2019 ANNUAL
REPORT
Our clients’
environment:
at the heart
of our
priorities.
The 14 beehives located on
the rooftops of some of our
properties produce more than
1,400 jars of honey a year, thus
helping pollination efforts
in the surrounding area.
Photo courtesy of Alvéole. All rights reserved.
OUR MISSION
To provide our
clients with
high-quality,
environmentally
friendly spaces.
Photo courtesy of Alvéole. All rights reserved.
Highlights
66
Properties
$93.6M
Rental income
99.8%
Payout ratio on
distributable income(1)
93.2%
Occupancy rate
4
(1) Non-IFRS financial measures. See appropriate sections of the Management
Discussion and Analysis for definition and reconciliation to the closest IFRS measure.
BTB ANNUAL REPORT $939M
Total assets
5.7M
Number of square
feet
52.8%
Mortgage debt ratio
5
In keeping with our commitment to creating workplaces that enhance our clients’ quality of life, we try and provide a maximum of green space at each of our properties. 2019 Highlights
Evolution of the rental Income* (in thousands of dollars)
2014
2015
2016
2017
2018
2019
Evolution of the net operating income* (in thousands of dollars)
2014
2015
2016
2017
2018
2019
67,170
72,892
73,384
76,039
87,423
93,602
37,983
41,294
41,339
40,394
47,637
50,897
Evolution of the distributable income* (in thousands of dollars)
2014
2015
2016
2017
2018
2019
16,626
18,733
19,711
19,721
23,897
25,063
Evolution of the total leasable area* (in thousands of square feet)
2014
2015
2016
2017
2018
2019
6
4,822
5,095
5,144
5,435
5,432
5,650
* For the years ending December 31st
BTB ANNUAL REPORT Breakdown of portfolio by geographical region (per leasable area)
Greater
Montreal area
54.8%
Greater
Quebec city
24.7%
Ottawa
area
16.9%
London
area
3.6%
Breakdown by asset type (per leasable area)
38.0 %
26.6 %
25.3 %
10.1 %
Office
Industrial
Retail
Mixed-use
Environmental Actions
Rooftop
beehives
14
BOMA Certified
buildings
Bicycle parking
structures
R-410A norm HVAC
installations
24
77
750
Performance on the markets
BTB’s Total Return
S&P/TSX Index Total Return
S&P/TSX Capped REIT Index Total Return
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7
2019
We strive to continuously
improve our environmental
performance without ever
compromising the efficiency
and quality of the services
offered to our clients.
8
BTB ANNUAL REPORT Message from the
Chairman of the Board
of Trustees and the
President and Chief
Executive Officer
Globally, 2019 was a year of great awareness regarding
the impact we are all having on our environment.
Many advocacy groups increased their efforts to
emphasize the urgency of taking action, thus fuelling
the momentum of companies around the world to
reduce their carbon footprint. At BTB, we have, for
some time now, been emphasizing to our employees
and clients the necessity of embracing this business
responsibility.
With this in mind, we deemed it sensible and
responsible to be even more proactive in this regard
during the year, in line with our clients’ expectations
and their environmental aspirations.
Historic highs for BTB
The portfolio repositioning strategy we launched
in 2018 is paying off not only impacting our revenues
positively, but it brought our market capitalization
to over $300 million and making us one of the
top real estate owners in Canada. Also we closed
the year with the fair value of assets north of
$900M, also a first, namely at $940 million, closing
in on our $1-billion target. These new milestones
brings us unparalleled visibility and makes us even
more appealing to the market’s leading players
and investors.
Our growth strategy, which is rooted in acquiring well
positioned properties in primary markets, allows us
not only to attract national tenants, but also we
generate more revenue from recently acquired
properties in comparison to those that
we disposed of.
The following are some of our acquisitions concluded
during 2019:
• 2425 Pitfield Boulevard, Saint-Laurent,
Québec
• 375, 340-360, 370-380 and 377-383 Sir-Wilfred-
Laurier Boulevard, Mont-Saint-Hilaire, Québec
• 1011-1191 and 1465-1495 Saint-Bruno Boulevard,
Saint-Bruno-de-Montarville, Québec
• 800 De l’Étang Street, Saint-Bruno-de-Montarville,
Province of Québec
After the end of our fiscal year, we purchased a
property located at 2611 Queenview Drive, Ottawa,
Ontario.
During the year we sold the following four properties:
• 15-41 Georges-Gagné Boulevard South, Delson,
Québec
• 37 Georges-Gagné Boulevard South, Delson, Québec
• 1400-1440 Antonio-Barbeau Street, Montréal,
Québec
• 3885 Harvey Boulevard, Saguenay, Québec.
We will continue to maximize the value of our assets
during the coming year by maintaining and improving
our properties in order to draw in a class of clients that
will ensure our long-term success and enable us to
incorporate value-added properties into our portfolio.
Dynamic growth in our leasing operations
Our employees and collaborators invested a lot of
time and effort in securing new clients and renewing
leases coming to maturity. Thanks to their combined
efforts, our clients can enjoy the best possible
environment, and we are proud to state that.
9
2019 Our occupancy rate rose to a record high for BTB,
closing the year at 93.2%. Our retention strategy has
enabled us renew 75.6% of our leases where more
than 692,000 square feet were renewed during the
year, up significantly from 54.2% and 455,000 square
feet in 2018.
Among these lease renewals, the leases for three
government agency tenants located in Ottawa were
renewed for an approximate area of 200,000 square
feet, as well as the lease for BTB’s first acquisition
in 2006, the Germain Larivière store in Laval with a
leasable area of more than 100,000 square feet.
We closed for the year with a total portfolio occupancy
rate of 93.2% (5.65 million square feet), an increase
of 2.2 % compared with the 91% posted in the fourth
quarter of 2018.
Environmental stewardship: a key factor
of our business strategy
At BTB, we are proud of our commitment to
the environment, which is helping to position our
company more favourably in the eyes of clients and
financial markets alike. We all share the conviction
that our growth and our long-term viability depend
on being environmentally responsible.
Initiatives in this realm include the installation
of beehives on the roof of certain office properties,
namely in Quebec City, Ottawa and Montréal, abiding
by stricter energy-efficiency standards when replacing
and installing new heating and air-conditioning
equipment, efforts to reuse and recycle construction
materials when constructing tenant leasehold
improvements and the creation of green spaces and
the installation of electric vehicle charging stations.
Everyone at BTB, from senior management through to
front-line staff, is behind our pledge to minimize our
carbon footprint, while making sure our tenants enjoy
the best possible workplace environment.
This approach applies both to our acquisition strategy,
which prioritizes properties that meet leading
environmental standards (such as BOMA and LEED
standards), and to the ongoing upgrades we make to
our properties.
A strategy focusing on continuous growth
and value creation
Our strategies when acquiring new properties
and our ability to retain our current clients
are contributing factors that allow us to exceed
our performance expectations and those of
our unitholders.
yearly goals and exceed our unitholders
expectations.
Rental income increased from $87.4 million in 2018
to $93.6 million in 2019, while net operating
income was up more than $3.3 million, growing
from $47.6 million to $50.9 million. Also, BTB’s net
income for 2019 rose from $41.3 million to
$51.9 million. This translated to an increase
in distributable income from $23.9 million to
$25.1 million.
BTB’s total asset value also posted an increase
of more than 9%, climbing from $855 million to
$939 million and allowing us to be a step closer to
reach our goal of achieving a total asset value
in excess of $1-billion. Our mortgage debt ratio
continued to decline, driven by our strategic
dispositions and acquisitions and the sound
management of our assets, reaching 52.8% by
year-end compared to 55.8% in 2018. As a result,
our total debt ratio has dipped below 60%.
For everyone at BTB, these results confirm that,
by working together in a strategic and synergistic
manner, by remaining responsive to our tenants’
needs no matter their demands and taking our
commitment to the environment seriously, we will be
able to attract a better clientele and improve the
quality of our portfolio. This approach will continue
to help us differentiate ourselves in this fiercely
competitive sector and further strengthen our
position in the industry.
We would like to thank our trustees and all of our
employees for their passion, their drive and their
dedication, all of which are helping BTB to become
one of the pre-eminent players in our field.
We are determined to pursue our efforts to reposition
our portfolio and enhance our offering in order to
resonate with corporate clients poised to take on
the challenges of tomorrow. And we will draw
inspiration from the words of a young Swedish
activist: “The moment we decide to fulfil something,
we can do anything.”
Jocelyn Proteau
Chairman of the Board of Trustees
The different strategies that we have implemented
over the course of the year regarding our acquisition
strategy, leasing strategy and client retention
strategy have allowed us to meet and exceed our
Michel Léonard
President and Chief Executive Officer
10
BTB ANNUAL REPORT Board of
Trustees
From left to right
Fernand Perreault
Jean-Pierre Janson
President of the Investment Committee and trustee
Vice President of the Board of Trustees and trustee
Peter Polatos
Trustee
Lucie Ducharme
President of the Human Resources and Governance
Committee and trustee
Jocelyn Proteau
Chairman of the Board of Trustees and trustee
Michel Léonard
President and Chief Executive Officer and Trustee
Luc Lachapelle
Secretary of the Board of Trustees and trustee
Sylvie Lachance
Trustee
Luc Martin
President of the Audit Committee and trustee
Executive
Team
From left to right
Benoit Cyr
Vice President and
Chief Financial Officer
Michel Léonard
President and
Chief Executive Officer
Paolo Valente
Vice President, Leasing
Sylvie Laporte
Vice President,
Property Management
11
2019 12
BTB ANNUAL REPORT We aim to strike
a balance between
financial performance
and environmental
responsibility when
selecting assets.
Jocelyn
Proteau
Chairman of the Board of Trustees
In 2019, we continued to execute
our strategy to reposition our real
estate portfolio, a shift that has
been ongoing for the past two years.
We chose to invest in future-oriented,
high-density markets in urban and
central business districts. As a result,
we divested properties in several
promising secondary markets that
were no longer aligned with our new
strategy. This approach has enabled
us to keep up our growth trajectory
and generate better results for our
unitholders.
Our acquisition strategy, paired
with our commitment to sustainable
development — which applies not
only to the new properties in our
portfolio but also to our existing
assets, is positioning our business
favourably in the eyes of prospective
tenants and addresses modern-day
environmental concerns. We firmly
believe in these priorities and in
the importance ascribed to such
issues by individual and institutional
investors alike.
Throughout the year, our teams have
demonstrated versatility, discipline
and adaptability as they have helped
to increase BTB’s profile within the
industry.
Integrity is a guiding principle in
everything we undertake. The way
we see it, this forms the foundation
of trust we seek to build with both
our tenants and our unitholders.
As BTB continues to grow, we will
continue to deliver on our pledge to
continuously improve our organization
and increasingly make it a force to be
reckoned with.
13
2019 Aïda Maalouf
Chief Property Accountant,
Greater Quebec City
Award: Respect
I’ve been working for BTB for more
than a decade. I have been recently
promoted as the Chief Property
Accountant for the Greater Quebec
City market and my focus has been on
integrating our Quebec City
procedures with the head office
procedures in Montréal.
The environment at BTB is stimulating
for the people who work here. There’s
a nice sense of synergy within the
various levels of the organization.
The company is constantly growing
and evolving at a brisk pace and
I’m proud of what I’ve been able
to contribute and accomplish over
the past decade.
I’m thrilled to be the recipient of
a Méritas Award. It always means
a lot to know people appreciate
what you do.
Nathalie Jacques
Chief Corporate Accountant
Award: Integrity
I’ve been working for BTB for about
nine years. My job requires me to play
an active role in every aspect of our
month-end, quarter-end and year-end
procedures. The wide range of duties
I’m responsible for sometimes mean
I have to put in long hours and absorb
the pressure and stress of deadlines.
I’m proud to work for BTB and be
a part of its success. It’s a great
company with a lot going for it, along
with a few shortcomings for good
measure. But there’s a wonderful spirit
of teamwork and collaboration shown
by management and across the
organization.
I’m grateful to my co-workers for
recognizing my efforts and the way
I approach my job.
Stéphanie Léonard
Director of Communications
and Lease Renewals
Award: Leadership
I’ve been working for BTB for
five years and just a little over a year
ago I was appointed as the Director of
Communications and Lease Renewals.
As part of my role, I promote BTB’s
image and portfolio, manage our
relationships with our investors and
negotiate the renewals with our existing
clients.
The atmosphere at BTB is special.
There’s a real family feel, combined
with the excitement and fast pace flow
that comes with a publicly traded
company. Creativity and diversity are
part and parcel of our everyday
operations, which gives us the agility to
move quickly and the flexibility and
autonomy we need to get things done.
I’m so grateful that my co-workers
picked me for this award. I feel like
I really belong here at BTB!
14
BTB ANNUAL REPORT 2019 Meritas
Award Winners
The Meritas Award program is the only initiative of its kind
in the industry, where employees vote for their co-workers
who have shown outstanding effort, attitude, dedication
and achievement throughout the year.
This year’s five winners embody the vitality and commitment to
excellence that drive every single person in our organization.
Congratulations to them and to all our employees for making
BTB a certified “Great Place to Work” in Canada.
Étienne Charbonneau
Principal Controller
Award: Teamwork
I’ve been BTB’s Controller for the past
four years. My job mainly consist of
ensuring that BTB has the best
reporting and analytical tools to help
improve the REIT’s performance.
BTB understands the necessity of
change. They give people room to grow
and encourage them in their progress.
I like the environment I work in and
I have a great relationship with all my
teammates. Entrepreneurship, energy
and integrity are three values that are
shared by the key teams within the
organization. I firmly believe that these
values have been responsible for BTB’s
success over the years.
I’m surprised and delighted to receive
the Méritas Award for teamwork,
something that means a great deal
to me personally.
Lise Brind’Amour (missing)
Accounts Payable Clerk,
Quebec City
Award: Quality
I am very proud to have worked
for BTB for close to 10 years now,
responding to accounting-related
requests from internal and external
collaborators.
The trust BTB has shown us, the
respect they have for their employees
and the pleasant work environment
we have are all great sources of
motivation and important values for
me. I learn something new every day,
and I am very lucky to work with a
talented, friendly and respectful group
of people. Because BTB is growing,
we as employees have the chance
to grow with it. And I’m proud of
my ability to face the daily challenges
of my job and come out on top.
I’m very touched to have received
the Méritas Award for quality this year.
15
2019 Yaourti’s story began with our grandmother,
who used to always say: “a yogurt a day keeps
the doctor away.” She firmly believed in the
health benefits of rich and creamy Greek yogurt,
the main ingredient in her tzatziki, her chocolate
mousse and other desserts that were as
delicious as they were satisfying.
Many years later, and a continent away, our story
migrated to Montréal, where our dream of sharing
these recipes came true with the genesis of
Yaourti.
After months of looking for the perfect location,
we visited 1407 Crescent Street, in the heart
of downtown Montréal. We were impressed
by the bright interior, the central location
and the charm of this Art Deco building.
From day one, the BTB team was very open to
our concept of healthy Mediterranean cuisine.
They believed in us, and their support and
advice have helped us develop something
our grandmother would have been proud of.
When we found out that BTB had rooftop
beehives at some of their properties, we knew
we shared the same environmental priorities.
For us, that means composting as much as we
can to avoid waste wherever possible, including
our utensils and takeout containers.
It’s no wonder that we’re quick to recommend
BTB to anyone looking for office or commercial
space. Their high-quality standards, their service,
their commitment to making their clients
happy and their human touch all make them
an excellent business partner.
Theodoros
and Cleo
Bertzeloto
YAOURTI
16
In an effort to encourage our clients reducing their greenhouse gas emissions, we are installing 77 electric vehicle charging stations at our properties. BTB ANNUAL REPORT As a leading insurance brokerage firm, we want
to make sure that our office space adds to the
quality of life of our employees and all of our
collaborators. Ever since we renewed the lease
for our offices with the BTB team, they have
been great at addressing our needs and helping
us meet the challenges that have risen as
we grow.
Day after day, their flexibility, expertise and
responsiveness prove that we made the right
decision in choosing this location.
From the get-go, BTB made things easy.
Having a direct access to their service portal
means that we receive quick callbacks, often
within five minutes if the situation warrants it.
This proactive approach is one of the reasons
we have renewed our lease for the next 12 years.
Beyond the advantages we have experienced
as a tenant, BTB’s commitment to environmental
sustainability is consistent with our core values.
As a paperless office, we were happy to learn
about BTB’s actions to reduce their carbon
footprint and are proud to follow their lead
to keep doing more for the planet. We have
eliminated drinking fountains and water bottles
and installed a filtration system instead.
Little steps towards a big difference.
Joanne
Walker
SATCOM DIRECT
AVIONICS
17
Jay Alexander
Glowa
GPL ASSURANCE
Satcom Direct Avionics is a leading manufacturer
of cabin and flight deck systems for international
business aviation and government customers.
The decision to develop the purpose-built
engineering and production facility was driven
by a significant rise in global demand for SD’s
advanced connectivity hardware products.
Strategically located in Kanata, just outside
Ottawa, our offices put us in close proximity
to a full array of complementary resources.
In addition to the layout that
BTB custom developed for us, we have appreciated
their responsiveness on daily issues which
makes them stand out from other landlords.
For instance, the day we were moving in there
was a huge snowstorm. Our property manager,
Mitch Provost, got there before us and made
sure the snow was cleared so the move was as
hassle-free as possible.
BTB clearly cares about our needs and our work
environment, as well as the environment in
general. Between the rooftop beehives they have
at some of their properties, the heat recovery
systems they have put in place and much more,
they are setting an example and encouraging us
to do the same.
2019 Our
Tenants
We focus on the
quality and diversity
of our clients
and strive to build
and maintain an
exceptional roster
of tenants.
50 Saint-Charles Street West, Longueuil
18
BTB ANNUAL REPORT Below is a list of some of our achievements
in terms of lease agreements and renewals
in 2019.
• International Datacasting
• Germain Larivière Inc.
Corporation
• EXO (Réseau de transport
métropolitain)
• John Mansville Canada Inc.
• Fieldless Farms Inc.
• FNX Innov Inc.
• AFS Interculture Canada
• Statcom Direct Avionics
• Telus Retail Limited
• Demers Beaulne Groupe
Conseil Inc.
• Facturation.net
• Publicité Maca Inc.
• Hydro Québec
• Plastifab Industries Inc.
• Groupe BBA Inc.
• Vallue Village Stores
• TORQ Le Groupe Inc.
• Société Québécoise
des Infrastructures
• Otsuka Canada Pharmaceutical
• GPL Assurance Inc.
• Englobe Corporation
• Public Works and Government
Services Canada
• GBI Expert Conseils Inc.
• Centre Financier SFL
19
50 Saint-Charles Street West, Longueuil
2019 This LEED Silver building
is a striking example
of BTB’s pledge to being
environmentally
responsible.
Our
Recent
Acquisitions
20
2611 Queensview Drive, Ottawa (acquired after December 31st, 2019)
BTB ANNUAL REPORT 1011-1191 and 1465-1495 Saint-Bruno Blvd, Saint-Bruno-de-Montarville
2425 Pitfield Blvd, St-Laurent
375 Sir-Wilfrid-Laurier Blvd, Mont-Saint-Hilaire
21
We’ve introduced a policy on recycling construction materials to give a second life to items such as steel doors, glass partitions, etc.2019 800 de l’Étang Street, Saint-Bruno-de-Montarville
377-383 Sir-Wilfrid-Laurier Blvd, Mont-Saint-Hilaire
340-360 Sir-Wilfrid-Laurier Blvd, Mont-Saint-Hilaire
22
370-380 Sir-Wilfrid-Laurier Blvd, Mont-Saint-Hilaire
By hiring Shred-It to recycle our confidential records since 2012, we’ve saved the equivalent of 175 trees, or 2,290,000 sheets of paper. BTB ANNUAL REPORT Our
Properties
Montréal
South Shore of Montréal
Greater London Area, Ontario
1327-1333 Ste-Catherine Street
West and 1405-1411 Crescent Street,
Montréal
5810 Sherbrooke Street East,
Montréal
5878-5882 Sherbrooke Street East,
Montréal
7001-7035 St-Laurent Blvd
and 25 Mozart, Avenue Montréal
1001 Sherbrooke Street East,
Montréal
2101 Sainte-Catherine Street West,
Montréal
550-560 Henri-Bourassa Blvd West,
Montréal
3761-3781 des Sources Blvd,
Dollard-des-Ormeaux
11590-11800 de Salaberry Blvd,
Dollard-des-Ormeaux
1325 Hymus Blvd, Dorval
5600 Côte-de-Liesse, Mount-Royal
4105 Sartelon Street, St-Laurent
208-244 Migneron Street
and 3400-3410 Griffith Street,
St-Laurent
7777 Transcanada Highway,
St-Laurent
2250 Alfred-Nobel Blvd, St-Laurent
7150 Alexander-Fleming Street,
St-Laurent
2425 Pitfield Blvd, St-Laurent
2665-2673 et 2681,
Côte Saint-Charles, Saint-Lazare
North Shore of Montréal
4890-4898 Taschereau Blvd,
Brossard
311 Ingersoll Street, Ingersoll
2340 Lapinière Blvd, Brossard
Ottawa Area, Ontario
204 De Montarville Blvd,
Boucherville
32 Saint-Charles Street West,
Longueuil
50 Saint-Charles Street West,
Longueuil
85 Saint-Charles Street West,
Longueuil
2111 Fernand-Lafontaine Blvd,
Longueuil
80 Aberdeen Street, Ottawa
245 Menten Place, Ottawa
1-9 and 10 Brewer Hunt Way
and 1260-1280 Teron Rd, Ottawa
400 Hunt Club Rd, Ottawa
2200 Walkley Street, Ottawa
2204 Walkley Street, Ottawa
7 and 9 Montclair Blvd, Gatineau
705 Boundary Road, Cornwall
2350 Chemin du Lac, Longueuil
725 Boundary Road, Cornwall
1939-1979 F.-X. Sabourin Street,
St-Hubert
805 Boundary Road, Cornwall * & **
2901 Marleau Avenue, Cornwall
* Properties in redevelopment
** Considered as two properties
Properties acquired after
December 31st, 2019
2611 Queensview Drive, Ottawa
Properties sold after
December 31st, 2019
311 Ingersoll Street, Ingersoll
5600 Côte-de-Liesse, Mount-Royal
145 Saint-Joseph Blvd,
St-Jean-sur-Richelieu
315-325 MacDonald Street,
St-Jean-sur-Richelieu
1000 Du Séminaire Blvd North,
St-Jean-sur-Richelieu
340-360, 370-380, 375 and 377-383
Sir-Wilfrid-Laurier Blvd,
Mont-Saint-Hilaire
1465-1495 and 1011-1191 Saint-Bruno
Blvd and 800 de l’Étang Street,
Saint-Bruno-de-Montarville
2059 René-Patenaude Street, Magog
Quebec City
6655 Pierre-Bertrand Blvd, Québec
6700 Pierre-Bertrand Blvd, Québec
909-915 Pierre-Bertrand Blvd,
Québec
2900 Jacques-Bureau Street, Laval
825 Lebourgneuf Blvd, Québec
4535 Louis B. Mayer Street, Laval
815 Lebourgneuf Blvd, Québec
3695 Des Laurentides (Highway-15),
Laval
3111 Saint-Martin Blvd West, Laval
3131 Saint-Martin Blvd West, Laval
81-83 Turgeon Street, Ste-Thérèse
1170 Lebourgneuf Blvd, Québec
625-675 De la Concorde Street,
Lévis
1200-1252 De la Concorde Street,
Lévis
5791 Laurier Blvd, Terrebonne
2175 Des Entreprises Blvd,
Terrebonne
2205-2225 Des Entreprises Blvd,
Terrebonne
191 D’Amsterdam Street,
St-Augustin-de-Desmaures
175 De Rotterdam Street,
St-Augustin-de-Desmaures
505 Des Forges Street and
1500 Royale Street, Trois-Rivières
23
2019 24
BTB ANNUAL REPORT Management
Discussion
and Analysis
Year ended December 31, 2019
TABLE OF CONTENTS
26
Introduction
46 Funds from Operations (FFO)
26 Forward-Looking Statements –
Caveat
47 Adjusted Funds
from Operations (AFFO)
27 Non-IFRS Financial Measures
48 Cash Flows
27 The Trust
28 Objectives and Business
Strategies
28 Highlights of the Fourth Quarter
Ended December 31, 2019
50 Segmented Information
51 Financial Position
52 Assets
54 Capital Resources
29 Highlights of the Year Ended
December 31, 2019
60 Sustainable Development
30 Selected Financial Information
31 Summary of the Fourth
Quarter 2019
32 Selected Annual Information
33 Selected Quarterly Information
33 Performance Indicators
34 Real Estate Portfolio
35 Real Estate Operations
38 Operating Results
43 Operating Results –
Same-Property Portfolio
44 Distributable Income
and Distributions
61
Income Taxes
62 Taxation of Unitholders
62 Accounting Policies and
Estimates
62 New Accounting Policies
63 Risks and Uncertainties
64 Disclosure Controls and
Procedures and Internal
Control Over Financial Reporting
64 Appendix 1 –
Performance Indicators
65 Appendix 2 – Definitions
25
2019 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, 2019
as well as its financial position on that date. The report also presents a summary of the Trust’s business
strategies and the business risks it faces. This MD&A dated March 12, 2020 should be read together with the
audited consolidated financial statements and accompanying notes for the years ended December 31, 2019
and 2018. It discusses 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 quarters and
years ended December 31, 2019 and 2018. Additional information about the Trust, including the 2019 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 reviewed the contents of this Management Discussion and Analysis and the annual
financial audited statements and the Trust’s Board of Trustees has approved them.
