debt or trust units,
are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are generally measured initially at their fair values at the
acquisition date. 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.
BTB Annual Report 2013
93
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
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.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Trust. Control exists when the Trust has the existing rights
that give it the current ability to direct the activities that significantly affect the entities’ returns. 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) Joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.
Those parties are called joint operators. The consolidated financial statements include the Trust’s
proportionate share of the joint operations’ 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
Financial assets and liabilities are recognized when the Trust becomes party to the contractual provisions
of the financial instrument. Financial assets and financial liabilities are initially recognized at fair value,
and their subsequent measurement is dependent on their classification as described below. The
classification depends on the purpose for which the financial instruments were acquired or issued, their
characteristics and the Trust’s designation of such instruments.
(i) 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 restricted cash, receivables and cash and cash equivalents.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and term deposits with original maturities of
three months or less.
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 amounts provided in guarantee of mortgage loans.
BTB Annual Report 2013
94
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
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.
(ii) Non-derivative financial liabilities
The Trust classifies non-derivative financial liabilities into the other financial liabilities category. Such
financial liabilities are recognized initially at fair value less 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 mortgage loans payable, convertible debentures, bank
loans, trade and other payables and distributions payable to unitholders.
The Trust derecognizes a financial liability when its contractual obligations are discharged or
cancelled, or expire.
(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
(“IAS 32”), 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 and
redemption 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.
(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. The Trust capitalizes into investment
property the costs incurred to increase their capacity, replace certain components and make
improvements after the acquisition date. The Trust also capitalizes major maintenance and repair
expenses providing benefits that will last far beyond the end of the reporting period. Investment property
BTB Annual Report 2013
95
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
includes income properties, properties under development and land held for future development if
necessary.
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) 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.
(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 - 5 years
Depreciation methods, useful lives and residual values are reviewed at each annual reporting date
and adjusted when appropriate.
BTB Annual Report 2013
96
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
(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.
(e) 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.
(f) 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.
(g) 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,
revenue 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 additions. 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. Any deferred amounts related to the straight-line
lease adjustments are recognized within investment properties. 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.
Lease incentives which are mostly leasehold improvements and 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
BTB Annual Report 2013
97
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
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.
(h) 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.
(i) 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.
(j) 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 debentures, 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.
(k) 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.
(l) Unit-based compensation
(i) 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
BTB Annual Report 2013
98
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
measured at fair-value at each reporting period and the change in the fair value is recognized as
compensation expense in profit and loss.
(ii) Deferred unit compensation plan for trustees and certain executive officers
Compensation costs related to the deferred 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 as compensation expense in profit
or loss.
(iii) Employee unit purchase plan
Compensation costs related to the employee unit purchase plan 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 settlement date. Any changes in fair value are recognized as compensation
expense in profit or loss.
(m) 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.
(n) 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 proscribed 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.
(o) Fair value measurement
The Trust measures financial instruments, such as derivatives, and non-financial assets,such as
investment properties, at fair value at each reporting date. 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 under current market conditions. The fair value measurement is based on the
presumption that the transaction to sell the asset or transfer the liability takes place either:
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Trust. The fair value of an
asset or a liability is measured using the assumptions that market participants would use when pricing the
BTB Annual Report 2013
99
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
asset or liability assuming that market participants act in their economic best interests. A fair value
measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market
participant that would use the asset in its highest and best use.
The Trust uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing
the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in
the financial statements are categorized within the fair value hierarchy, described as follows, based on the
lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Trust
determines whether transfers have occurred between Levels in the hierarchy by reassessing
categorization (based on the lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Trust has determined classes of assets and liabilities on the
basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy
as explained above.
(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, 2013, and have not been applied in preparing these consolidated financial
statements.
(i) IFRS 9, Financial Instruments (“IFRS 9”)
IFRS 9 as issued reflects the IASB’s work to date on the replacement of IAS 39, Financial
Instruments: Recognition and Measurement (“IAS 39”), and applies to the classification and
measurement of financial assets and financial liabilities as defined in IAS 39. In November 2013, the
IASB issued a new version of IFRS 9 (IFRS 9 (2013)) which includes the new hedge accounting
requirements and some related amendments to IAS 39 and IFRS 7, Financial Instruments:
Disclosures. IFRS 9 (2013) does not have a mandatory effective date. The impact of this ongoing
project will be assessed by the Trust as remaining phases of the project are completed.
