billybobjovialdechicoutimi

@Spekulatius thanks for that Please note that the 'independence' of the external appraisors is a question mark here too, since the board does not consider the inexistent disclosures to unitholders surrounding its employment of the CEO's daughter in a senior role as a problem. Implicitly it seems to believe the CEO's daughter is 'independent' of the CEO, the Board, etc. How many relatives of Board members are employed by the company? Who knows? I asked the Board who sets her compensation, its terms, etc. but got Nada... including in the Management Information Circular published in May of this year (3 months after writing to the Board on that topic).

What do I like about this one? Good question @Morgan The CEO of this company sits on the board of the OACIQ - the real estate broker regulatory body in Quebec. Annoyed by my activist efforts and questions at BTB REIT (and at the OACIQ), this gentleman threatened to resign from the board of the OACIQ if the latter did not sue to shut me up at the Quebec Superior Court. Why answer questions when you can sue the guy asking questions to shut him up? Why spend your own money suing to get that guy to shut up, when you can spend the money of others to do so? That legal effort, which has cost unknown thousands (perhaps hundreds of thousands) of dollars to the OACIQ (and the real estate brokers of Quebec) has led to interim Quebec Superior Court rulings forbidding me to share my opinions on the OACIQ (or even OACIQ facts) with BTB unitholders. Comically, the last interim order would remain inforce for at least a year past the BTB CEO having to leave his seat on the OACIQ's board in September 2025 by law anyway and regardless of my annoying questions, since the hearings in our case are slated to be held in Summer 2026 at the earliest. My view is that all of this coming from the CEO of a publicly-listed company is a brazen attempt to silence critics and/or obstruct their analysis. Quarterly earnings calls are reserved for sell-side analysts, who - in case you are wondering - are also ignoring me (trying to stay on the good side of the CEO for lucrative IB work? who knows?). The point is there is no way to get answers from these guys. The good (or bad) news is that there are so many strange things happenings at BTB itself, that there is no need to discuss the OACIQ with BTB unitholders, in order to ask tough questions from BTB's management. Now maybe there are no squeletons in BTB's closet, but obviously if the boy runs to hide when you ask him why there are no cookies left in the jar, you wonder what the boy is hiding, and in this case, they boy has run to hide in the closet, he has put on a fake moustache, and a whig, and is trying to speak in a foreign accent... Since all of this is happening in my backyard of Montreal, if there is indeed fraud, etc. I would prefer for it to be stopped asap, if only to protect the reputation of our local companies/markets. Sino-Forest was not great, Poseidon was not great, let's keep the list as short as possible.

Why I believe the CFA is a scam 1- Ethics The curriculum won't make anyone who is un-ethical, suddenly ethical, but that's what it naively proposes. Many of the 'cures' for discovery of unethical behavior at your employers are blind to reality: it recommends resigning, well here is the thing, in most of the world's job markets, and I believe even in large liquid ones like NYC or London, etc. , you simply cannot find a job fast enough to 'resign' your current one, furthermore, your ex-employer will not care that you were CFA or not, they will make it their life mission to destroy your chances of getting any other employment in the field, since it's essentially your word of them being 'unethical' against theirs, and the CFA will not intervene at all to adjudicate, etc. 2- Employment, Salary, etc. When I got the CFA charter, after passing the 3rd test, I got a handshake from my employer, and a few smiles, but that's it, no raise or anything like that, not even a change in title, just the three letters next to my name for them to brag to current/future clients. What the CFA stats on salary will not show you, is the many ex-charterholders who decided to stop paying their dues, because they are insanely high and can only be defended if one remains in the industry. The stat is massaged therefore higher therefore simply by cutting the denominator to the lowest possible. 3- Curriculum itself I was a Buffett devotee before 'learning' the material for the different tests. I cannot say exactly how much, but I wouldn't be surprised if at least half of the CFA material simply goes against all the teachings of the value school, of Buffett, Munger, et al. In my view, Benjamin Graham who pushed for the designation in the first place, himself would be shocked by what is taught as CFA gospel, and fyi, I 'un-learned' everything the curriculum advised, and thank god I did because if I hadn't, I'd be living under a bridge somewhere panhandling. BOTTOM LINE: Its a waste of time and money, and worse, to those who feel somehow comforted by the fact that their financial advisor is a CFA charterholder, well, I guess if you are naive enough to believe that ethics and honesty can be taught via a test, then you probably deserve whatever Hell you may eventually endure, at least in terms of underperformance.