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, in other filings
with Canadian regulators, in reports to unitholders and in other communications. These forward-looking
statements may include statements regarding our future objectives, strategies to achieve our objectives, as
well as statements with respect to our beliefs, outlooks, plans, objectives, expectations, forecasts, estimates
and intentions. The words “may,” “could,” “should,” “outlook,” “believe,” “plan,” “forecast,” “estimate,” “expect,”
“propose,” and the use of the conditional and similar words and expressions are intended to identify forward-
looking statements.
By their very nature, forward-looking statements involve numerous factors and assumptions, and are subject
to inherent risks and uncertainties, both general and specific, which give rise to the possibility that predictions,
forecasts, projections and other forward-looking statements will not be achieved. We caution readers not to
place undue reliance on these statements as a number of important factors could cause our actual results to
differ materially from the expectations expressed in such forwardlooking 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, our ability to renew leases coming to 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 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.
26
BTB ANNUAL REPORT Non-IFRS Financial Measures
“Net operating income,” “net operating income of the same-property portfolio,” “distributable income,” “funds
from operations” (“FFO”), “adjusted funds from operations” (“AFFO”), “adjusted net income and comprehensive
income” and “net property income” and per unit information, if applicable, are non-IFRS performance measures
and do not have standardized meanings prescribed by IFRS. These measures 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 February 2019.
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.
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 as of
December 31, 2019, it owns 66 retail, office and industrial properties located in primary and secondary markets
of the Provinces of Québec and Ontario. Since its inception, BTB has become an important property owner in
the province of Québec and in Eastern Ontario. The units and Series F and G convertible debentures are traded
on the Toronto Stock Exchange under the symbols “BTB.UN”, “BTB.DB. F” and “BTB.DB. G”, respectively.
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. Through this, 64 of the Trust’s 66 properties held
as at December 31, 2019 are managed by the Trust’s employees. The two remaining properties are managed
by third party managers dealing at arm’s length with the Trust. Management’s objective is, when favourable
circumstances will prevail, to directly manage the Trust’s remaining properties to possibly achieve savings
in management and operating fees through centralized and improved property management operations.
The following table provides a summary of the real estate portfolio.
As at December 31, 2019(1)
Number of
properties
66
Leasable area
(sq. ft.)
5,650,130
Fair value
(thousands of $)
924,320
(1) These figures include a 50% interest in a 17,114 square-foot building in a Montréal suburb and a 50% interest in two buildings totalling
74,940 square feet in Gatineau, Québec.
27
2019 Objectives and Business Strategies
BTB’s primary objective is to maximize total return to unitholders. Returns include cash distributions
and long-term appreciation of the value of its units. More specifically, the objectives are as follows:
(i) Generate stable monthly cash distributions that are reliable and fiscally beneficial to unitholders.
(ii) Grow the Trust’s assets through internal growth and accretive acquisitions 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 properties and therefore its units.
Strategically, BTB seeks to acquire properties with high occupancy rates, good tenant quality, superior locations
or low potential lease turnover and properties that are well maintained and require fewer capital expenditures.
BTB’s management regularly performs strategic portfolio assessments to determine whether it is financially
advisable to retain certain of its investments. BTB may dispose of certain assets if their size, location and/or
profitability do not meet the Trust’s investment criteria.
In such cases, BTB expects to use the proceeds from the sale of assets to reduce debt and/or redeploy capital
in accretive acquisitions.
Highlights of the Fourth Quarter Ended December 31, 2019
vs. the Fourth Quarter Ended December 31, 2018
• Increase of net income and comprehensive income from $24,396 to $41,552;
• Increase of 5.8% of the same-property portfolio NOI (1);
• Increase in the average lease renewal rate of 4.3%;
• Increase of $34 million of the fair value of the portfolio (2018: $21 million);
• Improvement in all other important key performance indicators.
(1) Non IFRS financial measures.
28
BTB ANNUAL REPORT Highlights of the Year Ended December 31, 2019
vs. the Year Ended December 31, 2018
• Increase of net income and comprehensive income from $41,337 to $51,881;
• Increase of 3.9% of the same property portfolio NOI (1);
• Occupancy rate increased to 93.2% from 91.0%;
• Increase of the retention rate from 54.2% to 75.6% and increase of the average renewal rate by 5.5%;
• Reduction of the total debt ratio to 59.1% and reduction of the mortgage debt ratio to 52.8%.
(1) Non IFRS financial measures
Sale of properties
• In January 2019, the Trust disposed of a retail property located at 15–41 South Georges-Gagné Blvd. in Delson,
Québec, for total proceeds of $22.5 million.
• In March 2019, the Trust disposed of a retail condominium located at 37 South Georges-Gagné Blvd. in Delson,
Québec, for total proceeds of $1.95 million.
• In May 2019, the Trust disposed of a mixed-use property located at 1400–1440 Antonio-Barbeau Street
in Montréal, Québec for total proceeds of $7.1 million.
• In August 2019, the Trust disposed of an office property located at 3885 Harvey Boulevard in Saguenay,
Québec, for total proceeds of $4.4 million.
Property acquisitions
• In May 2019, the Trust acquired a 65,000-square-foot industrial property located at 2425 Pitfield Blvd.
in Saint-Laurent, Québec, for total proceeds of $11.8 million.
• In June 2019, the Trust purchased two retail properties, Méga Centre Saint-Bruno and Développements
Mont-Saint-Hilaire, respectively located in Saint-Bruno, Québec and Saint-Hilaire, Québec, for a total
consideration of $62.2 million.
Financing activities
• On June 14, 2019, the Trust issued 6,157,100 units, including the overallotment option, at a price of $4.67
per unit, for approximately $27 million of proceeds, net of issue costs.
• On October 7, 2019 the Trust issued the Series G convertible debentures for total proceeds of $24 million
at an interest rate of 6.00%. The net proceeds were mainly used to redeem the Series E convertible
debentures in the amount of $23 million, bearing interest at a rate of 6.90%, the redemption taking effect
on November 1, 2019.
Subsequent events
• In January 2020, the Trust disposed of an industrial property located at 311 Ingersoll St. South in Ingersoll,
Ontario, for total proceeds of $13.3 million.
• In February 2020, the Trust acquired a 77,500-square-foot office property located at 2611 Queensview Drive
in Ottawa, Ontario, for total proceeds of $21.8 million.
• In February 2020, the Trust disposed of an industrial property located at 5600, Côte-de-Liesse
in Mount Royal, Québec, for total proceeds of $9.2 million.
Summary of significant items as at December 31, 2019
• Properties: 66
• Leasable area: approximately 5.7 million square feet
• Total asset value: $939 million
• Market capitalization: $321.8 million
29
2019 Selected Financial Information
The following table presents highlights and selected financial information for the quarters and years ended
December 31, 2019 and 2018:
Periods ended December 31 (in thousands of dollars,
except for ratios and per unit data)
Reference (page)
Quarter
2019
$
2018
$
Year
2019
$
2018
$
Financial information
Rental income
Net operating income(1)
Net income and comprehensive income
Adjusted net income(1)
Net property income from the same-property portfolio(1)
Distributable income(1)
Distributions
Funds from operations (FFO)(1)
Adjusted funds from operations (AFFO)(1)
Cash flow from operating activities
Total assets
Investment properties
Mortgage loans
Convertible debentures
Mortgage debt ratio
Debt ratio – convertible debentures
Debt ratio – acquisition line of credit
Total debt ratio
Weighted average interest rate on mortgage debt
Unitholders’ equity
Market capitalization
Financial information per unit
Units outstanding (000)
Class B LP units outstanding (000)
Weighted average number of units outstanding (000)
Weighted average number of units and Class B LP units
outstanding (000)
Net income and comprehensive income
Adjusted net income(1)
Distributable income(1)
Distributions
Payout ratio on distributable income(1)
FFO(1)
Payout ratio on FFO(1)
AFFO(1)
Payout ratio on AFFO(1)
Unitholders’ equity
Market price
Tax on distributions
Revenue
Tax deferral
Operational information
Number of properties
Leasable area (thousands of sq. ft.)
Occupancy rate
Retention rate
Increase in average lease renewal rate
(1) Non-IFRS financial measures.
30
39
40
43
43
43
44
45
46
47
48
51
52
55
56
57
57
57
57
55
58
59
58
59
59
43
43
44
45
45
46
46
47
47
58
61
62
34
34
36
36
35
25,558
14,174
41,552
6,445
6,266
7,466
6,584
7,421
6,795
17,235
22,082
11,624
24,396
4,278
5,702
5,212
5,859
3,858
3,371
15,695
93,602
50,897
51,881
20,518
25,247
25,063
25,141
23,313
21,409
47,223
939,130
924,320
493,152
49,096
87,423
47,637
41,337
20,860
23,665
23,897
22,154
21,528
19,514
44,724
855,223
839,015
471,162
48,716
52.8%
5.4%
1.1%
59.1%
3.92%
55.8%
5.9%
1.8%
62.5%
3.99%
356,139
321,843
298,377
240,633
62,252
497
59,098
55,318
532
52,121
55,240
55,773
59,628
52,536
62,139
62,661
66.2¢
10.3¢
11.9¢
10.5¢
88.1%
11.8¢
88.7%
10.8¢
96.8%
43.7¢
7.7¢
9.3¢
10.5¢
112.4%
6.9¢
151.8%
6.0¢
173.9%
87.0¢
34.4¢
42.1¢
42.0¢
99.8%
39.1¢
107.4%
35.9¢
117.0%
5.72
5.17
0.0%
100%
66
5,650
93.2%
75.6%
5.5%
78.8¢
39.8¢
45.6¢
42.0¢
92.2%
41.1¢
102.3%
37.2¢
112.9%
5.34
4.35
0.0%
100%
67
5,432
91.0%
54.2%
2.7%
4.3%
3.3%
BTB ANNUAL REPORT
Summary of the Fourth Quarter 2019
Occupancy rate
In the fourth quarter of 2019, the committed occupancy rate increased by 2.2%, from 91.0% as at December 31, 2018,
to 93.2% as at December 31, 2019. This ratio includes firm lease agreements committed as of the end of the quarter
and these firm lease agreements may not yet generate revenues. More than 88,000 square feet were leased
for occupancy scheduled over the next few months and will progressively generate additional income. Lastly,
since the beginning of the year, more than 75% of leases expiring in 2019 were renewed.
Debt ratio
The total debt and mortgage debt ratios declined respectively from 62.5% to 59.1% and from 55.8% to 52.8%
since December 31, 2018. These decreases are mostly explained by the increase in the fair value of our real
estate portfolio.
Payout ratio and per unit ratio
As expected, the distributable income and FFO payout ratios were below 100%. After three consecutive quarters
and at the end of the fiscal year 2018 and the beginning of 2019, with ratios higher than 100%, the cause of the
higher payout ratio has now mostly been resolved.
The decline in per unit and payout ratios over the last three fiscal years are due to higher vacancy rates which
have corrected a reduction in our total debt ratio.
Same-property portfolio
Mostly due to an increase in the occupancy rate from 91.0% on December 31, 2018 to 93.2% as at
December 31, 2019, the same-property portfolio rose significantly resulting in an increase of 5.8% of the NOI in
the fourth quarter of 2019 and 3.9% for the cumulative 12-month period.
31
2019 Selected Annual Information
The following table summarizes the Trust’s selected financial information for the last three years.
Years ended December 31
(in thousands of dollars, except for per unit data)
Rental income
Net operating income(1)(5)
Fair value adjustment on investment properties
Net income and comprehensive income
Net cash from operating activities
Distributable income(5)
FFO(2)(5)
AFFO(3)(5)
Distributions
Total assets
Long-term debt
Financial information per unit
Net income and comprehensive income
Distributable income(5)
FFO(2)(5)
AFFO(3)(5)
Distributions
Payout ratio on distributable income(4)(5)
2019
$
2018
$
2017
$
93,602
50,897
34,113
51,881
47,223
25,063
23,313
21,409
25,141
87,423
47,637
22,142
41,337
44,724
23,897
21,528
19,514
22,154
939,130
542,248
855,223
519,878
76,039
40,394
10,855
28,171
38,449
19,721
19,179
17,516
18,486
762,390
476,565
87.8¢
42.1¢
39.1¢
35.9¢
42.0¢
99.8%
78.7¢
45.6¢
41.1¢
37.2¢
42.0¢
92.2%
64.5¢
45.2¢
45.1¢
40.2¢
42.0¢
93.7%
(1) Defined as rental income from investment properties less operating expenses.
(2) See “Funds from operations” on page 46 for reconciliation to net income.
(3) See “Funds from operations” on page 47 for reconciliation to FFO and net income.
(4) Represents total distributions divided by distributable income.
(5) Non-IFRS financial measures. See appropriate sections for definition and reconciliation to the closest IFRS measure.
32
BTB ANNUAL REPORT
Selected Quarterly Information
The following table summarizes the Trust’s selected financial information for the last eight quarters.
(in thousands of dollars except
for per unit data)
2019
Q-4
$
2019
Q-3
$
2019
Q-2
$
2019
Q-1
$
2018
Q-4
$
2018
Q-3
$
2018
Q-2
$
2018
Q-1
$
Rental income
25,558
23,973
22,347
21,634
22,082
23,098
20,803
20,803
Net operating income(1)
Net income and
comprehensive income
Net income and comprehensive
income per unit
14,174
13,476
12,196
11,051
11,624
13,330
11,225
11,225
41,552
5,632
3,316
1,381
24,396
5,793
4,593
4,593
66.2¢
9.0¢
5.8¢
2.5¢
43.7¢
10.4¢
9.3¢
9.3¢
Adjusted net income
6,445
5,813
4,518
3,742
4,278
6,177
4,378
6,027
Adjusted net income per unit
10.3¢
9.3¢
7.9¢
6.7¢
7.7¢
11.1¢
8.8¢
8.8¢
Cash from operating activities
Distributable income(1)
17,235
7,466
9,875
6,780
11,897
5,550
8,216
5,268
15,695
12,540
5,212
7,478
7,804
5,521
7,804
5,521
Distributable income per unit(1)
11.9¢
10.9¢
9.7¢
9.4¢
9.3¢
13.4¢
11.1¢
11.1¢
Funds from operations (FFO)(1)
7,421
6,684
4,925
4,283
3,858
6,996
5,217
5,217
FFO per unit(1)
Adjusted funds from
operations (AFFO)(1)
AFFO per unit(1)
Distributions(2)
Distributions per unit
11.8¢
10.7¢
8.6¢
7.7¢
6.9¢
12.6¢
10.5¢
11.2¢
6,795
6,024
4,363
4,227
3,371
6,326
4,874
4,874
10.8¢
9.6¢
6,584
6,563
10.5¢
10.5¢
7.6¢
6,113
10.5¢
7.6¢
6.0¢
11.4¢
9.8¢
9.8¢
5,881
5,859
5,843
5,353
5,353
10.5¢
10.5¢
10.5¢
10.5¢
10.5¢
(1) Non-IFRS financial measures. See appropriate sections for definition and reconciliation to the closest IFRS measure.
(2) Includes distributions on Class B LP units.
Performance Indicators
The Trust’s performance indicators used to measure BTB’s financial performance are presented and explained
in Appendix 1.
The Trust adopted IFRS 16, Leases, during the first quarter of 2019. Comparative balances have not been
restated; however, the Trust considers the impact on its performance indicators to be minimal.
33
2019
Real Estate Portfolio
BTB owns 66 quality properties which have a fair market value of $924 million, generating approximately
$90 million in annual income and representing a total leasable area of approximately 5.7 million square feet.
A description of the properties owned as at December 31, 2019 can be found in the Trust’s Annual Information
Form available at www.sedar.com.
Summary of investment properties as at December 31, 2019
Operating segment
Number of properties
Leasable area
(sq. ft.)
Committed occupancy
rate (%)
Office
Retail
Industrial
Mixed-use
Subtotal
Properties under redevelopment
Total
Sale of investment properties
28
12
18
7
65
1
66
2,118,025
1,409,564
1,482,282
564,919
5,574,790
75,340
5,650,130
89.3
96.0
96.4
92.4
93.2
Pursuant to the conclusions of the last strategic review of its portfolio, the Trust has elected to sell certain
properties when circumstances are favorable. The proceeds of disposition from the sale of these assets
are used to either repay related mortgages and any remaining proceeds may be used to repay lines of credit
and/or to acquire accretive properties in line with its investment criteria.
In January 2019, the Trust disposed of the retail property located at 15–41 South Georges-Gagné Blvd. in Delson,
Québec, for total proceeds of $22.5 million.
In March 2019, the Trust disposed of a retail condominium located at 37 South Georges-Gagné Blvd. in Delson,
Québec, for total proceeds of $1.95 million.
In May 2019, the Trust disposed of a mixed-use property located at 1400-1440 Antonio-Barbeau Street
in Montréal, Québec, for total proceeds of $7.1 million.
In August 2019, the Trust disposed of an office property located at 3885 Harvey Boulevard in Saguenay, Québec,
for total proceeds of $4.4 million.
Property acquisitions
In May 2019, the Trust acquired a 65,000-square-foot industrial property located at 2425 Pitfield Blvd.
in Saint-Laurent, Québec, for total proceeds of $11.8 million.
In June 2019, the Trust purchased two retail properties, Méga Centre Saint-Bruno and Développements
Mont-Saint-Hilaire, respectively located in Saint-Bruno, Québec and Saint-Hilaire, Québec, for a total
consideration of $62.2 million.
34
BTB ANNUAL REPORT
Real Estate Operations
Leasing activities
The following table summarizes the changes in available leasable area for the quarters and years ended
December 31, 2019 and 2018.
Periods ended December 31
(in square feet)
Available leasable area at beginning of the period
Available leasable area purchased (sold)
Area under redevelopment
Quarter
Year
2019
2018
355,067
548,184
—
—
5,028
132,665
218,015
2019
479,420
(37,204)
—
2018
453,360
25,360
—
915,652
1,006,966
Leasable area of expired leases at term or before end of term
401,640
Leasable area of renewed leases
Leasable area of new leases signed
Other
(322,441)
(132,193)
(691,934)
(454,878)
(54,368)
(295,001)
(284,160)
(546,206)
(2)
2,722
(1,878)
(5,182)
Available leasable area at end of the period
379,896
479,420
379,896
479,420
Fourth quarter of 2019
At the beginning of the quarter, approximately 355,000 square feet were vacant.
Approximately 402,000 square feet have expired at the end of the term of leases or prior, including
35,000 square feet following the bankruptcy of the Ashley Furniture store in our F.X. Sabourin property
on the South Shore of Montréal. More than 322,000 square feet have been renewed with our existing tenants.
Lastly, the Trust leased more than 54,000 square feet to new tenants, leaving approximately 380,000 square
feet of leasable area available at the end of the quarter, resulting in a 0.4% increase in the vacancy rate for
the quarter and an occupancy rate of 93.2% at the end of the quarter.
Fiscal year 2019
As at January 1, 2019, more than 479,000 square feet of leasable area, or 9.0% of total leasable area, was
available for rent. More than 37,000 square feet have been removed from the vacant leasable area subsequent
to the net effect of purchase and sale of investment properties during the year.
More than 915,000 square feet (2018: 1,007,000) of leasable area became available as a result of lease expirations.
This availability allowed the Trust to negotiate new leases, for a total of approximately 284,000 square feet
(2018: 546,000).
