Good morning, ladies and gentlemen, and welcome to the Dream Office REIT Q2 2021 conference call for Friday, August 6th, 2021. During this call, management of Dream Office REIT may make statements containing forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dream Office REIT's control, that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Additional information about these assumptions and risks and uncertainties is contained in Dream Office REIT's filings with securities regulators, including its latest annual information and MD&A. These filings are also available on Dream Office REIT's website at www.dreamofficereit.ca. Later in the presentation, we will have a question and answer session. If you have a question, press star then one on your telephone keypad. Your host for today will be Mr. Michael Cooper, Chairman and CEO of Dream Office REIT. Mr. Cooper, please go ahead. Thank you, operator. Good morning, everyone, and welcome to Dream Office REIT's second quarter conference call. Today I'm with Jay Jiang, our CFO, and Gordon Wadley, our COO. Once we've made our presentation, we'll be happy to answer your questions. Over the last 18 months, everyone's lives have changed dramatically at the same time. This quarter it's become obvious to me that it will take longer than had been expected to get into a new rhythm on many ways in people's lives, including work. One example that I've thought of is how to address the different choices people have made around vaccines. Over the last six weeks, we have been researching what our policy could be for unvaccinated people in the office. Part of this research is a result of hearing from vaccinated employees that they aren't comfortable coming into the office if they will be exposed to people who are not vaccinated. Firstly, we are not medical people, and we are not scientists. While I don't believe that vaccinated people are at much risk by being around unvaccinated people, neither I nor our team are in any way talented or have the background to deal with this. Secondly, I don't even think the scientific community shares the same views. Thirdly, our provincial government has provided no guidance on this issue, leaving every company to find their own way. We will be taking it a bit slower before we make coming back to work mandatory. We also don't know what the capacity limits will be, so we are assuming that after Labor Day, we should be able to have 50% capacity. As a result, we will have people alternating with a week on in the office and a week off from the office through the fall until we know more. What we decided to do is that for September, coming to the office will be voluntary, and it will become mandatory in October so that people can get settled at home in September before they come back to work. We're also providing some flexibility for work from home throughout the fall, even among the five days that people are on. This will provide people the time to adjust to the post-COVID world. Having said that, with a completely voluntary come back to work policy, we already have over 70% of our people in the office. For the month of August, we've encouraged people to take a vacation and relax. We expect a very busy fall, and we want people to have the right frame of mind and the energy to do their best work starting after Labor Day. We are providing time and flexibility not just so people can adjust their life at home and their mental state to return to office, but also because we're more confident that people want to come back to work. And we want them to come back to work on their own. Here's a couple of my observations from recently. I really believe that people want to be downtown. Apartment rates are increasing in each month. Condo prices are at an all-time high. We have strong interest from potential new tenants for exciting concepts for our retail. There are more people downtown every day. And on the summer weekend days, the streets are very busy. People love what downtown offers, and as soon as they can access it, I am confident that downtown Toronto will thrive again. Already in the U.S., hotel occupancy and RevPAR are just about at pre-pandemic levels. If you look at airfares, you'll see that they're introducing significantly more flights, and the actual cost of those flights are no longer discounted. It does look like we'll see more normal outcomes with a little bit more time. If we look at economies that have opened before us, we're seeing that activity is returning. While it is a slower return to normal than expected, we are seeing that life is returning to normal. There have been enormous changes regarding labor in our society. Labor is exceptionally scarce, and companies are going to further lengths than any time I have seen in my career to attract and retain talent. The government would suggest that people need assistance to help them through this crisis at this time. The reality is that restaurants and many other businesses are unable to open or open at the capacity they are allowed to because they can't get staff. Further, the media has suggested that the only type of employees are the ones who want to stay at home, have more flexibility in their life, and make work a lower priority. Now, there are and there have always been all types of people. While some people may be making decisions to live their life differently after the last 18 months, others have seen the value of being in a better financial position and are actually more ambitious than ever. We have seen the most successful investment banks in the world provide across the board pay increases to entry-level staff. These pay increases are so much that the entry-level analysts at Goldman Sachs or JP Morgan would just about be in the top tax bracket in Canada. Imagine that for your first year out of school. Closer to home, the Canadian banks and law firms have raised compensation. In the real estate industry, every single one of our peers, as we do, have unfilled