(ii) Amendments to IAS 32, Financial Instruments: Presentation – Offsetting Financial Assets
and Financial Liabilities (“IAS 32”)
In December 2011, the IASB issued certain amendments to IAS 32, which establishes disclosure
requirements that are intended to help clarify for financial statement users the effect or potential
BTB Annual Report 2013
100
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
effect of offsetting arrangements on a company’s financial position. These amendments are effective
for the Trust’s annual period beginning on January 1, 2014. The Trust has determined that the
adoption of these amendments will not have a material impact on its consolidated financial
statements.
(iii) IFRIC 21, Levies (“IFRIC 21”)
IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers
payment occurs, as identified by the relevant legislation. The IFRIC 21 does not apply to accounting
for income taxes, fines and penalties or for the acquisition of assets from governments. IFRIC 21 is
effective for annual periods beginning on or after January 1, 2014. The extent of the impact of
adoption of the amendments has not yet been determined.
4. Investment Properties
For the years ended December 31,
Balance beginning of year
Acquisition of investment properties (note 5)
Disposal of investment properties (note 6)
Capital expenditures
Government grants
Capitalized leasing fees
Capitalized lease incentives
Lease incentives amortization
Straight-line lease adjustment
Net transfer from investment properties under development
Increase in fair value of investment properties
Balance end of year
2013
$
488,521
29,614
(2,300)
3,663
(176)
478
1,833
(1,480)
904
—
8,375
529,432
2012
$
343,383
128,446
(1,266)
3,378
—
678
2,454
(1,240)
661
4,316
7,711
488,521
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 the
Discounted Cash Flow, the Direct Capitalization and Comparable methods for a subset of the Trust’s
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 a particular individual investment property. The fair value of the remaining investment
properties is determined by management using internally generated valuations based on the Discounted
Cash Flow method.
BTB Annual Report 2013
101
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
At December 31, 2013 external appraisals were obtained for investment properties with an aggregate fair
value of $349,282 (December 31, 2012 - $361,021) and management’s valuation model was used for
investment properties with an aggregate fair value of $180,150 (December 31, 2012 - $127,500).
The fair value of investment properties is based on Level 3 inputs. There have been no transfers during
the year between levels. The significant inputs used to determine the fair value of the Trust’s investment
properties are as follows:
As at December 31, 2013
Capitalization rate
Terminal capitalization rate
Discount rate
As at December 31, 2012
Capitalization rate
Terminal capitalization rate
Discount rate
Commercial
Office
Industrial General purpose
6.25% - 10.00%
6.75% - 10.25%
6.50% - 10.50%
7.00% - 8.25%
6.50% - 8.25%
6.50% - 9.25%
7.00% - 10.50%
7.25% - 8.50%
7.25% - 9.00%
7.50% - 9.75%
7.25% - 10.75%
8.25% - 9.25%
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%
Significant increases (decreases) in estimated rental value and rent growth per annum in isolation would
result in a significantly higher (lower) fair value of income properties. Significant increases (decreases) in
long-term vacancy rate and exit yield in isolation would result in significantly lower (higher) fair value.
Generally, a change in the assumption made for the estimated rental value is accompanied by:
A directionally similar change in the rent growth per annum and discount rate and exit
yield
An opposite change In the long term vacancy rate
Valuations determined by the Discounted Cash Flow method are most sensitive to changes in discount
rate. The following table summarizes the sensitivity of the fair value of investment properties to changes in
discount rate assuming all properties were valued under a Discounted Cash Flow method:
Discount rate sensitivity
Increase (decrease)
(0.50%)
(0.25%)
Base rate
0.25%
0.50%
Fair Value
$
550,004
539,598
529,432
519,343
509,619
Change in
fair value
$
20,572
10,166
—
(10,089)
(19,813)
BTB Annual Report 2013
102
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
As shown in the sensitivity analysis above, an increase in the discount rate, other things being equal, will
result in a decrease in fair value of the investment properties and vice-versa.
5. Acquisitions
(a) 2013 Asset acquisitions
In December 2013, the Trust acquired the residual 50% interest in a general purpose building located in
the city of Saint-Lazare for a purchase price of $2,552, $1,555 through the assumption of a mortgage
loan, $475 through the assumption of trade and other payables and $522 in cash.