Approximately 692,000 square feet (2018: 455,000) were renewed with our existing tenants during the year.
As a result of these transactions, 380,000 square feet remained vacant, which results in a 6.8% vacancy rate,
a decrease of 2.2% for the year.
The average renewal rate
The following table shows a breakdown of the average rate of increase by operating segment:
Operating segment
Office
Retail
Industrial
Mixed-use
Total
Quarter
Square feet
80,000
132,000
83,000
27,000
322,000
(%)
2.6
1.4
21.6
0.6
4.3
Year
Square feet
362,000
196,000
88,000
46,000
692,000
(%)
5.5
1.4
21.7
0.8
5.5
35
2019
The average rental rate of expired and renewed leases during the fourth quarter increased by 4.3%
(3.3% increase in 2018). The industrial segment increased by 21.6% and the office segment increased by 2.7%.
For the year, the average rate increased by 5.5% (2.7% increase in 2018).
Retention rate
Approximately 692,000 square feet of leases expiring in 2019 were renewed for a retention rate of 75.6%
(2018: 54.2%).
Occupancy rates
The following tables detail the Trust’s committed occupancy rates by operating segment and geographic sector,
including firm lease agreements signed as at the date of this report.
Operating segment
Office
Retail
Industrial
Mixed-use
Total portfolio
Geographic sector
Laval and North Shore
Island of Montréal
Montréal South Shore
Québec City and
surrounding area
Ottawa and surrounding
area
Central Ontario
December 31,
2019
September 30,
2019
June 30,
2019
March 31,
2019
December 31,
2018
%
89.3
96.0
96.4
92.4
93.2
%
88.4
98.0
97.1
93.1
93.6
%
88.0
98.2
95.6
93.2
93.1
%
85.5
97.9
95.6
92.1
91.7
%
85.4
96.6
93.6
93.1
91.0
December 31,
2019
September 30,
2019
June 30,
2019
March 31,
2019
December 31,
2018
%
99.6
90.3
93.0
90.1
94.9
100.0
93.2
%
98.4
89.3
94.7
90.3
96.8
100.0
93.6
%
98.1
90.5
95.0
90.9
91.1
100.0
93.1
%
96.1
90.1
93.5
89.5
90.2
100.0
91.7
%
95.9
90.1
92.5
89.9
86.9
100.0
91.0
By province
Québec
Ontario
Total portfolio
December 31,
2019
September 30,
2019
June 30,
2019
March 31,
2019
December 31,
2018
%
92.6
95.5
93.2
%
92.8
97.2
93.6
%
93.3
92.2
93.1
%
91.8
91.4
91.7
%
91.7
88.5
91.0
36
BTB ANNUAL REPORT
The overall occupancy rate decreased by 0.4% since September 30, 2019 and increased by 2.2% since
December 31, 2018. It stood at 93.2% at the end of the fourth quarter of 2019. The decrease in the occupancy
rate since September 2019 is mainly due to the bankruptcy of the Ashley Furniture store in our F.X. Sabourin
property which added 35,000 square feet of additional space available for lease.
The following table shows the in-place occupancy rate compared to the committed occupancy rate by operating
segment as at December 31, 2019.
Operating segment
Office
Retail
Industrial
Mixed-use
Occupancy rate (%)
Square feet
In-place
Committed
Committed
85.8
95.7
95.8
91.9
91.6
89.3
96.0
96.4
92.4
93.2
75,500
1,500
8,200
2,900
88,100
The in-place occupancy rate as at December 31, 2019, without taking into account firm committed lease
agreements for tenants that are not occupying their spaces, was 91.6% (2018: 86.4%), a 5.2% increase,
representing more than 280,000 square feet that were leased in the last year and have generated rental
income. Vacant spaces totalling approximately 88,100 square feet as at December 31, 2019 are subject to firm
lease agreements and will generate additional income in the next few quarters.
The following are examples of firm lease agreements that will soon take effect.
Properties
Square feet
Tenants
Expected occupancy date
1-9 and 10 Brewer Hunt Way, Ottawa, Ontario
3131 Saint-Martin Blvd West, Laval, Québec
208-244 Migneron Street, St-Laurent, Québec
315-325 MacDonald Street,
St-Jean-sur-Richelieu, Québec
32,000
20,000
8,200
7,400
Satcom
City of Laval
Eventure Group
Government of
Québec
March 2020
May 2020
April 2020
April 2020
Lease maturities
The following table shows the Trust’s lease maturity profile for the next five years:
Office
Leasable area (sq. ft.)
Average lease rate/square foot ($)
% of office portfolio
Retail
Leasable area (sq. ft.)
Average lease rate/square foot ($)
% of retail portfolio
Industrial
Leasable area (sq. ft.)
Average lease rate/square foot ($)
% of industrial portfolio
Mixed-use
Leasable area (sq. ft.)
Average lease rate/square foot ($)
% of mixed-use portfolio
Total portfolio
Leasable area (sq. ft.)
Average lease rate/square foot ($)
% of total portfolio
2020
2021
2022
2023
2024
202,962
$14.16
8.6%
108,401
$11.01
6.4%
260,434
$5.30
16.0%
127,930
$13.42
17.7%
232,497
$12.88
250,717
$14.11
252,019
$14.26
195,842
$12.90
11.0%
11.8%
11.9%
9.3%
96,139
$15.17
290,319
$11.24
147,815
$10.40
82,484
$15.71
6.8%
20.6%
10.5%
5.9%
342,664
$7.40
251,122
$5.63
45,483
$5.83
88,393
$9.00
23.1%
17.0%
3.1%
6.0%
124,466
$11.86
98,148
$15.58
50,116
$12.99
12,966
$13.79
22.0%
17.4%
8.9%
2.3%
699,727
$10.13
795,766
$10.64
890,305
$10.95
495,432
$12.21
379,685
$12.63
12.6%
14.3%
16.0%
8.9%
6.8%
37
2019
Top 10 tenants
On December 31, 2019, BTB managed more than 620 leases, with an average leasable area of approximately
8,500 square feet. The three largest tenants of the Trust are Public Works Canada, West Safety Services Canada
and Walmart Canada Inc., representing respectively 4.8%, 2.0% and 1.8% of revenues, generated by multiple
leases whose maturities are spread over time. More than 27% of the Trust’s total revenues are generated by
leases signed with government agencies (federal, provincial and municipal) and public companies,
thus generating stable and high-quality cash flows for the Trust’s operating activities.
The following table shows the contribution of the Trust’s top 10 tenants as a percentage of revenues as at
December 31, 2019. This contribution accounts for 18.1% of annual rental income and 20.0% of leased area.
Client
Public Works Canada
West Safety Canada Inc.
Walmart Canada inc.
Atis Portes et Fenêtres Corp.
Strongco
Propriétés Shoppers Inc.
Sail Plein Air
Provigo Distribution Inc. (Loblaws)
CISSS Montérégie-Centre (Government of Québec)
Société québécoise des infrastructures
(SQIGovernment of Québec)
Operating results
% of revenue
% of leased area
Leased area
(square feet)
4.8
2.0
1.8
1.7
1.5
1.4
1.3
1.3
1.2
1.1
18.1
3.7
1.1
4.7
3.9
1.5
0.9
0.8
0.6
1.3
1.5
20.0
207,202
61,845
264,550
219,941
81,442
47,551
45,496
34,446
70,242
82,196
1,114,912
The following table summarizes financial results for the quarters and years ended December 31, 2019 and 2018.
The table should be read in conjunction with our consolidated financial statements and the accompanying
notes.
Periods ended December 31
(in thousands of dollars)
Rental income
Operating expenses
Net operating income(1)
Net financial expenses
Administration expenses
Transaction costs and prepayment penalties
Gain on disposal of property and equipment
Gain on write-off of debt
Fair value adjustment on investment properties
Net income and comprehensive income
(1) Non-IFRS financial measure.
Reference (page)
39
39
40
40
41
41
42
Quarter
Year
2019
$
25,558
11,384
14,174
5,564
1,198
—
—
—
2018
$
22,082
10,458
11,624
7,447
1,222
1,205
(7)
—
(34,140)
(22,639)
41,552
24,396
2019
$
93,602
42,705
50,897
26,634
5,515
980
—
—
(34,113)
51,881
2018
$
87,423
39,786
47,637
22,791
4,906
2,070
(1,192)
(133)
(22,142)
41,337
38
BTB ANNUAL REPORT
Rental income
BTB’s rental income increased by $3.5 million in its fourth quarter compared to the same quarter last year.
During the year, the Trust acquired three properties. These acquisitions contributed to an increase in rental
income of approximately $2.6 million for the quarter, while the Trust estimates the rental income associated
with the disposal of properties during the same period at $1.3 million in the quarter.
During the quarter, the Trust agreed to cancel the lease agreement with Jensen Company in consideration
of a cancellation payment of $1,062. In accordance with IFRS standards, this amount was fully recognized as
rental income during the fourth quarter of 2019. This amount improved net profit and comprehensive income,
distributable profit, the FFO and AFFO for the fourth quarter and for the fiscal year by approximately 1.7 ¢
per unit.
The Jensen space was immediately released on similar terms under a 10-year lease to an accounting firm.
Accordingly, the Trust did not suffer any impact caused by the departure of the Jensen Company. However,
the new tenant does benefit from a 6-month period of free rent. This free rent period is recognized as an
ajustement to rental income over the life of the lease in accordance with the straight-line method.
In the fourth quarter of 2019, straight line adjustments to rent payable of $469 (2018: $93) were recorded.
BTB also recorded amortization of lease incentives granted to tenants of $756 (2018: $608) as a reduction
of rental income.
For the fiscal year 2019, the Trust reported an increase of $6.2 million or 7.1% of its rental income. Acquisitions
completed during the past four quarters contributed to an increase of approximately $5.2 million, while the
Trust estimates the rental income associated with the disposed properties completed during the year at
approximately $3.3 million.
For the fiscal year 2019, rent payable adjustments of $703 (2018: $525) were recorded on a straight-line basis
and an amortization of $3,003 (2018: $3,223) of lease incentives granted to tenants was recorded as a reduction
in rental income.
Operating expenses
BTB recorded an increase in operating expenses of $926, or 8.9%, between the fourth quarter of 2019 and
the fourth quarter of 2018. The increase resulted mainly from the net effect of acquisitions vs. dispositions
completed in 2019, which added 220,000 square feet of new rental space.
The following table shows the breakdown of operating expenses for the quarters and years ended
December 31, 2019 and 2018.
Periods ended December 31
(in thousands of dollars)
Operating expenses
Maintenance, repairs and other operating costs
Property taxes, public utilities and insurance
Total operating expenses
% of rental income
Quarter
2019
$
3,874
7,510
11,384
44.5
2018
$
3,586
6,872
10,458
47.4
Year
2019
$
14,330
28,375
42,705
45.6
2018
$
13,140
26,646
39,786
45.5
For the fourth quarter, our recent acquisitions contributed to an increase of $1.7 million in operating expenses,
while recent dispositions reduced operating expenses by $0.7 million, hence a net increase of $1 million.
As a percentage of rental income, operating expenses for the fourth quarter of 2019 decreased by 2.9% to 44.5%
and increased by 0.1% to 45.6% for the entire fiscal year 2019.
39
2019 Net operating income
Periods ended December 31
(in thousands of dollars)
Net operating income(1)
% of rental income
(1) Non-IFRS financial measure.
Quarter
Year
2019
$
14,174
55.5
2018
$
11,624
52.6
2019
$
50,897
54.4
2018
$
47,637
54.5
Total net operating income (NOI) increased by $2,550 or 21.9% between the fourth quarter of 2018 and the same
quarter of 2019.
For the fiscal year 2019, the Trust reported an increase of $3.3 million or 6.8% of its NOI.
For the entire fiscal year 2019, the NOI includes the reception of a payment of $1,062 as a penalty in a lease
cancellation in the fourth quarter while the fiscal year 2018 was enhanced by receiving a penalty of $1,477 in the
third quarter.
Financial expenses
The following table shows the breakdown of financial expenses for the quarters and years ended
December 31, 2019 and 2018:
Periods ended December 31
(in thousands of dollars)
Interest on mortgage loans
Interest on convertible debentures
Interest on bank loans
Other interest expenses
Interest income
Net interest expenses
Distributions on Class B LP units
Financial expenses before non-monetary items
Accretion of effective interest on mortgage loans,
convertible debentures and bank loans
Accretion of non-derivative liability component
of convertible debentures
Net financial expenses before the following items:
Net fair value adjustment on derivative financial instruments
Fair value adjustment on Class B LP units
Net financial expenses
Quarter
Year
2019
$
4,928
955
164
137
(120)
6,064
56
6,120
2018
$
4,650
874
267
26
(14)
5,803
56
5,859
2019
$
18,941
3,577
915
444
(475)
23,402
224
23,626
2018
$
17,512
3,496
929
116
(76)
21,977
131
22,108
384
259
1,172
1,039
27
6,531
(1,184)
217
5,564
13
6,131
1,561
(245)
7,447
66
24,864
1,340
430
26,634
49
23,196
(229)
(176)
22,791
Net interest expenses increased by $261 during the fourth quarter of 2019 compared to the same period of
2018 and by $1,425 for the year, due to the net effect of financing of acquisitions and concluding dispositions
in recent quarters, as well as higher interest rates on mortgage refinancing completed during recent quarters.
In addition to net interest expenses, distributions on Class B LP units amounted to $56 for the quarter and
$224 for the year. Under IFRS, the Class B LP units are considered a financial instrument classified as a liability
and therefore the related distributions must be recognized as an expense.
40
BTB ANNUAL REPORT
Financial income mainly consists of interest income generated from a balance of sale held by the Trust
for the principal amount of $6 million pursuant to the sale in 2019 of a property located in Delson, Québec.
Net financial expenses include the net interest expenses plus distributions on Class B LP units, amounting
to $6,120 for the quarter (2018: $5,859) and $23,626 for the year (2018: $22,108)non-monetary items. Non
monetary items include the accretion of effective interest on mortgage loans and convertible debentures and
fair value adjustments on financial instruments. BTB recognized an increase in the value of derivative financial
instruments of $967 (2018: $1,316 decrease) for the quarter and a decrease of $1,770 (2018: $405 an increase)
for the year.
The decrease in the value of financial instruments, which generated an equivalent expense recorded as
an increase in non-monetary items, is due to lower interest rates in Canadian financial markets during the
reporting period. Conversely, an increase in the value of financial instruments, which generated an equivalent
income recorded as a decrease in non-monetary expenses, is due to higher interest rates in Canadian markets
during the reporting period.
The fair value of Class B LP units is equal to the fair value of the Trust’s units traded on Canadian stock markets.
An increase in the value of Class B LP units generates an equivalent expense recorded as an increase of non-
monetary financial expenses during the reporting period. Conversely, a decrease in the value of Class B LP units
generates the equivalent in income recorded as a decrease in non-monetary financial expenses during the
reporting period.
On December 31, 2019, the average weighted contractual rate of interest on mortgage loans outstanding
was 3.92%, 7 basis points lower than the rate in effect as at December 31, 2018. Interest rates on first-ranking
mortgage loans ranged from 2.77% to 6.80% as at December 31, 2019. The weighted average term of mortgage
loans in place as at December 31, 2019 was 5.1 years (5.6 years as at December 31, 2018).
Administration expenses
Periods ended December 31
(in thousands of dollars)
Administration expenses
Doubtful accounts (recovery)
Amortization
Unit-based compensation
Trust administration expenses
Quarter
Year
2019
$
1,034
(78)
—
242
1,198
2018
$
1,021
129
—
72
2019
$
4,346
493
—
676
2018
$
4,115
431
5
355
1,222
5,515
4,906
Fair value adjustment of 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 periods in which it arises.
The Trust annually uses chartered appraisers to evaluate the fair value of a significant portion of its portfolio.
Pursuant to its policy, the 10 largest properties and approximately a third of the remaining properties are
independently appraised by independent appraisers. In addition, as part of financing or refinancing and
at the request of lenders, other properties were independently appraised during the last months of the year.
For its properties that were not subject to independent appraisals, management receives quarterly capitalization
rate and discount rate data from external chartered appraisers 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
appraisers. 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.
41
2019 As at December 31, 2019, 62.9% (2018: 65.4%) of the fair value of the real estate portfolio was externally
independently appraised and 37.1% (2018: 34.6%) was internally appraised by the Trust’s personnel. Following
these appraisals, the Trust recorded an increase in value of $34.1 million (2018: $22.1 million) on its real estate
portfolio.
The change in fair value is broken down by segment as follows:
Office
Retail
Industrial
Mixed-use
Total change in fair value
$
22,741
3,061
11,883
(3,545)
34,140
%
66.6
9.0
34.8
(10.4)
100%
Office and industrial properties account for almost 100% of the portfolio’s increase in value, mainly due to lower
capitalization rates in these segments.
The following tables highlight the significant assumptions used in the modelling process for both internal
and external appraisals:
As at December 31, 2019
Capitalization rate
Retail
Office
Industrial
Mixed-use
6.00% – 7.75%
5.75% – 7.50%
5.75% – 8.50%
5.00% – 8.25%
Terminal capitalization rate
6.25% – 7.25%
6.25% – 7.50%
6.00% – 7.25%
5.25% – 7.25%
Discount rate
7.25% – 7.75%
6.75% – 8.00%
6.50% – 8.00%
6.25% – 8.00%
As at December 31, 2018
Capitalization rate
6.25% – 7.75%
6.00% – 8.50%
5.75% – 8.50%
5.00% – 7.25%
Terminal capitalization rate
6.25% – 7.75%
6.50% – 7.50%
6.25% – 8.25%
5.25% – 7.50%
Discount rate
7.25% – 8.50%
7.00% – 8.00%
6.75% – 9.00%
6.25% – 8.25%
The weighted average of the capitalization rate for the entire portfolio as at December 31, 2019 was 6.6%
(December 31, 2018: 6.8%), 20 basis point lower than December 31, 2018.
As at December 31, 2019, BTB has estimated that a variation of 0.25% in the capitalization rate applied to the
overall portfolio would increase/decrease the fair value of the investment properties by approximately $35 million.
Net income and comprehensive income
BTB generated net income of $41.6 million for the fourth quarter of 2019, compared to $24.4 million for
the fourth quarter of 2018, an increase of $17.2 million. For the year, the net income stood at $51.9 million,
an increase of $10.5 million from the same period in 2018.
Periods ended December 31
(in thousands of dollars, except for per unit data)
Net income
Per unit
Quarter
2019
$
2018
$
Year
2019
$
2018
$
41,552
24,396
51,881
41,337
66.2¢
43.7¢
87.0¢
78.7¢
42
BTB ANNUAL REPORT Adjusted net income
Net income and comprehensive income fluctuate from one quarter to the next based on non-recurring items
and certain volatile non-monetary items. Consequently, the fair value of derivative financial instruments and
the fair value of the real estate portfolio fluctuate based on the stock market volatility of BTB’s units, the
forward interest rate curve and the discount and capitalization rates of the real estate portfolio.
The following table presents adjusted net income before these non-recurring and volatile non-monetary items.
Periods ended December 31
(in thousands of dollars, except for per unit data)
Quarter
2019
$
2018
$
Year
2019
$
2018
$
Net income and comprehensive income
41,552
24,396
51,881
41,337
Non-recurring items:
+ Transaction costs
Volatile non-monetary items
—
1,205
980
2,070
± Fair value adjustment on derivative financial instruments
(1,184)
1,561
1,340
(229)
- Fair value adjustment on investment properties
(34,140)
(22,639)
(34,113)
(22,142)
± Fair value adjustment on Class B LP units
Adjusted net income(1)
Per unit
(1) Non-IFRS financial measure.
217
6,445
10.3¢
(245)
4,278
430
20,518
(176)
20,860
7.7¢
34.4¢
39.8¢
This table shows an increase of 50.6% in adjusted net income for the quarter and a decrease of 0.2%
for the year, before the items mentioned above. Quarterly adjusted net income per unit increased by 33.8%
(13.6% decrease for the year).
Operating Results – Same-Property Portfolio
Same-property portfolio
The same-property portfolio includes all the properties owned by BTB on January 1, 2019 and that are still
owned by BTB on December 31, 2019, but it does not include acquisitions and developments completed during
2018 and 2019, nor the results of properties sold during the same periods.
The following table summarizes the results of the same-property portfolio.
Periods ended December 31
(in thousands of dollars)
Rental income
Operating expenses
Net operating income(1)
Interest expense on mortgage loans payable
Net property income(1)
Increase in net property income from
the same-property portfolio
(1) Non-IFRS financial measure.
Quarter
2019
$
2018
$
18,593
17,802
8,668
9,925
3,659
6,266
8,417
9,385
3,683
5,702
Δ
%
4.4
3.0
5.8
(0.7)
Year
2019
$
73,950
34,052
39,898
14,651
25,247
2018
$
71,516
33,115
38,401
14,736
23,665
Δ
%
3.4
2.8
3.9
(0.6)
9.9%
6.7%
43
2019
Rental income, NOI and net property income of the same-property portfolio increased by 4.4%, 5.8%
and 9.9% respectively, for the fourth quarter of 2019 compared to the same period of 2018.
The good results of the same-property portfolio in the third and fourth quarters of 2019 cancelled the negative
first-quarter results, increasing rental income, NOI and net property income by 3.4%, 3.9% and 6.7%, respectively.
Distributable Income and Distributions
The following table shows the calculation of distributable income.
Periods ended December 31
(in thousands of dollars)
Quarter
Year
2019
$
2018
$
2019
$
51,881
(34,113)
107
—
676
—
66
1,340
430
3,003
(703)
1,172
980
224
2018
$
41,337
(22,142)
90
(1,192)
335
(1,185)
49
(229)
(176)
3,223
(525)
1,039
2,070
131
25,063
23,897
Net income (loss) and comprehensive income (IFRS)
41,552
24,396
- Fair value adjustment on properties
(34,140)
(22,639)
+ Amortization of property and equipment
- Gain on disposition of the Trust owned and occupied land
and building
+ Unit-based compensation expense
- Gain on disposal of property and equipment
+ Accretion of the non-derivative liability component
of convertible debentures
± Fair value adjustment on derivative financial instruments
± Fair value adjustment on Class B LP units
+ Amortization of lease incentives
- Straight-line rental income adjustment
+ Accretion of effective interest
+ Transaction costs on acquisitions and dispositions of properties
+ Distributions -Class B LP units
Distributable income(1)
(1) Non-IFRS financial measure.
