Good morning. My name is Sylvie, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the BTB Real Estate Investment Trust's 2022 first quarter results conference call, for which management will discuss the quarter ended March 31st, 2022. Note that all lines have been placed on mute to prevent any background noise. Should you wish to follow the presentation in greater details, management has made the presentation available on BTB's website at www.btbreit.com-investorrelations-quarterlyandannualmeetingpresentations. After the speaker's remarks, there will be a question-and-answer period reserved exclusively for analysts. If you would like to ask a question during this time, simply press star followed by the number one on your keypad. Before turning the meeting over to management, please be advised that some of the statements that may be made during this call may be forward-looking in nature.
Such statements involve numerous factors and assumptions and are subject to inherent risk 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. Several important factors could cause BTB Real Estate Investment Trust's actual results to differ materially from the expectations expressed or implied by such forward-looking statements. These risks, uncertainties, and other factors that could influence actual results are described in BTB Real Estate Investment Trust's management discussion and analysis and in its annual information form, which were filed on SEDAR and on BTB's website at www.btbreit.com. I would like to remind everyone that this conference is being recorded. Thank you. I will now turn the conference over to Mr. Michel Léonard, President and Chief Executive Officer, and Mr. Mathieu Bolté, Vice President and Chief Financial Officer. Monsieur Léonard, you may begin your conference, sir.
Thank you very much, Sylvie, and welcome to our conference call for Q1 2022. As you saw, it is a very robust quarter for us. We concluded during the quarter the acquisition of two Class A office properties located at 979 and 1031 Bank Street in Ottawa. We disposed in January 2022 of four industrial properties located on Boundary Road and Marleau Avenue in Cornwall, for total proceeds of $ 26 million. Remind you that we had purchased these properties at the purchase price of $ 15 million.
We concluded a bought deal in March 2022, where we sold more than 9,500,000 units at a price of $ 4.20 for total proceeds of $ 40.3 million. We use these proceeds in order to pay down our line of acquisition. We collected 91% of our rents, and this number has been affected by the thirteenth invoices that were recently invoiced and not yet collected, so it's not related to COVID. Leasing activity, we were extremely active during the quarter where we renewed leases for 175,000 sq ft and concluded leases for 18,000 sq ft, totaling the total activity is 193,000 sq ft.
Our occupancy rate stood at 93.1%, a decrease of 0.3% compared to the pre-previous quarter, and up by 2.1% compared to the same period last year. As far as the subsequent event is concerned, we concluded on April 5th, 2022, the acquisition of an industrial property located at 1,100 Algoma Road in Ottawa. If you look at our operating metrics, we are now the owners of 5.7 million sq ft, and that the decrease is basically reflecting the Cornwall disposition, but we are up 400,000 sq ft compared to Q1 2021. We concluded leases, as I mentioned, for 193,000 sq ft at 76.4% renewal rate for the quarter.
We own $ 1.1 million of investment property, so that's plus $ 222 million as compared to Q1 2021. Our occupancy rate, as I mentioned, is 93.1%. Our recurring FFO per unit stood at CAD 0.107 for the quarter. Our debt ratio, our total debt ratio, 60.3%. We did, as I mentioned earlier, we repaid the line of acquisition after the end of the quarter, and that represents roughly a 2% decrease. It had not been for this timing problem, we would have stood at around 58%. Our recurring AFFO payout ratio is at 76.8%.
As I mentioned earlier, we had a strong quarter as far as renewed or leased space. We secured long-term lease renewals with the service retailers, industrial tenants and government such as NCSG Crane & Heavy Haul in Edmonton. C oncluded a lease renewal with Loblaws for 34,000 sq ft and the Quebec government for 33,000 sq ft. We achieved a 13.5 average increase in the renewal rate. Noteworthy 7.8% in the industrial segment, and off-core office at 19.6%, and necessity-based retail at 3.9%. We're finalizing the construction work of a tenant who's arriving in our property left vacant by Ashley Furniture at F.X. Sabourin for 31,000 sq ft. As this new lease stabilized the occupancy of the building.