In October 2013, the Trust acquired an office property and an industrial property located in the city of
Longueuil and an industrial property located in the city of Sherbrooke for a purchase price of $12,700 in
cash.
In March 2013, the Trust acquired an industrial property located in the city of Laval for a purchase price of
$11,000 in cash.
In February 2013, the Trust acquired a 50% interest in a general purpose building located in the city of
Saint-Lazare for a purchase price of $2,563, $1,586 through the assumption of a mortgage loan, $69
through the assumption of trade and other payables and $908 in cash.
In addition to the purchase price, transaction costs of $799 were recognized in 2013.
The relative fair value of the assets and liabilities recognized in the consolidated statement of financial
position on the date of the acquisition during 2013 were as follows:
Investment properties, including transaction costs
Mortgage loans payable
Trade and other payables, including transaction costs
Total cash consideration paid
Fair value recognized
on acquisition
$
29,614
(3,141)
(1,343)
25,130
(b) 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.
BTB Annual Report 2013
103
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
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.
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., 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 follows:
Investment properties, including transaction costs
Mortgage loans payable
Trade and other payables, including transaction costs
Total cash consideration paid
BTB Annual Report 2013
104
Fair value recognized
on acquisition
$
128,446
(29,597)
(16,256)
82,593
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
6. Disposal
In May 2013, the Trust disposed of a general purpose building located in the city of Brossard for net
proceeds of $2,300.
In March 2012, the Trust disposed of a commercial building located in the city of Montréal for net
proceeds of $1,266.
7. Property and Equipment
Cost
Balance at December 31, 2011
Additions
Balance at December 31, 2012
Additions
Balance at December 31, 2013
Accumulated Depreciation
Balance at December 31, 2011
Depreciation for the year
Balance at December 31, 2012
Depreciation for the year
Balance at December 31, 2013
Net carrying amount
Balance at December 31, 2012
Balance at December 31, 2013
8. Restricted Cash
Owner-occupied
land
Owner-occupied
building
Equipment,
furniture and
fixtures
Rolling
stock
$
494
—
494
—
494
$
1,715
9
1,724
200
1,924
187
58
245
65
310
494
494
1,479
1,614
$
129
105
234
124
358
64
32
96
49
145
138
213
$
—
59
59
23
82
—
7
7
12
19
52
63
Total
$
2,338
173
2,511
347
2,858
251
97
348
126
474
2,163
2,384
Restricted cash consists of an amount of $3,522 (December 31, 2012 - $1,272) provided in guarantee of
the existing mortgage loan on the buildings disposed in March 2012 and May 2013 (see note 6) and an
amount of $2,310 (December 31, 2012 - $585) provided in guarantee of mortgage loans.
BTB Annual Report 2013
105
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
9. Other Assets
As at December 31,
Prepaid expenses
Deposits
Total
10. Receivables
As at December 31,
Rents receivable
Provision for doubtful accounts
Net rents receivable
Other receivable
Total
11. Mortgage Loans Payable
2013
$
3,273
398
3,671
2012
$
3,605
1,431
5,036
2013
$
2,619
(263)
2,356
103
2,459
2012
$
2,996
(271)
2,725
19
2,744
Mortgage loans payable are secured by immovable hypothecs on investment properties having a fair
value of approximately $525,342 as at December 31, 2013 (December 31, 2012 – $484,641) and by
restricted cash (see note 8).
As at December 31,
Fixed rate mortgage loans payable
Floating rate mortgage loans payable
Unamortized fair value assumption adjustments
Unamortized financing costs
Mortgage loans payable
Weighted average interest rate
Weighted average term to maturity (years)
Annual rated ranging
2013
$
305,794
8,379
1,642
(1,999)
313,816
4.44%
4.44
2012
$
280,313
15,901
2,111
(1,802)
296,523
4.69%
4.51
2.55% - 6.80%
3.18% - 8.50%
BTB Annual Report 2013
106
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
As at December 31, 2013, mortgage loan scheduled repayments are as follows:
2014
2015
2016
2017
2018
Thereafter
Unamortized fair value assumption adjustments
Unamortized financing costs
Scheduled
repayments
$
8,260
7,567
6,864
4,173
2,309
21,226
50,399
Principal
maturity
$
60,731
20,362
70,038
57,527
35,493
19,623
263,774
Total
$
68,991
27,929
76,902
61,700
37,802
40,849
314,173
1,642
(1,999)
313,816
In March 2013, the Trust entered into an interest rate swap agreement on a floating interest rate mortgage
to hedge the variability in cash flows attributed to fluctuating interest rates. Settlement on both the fixed
and variable portion of the interest rate swap occurs on a monthly basis. The original principal amount of
the interest rate swap was $7,150, the maturity date is April 2023 and the effective fixed interest rate is
4.02%. The Trust does not apply hedge accounting to such cash flow hedging relationships.