25
—
242
—
27
(1,184)
217
756
(469)
384
—
56
7,466
26
(7)
72
—
13
1,561
(245)
608
(93)
259
1,205
56
5,212
44
BTB ANNUAL REPORT
Distributions and per unit data
Periods ended December 31
(in thousands of dollars, except for per unit data)
Distributions
Cash distributions
Cash distributions – Class B LP units
Distributions reinvested under the distribution
reinvestment plan
Total distributions to unitholders
Percentage of reinvested distributions
Per unit data(1)
Distributable income
Distributions
Payout ratio on distributable income(2)
Cash payout ratio(3)
Quarter
2019
$
2018
$
Year
2019
$
2018
$
5,690
56
838
6,584
5,107
56
696
5,859
21,763
224
3,154
25,141
19,305
131
2,718
22,154
12.7%
11.9%
12.5%
12.3%
11.9¢
10.5¢
88.1%
77.0%
9.3¢
10.5¢
112.4%
99.1%
42.1¢
42.0¢
99.8%
87.7%
45.6¢
42.0¢
92.2%
81.3%
(1) Including Class B LP units.
(2) The payout ratio corresponds to distributions per unit divided by distributable income per unit.
(3) The cash payout ratio corresponds to cash distributions divided by distributable income.
Distributable income for the fourth quarter increased by $2,254 from $5,212 to $7,466 between 2018 and 2019.
Distributable income per unit for the fourth quarter of 2019 was 11.9¢ compared to 9.3¢ in 2018, up by 28.0%.
Distributable income for the year increased by $1,166 or 4.9%. Per unit, the distributable income for the year
is 42.1¢ (2018: 45.6¢). The annual decrease was mainly recorded during the first two quarters of the year
and the events that led to the decrease were previously explained and are now mostly resolved.
Distributions to unitholders totalled 10.5¢ per issued unit for each quarter of 2019 and 2018, and 42.0¢
per issued unit for each fiscal year of 2019 and 2018.
The payout ratio for distributable income was 88.1% in the fourth quarter of 2019 compared to 112.4%
in the fourth quarter of 2018, and 99.8% for the year compared to 92.2% in 2018.
Distribution reinvestment plan (DRIP)
In the fourth quarter of 2019, 12.7% of distributions (2018: 11.9%) were reinvested under the DRIP. Approximately
$3.2 million (2018: $2.7 million) of the Trust’s cash has thereby been preserved through unit conversions since
the beginning of the year.
45
2019
Funds From Operations (FFO)
The following table provides the reconciliation of net income and comprehensive income established according
to IFRS and FFO for the quarters and years ended December 31, 2019 and 2018:
Periods ended December 31
(in thousands of dollars, except for per unit data)
Quarter
2019
$
2018
$
Year
2019
$
2018
$
Net income and comprehensive income (IFRS)
41,552
24,396
51,881
41,337
- Gains on disposition of property and equipment and other
disposition costs
—
(7)
—
(1,192)
- Fair value adjustment on investment properties
(34,140)
(22,639)
(34,113)
(22,142)
± Fair value adjustment on Class B LP units
+ Amortization of a property recognized at cost
+ Amortization of lease incentives
± Fair value adjustment on derivative financial instruments
+ Leasing payroll expenses
+ Distributions -Class B LP units
FFO(1)
Non-recurring item
Transaction cost on acquisitions and dispositions
of investment properties
Recurring FFO(1)
FFO per unit(2)
Recurring FFO per unit(2)
FFO payout ratio(3)
Recurring FFO payout ratio(3)
FFO cash payout ratio(4)
Recurring FFO cash payout ratio
217
—
756
(1,184)
164
56
7,421
—
7,421
11.8¢
11.8¢
88.7%
88.7%
77.4%
77.4%
(245)
—
608
1,561
128
56
430
—
3,003
1,340
548
224
(176)
3
3,223
(229)
573
131
3,858
23,313
21,528
1,205
5,063
6.9¢
9.1¢
151.8%
115.7%
133.8%
102.0%
980
24,293
2,070
23,598
39.1¢
40.7¢
107.4%
103.1%
94.3%
90.5%
41.1¢
45.0¢
102.3%
93.3%
90.3%
82.4%
(1) Non-IFRS financial measures.
(2) Including Class B LP units.
(3) The FFO payout ratio corresponds to distributions per unit divided by FFO per unit.
(4) The FFO cash payout ratio corresponds to cash distributions divided by FFO.
For the fourth quarter of 2019, FFO per unit was 11.8¢, compared to 6.9¢ in 2018, a 72% increase. After taking
into account the transaction costs in the disposition of investment properties, recurring FFO was 11.8¢ per
unit compared to 9.1¢ in 2018. The FFO payout ratio stood at 88.7% for the fourth quarter of 2019 compared
to 151.8% for the same quarter of 2018, and the recurring FFO payout ratio stood at 88.7% compared to 115.7%
in the same quarter of 2018.
For the entire fiscal year 2019, the Trust posted an FFO of $23.3 million, an increase of $1.8 million over 2018.
Excluding the non-recurring item, the annual FFO increased by $0.7 million from 2018 to 2019.
Per unit, the annual FFO and recurring FFO show a decrease of 2.0¢ and 4.3¢ respectively. These decreases
mainly occurred during the first two quarters of the year.
46
BTB ANNUAL REPORT
Adjusted Funds from Operations (AFFO)
The following table provides the reconciliation of FFO and AFFO for the quarters and years ended
December 31, 2019 and 2018:
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
- Provision for non-recoverable capital expenditures
- Provision for unrecovered rental fees
AFFO(1)
Non-recurring item
Transaction costs on purchase and sale of properties
Recurring AFFO(1)
AFFO per unit(2)
Recurring AFFO per unit(2)
AFFO payout ratio(3)
Recurring AFFO payout ratio(3)
AFFO cash payout ratio(3)
Recurring AFFO cash payout ratio(4)
Quarter
2019
$
2018
$
Year
2019
$
2018
$
7,421
(469)
384
27
25
242
(490)
(345)
6,795
—
6,795
10.8¢
10.8¢
96.8%
96.8%
84.6%
84.6%
3,858
(93)
259
13
26
72
(439)
(325)
3,371
1,205
4,576
6.0¢
8.2¢
173.7%
128.0%
153.2%
112.8%
23,313
(703)
1,172
66
107
676
(1,842)
(1,380)
21,409
980
22,389
35.9¢
37.5¢
117.0%
111.9%
102.7%
98.2%
21,528
(525)
1,039
49
87
355
(1,719)
(1,300)
19,514
2,070
21,584
37.2¢
41.2¢
112.9%
102.0%
99.6%
90.0%
(1) Non-IFRS financial measures.
(2) Including Class B LP units.
(3) The AFFO payout ratio corresponds to distributions per unit divided by AFFO per unit.
(4) The AFFO cash payout ratio corresponds to cash distributions divided by AFFO.
AFFO per unit totalled 10.8¢ for the fourth quarter of 2019 compared to 6.0¢ for the fourth quarter of 2018,
an 80% increase. Recurring AFFO per unit, after taking into account the transaction costs on the sale of
investment properties in 2018, was 10.8¢ per unit for the quarter compared to 9.7¢ for the same quarter in 2018.
The AFFO payout ratio stood at 96.8% for the fourth quarter of 2019 compared to 173.7% for the fourth quarter
of 2018.
At the end of fiscal 2019, the Trust presented an AFFO of $22.4 million, a $0.8 million increase over the same
quarter in 2018. AFFO per unit decreased from 37.2¢ to 35.9¢. Again, this annual decrease mainly occurred
during the first two quarters of the year.
In calculating AFFO, the Trust deducts a provision for non-recoverable capital expenditures to take into account
capital expenditures invested to maintain properties in good condition and to preserve rental income. This
provision is based on our assessment of industry practices and our investment forecasts for the next few years.
47
2019 The following table compares the amount of the provision for non-recoverable capital investments to
the amount of investment actually made during the current comparative period and in the last few years.
Years ended December 31
(in thousands of dollars)
Provision for non-recoverable capital expenditures
Non-recoverable capital expenditures
December 31,
2019
December 31,
2018
December 31,
2017
$
1,851
2,603
$
1,719
1,871
$
1,467
2,876
The Trust intends to achieve a balance between actual investment and the estimated provisions over the long
term. Management may change the provision calculation, as required.
Cash Flows
Net cash flow from operating activities, funds available under the Trust’s credit facilities and surplus cash are
the main sources of cash to fund distributions, debt service, capital expenditures in investment properties,
lease incentives and rental fees.
The Trust expects to be able to meet its commitments. Management expects to have sufficient liquidity
generated from cash surpluses, net cash from operating activities and the Trust’s ability to raise capital.
Periods ended December 31
(in thousands of dollars)
Net cash from (used in):
Operating activities
Investing activities
Financing activities
Net change in cash during the period
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Quarter
2019
$
17,235
(3,139)
(14,140)
(44)
1,847
1,803
2018
$
15,620
129
(9,061)
6,688
2,136
8,824
Year
2019
$
47,223
(18,566)
(35,678)
(7,021)
8,824
1,803
2018
$
44,724
(57,747)
19,929
6,906
1,918
8,824
Cash from operating activities increased by $1.6 million to $17.2 million for the quarter and by $2.5 million to
$47.2 million for the entire year.
48
BTB ANNUAL REPORT The following table provides a reconciliation of distributable income (a non-IFRS financial measure)
and net cash flows from operating activities presented in the financial statements.
Periods ended December 31
(in thousands of dollars)
Net cash flows from operating activities (IFRS)
± Net change in non-cash operating items
+ Debt prepayment penalty
- Net interest expense
- Other items
Distributable income
Quarter
2019
$
17,235
(3,706)
—
2018
$
15,620
(4,533)
—
Year
2019
$
2018
$
47,223
44,724
1,065
176
1,150
—
(6,063)
(5,803)
(23,401)
(21,977)
—
7,466
(72)
5,212
—
—
25,063
23,897
The following table is provided to enable readers to assess the performance of distributed funds and reconcile
them with net cash flows and net income.
Years ended December 31
(in thousands of dollars)
Net cash from operating activities (IFRS)
- Interest paid
Net cash from operating activities
Net income
Total distributions
Surplus (deficit) of net cash from operating activities
compared to total distributions
Surplus (deficit) of net income over total distributions
2019
$
47,223
(23,442)
23,781
51,881
25,141
(1,360)
26,740
2018
$
44,724
(21,851)
22,873
41,337
22,154
719
19,183
2017
$
38,449
(18,593)
19,856
28,171
18,486
1,370
9,685
The Trust presented distributions in excess of net cash flows from operating activities (IFRS) of $1,360, net
of interest paid during the quarter ended December 31, 2019. In 2018 and 2017, the Trust presented surplus
distributions of $719 and $1,370.
The Trust may use authorized lines of credit totaling $22 million to finance surplus distributions. During the year
ended December 31, 2019, the Trust presented a deficit of net cash flow from operating activities over total
distributions of $1,360 (2018: surplus of $719). The Trust is confident that during the course of the fiscal year
2020 it will present adequate coverage of net cash flow over total distributions and intends to maintain the
current level of its distributions.
49
2019
The following table provides the reconciliation of net cash from operating activities presented in the financial
statements and AFFO, and FFO (non-IFRS financial measures).
Periods ended December 31
(in thousands of dollars, except for per unit data)
Cash flows from operating activities (IFRS)
+ Leasing payroll expenses
+ Gain on debt extinguishment
- Transaction costs on purchase and sale of properties
+ Debt prepayment penalty
+ Net change in non-cash operating items
- Net interest expense
- Provision for non-recoverable capital expenditures
- Provision for non-recovered rental fees
+ Other items
AFFO(1)
+ Provision for non-recoverable capital expenditures
+ Provision for non-recovered rental fees
+ Straight-line rental income adjustment
- Unit-based compensation expenses
- Accretion of non-derivative liability component
of convertible debentures
- Accretion of effective interest
- Amortization of property and equipment
- Other items
FFO(1)
(1) Non-IFRS financial measure.
Segmented Information
Quarter
2019
$
17,235
164
—
—
—
(3,706)
(6,063)
(490)
(345)
—
6,795
490
345
469
(242)
(27)
(384)
(25)
—
7,421
2018
$
Year
2019
$
2018
$
15,620
47,223
44,724
128
—
(1,205)
—
(4,533)
(5,803)
(439)
(325)
(72)
3,371
439
325
93
(72)
(13)
(259)
(26)
—
3,858
545
—
(980)
176
1,065
573
133
(2,070)
—
1,150
(23,401)
(21,977)
(1,851)
(1,380)
12
21,409
1,851
1,380
703
(676)
(66)
(1,172)
(107)
(9)
23,313
(1,719)
(1,300)
—
19,514
1,719
1,300
525
(355)
(49)
(1,039)
(87)
—
21,528
The Trust’s operations are generated from four segments of properties located in the Provinces of Québec and
of Ontario. The following tables present each segment’s contribution to revenues and to net operating income
for the quarters and years ended December 31, 2019 and 2018.
Quarters ended
December 31
(in thousands of dollars)
Retail
Office
Industrial
Mixed-use
Total
$
%
$
%
$
%
$
%
$
Quarter ended December 31, 2019
Investment properties
265,487
28.7
395,425
42.8
158,720
17.2
104,688
11.3
924,320
Rental income
from properties
Net operating income(1)
7,612
4,677
29.8
33.0
11,180
43.7
3,657
5,509
38.9
2,311
14.3
16.3
3,109
1,677
12.2
25,558
11.8
14,174
Quarter ended December 31, 2018
Investment properties
249,370
29.7
372,190
44.4 130,305
15.5
87,150
10.4 839,015
Rental income
from properties
6,928
31.4
10,180
46.1
2,306
10.4
2,668
12.1
22,082
Net operating income(1)
4,193
36.1
4,590
39.5
1,543
13.3
1,298
11.2
11,624
(1) Non-IFRS financial measure.
50
BTB ANNUAL REPORT
Years ended December 31
(in thousands of dollars)
Retail
%
$
Office
%
$
Industrial
Mixed-use
Total
$
%
$
%
$
Year ended December 31, 2019
Rental income
from properties
26,935
28.8
43,206
46.2
12,852
13.7
10,609
11.3
93,602
Net operating income(1)
16,102
31.6
21,190
41.6
8,236
16.2
5,369
10.6
50,897
Year ended December 31, 2018
Rental income
from properties
26,266
30.0
42,507
48.6
9,785
11.2
8,865
10.1
87,423
Net operating income(1)
15,925
33.4
20,005
42.0
7,226
15.2
4,481
9.4
47,637
(1) Non-IFRS financial measure.
Financial Position
The following table presents a summary of the Trust’s balance sheet as at December 31, 2019 and
December 31, 2018. It should be read in conjunction with the Trust’s consolidated financial statements
and the accompanying notes.
(in thousands of dollars)
Assets
Investment properties
Balance of sale
Amounts receivable from tenants and other receivables
Other assets
Cash and cash equivalents
Total assets
Liabilities
Mortgage loans payable
Convertible debentures
Lease liabilities
Bank loans
Class B LP units
Accounts payable and other liabilities
Total liabilities
Equity
Unitholders’ equity
Total liabilities and equity
December 31,
2019
December 31,
2018
Reference (page)
$
$
52
54
54
54
48
55
56
56
58
58
58
924,320
839,015
6,035
3,809
3,163
1,803
—
3,246
4,138
8,824
939,130
855,223
493,152
49,096
4,454
12,460
2,571
21,258
582,991
356,139
939,130
471,162
48,716
—
15,000
2,315
19,653
556,846
298,377
855,223
The main changes in the balance sheet as at December 31, 2019, compared to the balance sheet as at
December 31, 2018, reflect the purchase and sale of investment properties, adjustments of the fair market
value of investment properties, mortgage loans and the repayment of mortgage loans related to these
transactions.
51
2019
Assets
Investment properties
Over the years, BTB has fuelled its growth through high-quality property acquisitions based on its selection
criteria, while maintaining an appropriate allocation among four activity segments: office, retail, industrial
and mixed-use properties.
The real estate portfolio consists of direct interests in wholly owned investment properties and the Trust’s
share of the assets, liabilities, revenues and expenses of two jointly controlled investment properties.
The fair market value of its investment properties stood at $924 million as at December 31, 2019 compared to
$839 million as at December 31, 2018.
Acquisitions
In May 2019, the Trust acquired a 65,000-square-foot industrial building in St-Laurent, Québec for $11.8 million.
In June 2019, the Trust purchased two retail properties, Méga Centre Saint-Bruno and Développements
Mont Saint-Hilaire, respectively located in Saint-Bruno, Québec and Saint-Hilaire, Québec, for a total
consideration of $62.2 million.
Dispositions
In January 2019, the Trust disposed of the retail property located at 15-41 South Georges-Gagné Blvd., in Delson,
Québec, for total proceeds of $22.5 million.
In March 2019, the Trust disposed of a retail condominium located at 37 South Georges-Gagné Blvd., in Delson,
Québec, for total proceeds of $1.95 million.
In May 2019, the Trust disposed of the mixed-use property located on Antonio-Barbeau Street in Montréal,
Québec for total proceeds of $7.1 million.
In August 2019, the Trust disposed of the office property located at 3885 Harvey Boulevard in Saguenay,
Québec, for total proceeds of $4.4 million.
Summary by operating segment
As at December 31
2019
Number of
properties
Leasable
area (sq. ft.)
Office
Retail
Industrial
Mixed-use
Subtotal
Properties under
redevelopment
Total
28
12
18
7
65
1
66
2,118,025
1,409,564
1,482,282
564,919
5,574,790
75,340
5,650,130
%
38.0
25.3
26.6
10.1
100.0
2018
Number of
properties
Leasable
area (sq. ft.)
28
14
18
6
66
1
67
2,120,680
1,316,414
1,482,278
437,151
5,356,523
75,340
5,431,863
%
39.6
24.6
27.7
8.1
100.0
52
BTB ANNUAL REPORT
Improvements in investment properties
BTB invests capital to improve its properties to preserve the quality of their infrastructure and services
provided to tenants. These disbursements include value-added maintenance investments corresponding to
expenditures required to upkeep properties, as well as property improvement and redevelopment projects
intended to increase leasable area, occupancy rates or quality of space available for rental. In some cases,
capital expenditures are amortized and may be recovered from rent.
Capital expenditures for the quarter ended December 31, 2019 totalled $2,625, compared to $1,504 for the
same quarter of 2018, of which $1,278 was recoverable (2018: $754). Capital expenditures do not include repair
and maintenance costs. Capital expenditures vary from one quarter to another depending on the investment
required or planned for each property.
Upon the signing of several leases, the Trust may make disbursements for leasehold improvements and for
lease incentives applicable to the leased areas to meet the specific needs of tenants, as well as leasing
commissions that are paid to independent brokers. These disbursements totalled $1,214 for the fourth quarter
2019 and $4,394 for the year compared to $1,282 and $5,250 for the same periods of 2018. The leasing fees and
the cost of leasehold improvements/incentives may apply to both new tenants and tenants whose leases were
renewed in the Trust’s properties. The amount of leasing fees and leasehold improvements/incentives varies
depending on the lease renewal transaction concluded and tenancy profile.
The following table summarizes capital expenditures, incentives and leasing fees, for the quarters and years
ended December 31, 2019 and 2018.
Periods ended December 31
(in thousands of dollars)
Recoverable capital expenditures
Non-recoverable capital expenditures
Total capital expenditures
Leasing fees and leasehold improvements
Total
Quarter
Year
2019
$
1,278
1,347
2,625
1,214
3,839
2018
$
750
754
1,504
1,282
2,786
2019
$
2,888
2,603
5,491
4,394
9,885
2018
$
2,471
1,871
4,342
5,250
9,592
The following table shows changes in the fair value of investment properties during the quarters and years
ended December 31, 2019 and 2018.
Periods ended December 31
(in thousands of dollars)
Quarter
2019
$
2018
$
Year
2019
$
2018
$
Balance, beginning of the period
886,648
819,375
839,015
751,110
Additions:
Initial recognition of right-of-use assets
Acquisitions
Dispositions
Capital expenditures
Leasing fees and capitalized lease incentives
Fair value adjustment on investment properties
Other non-monetary changes
Balance, end of the period
—
(19)
—
2,625
1,214
34,140
(288)
—
25,180
3,900
75,658
(30,450)
(35,950)
1,504
1,282
22,639
(515)
5,491
4,394
34,113
(2,301)
—
104,613
(45,744)
4,341
5,250
22,142
(2,697)
924,320
839,015
924,320
839,015
53
2019 Balance of sale
In June 2019, the Trust granted a balance of sale when it disposed of its Delson property. The principal amount
of the balance of sale is $6 million, bearing interest at 7% for the first 3 years, 7.5% for the 4th year and 8% for
the 5th year. It will mature on or before February 1st, 2024.
Amounts receivable from tenants and other receivables
Amounts receivable from tenants and other receivables increased from $3,246 as at December 31, 2018 to
$3,809 as at December 31, 2019. These amounts are summarized below:
(in thousands of dollars)
Rent receivable from tenants
Allowance for doubtful accounts
Unbilled recoveries
Other receivables
Amounts receivable from tenants and other receivables
Other assets
December 31,
2019
December 31,
2018
$
2,801
(716)
2,085
776
948
3,809
$
2,556
(567)
1,989
430
827
3,246
Other assets include property and equipment required for the Trust’s operations, net of accumulated depreciation
prepaid expenses and derivative financial instruments in debit positions. They are summarized below:
(in thousands of dollars)
Property and equipment
Accumulated depreciation
Prepaid expenses
Derivative financial instruments
Deposits
Other assets
Capital Ressources
Long-term debt
December 31,
2019
December 31,
2018
$
1,067
(804)
263
1,921
304
675
3,163
$
1,027
(698)
329
1,366
1,599
844
4,138
The following table shows the balances of BTB’s indebtedness on December 31, 2019, including mortgage loans
and convertible debentures, based on the year of maturity and corresponding weighted average contractual
interest rates:
Au December 31, 2019
(in thousands of dollars)
Balance of convertible
debentures
Balance of mortgages
payable
Weighted average
contractual interest rate
Year of maturity
2020
2021
2022
2023
2024
2025 and thereafter
Total
54
$
26,700
—
—
24,000
—
50,700
$
74,320
67,702
32,353
20,980
88,764
211,128
495,247
%
5.39
3.42
3.51
4.19
4.57
3.71
4.17
BTB ANNUAL REPORT
Weighted average contractual interest rate
As at December 31, 2019, the weighted average contractual interest rate of the Trust’s long-term debt stood
at 4.17%, i.e., 3.92% mortgage loans and 6.61% for convertible debentures.