We're expecting the arrival of another tenant, whose lease is conditional upon the city approval for transformation, construction transformation within the space in question. Also, we are finalizing conditional leases that we concluded in 2021 for a total of 37,000 sq ft, one of which includes Giant Tiger for an occupancy of our Gatineau property. Again, this is a conditional. We're waiting for the approval of the city regarding the occupancy of Giant Tiger within this property. If we look at our real estate portfolio, our Lansdowne property, which is the one that we acquired in January in Ottawa, located on Bank Street, we had a great leasing velocity.
We're almost concluded two leasing transactions for office space and one additional potential new tenant where this property is gonna be almost fully leased by the end of this quarter. Our investment activity has been focused on industrial and off-core office assets with strong fundamentals, good pipeline for value creation, and maximization of the retail portfolio. Regarding our lease renewals, our occupancy rate in the industrial segment was 99%, off-core office at 89.3%, and necessity-based retail at 95%. Regarding the diversification, we have opportunities for additional geographic diversification, especially in the industrial segment where we're very active.
If we look at our asset diversification, we have 26% of our properties that are in the industrial segment, 24% in the necessity-based retail, and 50% in the off-core office properties. Year to year occupancy of 2.1%. Sorry, I made a note, and I can't read my note. So, plus 3.4% in the industrial segment, in the necessity-based retail at 5.8%, and in the off-core office at -1%. By geographic sector, our year to year occupancy increased by 2.1% in Montreal, on a complete basis. In Montreal by 2.8%, in Quebec City it's reduced by 0.6%, in Ottawa an increase by 0.8%.
Obviously in Edmonton and Saskatoon, 100% because these were not part of our portfolio in the past. With this summary, that concludes my summary, and I'd like Mathieu to take over and guide you through our financial highlights.
Thank you, Michel. Good morning, everyone. We're pleased with the results. The accretive effect as well, the recent acquisitions with the occupancy rate, as Michel mentioned, up 210 basis points versus a year ago, and showing increases across the three operating segments. The composition of the portfolio also evolved with now more than 23% of revenues coming from the industrial segment, so it's an increase of 5%, with a decrease of the necessity-based retail revenues from 27% to now 23%. On a consolidated basis, revenues are up 23.5% at $29 million. NOI is also up, at 30.8%, sorry, at $ 16.2 million, and the NOI margin was up 3.1% at close to 56%.
It's following the sale of the Cornwall portfolio that had a margin of 49%, and we replaced it by the recent acquisitions at a margin of 70%. Year-over-year, the industrial segment NOI has doubled. If we look overall for the same property NOI, we see an increase of 2%, and it's due to the combination of important leasing efforts resulting in an increase in occupancy rate, and also the average lease renewal rate that was positive across the three operating segments. For this quarter, it's plus 13.5%. Let's remember as well, 2021 for the entire year was an increase of 5.5%.
The recurring FFO was $ 0.107 per unit for the quarter, compared to $ 0.089 per unit for the same period in 2021. It's an increase of more than 20%, with a large contribution again coming from the accretive acquisitions and as well the good performance across all the operating segments. Just for the denominator, looking at the number of units, the weighted average number of units increased from $74.4 million in Q4 2021 to $78 million in Q1 2022. That's with the equity issuance that we did on March 30th with the overallotment. We were able to sell an aggregate of 9.6 million units at a price of $ 4.20 for total proceeds of $ 40.3 million.
Just thinking about the units as well, we also have 319,000 units converted from the Series H debenture during the quarter. Cumulative recurring AFFO payout at 76.8%, so it's down 10.6% compared to the same period last year.