12. Convertible Debentures
As at December 31, 2013, the Trust had three series of subordinated, convertible, redeemable
debentures outstanding.
Series C
Series D
Series E
Capital
Interest rates
Coupon
Effective
23,000
23,000
23,000
%
8.00
7.25
6.90
%
9.78
8.47
7.90
Unit
conversion
price
$
5.00
6.10
6.15
Interest
payments
Maturity
Semi-annual
Semi-annual
Semi-annual
January 2016
July 2018
March 2020
BTB Annual Report 2013
107
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
The components of the subordinated convertible debentures on the issue date were allocated as follows:
Non-derivative liability component
Conversion and redemption options liability component
Series C
$
21,592
1,408
23,000
Series D
$
21,346
1,654
23,000
Series E
$
22,690
310
23,000
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 and redemption options liability component is measured at fair value.
As at December 31,2013
Non-derivative liability component upon issuance
Accretion of non-derivative liability component
Unamortized financing costs
Series C
$
Series D
$
Series E
$
Total
$
21,592
754
22,346
(760)
21,346
472
21,818
(1,064)
22,690
30
22,720
(1,131)
65,628
1,256
66,884
(2,955)
Non-derivative liability component
21,586
20,754
21,589
63,929
Conversion and redemption options liability
component at fair value
As at December 31,2012
Non-derivative liability component upon issuance
Accretion of non-derivative liability component
Unamortized financing costs
780
361
582
Series B
$
Series C
$
Series D
$
12,339
639
12,978
(65)
21,592
477
22,069
(1,079)
21,346
270
21,616
(1,247)
1,723
Total
$
55,277
1,386
56,663
(2,391)
Non-derivative liability component
12,913
20,990
20,369
54,272
Conversion and redemption options liability
component at fair value
—
598
329
927
BTB Annual Report 2013
108
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
Series B
In March 2008, the Trust issued Series B subordinated convertible, redeemable, unsecured debentures,
bearing 8.5% interest payable semi-annually which were repaid at maturity in March 2013, in the amount
of $13,020.
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”).
As of January 31, 2014, but before January 31, 2015, under certain conditions, the debentures are
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 redeemable 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.
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
redeemable 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.
BTB Annual Report 2013
109
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
Series E
In February 2013, the Trust issued 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. The
debentures are convertible at the holder’s option at any time before March 2020, at a conversion price of
$6.15 per unit (“Series E Conversion Price”).
These debentures are not redeemable before March 31, 2016, except in the case of a change in control.
As of March 31, 2016, but before March 31, 2018, 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 March 31, 2018, but before March 31, 2020, under certain conditions, the
debentures will be redeemable 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.
13. Bank Loans
The Trust’s acquisition line of credit in the amount of $15,000 has matured in November 2013.
As at December 31, 2012, $15,000 was due under the acquisition line of credit and the unamortized
financing costs amounted to $175.
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 $4,308 (December 31, 2012 - $4,224). As at December 31,
2013, $1,045 was due under the operating credit facility (December 31, 2012 - $nil).
BTB Annual Report 2013
110
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
14. Fair Value Measurement
The following tables show the carrying amounts and fair values of financial assets and financial liabilities,
including their levels in the fair value hierarchy. It does not include the fair value of the cash and cash
equivalents, restricted cash, receivables, other assets, trade and other payables and distributions payable
to unitholders, which approximated their carrying amount as at December 31, 2013 and 2012 because of
their short-term maturity.