Mortgage loans
As at December 31, 2019, the Trust’s total mortgage loans amounted to $495 million compared to $473 million
on December 31, 2018, before deferred financing expenses and valuation adjustments, an increase of $22 million
following the financing of acquisitions completed in 2019, refinancing and principal repayments on monthly
payments and dispositions.
The following table summarizes changes in mortgage loans payable during the quarters and years ended
December 31, 2019:
Periods ended December 31
(in thousands of dollars)
Balance at beginning of the period
Mortgage loans contracted
Balance repaid at maturity or upon disposal
Monthly principal repayments
Balance as at December 31, 2019
Quarter
$
496,937
2,000
—
(3,679)
495,247
Year
$
473,205
67,180
(31,608)
(13,530)
495,247
Note: Before unamortized financing expenses and valuation adjustments.
As at December 31, 2019, the weighted average interest rate was 3,92% compared to 3.99% on December 31,
2018, a decrease of 7 basis points. As at December 31, 2019, except for five loans with a cumulative balance of
$46.2 million, all mortgages payable bear interest at fixed rates ($387.0 million) or are subject to an interest
rate swap ($62.0 million).
The weighted average term of existing mortgage loans was 5.1 years as at December 31, 2019. It was 5.6 years
as at December 31, 2018, a decrease of 0.5 years (or 6 months) in one year. The decrease is mainly due to the
assumption of a mortgage loan with a remaining term of three years when the Trust purchased a property and
the short-term financing of the property “1327-1333 Ste-Catherine Street West and 1411 Crescent Street” with a
loan with a 2-year term until the leasing of this property is stabilized.
BTB attempts to spread the maturities of its mortgages over many years in order to mitigate the risk associated
with renewing them.
Except for three properties, two of them partially securing the acquisition and operating lines of credit as
at December 31, 2019 all of the Trust’s other properties were subject to mortgages as at December 31, 2019.
Unamortized loan financing expenses totalled $2,723 and are amortized under the effective interest method
over the term of the loans.
The following table, as at December 31, 2019, shows future mortgage loan repayments for the next few years:
As at December 31, 2019
(in thousands of dollars)
Maturity
2020
2021
2022
2023
2024
2025 and thereafter
Total
+ Valuation adjustments on assumed loans
- Unamortized financing expenses
Balance as at December 31, 2019
Principal
repayment
Balance at
maturity
Total
% of total
$
$
$
14,574
13,369
11,750
10,311
8,253
36,582
94,839
73,015
63,846
27,882
18,697
76,529
140,439
87,589
77,215
39,632
29,008
84,782
177,021
17.7
15.6
8.0
5.9
17.1
35.7
400,408
495,247
100.0
628
(2,723)
493,152
55
2019
As at December 31, 2019, the Trust was in compliance with all the covenants to which it was subject except
for one mortgage loan’s debt service coverage ratio. The mortgage loan is maturing in July 2020. The balance
of the said mortgage loan as at December 31, 2019 was $18 million. The Trust has always met the other
mortgage loan provisions and has never been late on a monthly payment. The Trust believes that the said
mortgage loan will be refinanced at maturity for the entire amount outstanding.
Convertible debentures
(in thousands of dollars)
Par value
Contractual interest rate
Effective interest rate
Date of issuance
Per-unit conversion price
Series F(1)(3)
Series G(2)(3)
Total
26,700
7.15%
8.47%
24,000
6.00%
7.30%
December 2015
October 2019
$5.65
$5.42
Date of interest payment
June 30 and December 31
April 30 and October 31
Maturity date
Balance as at
December 31, 2019
December 2020
October 2024
26,364
22,732
49,096
(1) Redeemable by the Trust before December 31, 2020, at a redemption price equal to their principal amount plus accrued and unpaid
interest.
(2) Redeemable by the Trust, under certain conditions, as of October 31, 2022, but before October 31, 2023, 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 G
conversion price and, as of October 31, 2023, but before October 31, 2024, at a redemption price equal to their principal amount plus
accrued and unpaid interest.
(3) The Trust may, at its option and under certain conditions, elect to satisfy its obligation to pay the principal amount of the Series F
and G debentures by issuing freely tradable units to Series F and G debenture holders.
Bank loan – operating credit facility
BTB has an operating credit facility of $3 million with a Canadian chartered bank. The facility bears interest at
a rate of 0.75% above the said bank’s prime rate. As at December 31, 2019, $2,260 of the operating credit facility
was used.
Bank loan – acquisition credit facility
BTB has an acquisition credit facility of $19 million with a Canadian chartered bank. The facility bears interest
at a rate of 3.25% above the said bank’s prime rate. As at December 31, 2019, $10.2 million of the acquisition
credit facility was used.
These two credit facilities are secured by a first-ranking collateral mortgage on two properties and a second-
ranking collateral mortgage on six properties.
Debt ratio
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 total value of the assets 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 failure to abide by this condition, the Trust has a 12-month
delay from the date of knowledge to remedy the situation.
56
BTB ANNUAL REPORT
The following table presents the Trust’s debt ratios as at December 31, 2019 and December 31, 2018.
(in thousands of dollars)
Free cash flow
Mortgage loans outsanding(1)
Convertible debentures(1)
Acquisition credit facility
Total long-term debt less free cash flow
Total value of the assets of the Trust less free cash flow
Mortgage debt ratio (excluding convertible debentures
and acquisition credit facility)
Debt ratio – convertible debentures
Debt ratio – acquisition line of credit
Total debt ratio
(1) Gross amounts.
December 31,
2019
December 31,
2018
$
(1,803)
495,247
50,700
10,200
554,344
938,131
52.8%
5.4%
1.1%
59.1%
$
(8,824)
473,205
49,700
15,000
529,081
847,097
55.8%
5.9%
1.8%
62.5%
According to the table above, the mortgage debt ratio, excluding the convertible debentures and acquisition
credit facility as at December 31, 2019, amounted to 52.8%, down 3.0% from December 31, 2018. Including
the convertible debentures and the acquisition credit facility, the total debt ratio stood at 59.1%, down 3.4%
from December 31, 2018.
The Trust seeks to finance its acquisitions with a maximum mortgage debt ratio of 65% since the cost
of financing is lower than the capital cost of the Trust’s equity.
Interest coverage ratio
For the quarter ended December 31, 2019, the interest coverage ratio stood at 2.34, an increase of 34 basis
points from the fourth quarter of 2018. For the year, the ratio stood at 2.18, a small increase of 1 basis points
compared to 2018.
Periods ended December 31
(in thousands of dollars, except for the ratios)
Net operating income
Net interest expense(1)
Interest coverage ratio
Quarter
Year
2019
$
14,174
6,064
2.34
2018
$
11,624
5,803
2.00
2019
$
50,897
23,402
2.18
2018
$
47,637
21,977
2.17
(1) Interest expense excludes accretion of effective interest, distribution on class B LP units, accretion of non-derivative liability component
of convertible debentures and the fair value adjustment on derivative financial instruments.
57
2019
Class B LP units
Periods ended December 31, 2019
Class B LP units outstanding, beginning of period
Exchange into Trust units
Fair value adjustment
Class B LP units outstanding, end of period
Quarter
Year
Units
532,265
(35,000)
—
497,265
$
2,528
(174)
217
2,571
Units
532,265
(35,000)
—
497,265
$
2,315
(174)
430
2,571
The Class B LP units are exchangeable at any time, at the option of the holder, for an equal number of units
of BTB trading on the TSX. They are entitled to receive the same distributions as declared on the BTB units.
Distributions paid on Class B LP units are recorded as financial expenses when declared. Distributions declared
are adjusted in calculating distributable income, FFO and AFFO.
The Class B LP units were issued on May 30, 2018 in consideration for the acquisition of the residual portion
of “Complexe Lebourgneuf – Phase II” in Québec City (less the portion related to the mortgage loan assumption
by BTB). The holders of these units were entitled to a $56 distribution during the fourth quarter of 2019 and
$224 for the year.
Accounts payable and other liabilities
(in thousands of dollars)
Trade and other payables
Distributions payable to unitholders
Unit-based compensation
Derivative financial instruments
Accounts payable and other liabilities
Unitholders’ equity
Unitholders’ equity consists of the following:
(in thousands of dollars)
Trust units
Cumulative comprehensive income
Distributions
Unitholders’ equity
Distribution reinvestment plan
December 31,
2019
December 31,
2018
$
17,984
2,179
1,050
45
21,258
$
17,048
1,936
669
—
19,653
December 31,
2019
December 31,
2018
$
305,029
185,706
(134,596)
356,139
$
274,231
133,825
(109,679)
298,377
A distribution reinvestment plan is in place under which unitholders may elect to receive payment of distributions
in units, at a 3% discount on the market value of the units at the time of payment. Under the program,
178,531 units were issued during the fourth quarter of 2019 (2018: 155,871 units) and 677,771 units were issued
in 2019 (2018: 603,951 units).
58
BTB ANNUAL REPORT
Units outstanding
The following table summarizes the total number of units outstanding during the reporting quarters and years
and the weighted number of units outstanding for the same quarters and years.
Periods ended December 31
(in number of units)
Quarter
Year
2019
2018
2019
2018
Units outstanding, beginning of the period
62,036,146
55,161,852
55,317,723
48,423,118
Units issued
Public offering
Distribution reinvestment plan
Awards - employee unit purchase plan
Awards - restricted unit compensation plan
Class B LP units exchange into Trust units
—
—
6,157,100
6,250,250
178,531
155,871
677,771
603,951
—
1,881
35,000
—
—
—
9,253
54,711
35,000
9,691
30,713
—
Units outstanding, end of the period
62,251,558
55,317,723
62,251,558
55,317,723
Weighted average number of units outstanding
62,139,488
55,240,257
59,098,137
52,120,760
Weighted average number of Class B LP units
and units outstanding
62,661,481
55,772,522
59,627,813
52,435,744
Deferred unit compensation plan
The Trust has implemented a deferred unit compensation plan for its trustees and certain executive officers.
Under this plan, beneficiaries may elect to receive their compensation in cash, deferred units or a combination
of both.
The following table summarizes deferred units outstanding during the quarters and years ended
December 31, 2019 and 2018.
Periods ended December 31
(in number of units)
Deferred units outstanding, beginning of the period
Deferred units issued – Trustees’ compensation
Distributions paid in units
Quarter
Year
2019
56,699
1,707
1,236
2018
34,143
2,115
797
2019
37,055
18,071
4,516
59,642
2018
12,330
22,173
2,552
37,055
Deferred units outstanding, end of the period
59,642
37,055
Restricted unit compensation plan
Under this plan, beneficiaries are awarded restricted units that become fully vested over a period of up to
three years. The purpose of the plan is to encourage senior officers and selected employees to support the
Trust’s long-term growth objectives and align their interests with the interests of unitholders. The purpose
of the plan is also an executive retention tool.
59
2019
The following table summarizes restricted units outstanding during the quarters and years ended
December 31, 2019 and 2018.
Periods ended December 31
(in number of units)
Quarter
Year
2019
2018
Restricted units outstanding, beginning of the period
167,892
138,919
Restricted units issued
Restricted units cancelled
Restricted units settled
153
(1,152)
(1,881)
—
—
—
Restricted units outstanding, end of the period
165,012
138,919
2019
138,919
82,622
(1,818)
(54,711)
165,012
2018
115,628
72,819
(18,815)
(30,713)
138,919
Employee unit purchase plan
The Trust offers its employees an optional unit purchase plan. Under this plan, the employees may contribute,
each year, a maximum of 3% to 7% of their base salary depending on their years of tenure with the Trust.
Subject to the plan’s conditions, for each two units purchased by an employee, the Trust shall issue one unit
from treasury. During the quarter ended December 31, 2019, no units were issued (2018: nil). During fiscal 2019,
11,194 units were issued. (2018: 9,253)
Off-balance sheet arrangements and contractual commitments
BTB does not have any other off-balance sheet arrangement or commitment that have or are likely to have
an impact on its operating results or financial position, specifically its cash position and sources of financing.
Sustainable Development
In line with the principles of sustainable development, BTB incorporates environmental and social considerations
into its business practices. Under BTB’s Social Responsibility and Sustainable Development Policy, its properties
are managed and operated to integrate sustainable development values into the Trust’s activities, to promote
the health and well-being of its employees and the communities where it operates, to manage its environmental
footprint, and to demonstrate a commitment to transparency and continuous improvement of sustainability
practices.
Ongoing improvement of properties through investment in environmental projects, amongst other things,
is a top priority for BTB. The tangible results of BTB’s responsible behaviour include BOMA BEST certification
for 23 properties, publication of the Social Responsibility and Sustainable Development Policy, a sustainable
development good practices guide for tenants, benchmarking of the real estate portfolio’s energy performance,
a partnership with a social reintegration organization for parking lot clean-up, development of a client service
and preventive maintenance software, and environmental risk management.
As mentioned above, BTB Real Estate Investment Trust contributes to sustainable development and is committed
to mobilizing employees, tenants and suppliers to make it a reality. The Trust believes that its commitment to
reduce its environmental footprint should be reflected not only across property operation, maintenance and
management, but in everything it does. Accordingly, since September 2015, 23 properties in BTB’s portfolio have
received various levels of BOMA BEST certification, including Gold (2), Silver (3), Bronze (6) and Certified (12).
This prestigious certification recognizing BTB’s excellence in environmental property management was awarded
by the Building Owners & Managers Association - BOMA Québec, a leader in the real estate industry since 1927.
In the future, BTB plans to continue to reduce the environmental footprint of its properties. Major projects,
such as the Halles St-Jean energy efficiency project in St-Jean-sur-Richelieu, are in the works to optimize
overall equipment performance and to upgrade buildings. BTB also expects to keep its BOMA BEST
certifications and achieve the highest level of performance for certain of its properties.
60
BTB ANNUAL REPORT Initiatives
BTB Bees – Alvéole: As an ecoresponsible landlord, BTB, in partnership with the firm Alvéole, has taken
part in a unique initiative to help regenerate an endangered species by installing beehives on the roofs
of 14 of its properties and this, since 2018. Alvéole’s dedicated beekeepers tend to the hives and its bees on
a bi-weekly basis and following the late summer harvest, BTB distributes the packaged honey to its clients
and collaborators.
Ecosystem Protection - Grame: In early September 2019, BTB’s team, in partnership with the non-profit
organization Grame, took part in a tree-planting event, not only to beautify the playground of a primary
and secondary school located in Montréal’s West Island, but to also help purify and filter the ecosystem.
More than forty-five of BTB’s employees volunteered their time to help plant more than 60 trees.
Social Reintegration - Société de Développement Social de Montréal: Since 2016, BTB has entrusted the Société
de Développement Social de Montréal (“SDS”) with the cleaning of its indoor parking facilities. With their mission
of fighting against homelessness and the social exclusion of its members, their program, Action Méditation,
provides psychosocial assistance to people who are or are at risk of becoming homeless, whilst facilitating
cohabitation and collaboration among various communities located in Montréal. The foundation is based on
a principle of social solidarity and the pooling of human, technical and economic resources to address serious
societalissues. SDSact as an intermediary between the business world and communities by transparently
and impartially involving businesses in more practical and humanitarian projects.
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 “nonportfolio 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, disposals of “real or immovable
properties” that are capital properties, dividends, royalties and disposals 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 disposals 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.
As at December 31, 2019, 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 ongoing 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 2020 or any other subsequent year.
61
2019 Taxation of Unitholders
For Canadian unitholders, distributions are qualified as follows for taxation purposes:
Periods ended December 31
Taxable as other income
Tax deferred
Total
2019
%
—
100
100
2018
%
—
100
100
Accounting Policies and Estimates
The preparation of consolidated financial statements requires management to make judgments, estimates
and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Estimates
are based on historical experience and other assumptions that are considered reasonable under given
circumstances. The result of the continual review of these estimates is the basis for exercising judgment on the
carrying amounts of assets and liabilities and the reported amounts of revenues and expenses. Actual results
may differ from these estimates. Critical judgments made by BTB in applying significant accounting policies, the
most significant of which is the fair value of investment properties, are described in Note 2 to the consolidated
financial statements.
The Trust used the income approach to determine fair value. Fair value is estimated by capitalizing the cash
flow that a property can reasonably be expected to produce over its remaining economic life. The income
approach is based on two methods: the overall capitalization rate method, whereby net operating income is
capitalized at the requisite overall capitalization rate, or the discounted cash flow method, whereby cash flows
are projected over the expected term of the investment plus a terminal value discounted using an appropriate
discount rate.
New Accounting Policies
On January 1, 2019, the Trust implemented the following changes in accounting policies.
i) IFRS 16, Leases
The Trust has initially adopted IFRS 16, Leases, as at January 1, 2019. IFRS 16 introduced a single, on-balance
sheet accounting model for lessees. As a result, the Trust, as a lessee, has recognized right-of-use assets
representing its rights to use the underlying assets and lease liabilities representing its obligation to make
lease payments.
The Trust has applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of
initial application is recognized in retained earnings at January 1, 2019. Accordingly, the comparative information
presented for 2018 has not been restated.
ii) Amendments to IFRS 3, Business combinations
The Trust early adopted the amendments to IFRS 3, Business combinations, which clarified the definition of
a business, with the objective of assisting entities in determining whether a transaction should be accounted
for as a business combination or as an asset acquisition. These amendments also include an optional test
(the concentration test) to permit a simplified assessment of whether an acquired set of activities and assets
is not a business. These amendments were applied to transactions for which the acquisition date was on or
after January 1, 2019.
62
BTB ANNUAL REPORT Risks and Uncertainties
Numerous risks and uncertainties could cause BTB’s actual results to differ materially from those expressed,
implied or projected in the forward-looking statements, including those described in the “Risk Factors” section
of BTB’s 2019 Annual Information Form for the year ended December 31, 2019, which is hereby incorporated by
reference. Such risks and uncertainties include:
• Access to Capital and to Debt Financing
• Interest Rate Increases
• Ownership of Immovable Property
• Competition and Rising Property Prices
• Availability of Immovable Property for Acquisition
• Development Programs
• Recruitment and Retention of Employees and Executives
• Government Regulation
• Limit on Activities Under the Trust Agreement
• Tax Regulations
• Fluctuations in Cash Distributions
• Reliance on Single or Anchor Tenants
• Potential Unitholder Liability
• Conflicts of Interest
• Market Price of Units
• Legal Rights Relating to Units
• Dilution
• Environmental Matters
• Legal Risks
• General Uninsured Losses
• Retail Industry
• A possible economic recession
BTB has not identified any significant changes to the risks and uncertainties to which it is exposed
in its business.
63
2019 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
consolidated financial statements. Based on these evaluations, the President and Chief Executive Officer
and the Executive Vice-President and Chief Financial Officer concluded that the DC&P were effective as at
December 31, 2019, and that the current controls and procedures provide reasonable assurance that material
information about BTB is made known to them during the quarter 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 BTB concluded that
ICFR was effective as at December 31, 2019, and, more specifically, that the financial reporting is reliable and
that the consolidated financial statements have been prepared for financial reporting purposes in accordance
with IFRS.
During the fourth quarter of 2019, management made no changes to internal control over financial reporting
that materially affected, or are likely to materially affect, internal control over financial reporting.
Appendix 1 – Performance Indicators
• 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, reduce its operating costs and
generate organic growth;
• 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 other non-cash items as well as
investments in rental fees and capital expenditures, and which may vary substantially from one year to the
next;
• The payout ratios, which enable investors to assess the stability of distributions against distributable income,
FFO and AFFO;
• The debt ratio, which is used to assess BTB’s financial stability and its capacity for additional acquisitions;
• The interest coverage ratio, which is used to measure BTB’s ability to use operating income to pay interest
on its debt using its operating revenues;
• The committed occupancy rate, which provides an indication of the optimization of rental space and the
potential revenue gain from the Trust’s property portfolio. This rate takes into account occupied leasable area
and the leasable area of leases that have been signed as of the end of the year but not yet started;
• The in-place occupancy rate, which shows the percentage of total income-producing leasable area held
at period end;
• The retention rate, which is used to assess the Trust’s ability to renew leases and retain tenants;
• The increase in average rate of renewed leases, which measures organic growth and the Trust’s ability
to increase its rental income.
64
BTB ANNUAL REPORT Appendix 2 – Definitions
Class B LP Units
Class B LP units means the Class B LP limited partnership units of BTB LP, which are exchangeable for units,
on a one for one basis.
Rental income
Rental income includes all amounts earned from tenants related to lease agreements, including basic rent
and additional rent from operating expense recoveries. It also includes other service charges for parking
and storage, lease termination revenues and straight-line rent adjustments.
Some of the Trust’s leases include clauses providing for the recovery of rental income based on amounts
that increase every few years. These increases are negotiated when the leases are signed. Under IFRS, these
increases must be recognized on a straight-line basis over the terms of the leases.
Operating expenses
Operating expenses are expenses directly related to real estate operations and are generally charged back
to tenants 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 tenants depends on the occupancy rate of the properties and the nature of the
existing leases containing clauses regarding the recovery of expenses. Most of BTB’s leases are net rental leases
under which tenants are required to pay their share of the properties’ operating expenses. BTB pays particular
attention to compliance with existing leases and the recovery of these operating expenses.
Net operating income
Net operating income is used in the real estate industry to measure operational performance. BTB defines it as
rental income from properties, less the combined 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.
Financial expenses
Financial expenses arise from the following loans and financings:
• Mortgage loans payable contracted or assumed totalling approximately $495 million
as at December 31, 2019, compared to $473 million as at December 31, 2018.
• Series F and G convertible debentures for a total par value of $50.7 million.
• Operating and acquisition lines of credit used as needed.
• 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.
Administration expenses
Administration expenses include administrative costs such as payroll expenses and professional fees
associated with executive and administrative staff of the Trust, the compensation plan for trustees, legal
and auditing services, expenses related to listed fund status, insurance costs, office expenses and bad debts
and related legal fees. Administration expenses include amortization of the head office building and property
and equipment, as well as unit-based compensation, a non-monetary item that affects the volatility of
administrative expenses from quarter to quarter.
65
2019 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 quarters 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 quarter 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.
Same-property portfolio
The same-property portfolio includes all the properties owned by BTB as at January 1, 2019 and still owned
as at December 31, 2019, but does not include the financial impacts from disposals, acquisitions and
developments completed in 2018 and 2019, as well as the results of subsequently sold properties.