Looking at the capital structure, weighted average interest rate for mortgages at 3.56, slight decrease of 2 basis points compared to last year. The trust concluded the quarter with a total debt ratio, as Michel mentioned, of 60.3%. It's a slight improvement compared to previous quarter, but following the equity raise and the repayment of the credit facility of $31 million. We have an estimate around 58.6 post-closing. Finally, just for the refinancing commitments for this year, we have completed $ 25 million out of $74 million. With the rising interest rates, we don't see much exposure with the loans that are coming due this year. As well, for next year, we only have $35 million that is coming due, so it's not a big amount for us.
The interest rates to be refinanced are not materially far from the current interest rates that are available in the market. Cash, we had $41 million of cash available at the end of the quarter, $ 47.7 million of total availability between two credit lines. As we said, we reimbursed the $31 million on April 5th to bring up our capacity with the credit lines and to bring down the cash by $31 million. This completes our presentation, and we'll move to the Q&A.
Thank you. At this time, I would like to remind everyone that the analysts may now ask their questions by pressing star followed by the number one on your telephone keypad. Once again, if you would like to ask a question, please press star then number one. We'll pause for a brief moment to compile the Q&A roster. Your first question will be from Matt Kornack at National Bank. Please go ahead.
Good morning, guys.
Morning, Matt.
Morning.
Just wanted to quickly touch on the renewal spreads because they were quite strong, particularly in office. Can you give us a sense as to whether that is indicative in your view of the trend in office, or was it property-specific? Maybe if you can touch on what you're seeing in retail and industrial as well.
I think that to answer your question, it's not necessarily property-specific. I think it's tenant-specific. In this case, it was the need to move as a result of a lease renewal with the government of Quebec. The government of Quebec was not paying market rates. As a result of a negotiation that we did conduct, we brought it closer to market rates, so hence the increase. You know, sometimes we're affected by the reverse trend. I remember a year or so ago where we had renewed a lease for 30,000 sq ft with Desjardins at a lesser rate, and we carried the fact that in the office segment we were minus something.
I forget what percentage it was, but we carried it for a while as a result of a lease negotiation that was at a lesser rate. In this case, I think the pendulum goes the other way, where effectively, we were successful in getting close to a market rate with this tenant. We have other government tenants within the same area where that lease is coming up for renewal next year, so we are going to enter into negotiations for the lease renewal. We anticipate that in that lease, again, we're gonna see a substantial increase as a result of the fact that they're paying currently below market. Generally, in the office segment, we are able to increase rents.
We're leasing our space to new tenants. I talked about the Lansdowne property in Ottawa on Bank Street, where we're extremely successful in leasing spaces that are going to become available. Also in our portfolio generally, we see that there's demand for office space. I wouldn't call it, you know, very strong demand. I don't think that that's the qualification that I wanna leave you with, but there is demand, and it's not soft. You know, it's not business as usual, but it's getting a lot better, and it's new demand for vacant spaces. We see it in Quebec City as well, which is Quebec City was fairly quiet for a while, and all of a sudden, we see that there's a lot of demand.
There's a lot of activity regarding our lease renewals, so we tend to be positive on the office segment as well.
Are you finding generally that the government is kind of maintaining their footprint? That they're not increasing or decreasing, they're just kind of signing on to their, the same amount of space as they were prior to COVID, or I guess on renewal?
I think that generally the answer is yes. In this specific case, it is 30,000 sq ft, obviously government employees and the like. Their footprint, the individual's footprint within these premises, is extremely tight. Even if the government would want to lessen, you know, the number of people, I think that they would still need the same 30,000 sq ft because there's so many people in that space. It's so crowded that, you know, if they would let go 10% of their people or ask 10% of their people or 20% of their people to work from home, I think that they would still need the 30,000 sq ft.
Okay, fair enough. I guess on industrial, I mean, it was a positive spread. It was reasonably good, but that market has seen exceptional rent growth according to some third-party brokers. Was it again, tenant or lease specific this quarter? And are you seeing that trajectory in terms of rent growth within your portfolio as well?
