BTB Real Estate Investment Trust (TSE:BTB.UN) reported lower third-quarter rental revenue and operating income as prior-year lease cancellation payments and tenant departures weighed on results. Management said it is working to fill major vacancies while continuing to sell office properties and reinvest in industrial assets.
Rental revenue for the quarter ended September 30, 2026, was CAD 31.5 million, down 4.2% from a year earlier. Executive Vice President, Chief Financial Officer and Chief Operating Officer Marc-André Lefebvre said the decline would have been 0.9%, or CAD 0.3 million, excluding a CAD 1.1 million lease cancellation payment received in the third quarter of 2025.
Net operating income (NOI) fell 10.1%, while cash NOI declined 6.3%. Excluding the prior-year cancellation payment, the decreases would have been 4.8% and 0.9%, respectively, Lefebvre said.
Adjusted funds from operations (FFO) per unit were CAD 0.093, down CAD 0.022 from a year earlier. Adjusted funds from operations after capital expenditures (AFFO) per unit were CAD 0.088, down CAD 0.013. BTB maintained its quarterly distribution at CAD 0.075 per unit, equivalent to CAD 0.30 annually.
Vacancies Weigh on Operating Results
Cash same-property NOI declined 7% in the quarter and 5.9% over the first nine months of 2026. Lefebvre attributed the year-to-date decrease largely to the industrial and office segments, including prior-year cancellation payments and tenant departures.
In Ottawa, a government tenant vacated an office building on Walkley Road, while other planned departures had not yet been fully replaced. New leases in Québec City and leasing activity in the necessity-based retail segment partially offset the declines, Lefebvre said.
President and Chief Executive Officer Michel Léonard said BTB had interest in the vacant Ottawa building, including from other federal government entities, but had no concrete agreement to report. He anticipated that the property could be under contract by June 2027 if negotiations go well, though he could not predict when it might be occupied.
Léonard identified another Ottawa office property on Aberdeen and a 132,000-square-foot industrial property in Laval, Québec, as leasing priorities. BTB has decided to subdivide the Laval building for two or three tenants and hopes to lease part of it by year-end, he said.
Portfolio occupancy was 90.7% at the end of the quarter, slightly below the year-earlier level. Léonard said BTB is working toward occupancy of a little over 91% by year-end. The average increase in lease renewal rates was 6.6% for the quarter, including 5.7% in industrial, 11% in suburban office and 5% in necessity-based retail.
BTB renewed or signed leases covering 188,000 square feet during the quarter. Among the new agreements were a lease with GMACK Oilfield Services for a vacant 24,000-square-foot industrial building in Edmonton and a 10,000-square-foot office lease with Cohere in Ottawa.
Portfolio Shift and Financing
BTB owned 72 properties totaling 5.9 million square feet and had CAD 1.3 billion in total assets at quarter-end. Léonard said industrial properties represented 38% of the portfolio, compared with 39% for suburban office, as the trust continued a repositioning effort that began in 2018.
During the quarter, BTB sold an office property in Trois-Rivières for CAD 20 million. After quarter-end, it sold an office property on Taschereau Boulevard in Longueuil for CAD 8 million and acquired an Alberta industrial property occupied by Imperial Oil for CAD 18.75 million. The acquisition is expected to generate CAD 1.2 million in annualized NOI.
Léonard said BTB had conditional agreements for approximately CAD 87 million of additional office and retail dispositions. The trust is negotiating industrial acquisitions and aims to close those transactions during the first quarter of 2027, he said.
At quarter-end, BTB’s total debt ratio was 57.4% and its mortgage debt ratio was 50.9%. It had CAD 16.5 million in liquidity, consisting of CAD 1.4 million in cash and CAD 15.1 million available under credit facilities.
Lefebvre said BTB expects to refinance just under CAD 80 million across six properties in the fourth quarter of 2026, at an estimated spread increase of 150 basis points. For the first quarter of 2027, the trust expects to refinance approximately CAD 40 million across five properties, with an estimated increase of 140 basis points.
About BTB Real Estate Investment Trust (TSE:BTB.UN)
BTB is a real estate investment trust listed on the Toronto Stock Exchange. BTB invests in industrial, suburban office and necessity-based retail properties across Canada for the benefit of their investors. As of today, BTB owns and manages 72 properties, representing a total leasable area of approximately 6 million square feet. People and their stories are at the heart of our success.