Net property income from the same-property portfolio
Net property income from the same-property portfolio provides an indication of the profitability of existing
portfolio operations and BTB’s ability to increase its revenues and reduce its costs. It is defined as rental
income from properties from the same-property portfolio, less operating expenses and interest on mortgage
financing of the same portfolio.
Distributable income
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 fair value adjustments of investment properties and derivative financial
instruments, accretion of the liability component of convertible debentures, rental income 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.
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 following is a list of some of the adjustments to net income, calculated according to
IFRS:
• Fair value adjustment on investment properties;
• Amortization of lease incentives;
• Fair value adjustment on derivative financial instruments;
• Leasing payroll expenses (starting in 2016);
• Distributions on Class B LP limited partnership units.
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.
66
BTB ANNUAL REPORT 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 and equipment;
• Unit-based compensation expenses.
Furthermore, the Trust deducts a provision for non-recoverable capital expenditures in calculating AFFO.
The Trust allocates significant amounts to the regular maintenance of its properties to attempt to reduce
capital expenses as much as possible. The allocation for non-recoverable capital expenditures is calculated
on the basis of 2% of rental revenues.
The Trust also deducts a provision for rental fees in the amount of approximately 25¢ 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
not recovered directly in establishing the rent that the Trust will undertake. These disbursements consist of
inducements paid or granted when leases are signed that are generally amortized over the term of the lease
and are subject to an equivalent increase in rent per square foot, and of brokerage commissions and leasing
payroll expenses.
67
2019 68
BTB ANNUAL REPORT Audited
Consolidated
Financial
Statements
Year ended December 31, 2019
TABLE OF CONTENTS
74 Consolidated Statements
of Financial Position
75 Consolidated Statements
of Comprehensive Income
76 Consolidated Statements of
Changes in Unitholders’ Equity
77 Consolidated Statements
of Cash Flows
78 Notes to Consolidated
Financial Statements
69
2019 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, 2019, 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 LLP, 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, 2019 and
2018 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 11, 2020
70
BTB ANNUAL REPORT KPMG LLP
600 de Maisonneuve Blvd. West
Suite 1500, Tour KPMG
Montréal (Québec) H3A 0A3
Canada
Telephone
Fax
Internet
(514) 840-2100
(514) 840-2187
www.kpmg.ca
INDEPENDENT AUDITORS’ REPORT
To the Unitholders of BTB Real Estate Investment Trust
Opinion
We have audited the consolidated financial statements of BTB Real Estate Investment Trust
(the "Entity"), which comprise:
•
•
•
•
•
the consolidated statements of financial position as at December 31, 2019 and 2018
the consolidated statements of comprehensive income for the years then ended
the consolidated statements of changes in unitholders’ equity for the years then ended
the consolidated statements of cash flows for the years then ended
and notes to the consolidated financial statements, including a summary of significant accounting
policies
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the
consolidated financial position of the Entity as at December 31, 2019 and 2018, and its consolidated
financial performance and its consolidated cash flows for the years then ended in accordance with
International Financial Reporting Standards ("IFRS").
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the "Auditors’ Responsibilities for
the Audit of the Financial Statements" section of our auditors’ report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our
audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our 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.
71
2019
Other Information
Page 2
Management is responsible for the other information. Other information comprises:
the information, other than the financial statements and the auditors’ report thereon, included in Management’s
•
Autres informations
Discussion and Analysis filed with the relevant Canadian Securities Commissions.
La responsabilité des autres informations incombe à la direction. Les autres informations se
•
composent :
the information, other than the financial statements and the auditors’ report thereon, included in a document likely to be
entitled “Annual Report”.
•
du rapport de gestion déposé auprès des commissions des valeurs mobilières canadiennes
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon.
compétentes;
In connection with our audit of the financial statements, our responsibility is to read the other information identified
•
des informations contenues dans un document susceptible de s'intituler « Rapport annuel sur
above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or
papier », autres que les états financiers et le rapport des auditeurs sur ces états.
our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially
misstated.
Notre opinion sur les états financiers ne s'étend pas aux autres informations et nous n'exprimons et
n'exprimerons aucune forme d'assurance que ce soit sur ces informations.
We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities
Commissions as at the date of this auditors’ report. If, based on the work we have performed on this other information, we
En ce qui concerne notre audit des états financiers, notre responsabilité consiste à lire les autres
conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors’
informations identifiées ci-dessus et, ce faisant, à apprécier s'il existe une incohérence significative
report.
entre celles-ci et les états financiers ou la connaissance que nous avons acquise au cours de l'audit,
We have nothing to report in this regard.
et à demeurer attentifs aux éléments indiquant que les autres informations semblent comporter une
The information, other than the financial statements and the auditors’ report thereon, included in a document likely to be
anomalie significative.
entitled “Annual Report” is expected to be made available to us after the date of this auditors’ report. If, based on the work
we will perform on this other information, we conclude that there is a material misstatement of this other information, we are
Nous avons obtenu les informations contenues dans le rapport de gestion déposé auprès des
required to report that fact to those charged with governance.
commissions des valeurs mobilières canadiennes compétentes à la date du présent rapport des
auditeurs. Si, à la lumière des travaux que nous avons effectués sur ces autres informations, nous
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
concluons à la présence d'une anomalie significative dans ces autres informations, nous sommes tenus
de signaler ce fait dans le rapport des auditeurs.
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS,
and for such internal control as management determines is necessary to enable the preparation of financial statements that
Nous n'avons rien à signaler à cet égard.
are free from material misstatement, whether due to fraud or error.
Nous nous attendons à obtenir les informations contenues dans un document susceptible de s'intituler
In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going
« Rapport annuel sur papier », autres que les états financiers et le rapport des auditeurs sur ces états,
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.
après la date du présent rapport des auditeurs. Si, à la lumière des travaux que nous effectuerons sur
ces autres informations, nous concluons à la présence d'une anomalie significative dans ces autres
Those charged with governance are responsible for overseeing the Entity’s financial reporting process.
informations, nous serons tenus de signaler ce fait aux responsables de la gouvernance.
Auditors’ Responsibilities for the Audit of the Financial Statements
Responsabilités de la direction et des responsables de la gouvernance à l’égard
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
des états financiers
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
La direction est responsable de la préparation et de la présentation fidèle des états financiers
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
conformément aux Normes internationales d’information financière (IFRS), ainsi que du contrôle
Canadian generally accepted auditing standards will always detect a material misstatement when it exists.
interne qu’elle considère comme nécessaire pour permettre la préparation d’états financiers exempts
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
d’anomalies significatives, que celles-ci résultent de fraudes ou d’erreurs.
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Lors de la préparation des états financiers, c’est à la direction qu’il incombe d’évaluer la capacité de
l’entité à poursuivre son exploitation, de communiquer, le cas échéant, les questions relatives à la
continuité de l’exploitation et d’appliquer le principe comptable de continuité d’exploitation, sauf si la
direction a l’intention de liquider l’entité ou de cesser son activité ou si aucune autre solution réaliste
ne s’offre à elle.
Il incombe aux responsables de la gouvernance de surveiller le processus d’information financière de
l’entité.
72
BTB ANNUAL REPORT As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment
Page 2
and maintain professional skepticism throughout the audit.
We also:
Autres informations
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion.
La responsabilité des autres informations incombe à la direction. Les autres informations se
Page 4
composent :
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
• Communicate with those charged with governance regarding, among other matters, the planned
•
du rapport de gestion déposé auprès des commissions des valeurs mobilières canadiennes
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
scope and timing of the audit and significant audit findings, including any significant deficiencies
compétentes;
in internal control that we identify during our audit.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
•
•
des informations contenues dans un document susceptible de s'intituler « Rapport annuel sur
• Provide those charged with governance with a statement that we have complied with relevant
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control.
papier », autres que les états financiers et le rapport des auditeurs sur ces états.
ethical requirements regarding independence, and communicate with them all relationships and
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
other matters that may reasonably be thought to bear on our independence, and where
disclosures made by management.
applicable, related safeguards.
•
Notre opinion sur les états financiers ne s'étend pas aux autres informations et nous n'exprimons et
n'exprimerons aucune forme d'assurance que ce soit sur ces informations.
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
En ce qui concerne notre audit des états financiers, notre responsabilité consiste à lire les autres
doubt on the Entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we
informations identifiées ci-dessus et, ce faisant, à apprécier s'il existe une incohérence significative
are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such
entre celles-ci et les états financiers ou la connaissance que nous avons acquise au cours de l'audit,
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a going
et à demeurer attentifs aux éléments indiquant que les autres informations semblent comporter une
concern.
anomalie significative.
The engagement partner on the audit resulting in this auditors’ report is Philippe Grubert.
Page 4
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and
•
Nous avons obtenu les informations contenues dans le rapport de gestion déposé auprès des
whether the financial statements represent the underlying transactions and events in a manner that achieves fair
commissions des valeurs mobilières canadiennes compétentes à la date du présent rapport des
presentation.
Montréal, Canada
• Communicate with those charged with governance regarding, among other matters, the planned
auditeurs. Si, à la lumière des travaux que nous avons effectués sur ces autres informations, nous
Communicate with those charged with governance regarding, among other matters, the planned scope and timing of
•
scope and timing of the audit and significant audit findings, including any significant deficiencies
March 11, 2020
concluons à la présence d'une anomalie significative dans ces autres informations, nous sommes tenus
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
in internal control that we identify during our audit.
de signaler ce fait dans le rapport des auditeurs.
audit.
• Provide those charged with governance with a statement that we have complied with relevant
Provide those charged with governance with a statement that we have complied with relevant ethical requirements
•
Nous n'avons rien à signaler à cet égard.
ethical requirements regarding independence, and communicate with them all relationships and
regarding independence, and communicate with them all relationships and other matters that may reasonably be thought
other matters that may reasonably be thought to bear on our independence, and where
to bear on our independence, and where applicable, related safeguards.
applicable, related safeguards.
Nous nous attendons à obtenir les informations contenues dans un document susceptible de s'intituler
« Rapport annuel sur papier », autres que les états financiers et le rapport des auditeurs sur ces états,
après la date du présent rapport des auditeurs. Si, à la lumière des travaux que nous effectuerons sur
ces autres informations, nous concluons à la présence d'une anomalie significative dans ces autres
informations, nous serons tenus de signaler ce fait aux responsables de la gouvernance.
Responsabilités de la direction et des responsables de la gouvernance à l’égard
des états financiers
The engagement partner on the audit resulting in this auditors’ report is Philippe Grubert.
La direction est responsable de la préparation et de la présentation fidèle des états financiers
conformément aux Normes internationales d’information financière (IFRS), ainsi que du contrôle
Montréal, Canada
interne qu’elle considère comme nécessaire pour permettre la préparation d’états financiers exempts
March 11, 2020
d’anomalies significatives, que celles-ci résultent de fraudes ou d’erreurs.
Lors de la préparation des états financiers, c’est à la direction qu’il incombe d’évaluer la capacité de
l’entité à poursuivre son exploitation, de communiquer, le cas échéant, les questions relatives à la
continuité de l’exploitation et d’appliquer le principe comptable de continuité d’exploitation, sauf si la
direction a l’intention de liquider l’entité ou de cesser son activité ou si aucune autre solution réaliste
ne s’offre à elle.
*CPA auditor, CA, public accountancy permit No. A120220
Il incombe aux responsables de la gouvernance de surveiller le processus d’information financière de
l’entité.
73
*CPA auditor, CA, public accountancy permit No. A120220
2019
Consolidated Statements of Financial Position
As at December 31, 2019 and 2018 (in thousands of CAD dollars)
Notes
2019
$
2018
$
4
11
5
4
6
7
8
9
23
10
12
11
924,320
839,015
263
304
2,596
6,035
3,809
1,803
329
1,599
2,210
—
3,246
8,824
939,130
855,223
493,152
49,096
12,460
4,454
2,571
1,050
45
17,984
2,179
582,991
356,139
939,130
471,162
48,716
15,000
—
2,315
669
—
17,048
1,936
556,846
298,377
855,223
ASSETS
Investment properties
Property and equipment
Derivative financial instruments
Other assets
Balance of sale
Receivables
Cash and cash equivalents
Total assets
LIABILITIES AND UNITHOLDERS’ EQUITY
Mortgage loans payable
Convertible debentures
Bank loans
Lease liabilities
Class B LP Units
Unit-based compensation
Derivative financial instruments
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 11, 2020.
Michel Léonard, Trustee
Jocelyn Proteau, Trustee
74
BTB ANNUAL REPORT
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2019 and 2018 (in thousands of CAD dollars)
Notes
2019
$
2018
$
14
93,602
87,423
Operating revenues
Rental revenues
Operating expenses
Public utilities and other operating expenses
Property taxes and insurance
Net operating income
Financial income
Expenses
Financial expenses
10
10
15
Distributions - Class B LP Units
Fair value adjustment – Class B LP Units
Net adjustment to fair value of derivative financial instruments
Net financial expenses
Administration expenses
Gain on disposition of property and equipment
Gain on debt extinguishment
Prepayment penalties
Net change in fair value of investment properties, net of disposition expenses
4
Net income being total comprehensive income for the year
See accompanying notes to consolidated financial statements.
20,558
22,147
42,705
19,666
20,120
39,786
50,897
47,637
475
76
25,115
224
430
1,340
27,109
23,141
131
(176)
(229)
22,867
5,515
4,906
—
—
176
(1,192)
(133)
—
(33,309)
51,881
(20,072)
41,337
75
2019
Consolidated Statements of Changes in Unitholders’ Equity
For the years ended December 31, 2019 and 2018 (in thousands of CAD dollars)
Notes
Unitholders’
contributions
Cumulative
distributions
Cumulative
comprehensive
income
Total
Balance at January 1, 2019
Issuance of units, net of issuance costs
Distributions to unitholders
Comprehensive income
Balance as at December 31, 2019
Balance at January 1, 2018
Issuance of units, net of issuance costs
Distributions to unitholders
Comprehensive income
13
13
13
13
(109,679)
133,825
298,377
274,231
30,798
—
305,029
—
—
(24,917)
(134,596)
—
305,029
(134,596)
—
—
133,825
51,881
185,706
30,798
(24,917)
304,258
51,881
356,139
244,115
30,116
—
274,231
(87,656)
92,488
248,947
—
(22,023)
(109,679)
—
—
92,488
41,337
30,116
(22,023)
257,040
41,337
Balance as at December 31, 2018
274,231
(109,679)
133,825
298,377
See accompanying notes to consolidated financial statements.
76
BTB ANNUAL REPORT
Consolidated Statements of Cash Flows
For the years ended December 31, 2019 and 2018 (in thousands of CAD dollars)
Operating activities
Net income for the year
Adjustment for:
Notes
2019
$
2018
$
51,881
41,337
Net change in fair value of investment properties and disposition expenses
4
(33,309)
(20,072)
Gain on debt extinguishment
Gain on disposition of property and equipment
Depreciation of property and equipment
Unit-based compensation
Straight-line lease adjustment
Lease incentive amortization
Financial income
Net financial expenses
Net change in non-cash operating items
Net cash from operating activities
Investing activities
Increase in investment properties
Acquisition of a business
Net proceeds from disposition of investment properties
Additions to property and equipment
Disposition of Owner-occupied
land and Building
Net cash used in investing activities
Financing activities
Mortgage loans, net of financing expenses
Repayment of mortgage loans
Bank loans, net of financing expenses
Repayment of bank loans
Lease liability payments
Net proceeds from issuance of convertible debentures
Repayment of convertible debentures
Net proceeds from issuance of units
Net distributions to unitholders
Net distributions – Class B LP units
Interest paid
Net cash (used in) from financing activities
Net change 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.
12
14
14
15
4
4
4
13
10
—
—
106
676
(703)
3,003
(475)
27,109
48,288
(1,065)
47,223
(133)
(1,192)
90
355
(525)
3,223
(76)
22,867
45,874
(1,150)
44,724
(35,082)
(104,262)
—
16,556
(40)
—
(18,566)
17,841
(32,604)
14,560
(17,100)
(42)
22,678
(23,000)
27,220
(21,565)
(224)
(23,442)
(35,678)
(7,021)
8,824
1,803
(43)
43,690
(214)
3,082
(57,747)
103,180
(66,292)
16,580
(19,710)
—
—
—
27,239
(19,086)
(131)
(21,851)
19,929
6,906
1,918
8,824
77
2019
Notes to Consolidated Financial Statements
For the years ended December 31, 2019 and 2018 (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 1411 Crescent Street, Suite 300, Montreal, Quebec, Canada. The consolidated
financial statements of BTB for the years ended December 31, 2019 and 2018 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
Standard (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
This is the first set of the Trust’s annual financial statements in which IFRS 16 Leases and Amendments to
IFRS 3, Business combinations have been applied. Changes to significant accounting policies are described
in Note 3 (a) i) and ii).
These consolidated financial statements were approved by the Board of Trustees on March 11, 2020.
b) Basis of presentation and 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 which are measured at fair value:
• Investment properties (including right-of-use assets);
• Derivative financial instruments;
• Unit-based compensation;
• Class B LP Units.
The Trust presents its consolidated statements of financial position based on the liquidity method,
whereby all assets and liabilities are presented in increasing order of liquidity.
c) Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is BTB’s functional currency.
All financial information 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. Revisions to accounting estimates are recognized in the period in which the estimates are
revised and in any future periods affected. 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:
78
BTB ANNUAL REPORT i) Critical judgements in applying accounting policies
The following are critical judgements that management has made in the process of applying accounting
policies and that have the most significant effect on the amounts recognized in the consolidated financial
statements:
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 an acquired process (or group of processes) is considered substantive 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 and types of investment properties acquired.
In addition, the Trust can elect for each transaction or other event to apply the optional test (the concentration
test) to permit a simplified assessment of whether an acquired set of activities and assets is not a business.
An acquisition of a business is accounted for as a business combination under IFRS 3, Business
Combinations.
When the acquisition does not represent a business, it is accounted for as an acquisition of assets and
liabilities in which case, 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.
Partially owner-occupied property
The Trust owns a property which is partially owner-occupied with the rest being held for rental income
and capital appreciation. The Trust has determined that only an insignificant portion is owner-occupied
and therefore the entire property has been accounted for as an investment property. In determining whether
the portion is insignificant the Trust used a 10% threshold on the fair value of the property.
ii) Key sources of estimation uncertainty
The following are key assumptions concerning the future and other key sources of estimation uncertainty
that have a significant risk of resulting in a material adjustment to the carrying amount of assets and
liabilities within the next financial year:
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 the Discounted Cash Flow
Method and the Direct Capitalization method and in some cases, the Comparable method.
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 costs, 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.
79
2019 The significant methods and assumptions used by management and the independent external appraisers
in estimating the fair value of investment properties are set out below:
Techniques used for valuing investment properties
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 estimated fair value of the investment property.
The Direct Capitalization method converts anticipated future cash flow benefits in the form of rental
income into present value. This approach requires estimation of normalized annual future cash inflows
and application of investor yield or return requirements.
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 and if the entire contract is not
measured at fair value with changes in fair value recognized in profit and loss.
3. Significant Accounting Policies
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements.
a) New accounting standards adopted
On January 1, 2019, the Trust adopted IFRS 16 Leases (“IFRS 16”) and amendments to IFRS 3 Business combinations
(“IFRS 3”). The impacts are described below.
i) IFRS 16
The Trust adopted all of the requirements of IFRS 16 with a date of initial application of January 1, 2019.
See note 3 (f) for a discussion of the impact of the adoption and the change in significant accounting policy.
ii) Amendments to IFRS 3, Business combinations:
On January 1, 2019, the Trust early adopted the amendments to IFRS 3, Business combinations, which clarified
the definition of a business, with the objective of assisting entities in determining whether a transaction
should be accounted for as a business combination or as an asset acquisition. These amendments also
include an optional test (the concentration test) to permit a simplified assessment of whether an acquired
set of activities and assets is not a business. These amendments were applied to transactions for which
the acquisition date was on or after January 1st, 2019.
80
BTB ANNUAL REPORT b) 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 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 identifiable assets acquired and liabilities assumed, generally at fair value, 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.
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. Subsidiaries
are consolidated 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.
c) Financial instruments
i) Recognition and initial measurement
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. If a financial asset
or liability is not subsequently measured at fair value through profit or loss (FVTPL), the initial measurement
includes transaction costs that are directly attributable to its acquisition or issue.
Financial assets and liabilities are offset and the net amount is reported in the statement of financial
position when there is a legally enforceable right to offset the recognized amounts and there is an intention
to settle on a net basis or realize the asset and settle the liability simultaneously.
ii) Classification and subsequent measurement
The Trust classifies its financial assets and financial liabilities in the following measurement categories:
• those to be measured subsequently at FVTPL; and
• those to be measured at amortized cost.
The classification of financial assets depends on the business model for managing the financial assets
and the contractual terms of the cash flows, and on the Trust’s designation of such instruments. Financial
liabilities are classified as those to be measured at amortized cost unless they are designated as those to be
measured subsequently at FVTPL.
Financial instruments are not reclassified subsequent to their initial recognition, unless the Trust identifies
changes in its business model in managing financial assets and would reassess the classification of financial
instruments.
81
2019 The Trust’s business model objective is to collect contractual cash flows and the contractual cash flows
are solely payments of principal and/or interest, and as such financial assets are generally subsequently
measured at amortized cost using the effective interest method net of any impairment loss. All other
financial assets, including derivatives, are subsequently measured at FVTPL.
Financial assets measured at amortized cost comprise cash and cash equivalents, restricted cash,
receivables and deposits.
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.
Financial liabilities are generally subsequently measured at amortized cost using the effective interest
method unless they are held for trading, they are derivatives or they have been designated as those to be
measured subsequently at FVTPL.
Financial liabilities measured at amortized cost 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.
Derivative financial instruments are subsequently measured at fair value, and changes therein are recognized
immediately in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether
their cash flows are solely payments of principal and interest. Embedded derivatives in financial liabilities
are treated as separate derivatives when their risks and characteristics are not closely related to those
of the host contract, a separate instrument with the same terms as the embedded derivative meets the
definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.
Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.
The following table summarizes the classification under IFRS 9:
Asset/Liability
Cash and cash equivalents
Restricted cash
Receivables
Deposits
Mortgage loans payable
Convertible debentures
Bank loans
Trade and other payables
Distribution payable to unitholders
Derivative financial instruments
Class B LP Units
82
Classification under IFRS 9
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value through profit and loss
Fair value through profit and loss
BTB ANNUAL REPORT iii) Impairment
The Trust uses the expected credit loss (ECL) model for calculating impairment and recognizes expected
credit losses as a loss allowance in the consolidated statement of financial position if they relate to a
financial asset measured at amortized cost. For trade receivables, the Trust applies the simplified approach
as permitted by IFRS 9 which requires lifetime expected credit losses be recognized from initial recognition
of receivables. The carrying amount of these assets in the consolidated statement of financial position is
stated net of any loss allowance.