For this year, we don't have a lot of lease renewals in that sector. I can't really answer that question because most of our leases, industrial leases, are coming up for renewal next year or the year after, and so on. There's no impact this year.
Is your approach to hold off, I guess, until as close as possible to the leasing date because market rents are moving at the pace that they are? I mean, sounds like, I mean, there's one possibility.
I know what you're talking about, and that's not really our lease strategy with our tenants. You know, if you wait till the last minute in order to wake them up and, all of a sudden they have to conclude the renewal, you know, that's a strategy, but it's not. We try to speak to our tenants, you know, good times, bad times, 12 months prior to their lease expiration. Yes, there's gonna be an increase, but we don't wait till the last minute. You saw from our numbers that we try to stabilize our portfolio by concluding our lease negotiations at least a year prior. We're on track within our strategy.
Maybe, you know, we could lose a buck or two, but, you know, there's also something that's important, and it is to respect our tenants and create a long-term relationship with them, because this increase in the industrial segment eventually may lead to a decrease in the industrial segment, and you wanna make sure that your tenants have been fully satisfied with the approach on lease renewals as well. As you know, Matt, real estate is a long game, and, you know, we went through COVID, and there's some tenants that didn't respect the relationship that we may have had with them, and we didn't forget about that. When it's gonna be time for these tenants to renew, we will, you know, we will remember what happened during COVID.
It's the same thing goes, you know, it goes both ways. I think that, within the relationship that you're trying to create, the long-term relationship that you try to create, I think it is really important to conclude fair negotiations with our clients.
Fair enough. No, that makes sense. On the balance sheet side, and maybe tie it into the acquisition side, it sounds like you're fairly insulated from an interest rate standpoint, this year, given the maturity profile. Can you speak to changes, if anything, in underwriting of acquisitions? Like, are cap rates starting to move a little bit higher to account for this move in the bond yields, or are you still seeing the same level of demand at similar cap rates at this point in the market?
Well, if we price the increase in interest rates within our accretion environment, we definitely have to conclude transactions at higher cap rates than what we have done in the past. You know, the message out there that we're trying to send is the fact that it's not business as usual when it comes time to make acquisitions. We are going to acquire accretively, and as a result of that, we have to move up in our cap rates. As far as interest rates are concerned, your view is as good as my view, but I don't think that this is going to be an event that's gonna last for five years.
As far as our strategy there is that, we may go two years, we may go three years, but we may not conclude on a five-year basis if the rate curve doesn't flatten. We're expecting the curve to flatten, you know. As a result of competition and so on, I don't think that the banks are gonna continue, or the lenders, I should say, are gonna continue to fully price what's going on in the market. As a result of this, I think that, we're gonna see a flattening of the curve, as we've seen before. It's not the first time that, in the 15-year history of BTB that, you know, that the interest rates have risen.
Overall, you know, we're gonna adapt our strategy and we're not going along in our financings as a result of what's going on in the markets right now.
Makes sense. Yeah. Seems this appears to be similar to 2013 and 2018. On the disposition front, last question from me. Those weren't necessarily cap rate trades. It was kind of land value and density. So is that market still kind of there in terms of what buyers were willing to pay for that excess density?
Overall, I think the buyers are still there, like we're still there for, you know, as buyers. I think that, you know, the kind of environment of real estate is gonna come to an end, and I think it's good. I think it's good for the market. That's gonna cause the construction industry to slow down and, we're gonna go back to normal pricing as far as construction is concerned.
Construction, you know, is so expensive that when a tenant tries to renovate their premises, it's so expensive that in a lease renewal, they're asking us to basically show them other spaces within the same property to see if they can accommodate their need in another space. The construction cost that used to be, I don't know, $ 35- 50/sq ft in order to improve an office space is now $ 100- 120/sq ft. It's completely crazy, and it's difficult to conclude leasing transactions if a tenant wants to renovate its space, because, you know, we're not gonna hold the bag. It's for them to pay the full freight of what it costs to renovate the premises.
