Q: Hello, I would like your opinion of BTB REIT. I know it is small but it seems to be chugging along since the pandemic. The distribution is attractive, given the 8% AND the fact that, since 2006, it is all return of capital. How is this possible since most other REITs have typically a mixed bag of ROC and « other income » and/or capital gains? Thanks
5i Research Answer:
BTB has an annual yield of 8.20%, but its total cumulative 5-year return is just over 11%. Thus, it really has been paying out its own capital to meet the distributions. ROC depends on what the company does during the year (or not) and whether there are asset gains/sales. There is also some accounting flexibility depending on retained earnings and other factors. Units are up 26% in the past year. Q1 growth was 5.4%. Occupancy did dip two points to 92.5%. We would consider it OK, but would also consider it higher-risk income overall. Units are cheap at only 8.5X cash flow.