Impairment losses are recorded in the Trust administration expenses in the consolidated statement of
comprehensive income with the carrying amount of the financial asset or group of financial assets reduced
through the use of impairment allowance accounts. In periods subsequent to the impairment where the
impairment loss has decreased, and such decrease can be related objectively to conditions and changes in
factors occurring after the impairment was initially recognized, the previously recognized impairment loss
would be reversed through the consolidated statement of comprehensive income. The impairment reversal
would be limited to the lesser of the decrease in impairment or the extent that the carrying amount of the
financial asset at the date the impairment is reversed does not exceed what the amortized cost would have
been had the impairment not been recognized, after the reversal.
iv) 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.
v) Convertible debentures
The convertible debentures, which are considered financial liabilities, are convertible into Trust units.
Since BTB’s trust units meet the definition of a financial liability, the conversion and redemption options
are considered embedded derivatives. As the conversion and redemption options are not considered
closely related to the debt contract host, the non-derivative and derivative components of the convertible
debentures are separated upon initial recognition using the residual fair value approach. Subsequently,
the non-derivative liability component is measured at amortized cost.
vi) Class B LP Units
The Class B LP Units issued by one of the limited partnerships that the Trust controls, are classified as
“financial liabilities”, as they are exchangeable into Trust units on a one-for-one basis at any time at the
option of the holder. The Class B LP Units are measured at fair value and presented as part of the liabilities
in the statement of financial position, with changes in fair value recorded in the statement of comprehensive
income. The fair value of the Class B LP Units is determined with reference to the market price of the Trust
units on the date of measurement. Distributions on the Class B LP Units are recognized in the statement
of comprehensive income when declared.
d) Investment properties
Investment properties are held either to earn rental income or for capital appreciation or for both, but
not for sale in the ordinary course of business, use in the production or supply of goods or services or for
administrative purposes. Investment properties are measured at cost on initial recognition and subsequently
at fair value with any change therein recognized in profit or loss. The Trust capitalizes the costs incurred to
increase 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 properties 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 properties.
83
2019 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 properties and
then considered in the fair value adjustment of the investment properties at the next reporting period.
Should the use of an investment property change and be reclassified as property and equipment, its fair value
at the date of reclassification would become its cost for subsequent accounting.
e) Property and equipment
i) Recognition and measurement
Property and equipment is measured at cost less accumulated depreciation and accumulated impairment
losses.
When parts of an item of property and equipment have different useful lives, they are accounted
for as separate items (major components).
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:
Equipment, furniture and fixtures
Rolling stock
3 - 10 years
3 - 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.
f) Leases
The Trust has initially adopted IFRS 16 Leases as at January 1, 2019. IFRS 16 introduced a single, on-balance
sheet accounting model for lessees. As a result, the Trust, as a lessee, has recognized right-of-use assets
representing its rights to use the underlying assets and lease liabilities representing its obligation to make
lease payments. Lessor accounting remains similar to previous accounting policies.
The Trust has applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of
initial application is recognized in retained earnings at January 1, 2019. Accordingly, the comparative information
presented for 2018 has not been restated – i.e. it is presented, as previously reported, under IAS 17 and related
interpretations. The details of the changes in accounting policies are disclosed below.
On transition to IFRS 16, the Trust elected to apply the practical expedient to grandfather the assessment
of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases.
Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. Therefore, the
definition of a lease under IFRS 16 has been applied only to contracts entered into or changed on or after
January 1, 2019.
The Trust also applied the exemption not to recognize right-of-use assets and lease liabilities for leases
previously classified as an operating lease applying IAS 17 where the lease term at the transition date is less
than 12 months.
84
BTB ANNUAL REPORT As a result of the adoption of IFRS 16, the Trust updated its accounting policy for leases as follows:
i) Significant accounting policies
At contract inception, the Trust now assesses whether a contract is or contains a lease based on the new
definition of a lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to
control the use of an identified asset for a period of time in exchange for consideration
At inception or on reassessment of a contract that contains a lease component, the Trust allocates
the consideration in the contract to each lease and non-lease component on the basis of their relative
stand-alone prices.
ii) As a lessor
The Trust leases out its investment property, including right-of-use assets. The Trust has classified these
leases as operating leases. The accounting policies applicable to the Trust as a lessor are not different
from those under IAS 17. The Trust is not required to make any adjustments on transition to IFRS 16
for leases in which it acts as a lessor. However, the Trust has applied IFRS 15 Revenue from Contracts
with Customers to allocate consideration in the contract to each lease and non-lease component.
iii) As a lessee
Prior to the adoption of IFRS 16, leases of assets classified as finance leases were presented in the consolidated
statements of financial position according to their nature. The interest element of the lease payment was
recognized over the term of the lease based on the effective interest rate method and was included in
financing expense. Payments made under operating leases were recognized in expenses on a straight-line
basis over the term of the lease.
Since the adoption of IFRS 16, the Trust recognizes a right-of-use asset and a lease liability at the lease
commencement date. Right-of-use assets that meet the definition of investment property are presented
within investment property. These right-of-use assets are initially measured at cost, and subsequently
measured at fair value, in accordance with the Trust’s accounting policies.
However, the Trust has elected not to recognize right-of-use assets and lease liabilities for some leases
of low-value assets (e.g. equipment). The Trust recognizes the lease payments associated with these leases
as an expense on a straight-line basis over the lease term.
The lease liability is initially measured at the present value of the lease payments that are not paid at
the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be
readily determined, the Trust’s incremental borrowing rate for similar assets. Generally, the Trust uses
its incremental borrowing rate as the discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease
payments made. It is remeasured when there is a change in future lease payments arising from a change
in an index or rate, a change in the estimate of the amount expected to be payable under a residual value
guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is
reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
iv) Consequences of transition
Previously, the Trust classified its emphyteutic leases of land as operating leases under IAS 17 and included
the related rent expense in operating costs. At transition, the related lease liabilities were measured at the
present value of the remaining lease payments, discounted at the Trust’s incremental borrowing rate as at
January 1, 2019 for a similar term as that of the lease obligations being measured (the weighted-average
rate applied is 5%), giving rise to an amount of $3,900. Right-of-use assets for these emphyteutic leases,
which are classified as investment property, were measured at their fair value on transition, which amount
approximated the amount of the lease liability.
The Trust also leases equipment that is included in one of its investment properties. This lease was
classified as finance leases under IAS 17. For this finance lease, the carrying amount of the right-of-use
asset and the lease liability as at January 1, 2019 were determined to be the carrying amount of the leased
asset and lease liability under IAS 17 immediately before transition, i.e., an amount of $596.
85
2019 The following table reconciles the operating lease commitments disclosed under IAS 17 as at
December 31, 2018 and the lease liabilities recognized on January 1, 2019:
Operating lease commitments as at December 31, 2018 as disclosed in the Trust’s consolidated
financial statements
Recognition exemption for short-term leases and leases of low-value items
Impact of discounting using the incremental borrowing rate as at January 1, 2019
Finance lease liabilities previously recognized as at December 31 2018 under IAS 17
Lease liabilities recognized as at January 1st, 2019
January 1st, 2019
$
15,012
(107)
(11,005)
596
4,496
g) Provisions
Provisions are recognized when the Trust has a present obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation,
and a reliable estimate can be made of the amount of the obligation. Where the Trust expects some or all of a
provision to be reimbursed, the reimbursement is recognized as a separate asset. The expense relating to any
provision is presented in profit or loss, 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.
h) Revenue recognition
i) Rental revenue – lease components
Rental revenue for lease components is recognized when the service has been rendered and the amount
of expected consideration can be reliably estimated, which is over the term of the related lease.
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 profit or loss 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 straight-line lease
adjustments are recognized within investment properties. 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 and are recognized as adjustments to the carrying amount of investment
properties. 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.
Cancellation fees or premiums received to terminate leases are recognized in profit and loss at the effective
date of the lease termination and when the Trust no longer has any performance obligations under the
related lease.
ii) Rental revenue – non-lease components
Leases generally provide for the tenants’ payment of maintenance expenses of common elements and other
operating costs. These services are considered to be a single performance obligation rendered to tenants
over time. These recoveries are accounted for as variable consideration and are recognized as operating
revenues in the periods in which the services are provided.
i) Government grants
Government grants are recognized initially as deferred income at fair value when there is reasonable assurance
that they will be received and the Trust will comply with the conditions associated with the grant. Grants that
compensate the Trust for expenses incurred are recognized in profit or loss on a systematic basis in the same
periods in which the expenses are recognized. Grants that compensate the Trust for the cost of an asset are
deducted from the carrying amount of the asset.
86
BTB ANNUAL REPORT
j) Earnings per unit
The Trust presents basic earnings per unit data for its Trust units. Basic earnings per unit are calculated by
dividing the profit or loss attributable to unit holders of the Trust by the weighted average number of Trust
units outstanding during the period.
k) Financial income and financial expenses
Financial income comprises interest income on funds invested and balance of sale. Interest income is
recognized as it accrues in profit or loss, using the effective interest method.
Financial expenses comprise interest on mortgage loans payable, convertible debentures, bank loans, lease
liabilities and other payables, as well as accretion of the non-derivative liability component of convertible
debentures, and accretion of effective interest on mortgage loans payable and convertible debentures.
Net financial expenses comprise financial expenses, distributions to Class B LP unitholders, fair value
adjustment on Class B LP Units and changes in the fair value of derivative financial instruments.
l) Operating segment
An operating segment is a component of the Trust that engages in business activities from which it may
earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of
the Trust’s other components. All operating segments’ operating results are reviewed regularly by the Trust’s
Chief Executive Officer (‘’CEO’’) to make decisions about resources to be allocated to the segment and assess
its performance, and for which discrete financial information is available. Segment results that are reported to
the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable
basis.
m) Unit-based compensation
i) 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 units, 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.
ii) 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 units, and are revalued
at settlement date. Any changes in fair value are recognized as compensation expense in profit or loss.
iii) Restricted unit compensation plan
Compensation costs related to the restricted unit compensation 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 units, 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. The compensation expense is amortized using the graded vesting
method.
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.
87
2019 o) Fair value measurement
The Trust measures financial instruments, such as derivatives, and non-financial assets, such as investment
properties (including right-of-use assets), 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.
4. Investment Properties
For the years ended December 31,
Balance beginning of year
Initial recognition of right-of-use assets
Acquisitions of investment properties (note 4(a))
Business combination
Dispositions of investment properties (note 4(b))
Capital expenditures
Capitalized leasing fees
Capitalized lease incentives
Lease incentives amortization
Straight-line lease adjustment
Net changes in fair value of investment properties (note 4 (c))
Balance end of year
88
2019
$
839,015
3,900
75,658
—
(35,950)
5,491
1,301
3,093
(3,004)
703
34,113
924,320
2018
$
751,110
—
97,114
7,500
(45,744)
4,341
1,636
3,614
(3,223)
525
22,142
839,015
BTB ANNUAL REPORT The fair value of a subset of the Trust’s investment properties comprised of a selection of the most significant
investment properties and approximately 1/3 of the remaining investment properties 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. The selection of investment properties subject to independent 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 Direct Capitalization method.
At December 31, 2019, external appraisals were obtained for investment properties with an aggregate fair value
of $581,420 (December 31, 2018 - $548,940) and management’s internal valuations were used for investment
properties with an aggregate fair value of $342,900 (December 31, 2018 - $290,075).
The fair value of investment properties is based on Level 3 inputs. There have been no transfers during
the period between levels. The significant inputs used to determine the fair value of the Trust’s investment
properties are as follows:
As at December 31, 2019
Capitalization rate
Retail
Office
Industrial
Mixed-use
6.00% - 7.75%
5.75% - 7.50%
5.75% - 8.50%
5.00% - 8.25%
Terminal capitalization rate
6.25% - 7.25%
6.25% - 7.50%
6.00% - 7.25%
5.25% - 7.25%
Discount rate
As at December 31, 2018
Capitalization rate
7.25% - 7.75%
6.75% - 8.00%
6.50% - 8.00%
6.25% - 8.00%
6.25% - 7.75%
6.00% - 8.50%
5.75% - 8.50%
5.00% - 7.25%
Terminal capitalization rate
6.25% - 7.75%
6.50% - 7.50%
6.25% - 8.25%
5.25% - 7.50%
Discount rate
7.25% - 8.50%
7.00% - 8.00%
6.75% - 9.00%
6.25% - 8.25%
Valuations determined by the Direct Capitalization method are most sensitive to a change in the capitalization
rate. An increase in the capitalization rate, other things being equal, will result in a decrease in fair value
of the investment properties and vice-versa. The following table summarizes the sensitivity of the fair value
of investment properties to changes in capitalization rate:
Capitalization rate sensitivity
Increase (decrease)
(0.50%)
(0.25%)
Base rate
0.25%
0.50%
Fair Value
$
1,001,900
962,018
924,320
890,382
858,558
Change in
fair value
$
77,580
37,698
—
(33,938)
(65,762)
89
2019
a) Acquisitions
The fair value of the assets and liabilities recognized in the consolidated statement of financial position
on the date of the acquisition during years ended December 31, were as follows:
i) Asset Acquisitions in 2019
Acquisition
date
Property
type
Location
Interest
acquired
Industrial
St-Laurent, QC
Mixed-use
St-Hilaire, QC
Retail
St-Bruno, QC
%
100
100
100
May 2019
June 2019
June 2019
Transaction
costs
Total
ii) Asset acquisitions in 2018
Acquisition
date
Property
type
Location
Interest
acquired
February 2018
Retail
Delson, QC
Mixed-use
Montréal, QC
Retail
Office
Lévis, QC
Laval, QC
July 2018
July 2018
December
2018
Transaction
costs
Total
%
100
100
100
100
Fair value recognized on acquisition
Investment
properties,
including
transaction
costs
$
11,790
19,238
42,931
Mortgage
loan
$
(8,050)
(12,700)
(28,000)
Receivable
/ (Trade
and other
payables),
including
transaction
costs
$
33
301
(32)
1,699
—
75,658
(48,750)
(1,699)
(1,397)
Total cash
consideration
paid
$
3,773
6,839
14,899
—
25,511
Fair value recognized on acquisition
Investment
properties,
including
transaction
costs
Balance of
purchase
price
$
$
1,865
(1,399)(1)
25,200
42,600
24,478
2,971
97,114
—
—
—
—
(1,399)
Receivable
/ (Trade
and other
payables),
including
transaction
costs
$
—
(121)
349
(201)
(2,971)
(2,944)
Total cash
consideration
paid
$
466
25,079
42,949
24 277
—
92,771
(1) The balance of purchase price is comprised of one mortgage loan payable bearing interest at 4.00%, payable monthly, which matured in
December 2018.
iii) 2018 Acquisition of a subsidiary accounted as a business combination
On May 30, 2018, the Trust acquired 25% of the interest in Complexe Lebourgneuf-Phase II joint operation.
As a result, the Trust’s interest in Complexe Lebourgneuf-Phase II increased from 75% to 100% and the Trust
obtained control of Complexe Lebourgneuf-Phase II.
90
BTB ANNUAL REPORT
b) Dispositions
i) 2019 Asset dispositions
Disposition
date
Property
type
Location
Gross
proceeds
Mortgage
Assumption
Balance of
sale
February 2019
March 2019
May 2019
Retail
Retail
Retail
Delson, QC
Delson, QC
Montreal, QC
August 2019
Office
Saguenay, QC
Transaction costs
[(note 4 (c)]
Total
$
$
$
22,500
(12,533)
(6,000)
1,950
7,100
4,400
—
—
—
—
—
—
—
—
35,950
(12,533)
(6,000)
Receivable
/ (Trade
and other
payables),
including
transaction
costs
$
(20)
(5)
(31)
(1)
Net
proceeds
$
3,947
1,945
7,069
4,399
(804)
(861)
(804)
16,556
The balance of sale consists of a loan, expiring on January 31, 2024, bearing interest at 7% for the first
3 years, at 7.50% for the 4th year, and at 8% for the 5th year. The balance of sale as at December 31, 2019
is $6,035 and includes $35 of accrued interest.
ii) 2018 Asset dispositions
Disposition date
Property
type
Location
Gross
proceeds
Receivable /
(Trade and other
payables), including
transaction costs
January 2018
February 2018
February 2018
July 2018
August 2018
October 2018
Transaction costs
[(note 4 (c)]
Total
Industrial
Industrial
Dorval, QC
Cornwall, ON
Retail
Retail
Retail
Drummondville, QC
Thetford Mines, QC
Chambly, QC
$
5,650
490
3,075
475
5,604
Mixed-use
Sherbrooke, QC
30,450
—
45,744
$
(1)
(6)
(31)
—
32
(35)
(2,013)
(2,054)
Net
proceeds
$
5,649
484
3,044
475
5,636
30,415
(2,013)
43,690
91
2019
c) Net changes in fair value of investment properties, net of disposition expenses
Year ended December 31,
2019
2018
Net changes in fair value of investment properties (note 4)
Business combination expenses
Disposition expenses (note 4 (b))
34,113
—
(804)
33,309
22,142
(57)
(2,013)
20,072
Net changes in fair value of investment properties includes the net changes in fair value of right-of-use assets
related to the investment properties to which a lease is attached.
The disposition expenses include mainly commissions and debt prepayment penalties on mortgage loans
related to disposed properties.
5. Other Assets
As at December 31,
Prepaid expenses
Deposits
Total
6. Receivables
As at December 31,
Rents receivable
Allowance for expected credit losses
Net rents receivable
Unbilled recoveries
Other receivables
Total
7. Mortgage Loans Payable
2019
$
1,921
675
2,596
2019
$
2,801
(716)
2,085
776
948
3,809
2018
$
1,366
844
2,210
2018
$
2,556
(567)
1,989
430
827
3,246
Mortgage loans payable are secured by immovable hypothecs on investment properties having a fair value
of approximately $913,620 as at December 31, 2019 (December 31, 2018 – $822,945).
As at December 31,
Fixed rate mortgage loans payable
Floating rate mortgage loans payable
Unamortized fair value assumption adjustments
Unamortized financing expenses
Mortgage loans payable
Short-term portion
Weighted average interest rate
Weighted average term to maturity (years)
Range of annual rates
92
2019
$
387,029
108,218
628
(2,723)
493,152
87,589
3.92%
5.12
2018
$
370,988
102,217
839
(2,882)
471,162
70,086
3.99%
5.56
2.77% - 6.80%
2.77% - 6.80%
BTB ANNUAL REPORT As at December 31, 2019, the mortgage loan scheduled repayments are as follows:
2020
2021
2022
2023
2024
Thereafter
Unamortized fair value assumption adjustments
Unamortized financing expenses
Scheduled
repayments
$
14,574
13,369
11,750
10,311
8,253
36,582
94,839
Principal
maturity
$
73,015
63,846
27,882
18,697
76,529
140,439
400,408
Total
$
87,589
77,215
39,632
29,008
84,782
177,021
495,247
628
(2,723)
493,152
The Trust may enter into floating-for-fixed interest rate swap agreements on floating interest rate mortgages
to hedge the variability in cash flows attributed to fluctuating interest rates. The Trust does not apply hedge
accounting to such cash flow hedging relationships (see Note 11). The following table presents relevant
information on interest rate swap agreements:
Transaction
date
Original
principal
amount
Effective
fixed interest
rate
Settlement
basis
Maturity date
Outstanding amount
As at
December 31,
2019
As at
December 31,
2018
March 2013
June 2016
November 2017
November 2017
Total
$
7,150
13,000
23,200
23,075
66,425
8. Convertible Debentures
%
4.12
3.45
3.8825
3.905
Monthly
Quarterly
April 2023
June 2026
Monthly
November 2027
Monthly
December 2027
$
5,391
11,628
23,098
21,943
62,060
$
5,684
12,020
23,200
22,524
63,428
As at December 31, 2019, the Trust had two series of subordinated, convertible, redeemable debentures
outstanding.
Capital
26,700
24,000
Series F
Series G
Interest rates
Coupon
Effective
Unit
conversion
price
Interest
payments
Maturity
%
7.15
6.00
%
8.47
7.30
$
5.65
5.42
Semi-annual
December 2020
Semi-annual
October 2024
93
2019
For both the Series F and the Series G subordinated, convertible, redeemable debentures, the fair value
of the conversion and redemption options liability component at initial issuance was determined to be nil.
The accretion of the non-derivative liability component of the subordinated convertible debentures, when applicable,
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, 2019
Non-derivative liability component upon issuance
Unamortized financing expenses
Series E
Series G
$
$
26,700
(336)
24,000
(1,268)
Total
$
50,700
(1,604)
Non-derivative liability component
26,364
22,732
49,096
Conversion and redemption options liability component
at fair value
45
—
45
As at December 31, 2018
Non-derivative liability component upon issuance
Accretion of non-derivative liability component
Unamortized financing expenses
Non-derivative liability component
Conversion and redemption options (asset) liability
component at fair value
Series E
22,690
244
22,934
(273)
22,661
(48)
Series E
Series F
$
$
Total
$
49,390
244
49,634
(918)
48,716
26,700
—
26,700
(645)
26,055
3
(45)
In February 2013, the Trust issued Series E subordinated convertible, redeemable, unsecured debentures
bearing 6.90% interest payable semi-annually and initially maturing in March 2020, in the amount of $23,000.
The debentures were redeemed for their nominal value on November 1, 2019. The excess of the redemption
amount over the carrying amount, which totalled $117 and would have otherwise been amortized over time,
was charged to net financial expenses on November 1, 2019 (see note 15).
Series F
In December 2015, the Trust issued Series F subordinated convertible, redeemable, unsecured debentures
bearing 7.15% interest payable semi-annually and maturing in December 2020, in the amount of $26,700.
The debentures are convertible at the holder’s option at any time before December 2020, at a conversion price
of $5.65 per unit (“Series F Conversion Price”).
As of December 31, 2019, but before December 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.
Series G
In October 2019, the Trust issued Series G subordinated convertible, redeemable, unsecured debentures bearing
6.00% interest payable semi-annually and maturing in October 2024, in the amount of $24,000. The debentures
are convertible at the holder’s option at any time before October 2024, at a conversion price of $5.42 per unit
(“Series G Conversion Price”).