Overall, it's an impediment in order to do business. I think that the slowdown is gonna cause the construction industry to itself slow down, and I think it's a good thing for the market.
Okay. Sorry, Michel, I. That was my fault on the question, but I was actually asking about your disposition possibilities within the retail portfolio and whether or not the ability to sell the density or the partners that you're working on building out the density, has that changed at all in terms of their appetite to go after your assets?
No, not at all.
Okay. Thank you, guys. Appreciate the color.
Very good.
Thank you. This is the conference operator again. If analysts would like to ask a question, please press star followed by the one on your telephone keypad. Next question will be from Chris Koutsokaloudis at Canaccord. Please go ahead, Chris.
Hey, thanks. Morning, guys.
Morning.
Morning.
Just maybe following up on the line of questioning on the acquisition front. Are you seeing maybe a slower pace of transaction activity in the market now? You know, does the impact of higher rates change the types of properties you're looking to acquire? I know you mentioned, you know, the need to acquire at higher cap rates, but does the nature of the assets and the asset classes change as well?
That's a difficult question to answer. Chris, as you know, we're focused in the industrial segment, and we are concentrating on acquiring in the industrial segment. We've seen that, you know, what was asked by vendors, right now in certain circumstances, we're able to, and I don't wanna use the word retrade because it's a dirty word, but I think that there's a reality check that has to, you know, for everybody, whether seller or buyer, has to basically glean on in the sense that you have to realize that people are purchasing properties in order to make money. If you can't make money when you acquire a property, then there's no purpose in acquiring a property.
That's why, you know, our mentors, and we're harping on this, is the fact that we have to be accretive when we purchase. Overall, we've seen buyers and sellers that are understanding what's going on in the market and are adjusting their cap rates upwards. Not necessarily a huge adjustment, but an adjustment that is necessary in order for us to be able to conclude a transaction. I think that there's an understanding. I think that people are not crazy about, you know, whatever they're asking as far as consideration for the sale, but I think that there's an adjustment out there that's taking place right now. It's very quiet, but there is an adjustment that's taking place.
Okay. Thanks, guys. I'll turn it back.
Thank you. At this time, there are no further questions. Michel Léonard, please continue.
Thank you very much for joining us today. I think that our quarter has been extremely strong. We've shown that, you know, patience in real estate is really rewarded by being patient. I know that, you know, regarding, you know, when we started in 2018 to dispose, it did create a lot of pressure on BTB as far as its ratios were concerned, as far as its overall performance was concerned.
Now we're seeing that after the acquisitions that we concluded last year, which was a strong pipeline of $ 222 million, the dispositions that we were able to conclude at a profit, and the overall portfolio performance that is demonstrated in this first quarter, I think that it's a great testimony to the work that took place by all employees involved with BTB. It was strenuous as far as the work that had to be done in order to get to where we are. We don't wanna lose our place, we don't wanna lose our position, our current position, and we wanna build on this.
That's why we've been saying that, you know, overall, year after year, we wanna double the portfolio, but do it in a way that is going to bring results for our unitholders. As I mentioned, interest rates are currently a factor, and we're, you know, we're considering this factor in all our decisions. We still have a pipeline that is very interesting as far as our acquisitions are concerned. We have certain properties that we've decided to dispose, and we're putting them on the market, but again, not a fire sale. If we don't sell them, then we're just gonna keep them for a while and put them back on the market when the time is going to be propitious for them to be sold.
Overall, great results, very proud of our performance, very proud of our team that, you know, everybody's been rowing in the same direction, and that has concluded a fantastic quarter for us. All I've got left to say is to thank you for your trust, thank you for following us, and thank you again for seeing BTB to a better position. Thank you again, and we'll see you in the next quarter.
Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines.