Montreal-based BTB Real Estate Investment Trust (BTB-UN-T) continues to expand its portfolio in Alberta with the recent acquisition of three industrial properties in the Edmonton area as it continues to look for more real estate there as well as the Calgary market.

In an interview with RENX, Michel Léonard, president and CEO of BTB, said the REIT, which has been around for close to 20 years, likes the fundamentals of the Alberta real estate market with an eye particularly on the industrial space.

“We like the driving forces of the economy of Alberta. As a result, we want to continue our acquisitions in Edmonton, eventually also Calgary, I must say. So, we're definitely open to acquiring in Calgary as well,” Léonard revealed. 

“We can't afford to buy industrial properties in Toronto... because cap rates are just too low for us, our cost of capital being too high.... Same thing with Vancouver.

“We know that in Alberta we can acquire accretively. We know that in the province of Quebec, we can do so as well. In Ottawa, industrial properties are rarer, so maybe a little bit more difficult to acquire because of the rarity of industrial properties in that city. But generally, these are the markets that we want to concentrate in and create a critical mass.”

The three Edmonton properties

The three properties in Edmonton, recently-acquired from Melcor, bring the REIT’s Alberta presence to 13 properties – all in the Edmonton area with one office and 12 industrial properties.

The properties totalled 143,118 square feet in Leduc, just south of Edmonton, near Edmonton's International Airport and the Queen Elizabeth II Highway. The purchase price for the properties was $31.5 million, excluding transaction fees and adjustments.

The first acquired property is located at 6303 39 St. with 88,699 square feet of leasable area and a 26-foot clear height. The building was built in 2014 for the tenant Abaco Drilling Technologies, a manufacturer in the oil exploration and distribution industry, and is the only facility of its kind in Canada, BTB said.

The second and most recently constructed building is located at 6302 39 St. and was built in 2016. It has a leasable area of 44,328 square feet with a ceiling height of 28 feet. The property is currently leased to NDT Global Inc., a company specializing in pipeline inspection with international operations.

The third is located at 6207 39 St. with 10,091 square feet of leasable area and a 28-foot clear height. Built in 2014, the property is leased to Revolution Crane & Transport, an Alberta-based company providing crane and transport services to clients across Western and Northern Canada.

“It's investments that we can afford. It's a notion of BTB, from the first day of operations, we decided that for us, the acquisitions that we conclude are accretive. They're not accretive in a year’s time or five years’ time. They're accretive right away," Léonard said. "We want to ensure that every month we pay a distribution. We want to make sure that we have the means and ways in order to pay for the distribution. If and when we would purchase a property that is not accretive, then we are encroaching on our ability to pay a distribution.”

BTB's portfolio

Léonard said the REIT’s overall portfolio is about 37 per cent in industrial assets with 40 to 41 per cent in office, mostly suburban, and 22 per cent in grocery-anchored retail.

That percentage has changed over the years. He said the REIT was previously heavily weighted in suburban office, but in 2018, it started to divest of office and increase in industrial. 

In 2020, the REIT’s portfolio used to be about 18 per cent industrial, he said. Office space has been reduced to its current presence from about 52 to 53 per cent six years ago.

“When BTB started, we basically started from a white sheet of paper, so no assets. We raised capital, and our cost of capital was obviously more important than our cost of capital today. As a result, we couldn't buy properties that were non-accretive.... Throughout the years, what we did, is we rejigged the portfolio in order to buy larger properties and divest of our smaller properties,” Léonard explained.

“Our portfolio is mostly located in suburban areas, but suburban areas that are in close proximity to downtown.... Our properties are mostly located in Montreal, about 50 per cent of the portfolio, Quebec City, Ottawa, Saskatoon and Edmonton.”

BTB owns and manages 74 properties, representing a total leasable area of approximately six million square feet.

Aligned with BTB's portfolio optimization strategy and enabling the acquisition of industrial properties, the REIT said it has accepted an offer to sell a mixed-use property located at 909–915, Boulevard Pierre-Bertrand in Québec City. The sale conditions for the property have been satisfied by the buyer, and the transaction is expected to close on or around March 24. No further details were announced.