As at December 31, 2013
Carrying amount
Fair value
Measured at fair value
Conversion and redemption options of convertible debentures (note 12)
Interest rate swap asset
For which fair values are disclosed
Mortgage loans payable
Convertible debentures, including their conversion and redemption features
Bank loans
Level 1
$
$
Level 2 Level 3
$
$
1,723
(251)
—
—
—
(251)
1,723
—
313,816
65,652
1,045
—
67,505
—
317,816
—
1,045
—
—
—
As at December 31, 2012
Carrying amount
Fair value
Measured at fair value
Conversion and redemption options of convertible debentures (note 12)
For which fair values are disclosed
Mortgage loans payable
Convertible debentures, including their conversion and redemption features
Bank loans
Level 1
Level 2 Level 3
$
927
$
—
$
$
—
927
296,523
55,199
14,825
—
59,882
—
300,046
—
15,030
—
—
—
The fair value of mortgage loans payable was calculated by discounting cash flows from future payments
of principal and interest using the year end market rate for various loans with similar risk and credit
profiles. The year end market rates have been estimated by reference to published mortgage rates by
major financial institutions for similar maturity.
The fair value of convertible debentures, including their conversion and redemption features, was
determined with reference to the last quoted trading price preceding the year end.
The fair value of bank loans was calculated by discounting cash flows from financial obligations using the
year end market rate for similar instruments.
BTB Annual Report 2013
111
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
The fair value of derivative instruments, which comprise conversion and redemption options of convertible
debentures and an interest rate swap, is based respectively on the partial differential equation method
and the discounted future cash flows method. The assumptions used in the partial differential equation
method are estimated by reference to the Trust unit price and its volatility, and take into account the credit
risk of the financial instrument. The assumptions used in the discounted future cash flows method are
estimated by reference to the Canadian Dealer Offered Rate (“CDOR”) forward rates.
Such fair value estimates are not necessarily indicative of the amounts the Trust might pay or receive in
actual market transactions. Potential transaction costs have also not been considered in estimating fair
value.
The following tables provide a reconciliation of Level 3 fair value measurements on the consolidated
statements of financial position:
Year ended December 31, 2013
Balance beginning of year
Losses for the year recognized in profit and loss under Net adjustment to fair
value of derivative financial instruments
Issue of Series E subordinated convertible redeemable debentures
Balance end of year
Year ended December 31, 2012
Balance beginning of year
(Gains) Losses for the year recognized in profit and loss under Net adjustment to
fair value of derivative financial instruments
Exercise of warrants
Balance end of year
Conversion and redemption
options of convertible
debentures
$
927
486
310
1,723
Warrants Conversion and redemption
options of convertible
debentures
$
$
265
42
(307)
—
6,256
(5,329)
—
927
BTB Annual Report 2013
112
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
The following table provides a sensitivity analysis for the volatility applied in fair value valuation of the
conversion and redemption options of convertible debentures at December 31, 2013:
Volatility sensitivity
Increase (decrease)
(0.50%)
December 31, 2013
0.50%
CONVERSION AND REDEMPTION
OPTIONS OF CONVERTIBLE
DEBENTURES
$
1,594
1,723
1,971
VOLATILITY
%
19.25
19.75
20.25
As shown in the sensitivity analysis above, the fair value of the conversion and redemption options of
convertible debentures is impacted by a change in the volatility used in the valuation model. Generally, an
increase in the volatility, other things being equal, will result in an increase in fair value of the conversion
and redemption options of convertible debentures and vice-versa. In some cases, when the fair value of
the redemption option component is increasing more than the fair value of the conversion option
component, an increase in volatility will result in a decrease in fair value of the conversion and redemption
options.
15. Unit-based Compensation and Warrants
(a) Unit-based compensation
(i) 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.
BTB Annual Report 2013
113
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
Unit-based compensation expense and the assumptions used in the calculation thereof using the
Black & Scholes option valuation model are as follows:
As at December 31,
Unit-based compensation expense
Liability recognized for unit-based compensation
Unit options granted
Remaining life (years)
Volatility rate
Distribution yield
Risk-free interest rate
2013
2012
(8)
14
—
(76)
22
—
1.40 - 2.22
0.69 - 3.53
17.54 - 16.41%
17.35 - 32.07%
8.97%
9.44%
1.10 - 1.13%
1.01 - 1.33%
The following tables present relevant information on options outstanding at year-end and changes in
the balances during the year:
Grant date
March 25, 2011
June 22, 2011
Number of
units
Maturity
date
Exercise
price
10,000 March 21, 2016
May 26,2015
88,000
$4.60
$4.50
98,000
For the years ended December 31,
Outstanding, beginning of year
Forfeited/Cancelled
Outstanding, end of year
Units
options
227,000
(129,000)
98,000
2013
Weighted
average
exercise price
$5.07
$5.55
$4.51
Units
options
551,000
(324,000)
227,000
2012
Weighted
average
exercise price
$10.20
$13.17
$5.07
Options vested
98,000
$4.51
227,000
$5.07
Weighted average remaining life (years)
1.48
1.59
BTB Annual Report 2013
114
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
(ii) 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 presents relevant information on changes in the unit balances:
For the years ended December 31,
Outstanding, beginning of year
Trustees’ compensation
Distributions paid in units
Outstanding, end of year
2013
Units
15,981
11,948
1,842
29,771
2012
Units
—
15,264
717
15,981
As at December 31, 2013, the liability related to the plan was $140 (December 31, 2012 - $75). The
related expenses recorded in profit and loss amount to $65 for the year ended December 31, 2013
(for the year ended December 31, 2012 - $75). No amount was paid under this plan for the years
ended December 31, 2013 and 2012.
(iii) Employee unit purchase plan
The Trust offers an optional employee unit purchase plan to all its employees. Under this plan, the
employees may contribute, each year, pursuant to a maximum of 3% to 7% of their base salary
depending of their years of experience with the Trust. For each two units purchased by an
employee, the Trust shall issue one unit from treasury. As at December 31, 2013, the liability related
to the plan was $33, representing a total of 7,456 units to issue. The related expenses recorded in
profit and loss amount to $33 for the year ended December 31, 2013. The units have been issued
after year-end.
(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. The related expenses recorded in profit and
loss amount to $42 for the year ended December 31, 2012.
BTB Annual Report 2013
115
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
16. Trust 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 accordance 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 in accordance with IAS 32.
In July 2013, the Trust completed a public issue of 4,328,600 units, including the over-allotment option, for
total net proceeds of $18,996.
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.
Trust units issued and outstanding are as follows:
For the years ended December 31,
Units outstanding, beginning of year
Issue pursuant to a public issue
Unit issue costs
Issue pursuant to the distribution reinvestment plan
Issue pursuant to the exercise of warrants
Units outstanding, end of year
Units
23,791,797
4,328,600
—
28,120,397
205,141
—
28,325,538
2013
Value
$
137,330
20,128
(1,132)
156,326
881
—
Units
14,810,790
8,348,150
—
23,158,940
132,857
500,000
157,207
23,791,797
2012
Value
$
99,503
37,252
(2,225)
134,530
582
2,218
137,330
(a) 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 units 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, less a discount of 5%.
BTB Annual Report 2013
116
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
17. Rental Revenues from Properties
For the years ended December 31,
Rental income contractually due from tenants
Lease incentive amortization
Straight-line lease adjustment
18. Net Financing Costs
For the years 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 loans
Net adjustment to fair value of derivative financial instruments
19. Expenses by Nature
For the years ended December 31,
Depreciation
Employee benefits expense
20. Earnings per Unit
2013
$
64,049
(1,480)
866
63,435
2013
$
(105)
13,861
5,146
776
45
2012
$
48,697
(1,240)
661
48,118
2012
$
(141)
11,822
4,622
87
107
551
598
1,142
113
21,529
1,412
(5,286)
13,221
2013
$
126
3,665
2012
$
97
2,856
BTB’s trust units being puttable financial instruments presented as equity in accordance with IAS 32 (see
note 16), the Trust is not required to report a profit or loss per unit figure on its consolidated statements of
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.
BTB Annual Report 2013
117
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
Net earnings per unit are calculated based on the weighted average number of units outstanding as
follows:
For the years ended December 31,
Net income
Weighted average number of units outstanding – basic
Earnings per unit – basic
21. Operating Lease Income
2013
$
2012
$
18,349
25,735,969
17,967
18,668,871
0.71
0.96
The Trust as lessor has entered into leases on its property portfolio. Initial lease terms are generally
between three and ten years and include clauses to enable periodic upward revision of the rental charge
according to prevailing market conditions. Some leases contain options to terminate before the end of the
lease term.
Future minimum base rentals receivable under non-cancellable operating leases as at December 31,
2013 are as follows:
Within one year
Over one year but within five years
Over five years
22. Capital Management
2013
$
40,424
117,451
70,396
228,271
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 operations and development, while maximizing returns for unitholders and
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.