still, its really weird... Saskatchewan went from 41.1 in 2021 to 44.6 in 2023 (assuming the 2023 AR has no typo) so this implies that the 100% leased industrial properties in Saskatchewan, went up in value by 8.5% over 2 years, and the Colliers Industrial market reports indicate that that market saw industrial rents going up something like 2-5% from FY22 to FY23, so if those top of the line properties went up in value by only 8.5% over 2 years, how did the full Industrial portfolio go up in value by 9%+ over 1 year??? Considering the weakness in the Montreal industrial market? Considering the rising cap rates? Considering the fact that the industrial portfolio had 100% committed occupancy at Dec 2022 and 99.9% at Dec 2023? I am sorry but the NOI increase simply cannot account for that huge FV increase, the only explanation I can think of is that somehow the new Industrial properties (2 purchased with a combined value at purchase of $36mn including one in Mirabel outside Montreal, representing 80% of that) purchased within the 2023 fiscal year, increased in value substantially by the end of the 2023 year, not impossible but kind of weird, no?

scrap that, looks like it was a typo corrected in the 2023 annual report.

So it looks to me like something is going on with the Saskatchewan portfolio. In 2021, BTB bought the following 4 properties with a total combined leasable area of 223,472sqft. (all of them in December 2021, so at the very end of the year) 3542 Millar Avenue 318 - 68th Street 3911 Millar Avenue 3927 and 3931 Wanuskewin BTB would have spent a total of $41mn to buy these properties, which on page 8 of the 2021 annual report were reported to be worth $41.1mn. Now in 2022, BTB did not buy anything in Saskatchewan, and on page 15 of the 2022 annual report, the same 4 properties (with the same total area of 223,472 sqft) were now worth a combined $86mn, so only one year after purchasing these Saskatchewan properties, their value more than doubled... What am I missing? Keep in mind these 4 properties were 100% leased when purchased, so how did they increase in fair value so much?

I can only discourage you to proceed. I passed all three exams each in the first shot, was a CFA charterholder for about 4 years, and then I stopped paying my dues, and I gradually understood that the designation is really a scam, happy to develop on why I hold this strong belief

Yeah so I found it, page 44 "In line with the Trust’s strategy to increase it’s industrial footprint, the proportional fair value of industrial properties increased from 29.6% to 36.4% compared to the same period last year, due to the acquisitions of industrial properties totalling $36.3 million concluded since the said period, a net increase of $32.5 million from fair value adjustments in 2023, and the reclassification of 2 office properties (both flex industrial properties with higher industrial footprint) in the industrial segment representing a total of $26.3 million." Thanks for the help @mcliu, so I guess the question now is how much did the 2 reclassified properties generate in NOI. And fyi, BTB IR, Mgmt, and all the trustees AND all sellside analysts ignore any and all my questions, so sadly that is not a source for answers for me at least... maybe you'd have better luck

I also wanted to underline the following discrepancy: 1- In 2023, BTB did not dispose of any property (pages 100-101, note 4 b) of the 2023 annual report). 2- In 2023, BTB bought $36.4mn worth of industrial properties, and it didn't buy anything else (note that 80% of that amount was a building outside Montreal, in Mirabel) - page 100 note 4 a) of the 2023 Annual Report Now the fair value of the industrial property portfolio went up from: a- $350mn in 2022 (30% - as stated in the front pages of the AR - multipled by $1,164,881) b- $440 in 2023 (36.4% as stated in the front pages of the AR - multiplied by $1,207,522) Now if we were to remove the FV change of the Industrial portfolio over 2023 ($32.5 - explained earlier) and the $36.4mn of new properties they bought in 2023, that leaves an unexplained $22mn increase in the FV of the Industrial portfolio... Why? How?

Thanks for that insight @mcliu but that opens up questions on the other two segments then (Retail and Offices), e.g. office NOI dropped by 7.5% in 2023, office cap rates (pa. 100) went up by 26bps to 7.01%, yet the Office portfolio value only dropped by 4.8%, it looks to me like the actual Office fair value drop should be more like a 10% (2x the reported figure), do you follow?

So on October 15th, I asked the board of trustees of BTB to explain the significant implied increase in fair value of the company's industrial portfolio from FY22 to FY23. The company indicates: A- on page 14 of its 2022 Annual Report, the Industrial property portfolio is indicated to represent 30% of the total portfolio that year B- on page 101 in note 4 of the 2023 Annual Report, that the total change in fair value in 2023 of its Industrial Property portfolio was stated to be $32.5mn Now this increase in fair value, represents 9.3% over the 2022 value (30%x$1,164,881=$349,465), which is quite strange considering that: 1- Weighted Capitalization rates used by the company for its Industrial portfolio went up from 5.75% end of FY22 to 6.09% end of 2023 (capitalization rates move in the inverse direction as the underlying value, so this is a headwind). 2- Colliers Montreal (a major geographic exposure for BTB's portfolio) indicates that from FY22 to FY23, industrial market rents stayed flat and that asset transactions fell by ca. 50%, typically not a good indicator for value. This report is available at this link: https://www.collierscanada.com/download-article?itemId=cdf055bd-ad04-42b1-984a-fc2c915e1e94 on this page https://www.collierscanada.com/en-ca/research/montreal-industrial-market-report-2023-q4 Since the company will not answer me, I was wondering if a REIT expert reading this bullboard would have any ideas as to how this portfolio's value increased so much. The company claims that its portfolio is continuously valued by 'independent' appraisors, and as we know at the same time, the employment by BTB of the CEO's daughter in a senior role is not considered to be worthy of disclosure in regulatory filings like the Management Information Circular, so obviously the word 'independent' could mean different things to different people. Any clue what's going on? By all means, check my maths, I could have made a mistake