94
BTB ANNUAL REPORT
These debentures are not redeemable before October 31, 2024, except in the case of a change in control.
As of October 31, 2022, but before October 31, 2023, 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 October 31, 2023, but before October 31, 2024, 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.
9. Bank Loans
The Trust has access to an acquisition line of credit in the amount of $19,000. This line of credit bears interest
at a rate of 3.25% above the prime rate. As at December 31, 2019, $10,200 was due under the acquisition line
of credit (December 31, 2018 – $15,000).
The Trust also has access to an operating credit facility for a maximum amount of $3,000. This facility bears
interest at a rate of 0.75% above the prime rate. As at December 31, 2019, $2,260 was due under the operating
credit facility (December 31, 2018 – nil).
The acquisition line of credit and the operating credit facility are secured by an immoveable first rank hypothec
on two properties having a fair value of $6,375 and by an immoveable second rank hypothec on six properties
having a fair value of $131,625.
10. Class B LP Units
Units outstanding, beginning of year
Issuance of Class B LP units - Acquisitions
Exchange into Trust units
Fair value adjustment
Units outstanding, end of year
Year ended
December 31, 2019
Year ended
December 31, 2018
Units
532,265
—
(35,000)
497,265
$
2,315
—
(174)
430
2,571
Units
—
532,265
—
532,265
$
—
2,491
—
(176)
2,315
The Class B LP Units are exchangeable into Trust units on a one-for-one basis at any time at the option of
the holder. During the year ended December 31, 2019, 35,000 Class B LP Units were exchanged into Trust units.
The Class B LP Units are entitled to distributions equal to distributions declared on Trust units, on a one-to-one
basis. Distributions on Class B LP Units are recognized in the statement of comprehensive income when
declared. Monthly distributions of $0.035 per Class B LP Unit were declared for a total amount of $224 during
the year ended December 31, 2019 ($131 for the year ended December 31, 2018).
11. 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. They do not include the fair value of cash and cash equivalents,
receivables, balance of sale, trade and other payables and distributions payable to unitholders, which
approximated their carrying amount as at December 31, 2019 and December 31, 2018 because of their short-
term maturity or because they bear interest at current market rates.
95
2019 As at December 31, 2019
Measured at fair value
Conversion and redemption options of convertible debentures
(note 8)
Interest rate swap asset
Class B LP Units (note 10)
For which fair values are disclosed
Mortgage loans payable (note 7)
Convertible debentures, including their conversion
and redemption features (note 8)
Bank loans (note 9)
As at December 31, 2018
Measured at fair value
Conversion and redemption options of convertible debentures
(note 8)
Interest rate swap asset
Class B LP Units (note 10)
For which fair values are disclosed
Mortgage loans payable (note 7)
Convertible debentures, including their conversion
and redemption features (note 8)
Bank loans (note 9)
Carrying
amount
$
45
(304)
2,571
Carrying
amount
$
(45)
(1,554)
2,315
Level 1
Level 2
Level 3
Fair
value
$
—
—
2,571
$
—
(304)
—
493,152
—
506,430
49,141
12,460
52,827
—
—
12,460
Level 1
Level 2
Level 3
$
—
—
2,315
$
—
(1,554)
—
471,162
—
459,633
48,671
15,000
49,946
—
—
15,000
$
45
—
—
—
—
—
Fair
value
$
(45)
—
—
—
—
—
The fair value of mortgage loans payable was calculated by discounting cash flows from future payments of
principal and interest using the period end market rate for various loans with similar risk and credit profiles.
The period end market rates have been estimated by reference to published mortgage rates by major financial
institutions for similar maturities.
The fair value of convertible debentures, including their conversion and redemption features, was determined
with reference to the last quoted trading price preceding the period end.
The fair value of the Class B LP Units is determined with reference to the market price of the Trust units
as at period end.
The fair values of derivative financial instruments, which comprise the conversion and redemption options
of convertible debentures and an interest rate swap, are 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 market price of the Trust units 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 Dollar 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.
96
BTB ANNUAL REPORT
The following tables provide a reconciliation of Level 3 fair value measurements on the consolidated
statements of financial position:
Year ended December 31, 2019
Balance beginning of year
Change for the year recognized in profit or loss under Net adjustment to fair
value of derivative financial instruments
Balance end of year
Conversion and redemption options
of convertible debentures
$
(45)
90
45
Conversion and redemption
options of convertible debentures
Year ended December 31,2018
Balance beginning of year
Change for the year recognized in profit or loss under Net adjustment to fair
value of derivative financial instruments
Balance end of year
The following table provides a sensitivity analysis for the volatility applied in fair value measurement
of the conversion and redemption options of convertible debentures at December 31, 2019:
Volatility sensitivity
Increase (decrease)
(0.50%)
December 31, 2019
0.50%
Conversion and redemption
options of convertible debentures
$
(41)
45
140
$
1
(46)
(45)
Volatility
%
10.02
10.52
11.02
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.
12. Unit-based Compensation
a) 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 number of deferred units:
For the years ended December 31,
Outstanding, beginning of year
Trustees’ compensation
Distributions paid in units
Outstanding, end of year
2019
2018
Deferred units
Deferred units
37,055
18,071
4,516
59,642
12,330
22,173
2,552
37,055
97
2019
As at December 31, 2019, the liability related to the plan was $306 (December 31, 2018 - $153). The related
expense recorded in profit or loss amounted to $153 for the year ended December 31, 2019 ($97 for the year
ended December 31, 2018).
b) 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
service with the Trust. For each two units purchased by an employee, the Trust issues one unit from treasury.
As at December 31, 2019, the liability related to the plan was $58 representing a total of 11,194 units to issue
(December 31, 2018 - $41, representing a total of 9,253 units to issue). The related expense recorded in profit
and loss amounted to $61 for the year ended December 31, 2019 (for the year ended December 31, 2018 - $40).
The 11,194 units related to 2019 purchases were issued in February 2020 (9,253 units related to 2018 purchases
issued in February 2019).
c) Restricted unit compensation plan
The Trust offers a restricted unit compensation plan for all executive officers and key employees. Under this
plan, the executive officers and key employees are eligible to receive restricted units.
The following table presents relevant information on changes in the restricted units:
For years ended December 31,
Outstanding, beginning of year
Granted
Cancelled
Settled
Outstanding, end of year
2019
2018
Restricted units
Restricted units
138,919
82,622
(1,818)
(54,711)
165,012
115,628
72,819
(18,815)
(30,713)
138,919
As at December 31, 2019, the liability related to the plan was $686 (December 31, 2018 - $475). The related
expense recorded in profit and loss amounted to $462 for the year ended December 31, 2019 (for the year
ended December 31, 2018 - $218).
13. 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 trust units are redeemable at the option of the
holder, however they are presented as equity in accordance with IAS 32.
In June 2019, the Trust completed a public issue of 6,157,100 trust units, including the over-allotment option,
for total net proceeds of $27,220.
In June 2018, the Trust completed a public issue of 6,250,250 trust units, including the over-allotment option,
for total net proceeds of $27,239.
98
BTB ANNUAL REPORT Trust units issued and outstanding are as follows:
For the years ended December 31,
Units
2019
$
Units
Trust units outstanding, beginning of year
55,317,723
274,231
48,423,118
Issue pursuant to a public issue
Trust unit issuance costs
6,157,100
28,754
6,250,250
—
(1,534)
—
2018
$
244,115
28,751
(1,512)
Issue pursuant to the distribution reinvestment plan (a)
Issue pursuant to the employee unit purchase plan (note 12 (b))
Issue pursuant to the restricted unit compensation plan
(note 12 (c))
Class B LP units exchange into Trust units
Trust units outstanding, end of year
a) Distribution reinvestment plan
61,474,823
301,451
54,673,368
271,354
677,771
9,253
54,711
35,000
3,110
603,951
2,691
43
251
174
9,691
30,713
—
44
142
—
62,251,558
305,029
55,317,723
274,231
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 a price based on the volume-weighted average of the trading
prices on the Toronto Stock Exchange for the last five trading days before the distribution date, less a 3%
discount.
b) Distributions
For the years ended December 31,
Distributions to unitholders
Distributions per Trust unit
14. Rental Revenues
For the years ended December 31,
Base rent and other lease generated revenues
Lease cancellation fees
Property tax and insurance recoveries
Operating expenses recoveries and other revenues
Lease incentive amortization
Straight-line lease adjustment
2019
$
24,917
0.42
2019
$
56,844
1,062
18,434
76,340
19,562
(3,003)
703
93,602
2018
$
22,023
0.42
2018
$
53,384
1,482
17,200
72,066
18,055
(3,223)
525
87,423
The Trust as lessor enters into leases on its investment properties. 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.
The Trust has classified these leases as operating leases, because they do not transfer substantially all of
the risks and rewards incidental to the ownership of the assets.
99
2019 Future minimum base rentals receivable under non-cancellable operating leases as at December 31, 2019 are
as follows:
Within one year
Beyond one year but within two years
Beyond two year but within three years
Beyond three year but within four years
Beyond four year but within five years
Beyond five years
15. Net Financial Expenses
For the years ended December 31,
Interest on mortgage loans payable
Interest on convertible debentures
Interest on bank loans
Interest on lease liabilities (Note 23)
Other interest expense
Accretion of non-derivative liability component of convertible debentures
Accretion of effective interest on mortgage loans payable and convertible
debentures
Distributions - Class B LP Units
Fair value adjustment – Class B LP Units
Impact of early redemption of convertible debenture series E (note 8)
Net adjustment to fair value of derivative financial instruments
16. Expenses by Nature
For the years ended December 31,
Depreciation
Employee compensation and benefits expense
17. Earnings per Unit
2019
$
57,272
50,681
42,623
35,162
30,050
86,608
302,396
2018
$
17,512
3,496
929
—
116
49
1,039
131
(176)
—
(229)
22,867
2018
$
90
6,527
2019
$
18,941
3,577
915
271
173
43
1,078
224
430
117
1,340
27,109
2019
$
106
7,367
BTB’s trust units being puttable financial instruments presented as equity in accordance with IAS 32, the Trust
is not required to report a profit or loss per trust 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.
Net earnings per unit are calculated based on the weighted average number of trust units outstanding
as follows:
For the years ended December 31,
Net income
Weighted average number of trust units outstanding – basic
Earnings per unit – basic
2019
$
51,881
2018
$
41,337
59,098,137
52,120,760
0.88
0.79
100
BTB ANNUAL REPORT
18. Capital and Financial Risk Management
This note presents information about the Trust’s management of capital and the Trust’s exposure to financial
risk and its objectives, policies and processes for measuring and managing risk.
a) Capital Management
The Trust’s capital consists of contributions by unitholders, convertible debentures, mortgage loans and bank
loans, excluding issuance costs. In managing its capital, the Trust’s objectives are to ensure that it has adequate
resources for its 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.
The Trust’s capital is as follows:
As at December 31,
Cash and cash equivalents
Mortgage loans payable(1)
Convertible debentures(1)
Acquisition line of credit
Mortgage loans payable, Convertible debentures and Acquisition line of credit
adjusted for Cash and cash equivalents
Total assets
Accumulated depreciation on Property and equipment
Cash and cash equivalents
Totals assets adjusted for accumulated depreciation and cash and cash equivalents
(1) Excluding issue costs
As at December 31,
Mortgage loans payable, Convertible debentures and Acquisition line of credit
adjusted for Cash and cash equivalents / total assets adjusted for accumulated
depreciation and cash and cash equivalents ratio
Mortgage loans payable / total assets adjusted for accumulated depreciation and
cash and cash equivalents ratio
b) 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 11)
2019
$
(1,803)
495,247
50,700
10,200
554,344
939,130
804
(1,803)
938,131
2019
%
59.1
52.8
2018
$
(8,824)
473,205
49,700
15,000
529,081
855,223
698
(8,824)
847,097
2018
%
62.5
55.9
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.
101
2019
i) 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 establishes an allowance for expected credit losses that represents its estimate of lifetime
expected credit losses to be incurred in respect of its trade receivables. As at December 31, 2019, overdue
rent receivable amounted to $1,959 (December 31, 2018 - $1,794), for which an allowance for expected credit
losses of $716 (December 31, 2018 - $567) has been recorded. 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 equivalents with Canadian financial institutions with high credit ratings.
Credit ratings are actively monitored and these financial institutions are expected to meet their obligations.
The Trust is also exposed to credit risk with respect to derivative financial instruments that are in an
unrealized gain position, for which the credit exposure is equal to the positive fair value of the outstanding
contracts. The Trust only enters into derivative financial instruments with Canadian financial institutions
with high credit ratings.
ii) 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 five mortgage loans outstanding of $46,158 as at December 31, 2019, all other mortgage loans
payable and convertible debentures bear interest at fixed rates or are covered by a floating-to-fixed 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 $4,616
on the Trust’s comprehensive income for the year ended December 31, 2019.
iii) Liquidity risk
Liquidity risk is managed by:
• maximizing cash flows from operations;
• adopting an investment property acquisition and improvement program that takes into account available
liquidity;
• using credit facilities;
• 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, 2019, the Trust was in compliance with all the covenants to which it was subject except
for one mortgage loan’s debt service coverage ratio. The mortgage loan is maturing in July 2020 and is
therefore already included in the 2020 scheduled repayments. The balance of the mortgage loan as at
December 31, 2019 was $18,000. The Trust has always met the other mortgage loan provisions and has never
been late on a monthly payment. The Trust believes that the mortgage loan will be refinanced at maturity
for the entire amount outstanding.
102
BTB ANNUAL REPORT The Trust’s cash position is regularly monitored by management. The following are the contractual maturities
of financial liabilities, including estimated interest payments:
As at December 31, 2019
Estimated payment schedule
Carrying
amount
Total
contractual
cash flows
2020
2021
2022
2023
2024
$
$
$
17,984
18,110
18,028
2,179
4,454
12,460
2,179
10,594
12,460
2,179
322
12,460
$
67
—
330
—
$
9
—
332
—
$
6
—
334
—
$
—
—
294
—
2025 and
thereafter
$
—
—
8,982
—
542,248
579,325
637,567
135,746
93,462
680,910
168,735
93,859
53,371
53,712
41,021
117,764
41,361
118,058
196,203
205,185
Trade and other
payables
Distributions payable
to unitholders
Lease liabilities
Bank loans
Mortgage loans
payable and
convertible
debentures
As at December 31, 2018
Estimated payment schedule
Carrying
amount
Total
contractual
cash flows
2019
2020
2021
2022
2023
2025 and
thereafter
$
$
$
$
$
$
$
17,048
17,140
16,385
256
168
124
124
1,936
15,000
1,936
1,936
15,000
15,000
—
—
—
—
—
—
—
—
$
83
—
—
519,878
553,862
614,913
90,723
123,444
81,762
48,349
30,234
240,401
648,989
124,044
123,700
81,930
48,473
30,358
240,484
Trade and other
payables
Distributions payable
to unitholders
Bank loans
Mortgage loans
payable and
convertible
debentures
19. Subsidiaries and Joint Arrangements
a) Subsidiaries
The principal entities included in the Trust’s consolidated financial statements are as follows:
Entity
BTB, Acquisition and operating Trust (“BTB A&OT”)
BTB Real Estate Management Inc.
Immeuble BTB Crescent Sainte-Catherine Inc
Cagim Real Estate Corporation (“CREC”)
Type
Trust
Corporation
Corporation
Corporation
Lombard SEC
Limited Partnership
Place d’affaire Lebourgneuf Phase II, SENC (“PAL II”)
General Partnership
Société immobilière Cagim, SEC
Limited Partnership
Relationship
100% owned by BTB Real Estate
Investment Trust
100% owned by BTB A&OT
100% owned by BTB A&OT
100% owned by BTB A&OT
99.9% owned by BTB A&OT
0.1% owned by CREC
99.9% owned by BTB A&OT
0.1% owned by CREC
70.4% owned by BTB A&OT
29.5% owned by PAL II
0.1% owned by CREC
103
2019
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
Location
Terrebonne, QC
Gatineau, QC
2019
%
50
50
2018
%
50
50
The consolidated financial statements include the Trust’s proportionate share of the assets, liabilities, revenues
and expenses of these joint arrangements. Summarised financial information is as follows:
As at and for the years ended December 31,
Assets
Liabilities
Revenues
Expenses
20. Operating Segments
2019
$
20,007
10,141
2,372
1,420
2018
$
19,917
10,523
605
110
For investment properties, discrete financial information is provided to the CEO on an aggregated investment
property basis. The information provided is net rentals (including gross rent and property expenses), the change
in fair value of investment properties and fair 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 retail, office, industrial and mixed-use segments.
Consequently, the Trust is considered to have four operating segments, as follows:
• Retail
• Office
• Industrial
• Mixed-use
Year ended December 31, 2019
Investment properties
Rental revenue from properties
Net operating income
Year ended December 31, 2018
Investment properties
Rental revenue from properties
Net operating income
Retail
$
265,487
26,935
16,102
249,370
26,266
15,925
Office
Industrial
Mixed-use
$
$
$
Total
$
395,425
43,206
21,190
372,190
42,507
20,005
158,720
12,852
8,236
130,305
9,785
7,226
104,688
924,320
10,609
5,369
93,602
50,897
87,150
8,865
4,481
839,015
87,423
47,637
104
BTB ANNUAL REPORT 21. Supplemental Cash Flow Information
The following table provides a reconciliation of movements of liabilities to cash flows arising from financing
activities
Convertible debentures
Mortgage loans payable
Year ended December 31,2019
Balance beginning of year
Mortgage loans, net of financing costs
Repayment of mortgage loans
Asset acquisitions mortgage assumption
Asset dispositions mortgage assumption
Net proceeds from issuance of convertible debentures
Repayment of convertible debentures
Fair value assumption adjustments and financing costs
amortization
Accretion of non-derivative liability component
Impact of early redemption of convertible debenture series E
Balance end of year
22. 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
$
48,716
—
—
—
—
22,678
(23,000)
542
43
117
49,096
2019
$
2,191
604
2,795
$
471,162
17,841
(32,604)
48,750
(12,533)
—
—
536
—
—
493,152
2018
$
2,142
333
2,475
Key management personnel are comprised of the Company’s executive officers.
105
2019
23. Leases, Commitments and Contingencies
a) Leases
Lease liabilities
As at December 31,
Maturity analysis – contractual undiscounted cash flows
Within one year
Beyond one year but within five years
Beyond five years
Total undiscounted lease liabilities
Lease liabilities included in the statement of financial position
Current
Non-current
Amounts recognised in profit and loss and statement of cash flow
As at December 31,
Profit and loss
Interest on lease liabilities (Note 17)
Expenses relating to leases of low-value assets, excluding short-term leases of low-
value assets
Statement of cash flow
Total cash outflow for leases
Finance lease as lessee – 2018
2019
$
322
1,290
8,982
10,594
4,454
105
4,349
2019
$
271
105
418
The annual future payments required under finance leases expiring between 2020 and 2025 are as follows:
As at December 31,
2018
Future minimum
lease payments
Interest
Present value of
minimum lease payments
Within one year
Beyond one year but within five years
Beyond five years
$
124
496
83
703
$
33
72
2
107
$
91
424
81
596
The present value of the minimum lease payments was recorded in Trade and other payables.
106
BTB ANNUAL REPORT
b) Litigation
The Trust is involved in 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.
24. Subsequent Event
In January 2020, the Trust completed the sale of an industrial property in Ingersoll (Ontario) for $13,300.
As part of the transaction, the buyer assumed a mortgage loan of $9,068 discharging the Trust from is
obligation under the mortgage loan.
In February 2020, the Trust completed the purchase of an office property in Ottawa (Ontario) for $21,750.
As part of the transaction, the Trust assumed a mortgage loan of $13,474.
In February 2020, the Trust completed the sale of an industrial property in Montreal (Quebec) for $9,250.
The Trust used $6,100 from the proceeds to repay outstanding mortgage loan.
25. Comparatives Figures
Certain comparative figures have been reclassified to conform to the current year’s presentation.
107
2019 Corporate
Information
Board
of Trustees
Jocelyn Proteau(2)
Jean-Pierre Janson(2)
Fernand Perreault(3)
Chairman of the Board of Trustees
and trustee
Vice President of the Board
of Trustees and trustee
President of the Investment
Committee and trustee
Michel Léonard
Luc Martin(1)
President and Chief Executive
Officer and Trustee
President of the Audit
Committee and trustee
Lucie Ducharme(1)(2)
President of the Human
Resources and Governance
Committee and trustee
108
BTB ANNUAL REPORT Executive
Team
Luc Lachapelle(1)
Secretary of the Board
of Trustees and trustee
Michel Léonard
President and Chief Executive
Officer and trustee
Sylvie Lachance(3)
Trustee
Peter Polatos(3)
Trustee
Benoit Cyr, CPA, CA, MBA
Vice-President and
Chief Financial Officer
Paolo Valente
Vice President, Leasing
Sylvie Laporte
Vice President,
Property Management
(1) Member of the Audit Committee
(2) Member of the Human Resources and Governance Committee
(3) Member of the Investment Committee
109
2019 At BTB, we encourage
all our staff and tenants
to uphold the 3Rs:
reduce, reuse, recycle.
Unitholders
Information
Head office
BTB Real Estate Investment Trust
1411 Crescent, Suite 300
Montreal, Quebec, H3G 2B3
T 514 286 0188
www.btbreit.com
Listing
The units and debentures of
BTB Real Estate Investment Trust
are listed on the Toronto Stock
Exchange under the trading symbols:
BTB.UN
BTB.DB.F
BTB.DB.G
Transfer Agent
Computershare Investor Services
1500 Robert-Bourassa Blvd
7th floor, 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 2019, for all Canadian unitholders,
the distributions were fiscally treated
as follow:
• Other revenues: 0%
• Fiscal Deferral: 100%
Auditors
KPMG LLP.
600 De Maisonneuve Blvd. West
Suite 1500
Montreal, Quebec, H3A 0A3
Legal counsel
De Grandpré Chait LLP.
1000 De la Gauchetière St. West
Suite 2900
Montreal, Quebec, H3B 4W5
Annual Meeting of Unitholders
June 8, 2020
11:00 a.m. (EDT)
Espace CDPQ
3 Place Ville-Marie
Montreal, Quebec, H3B 2E3
Unitholders 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 3%.
For further information about the
Distribution Reinvestment Plan, please
refer to the Investor relations section
of our website at www.btbreit.com or
contact the Plan agent: Computershare
Investor Services.
P O U R P O SITIO N
SEULE M EN T
2019 ANNUAL REPORT
btbreit.com