BTB Annual Report 2013
118
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
The Trust’s capital is as follows:
As at December 31,
Mortgage loans payable(1)
Convertible debentures(1)
Bank loans(1)
Unitholders’ equity
(1) Excluding issue costs
As at December 31,
Mortgage loans payable, Convertible debentures and Bank loans / total asset value ratio
Mortgage loans payable and Bank loans/ total asset value ratio
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 (see note 14)
2013
$
314,173
69,000
1,045
384,218
152,592
536,810
2012
$
296,214
59,020
15,000
370,234
124,778
495,012
2013
%
70.3
57.7
2012
%
73.3
61.6
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, 2013, overdue rent receivable amounted to $1,037 (December 31, 2012 -
$953), of which a provision for doubtful account of $263 (December 31, 2012 - $271) has been recorded.
BTB Annual Report 2013
119
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
Management 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.
(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 one mortgage loan outstanding of $1,380 as at December 31, 2013, all other mortgage loans
payable and convertible debentures bear interest at fixed rates or are covered by an interest rate swap
agreement, accordingly a 100-basis point increase or decrease in the average interest rates for the fiscal
year, assuming that all other variables remain constant, would have an impact of approximately $14 on
the Trust’s comprehensive income for the year ended December 31, 2013.
(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 BTB’s 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, 2013, the Trust was in compliance with all the covenants to which it was subject.
BTB Annual Report 2013
120
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
The Trust’s cash position is regularly monitored by management. The following are contractual maturities
of financial liabilities, including estimated interest payments:
As at December 31, 2013
Estimated payment schedule
Trade and other
payables
Distributions payable
to unitholders
Bank loans
Mortgage loans
payable and
convertible
debentures
Carrying
amount
Total
contractual
cash flows
2014
2015
2016
2017
2018
$
$
$
12,357
12,357
12,357
943
1,045
943
1,045
943
1,045
$
—
—
—
$
—
—
—
$
—
—
—
$
—
—
—
2019 and
thereafter
$
—
—
—
377,745
455,083
86,132
43,033
111,917
392,090
469,428
100,477
43,033
111,917
70,223
70,223
66,170
66,170
77,608
77,608
As at December 31, 2012
Estimated payment schedule
Trade and other
payables
Distributions payable
to unitholders
Bank loans
Mortgage loans
payable and
convertible
debentures
Carrying
amount
Total
contractual
cash flows
2013
2014
2015
2016
2017
$
$
$
12,788
12,788
12,788
792
14,825
792
16,031
792
16,031
$
—
—
—
$
—
—
—
$
—
—
—
$
—
—
—
2018 and
thereafter
$
—
—
—
350,795
419,307
76,441
379,200
448,918
106,052
85,176
85,176
30,486
30,486
93,522
93,522
65,219
65,219
68,463
68,463
BTB Annual Report 2013
121
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
23. Subsidiaries and Joint Arrangements
(a) Subsidiaries
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”)
Gestion immobilière BTB Inc.
Corporation immobilière Cagim (“CIC”)
Lombard SEC
Place d’affaire Lebourgneuf Phase II, SENC (“PAL II”)
Société immobilière Cagim, SEC
Type
Trust
Trust
Relationship
Parent
100% owned by BTB REIT
Corporation
100% owned by BTB FA&E
Corporation
100% owned by BTB FA&E
Limited Partnership
General Partnership
Limited Partnership
99.9% owned by BTB FA&E
0.1% owned by CIC
99.9% owned by BTB FA&E
0.1% owned by CIC
70.4% owned by BTB FA&E
29.5% owned by PAL II
0.1% owned by CIC
(b) Joint arrangements
The Trust has investments in joint arrangements whereby the parties that have joint control of the
arrangements have rights to the assets, and obligations for the liabilities, relating to the arrangements.
Therefore, the joint arrangements are classified as joint operations. The joint operations included in the
Trust’s consolidated financial statement are as follows:
As at December 31,
Property*
Immeuble BTB/Laplaine
Huntington/BTB Montclair
Complexe Lebourgneuf Phase II**
* The three investments properties are located in Quebec.
2013
%
50
50
75
2012
%
50
50
75
** Structured through a separate vehicle. The legal form of the separate vehicle gives the parties rights to the assets, and obligations for the liabilities, relating to the
arrangement. Accordingly, the joint arrangement is classified as a joint operation.
