Company spreads mortgage maturities to combat interest rate swings
Commercial lender BTB Real Estate Investment Trust has reported a decline in net income for the second quarter of 2024 as it navigates the challenging interest rate environment.
The REIT – which invests in industrial, suburban office, and necessity-based retail properties across Canada – revealed that its net income for the quarter ended June 30 declined to $7.3 million, down $3.5 million from the same period last year.
The decrease in net income was primarily due to a rise in net financial expenses by $2.6 million and an increase in administrative costs by $0.8 million. The REIT also experienced a slight decline in net operating income (NOI), which fell 0.5% quarter over quarter to $18.9 million.
Despite the profit decline, BTB saw positive developments in other areas. Rental revenue increased by 1.6% to $32.2 million for the quarter, driven by a record-high occupancy rate of 94.6%. The company also renewed 216,605 square feet of leases and signed 40,080 square feet of new leases during the period.
“These results are a testament to the organic growth of our portfolio and our property management,” president and CEO Michel Léonard said in BTB’s Q2 earnings report. “Our FFO adjusted and AFFO adjusted also saw positive growth compared to the previous quarter, reflecting the strong performance of our assets.”
Léonard also acknowledged the challenges posed by rising interest rates. To mitigate their impact, BTB has been extending the maturity dates of its mortgage refinancing.
“We are spreading out our mortgage refinancing maturities to try to counteract the fluctuations in interest rates on mortgages of recent months, and with the latest announcements from the Bank of Canada, the outlook appears to bode well for future refinancings of our portfolio,” he said. “This strategy demonstrates our proactive and prudent approach to debt management in the current environment.”
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Léonard further highlighted the REIT's ongoing strategic priorities, including targeted property dispositions and acquisitions, prudent capital management, and property improvements.
As of June 30, BTB's portfolio included 75 properties, with a total leasable area of approximately 6.1 million square feet and a total asset value of $1.236 billion. The market capitalization stood at $274 million, with units trading at $3.13 per share.
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