positions, and competition for talent is driving up compensation. I actually don't think that there's ever been a better time to enter the workforce or be early in your career to find jobs that achieve great pay and manage an ambitious plan for your career. That actually includes any time, including right after World War II. We are seeing increased wages, unlike in the previous decade, companies are able to pass these costs through to customers in almost all industries, so their profitability isn't suffering. We clearly do not have sufficient skilled labor for the jobs we have vacant in real estate, banking, law, service industries, and likely in just about every field. It is great that we expect over 400,000 new immigrants annually to help us grow. Given all of the above, I'm pretty bullish about the economy and about our city. With regards to office space, all of our tenants are working with us to get ready to welcome a higher percentage of their staff back in the office after Labor Day. We are not seeing any significant changes to how they want to use their office space. In fact, I was speaking with one of the largest office furniture manufacturers in Canada who said that they are very busy. They are not being asked to make material changes to the furniture they produce. Other than that, their clients want more flexible, less expensive furniture with shorter delivery times. Obviously, over the next few years, we may see more changes, but we aren't seeing them yet. Gordon and Jay will provide much more detail on the leasing demand for space. As we have said in our press release, we are seeing a big increase in tours and we're starting to complete new leases on vacant space. Now that we are seeing more interest from tenants, we anticipate that the third quarter will be our low for occupancy this cycle. With respect to our view of the value of the company, we are very comfortable with the current book value and expect to see increases as we get more back to normal. To the extent that there have been trades of downtown Toronto real estate, the values are significant based on cap rate or value per square foot. Good real estate is hard to come by, and Toronto continues to have desirable attributes that make it one of the top markets for investment in North America. We've been investing in our buildings in very creative ways, which are attractive to tenants in the community. We have taken great steps to make our buildings more sustainable. We are also working on making the operation of our buildings more inclusive for suppliers, tenants in the community. We believe our offerings are very competitive with our peers, and our approach will keep our buildings desirable over the long term. Office buildings have been selling around the core for at least CAD 600/ sq ft. As a comparator, condominiums in the same vicinity are selling for about CAD 1,400 sq ft. There's relative value. In addition, we don't just own office buildings. We also own 26.6 million shares in Dream Industrial, which are currently worth about CAD 425 million, which is a significant portion of our market cap. Notwithstanding that the current stock price is much higher than it has been in industrial. We expect that its outstanding real estate and stock performance will continue to accelerate, which will be of great value to the office REIT. As we have discussed before, we also have development assets that are currently producing income but also provide additional value which is less correlated to the office dynamics as they include significant residential components. It is surreal to own assets that aren't used very much for 18 months. Behavior patterns have changed dramatically. Valuable information is scarce. We continue to believe that our business is well-positioned and will continue to be successful as we adapt to the new world. Gord? Thanks, Michael, and hello, everyone. I sincerely hope you and all your families are doing really well. Candidly, it's no secret the pandemic and the many various states of emergency have resulted in Toronto vacancy to increase to over 9% downtown across all classes. This is a level not seen since the great financial crisis. It's really important to keep in mind that just before the pandemic, vacancy was around 2.5% across all classes. Vacancy in our portfolio has seemingly moved in lockstep with the market, moving from 3%- 9%, taking us to an overall occupancy rate of just over 91%. That being said, there's genuine and real optimism at all levels of our business from leasing, operations, and construction as our clients open their doors, people come back to work, and regulations are relaxed. Due in large part to the national vaccination effort and associated reopening of the economy in our core market of Ontario, we're seeing great momentum throughout all phases of our business. Tours are up dramatically, like Michael said. Sublease space is being taken off the market. It now represents less than 1.5% of our portfolio. Absorption is picking up. Key deal metrics are very strong in terms of net rents, and even NERs for deals done this year are all north of CAD 30 on average. Other markets, Saskatchewan and Calgary, current and committed occupancy grew from 71%-78% since the start of the year. This is due in large part to those economies being open sooner and coupled with some viable new leasing and expansions to the tune of about 148,000 sq ft. NERs are up 20% on new deals there and 35% on renewals versus budget. From an income perspective, we're really very pleased with how our team's managed through the COVID pandemic. Regular communications with our clients and brokers have helped secure our overall collection ratio of 98%. For the most part, the vast majority of existing clients have renewed their leases over the last 12 months, as seen by our 75% GLA retention ratio at mid-year for 2021. New leasing has picked up in Q2 versus a much slower Q1 in our core portfolio, and to date, we've