BTB Annual Report 2013
122
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
The consolidated financial statements include the Trust’s proportionate share of the assets, liabilities,
revenues and expenses of these three joint arrangements.
As at and for the years ended December 31,
Assets
Liabilities
Revenues
Expenses
24. Operating Segments
2013
$
45,615
31,273
4,852
1,860
2012
$
45,587
32,153
4,572
1,888
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), valuation 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
Office
General purpose
Industrial
Commercial
Office
Industrial
$
$
$
General
purpose
$
118,403
15,889
7,791
100,561
8,855
7,324
79,236
6,841
5,517
110,585
9,795
4,701
Total
$
529,432
63,435
35,336
488,521
48,118
26,996
Year ended December 31, 2013
Investment properties
Rental revenue from properties
Net operating income
Year ended December 31, 2012
Investment properties
Rental revenue from properties
Net operating income
101,675
11,684
7,163
98,608
7,898
5,360
208,793
27,007
13,058
200,092
23,584
11,418
BTB Annual Report 2013
123
Consolidated Financial Statements
BTB Real Estate Investment Trust
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Audited - in thousands of CAD dollars, except per unit amounts)
25. Compensation of Key Management Personnel and Trustees
Key management personnel and trustees compensation is as follows:
For the years ended December 31,
Salaries and short-term benefits
Unit-based compensation
Total
2013
$
1,654
83
1,737
2012
$
1,527
(21)
1,506
Key management personnel are comprised of the Company’s executive officers.
26. Commitments and Contingencies
(a) Contractual obligations on real estate
The Trust entered into a binding agreement under which the Trust is committed to pay, up to a maximum
of $1,275, for the refurbishment work of one investment property recently acquired. The execution of this
obligation will not require any net cash disbursement as $1,275 presented as restricted cash will be
available for the payment of the refurbishment work.
(b) Litigation
The Trust is involved with litigation and claims which arise from time to time in the normal course of
business. These litigation and claims are generally covered by insurance. In the opinion of management,
any liability that may arise from such contingencies will not have a significant adverse effect on the Trust’s
consolidated financial statements.
27. Subsequent Events
In February 2014, the Trust concluded a refinancing agreement for six of its properties for a total amount
of $26,395, at an interest rate of 3.34%. The amount has been used to reimburse two existing financings
of $ 24,857 bearing a weighted average interest rate of 5.74% and for general Trust purposes.
BTB Annual Report 2013
124
Corporate Information
Board of Trustees
Executive Team
Michel Léonard
President and Chief Executive Officer
Benoit Cyr, CPA, CA, MBA
Vice-President and Chief Financial Officer
Frédéric Seigneur
Vice-President, Leasing
Dominic Gilbert, B.A.A.
Vice-President, Property Management
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 Léonard
President and Chief Executive Officer
BTB Real Estate Investment Trust
Normand Beauchamp(2)(3)
President and Chief Executive Officer
Capital NDSL inc.
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
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
BTB Annual Report 2013
125
Legal Counsel
De Grandpré Chait s.e.n.c.r.l.
1000 De la Gauchetière St. West
Suite 2900
Montreal, Quebec, H3B 4W5
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 reinvested
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
Investor relations section of our website at www.btbreit.com
or contact the Plan agent: Computershare Trust Company
of Canada.
Unitholders Information
Head Office
BTB Real Estate Investment Trust
2155 Crescent
Montreal, Quebec, H3G 2C1
T 514 286-0188
F 514 286-0011
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.C
BTB.DB.D
BTB.DB.E
Transfer Agent
Computershare trust company of Canada
1500 University St.
Suite 700
Montreal, Quebec, H3A 3S8
Canada
T 514 982-7555
T Toll free: 1 800 564-6253
F 514 982-7850
service@computershare.com
Taxability of distributions
In 2013, for all Canadian unitholders, the distributions are
fiscally treated as follow:
Other revenues: 0%
Fiscal Deferral: 100%
Auditors
KPMG s.r.l. / S.E.N.C.R.L.
600 De Maisonneuve Blvd. West
Suite 1500
Montreal, Quebec, H3A 0A3
BTB Annual Report 2013
126
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BTB Real Estate Investment Trust
2155, Crescent
Montreal, Quebec, H3G 2C1
T 514 286 0188
F 514 286 0011
www.btbreit.com