BTB Reit weathers the Storm but cuts Dividend

BTB Reit is a small but well managed reit mostly located in Quebec and eastern Ontario.It just reported it's second quarter results and they were lukewarm.Revenues grew by 3% or from $22.4 million to $23.1 million.This includes a loss of $.5 million resulting from the government program.Net Onsite Income grew 2% or from $12.2 to $12.4 million.Yet it had a net loss of 7% over Q2 2020.BTB tells shareholders that rent recovery was at 97% with rent deferrals being8% of the total collected.Surprisingly the occupancy rate went from 92.9% to 93.1% in these tough times.Furthermore the decrease in total debt  ratio went from 61.4 to 58.6%.So,in summary,solid management and a slight pick up in revenues has allowed BTB Reit to weather the storm but it felt that it had to cut it's dividend from $.035 to$.025 per month.This blog feels that this was the prudent thing to do as there will be capital left for organic growth.

    BTB has been active in 2020.It sold 5 properties and made gains on the 5.And it also made 4 acquisitions.Michel Leonard,the CEO,tells investors that $2 million in revenues were made above that for the 5 properties sold.Leonard also tells us that their weighted average interest rate fell from 3.93% to 3.75%.All these small improvements help to increase operational income or at least to reduce the decrease in op. income.To this end,adjusted funds from operations (AFFO) went from $4,884,000 to$4,237,000 in Q2 and from $9,754,000 ($.16/share) to $9,507,000 ($.15/share) in the first half. AFFO is the financial statistic that most investors rely on when analysing reits.

      Looking for Sunny Days

        This is a tough time in Quebec and eastern Ontario.And there is little doubt that BTB counts on the more stable incomes in Ottawa to prop up it's share price.But what lies ahead for BTB?It is going to have to sell off more of it's properties with high cap rates and some gross profit and find properties with low cap rates and lots of potential.For example, BTB tells shareholders that it sold a property on Sherbrooke Street in Montreal and the total proceeds were $22 million.But we do not know what the gross profit nor net profit(after tax) was here.Investors now need to see more acquisitions with low cap rates and more sales with high cap rates.It seems at this time that Michel Leonard is too focused on increasing the total assets of BTB Reit and not enough on increasing market capitalization.So this blog sees more "bad weather" before investors see "sunny days" coming from BTB Reit.

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