done about 250,000 sq ft, all at pre-pandemic rates in NERs. We also sincerely feel really good about the additional 260,000 sq ft of LOIs and deals in very active negotiation, which we hope to report on in the coming quarters. One important variable that supports our optimism is the growing interest in retail leasing. Michael touched on it, but we're conditional on three deals for almost 35,000 sq ft at rates north of CAD 85 a sq ft per average in our downtown retail portfolio. A lot of that space, just so everybody knows, is repurposed or currently not income producing, so it'll be viable impact to our NOI in the future. It's funny, 12 months ago the hot take was beds in sheds. Everyone was talking about beds in sheds. Res and industrial were seen as the most viable asset class, with bricks and mortar retail often left for dead or a distant afterthought. We're really excited about the quality of these deals we're working on, the concepts, and the offerings we're going to provide our clients and the community as a whole. These are potentially landmark transactions that align really well with our Bay Street Collection, and we feel the amenity and cachet of these will enhance the value of our assets and overall offering even further. One thing I also take solace in the fact in is leasing rents and inducements have remained in line with our business plan, thus exceeding rental expectations on our core assets for some recent deals done and outpacing expectations in non-core markets where we see the most demand. The absorption in the core portfolio was tempered very early due to the lockdowns, but akin to what we saw in non-core markets, have been accelerating over the last month. We're seeing dramatic increase in tours and interest, which we hope to transition into commitments that we can soon share. Aside from leasing and income metrics, the team remains active, on pace, and very committed to our operational, construction, and most importantly, ESG goals. As a company, we're really fortunate to have focused on great buildings in unparalleled locations, and prior to the pandemic, we used our capital and time to improve our buildings to a whole new standard of boutique luxury. Despite the mandated construction closures, our team's done a great job and had a head start to make our buildings safe throughout the pandemic. We used this time to upgrade many of our assets, not just aesthetically, but from all aspects of base building, ranging from HVAC, mechanical, and structural. This is to future-proof and really support all facets that tenants covet coming back to the office, primarily air quality, vertical transportation, and accessibility. By upgrading our assets, we put a real focus improving consumption metrics and data around GHG and carbon utilization associated with our new overall net zero strategy. These variables are really at the forefront of what we hope will separate us from our peers. Our team takes real pride that as a landlord and a leader, we have a tremendous opportunity to influence and improve our carbon footprint and in turn align with the growing sustainability demands of our clients. We had a corporate goal this year to establish a viable GRESB score, and the team worked really hard on implementing our ESG strategy throughout the portfolio. We're pleased to report that we have submitted our application last month and based on our preliminary assessment, hope to secure a strong score next quarter that separates us from our peer set. In the end, being a good community and environmental steward is absolutely core to our business, and as tenants become more sophisticated in their commitment to the environment and community, we want to be ready to share our strategies, be a resource, and ultimately partner to make meaningful contributions to support sustainability and the environment. This past quarter, our operating lease was the first to be certified gold and recognized by the Green Lease Leaders Association of Canada. We had some very strong national coverage coast to coast for being the first and largest portfolio in Canada to be WELL Health-Safety certified. Just as a quick reminder, the WELL Health-Safety certification is an evidence-based, third-party verified rating to address the post-COVID environment. The WELL Health-Safety Rating helps guide users in preparing their spaces for reentry. We're so proud to have achieved this high standard in health and safety at this remarkable scale. This verification of our operational maintenance policies, communications and engagement, and emergency preparedness ensures all of our occupants, all of our clients, and all of their staff can feel safe and confident in our buildings emerging from this pandemic. Whether it's a boutique heritage building on Bay Street or one of our downtown high-rises at Adelaide Place, we're ready. In the end, creating healthy and positive buildings has always been a cornerstone of our Dream Office approach. Over the pandemic, this has never been as important. We feel really strongly and committed that having proactively made investments in new technologies and put in place extensive measures and protocols to ensure a healthy and safe return to our buildings. We are very uniquely positioned to capitalize on the momentum that we're starting to see in the market going towards the end of the year and far beyond. As such, to be honest with everyone, I'm real proud of the team for their efforts and commitments throughout as we transition into the new normal. I'll turn it over to Jay. Thank you. Thank you, Gord. I'll be speaking briefly on our operations, financial position, and some thoughts on capital allocation going forward. Our operational results to date have been affected by the effects of the pandemic and the multiple states of emergency in Ontario. Our buildings and parking garages have remained empty for the better part of 16 months, and a decrease in transient parking revenue has negatively