Excellent point @bizaro86 What I'd tell those in your shoes is: 1- This thing is owned by exactly zero fundamental insitutional investor, despite ca. 20 years of various IR efforts from the current CEO, I am not saying that getting a few onboard would get this thing to double, but fyi 2- Investing in the S&P/TSX Capped REIT Index (the index the Board believes they should be compared to) would have gotten you 50% more over the 10 years ending 2023 than in this name (including all distributions), again its no guarantee that it's undervalued since this could just be a function of fundamental value having been destroyed on a relative basis, but fyi This is a situation where the excessively poor corporate governance doesn't just hurt this REIT's unitholders, by overpaying a mediocre management team, its Board is contributing to CEOs at other REITs - those who are actually doing a decent job, who don't get their entire family on the payroll, who don't treat their unitholders like morons - telling their own boards: Well look if that loser can make X, I definitely deserve a huge multiple of X! And so these basket cases are just hurting the whole ecosystem in my view... and I am not even factoring the unhappiness the undeserved pay causes internally within the REIT So what do you do? a- Ignore all these basket cases and hope that somehow they will see the light? Unlikely in my view b- Short these basket cases? The dividend yield is 10%, and so I doubt many will have the patience to see this go through c- Somehow nudge them into cleaning up their act? Am not saying that this is the best option, but it's the one I have chosen It's chicken and egg, no one wants to get in until its cleaned, and no one wants to clean it up!... I think the market should come up with a process to 'police' these bad apples, otherwise we will get the annual articles complaining about CEO compensation for the rest of time... We all know where the problem is: the compensation committees of boards, notably at the mediocre companies Anyway... I realize that I am ranting a this point, but thanks for the comment for real @bizaro86...

Good point @HubbadaPow - but trust me, we are not talking about a Buffett-like character here WEB keeps his salary steady (in fact ML's at $0) for years, this guy gets a salary increase every year, and in 2022 and 2023, double-digit increases even WEB has delivered fantastic returns to his shareholders, not this guy... I will stop here but yeah, folks voting against the trustees are not related to me, so irrespective of my opinions/questions, there is unitholder frustration

Thanks @LC and @Saluki for the encouraging words... I read Markopolos' book and it is not really clear from it how eccentric he comes across, so thanks for that color I do want to stress again that I am not comparing myself to Markopolos. Right now, my ability to state more about the situation is limited due to a Quebec Superior Court ruling forbidding me from discussing OACIQ-related matters with BTB REIT unitholders (or even journalists). All I can say is: 1- I hope that I will soon be able to able to share details of the hell I have had to go through just because I naively believe that asking tough questions from public nonprofits and publicly-listed company leadership is a fundamental right Canadian laws entitle me to. 2- The muzzling ordered by the Quebec Superior Court was driven by Michel Leonard (BTB REIT CEO) threatening to resign from the board of the OACIQ (months before he needs to leave that board by law anyway) if the latter did not sue me in court (yes, believe it or not, I am THAT powerful, despite having 60 facebook/linkedin friends/connections) 3- Because of point 2, BTB REIT trustees essentially believe they can ignore anything I say, arguing that I have a personal grievance, even though the facts only show that Michel Leonard has a personal grievance against ME (and trust me this grievance is kindergarden-level material and I cannot wait to share it with you considering how funny it is), so it appears to me that the only way forward is either (a) litigation to get the trustees to do their job or (b) for some other BTB unitholder who wouldn't have point 2 as a history to take over the effort from me, assuming the trustees would not find another self-serving excuse to ignore that other BTB unitholder as well

I believe that the profits possible over the long term by cleaning up this REIT are compelling and since (i) this REIT is right in my backyard in Montreal and (ii) the red flags are as bad as I have seen them in 25 years of following capital markets (you mentioned Enron, not me), I feel I have a responsibility to try to intervene to avoid this disaster getting too big... Would it not have been better if Markopolos had been able to convince the SEC and others that Madoff was a crook earlier? I think so. I am not comparing myself to Markopolos or anyone to Madoff, I am just saying that sometimes, it gets so bad and it's so close to home (and you're old enough to start caring about the world you leave to others) that you have to do something...