affected our results by over CAD 0.03 per unit this year. The majority of tenants, or approximately 98% each quarter, are paying their rents. Our retention ratio year to date has been just shy of 70%, and both spreads and Net Effective Rents on deals executed have been favorable and in line with pre-COVID leasing rates. Unsurprisingly, the main challenge has been for us to tour prospective tenants to see new spaces and for those prospective tenants to be able to commit to new leases when they do not know when they can return to work. As Gordon has covered, we are quite encouraged that we are finally seeing touring activities resume in our downtown Toronto portfolio, and we are optimistic some of those prospective deals will turn into commitments by the end of the year. We have also completed our development project at 1900 Sherwood Place in Regina, which will contribute CAD 5.3 million of annualized NOI, starting in the third quarter, and we anticipate that post Labor Day, our parking garages will have better utilization. Despite these restrictions and the challenges on occupancy and income, we're quite pleased that our year-over-year Funds From Operations per unit were relatively flat. We have a great portfolio of assets that's very well positioned to come out of the pandemic, and our balance sheet is in great shape and can provide a lot of flexibility in terms of how we want to allocate capital over the next year. We think there's a tremendous amount of capital available to us in the debt markets due to the quality of our portfolio and the strong relationships with our lenders. We have addressed all expiring mortgages in 2021, which collectively equates to about CAD 127 million at a weighted average interest rate of about 2.76%. This replaces CAD 104 million maturing at 4.88%. That's a healthy lift on both the balance and the rate. We are also in discussions with our syndicate of lenders on the renewal and upsizing of our secured revolving facility. We anticipate to be able to finalize the extension shortly at comparable terms. Our Net Asset Value per unit continues to improve. It's up about 1% quarter-over-quarter. Since COVID started, our NAV increased from just over CAD 27 in March 2020 to CAD 29.09 this quarter. Consistent with CBRE cap rates and private market transactions, we have noticed no movements in cap rates for downtown Toronto office buildings during the pandemic. We are quite comfortable with using a 4.8% cap rate on stabilized annualized value of our portfolio in downtown Toronto today. Now, to categorize the movements through COVID, the increase in our NAV over the entire period, we're up 40% from our investment in Dream Industrial REIT, 40% from accretive unit purchases at an average price of CAD 19.30, and the remainder is coming from retained earnings within our business. At our current trading price this morning, just about CAD 22.20, if we fair value our Dream Industrial holdings and the assets in other markets at book, our downtown Toronto portfolio of 3.5 million sq ft is trading at an implied price per square foot of less than CAD 500. We think that's a significant discount to what we consider to be intrinsic value. The appraisals we see at private market comps for similar assets that have transacted, we feel optimistic that the leasing and income will normalize as we come out of the other side and as the employees gradually return to the office. We think the obvious use of capital today is for Dream Office to continue to repurchase your units under the normal course issuer bid program. It begins later this month. We have ample excess liquidity on our balance sheet. We can also fund acquisitions with either a disposition of non-core assets when they happen and a bit of our Dream Industrial unit. We're happy to take any questions, and now I'll turn the call over to the moderator. Thank you. Thank you. I'll begin the question and answer session. If you do have a question, press star then one on your touch-tone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. There will be delay before the first question is announced. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, press star then one on your touch-tone phone. Our first question is from Sairam Srinivas from Cormark Securities. Good morning, gentlemen, firstly, congratulations on a great quarter. My first question is in terms of the leasing activity. You mentioned that the activity is picking up since June. In terms of the pre-pandemic levels and what you're seeing right now, how do they compare? Secondly, when you see an occupancy recovery, how is the private market thinking about occupancy, and where are they pricing in the recovery as such? Gordon, Jay, do you want to pick that question up? Sure. The audio wasn't clear. I think one of your questions was how is the touring activity comparing to pre-pandemic. I think, Gordon, you want to take that one? Yeah. It's a great question. Pre-pandemic, we were probably averaging close to about 25 to about 35 tours a week. Last week, we had our high -watermark. Throughout the pandemic, we had 27 tours. We're starting to get in line with what the tours were during the course of the pandemic. We were averaging about 5- 6 tours a week, and the majority of those were virtual tours, through Zoom, sending 3D plans, those kinds of things. Active walking tours over the course of the past week, and we'll get our releases today, have all been north of 25, which is almost in line with pre-pandemic levels. Thanks, Gord. I think the second part of your question, which I guess got a bit blurred out in audio, was in terms of the occupancy recovery and how the private market is thinking about occupancy and essentially pricing that into any deals you're seeing in the market. Yeah, sure. I think right now it'll take a bit of time for some of the tours to convert into commitments. We are quite optimistic because the conversations are speeding up. Michael did mention that we think Q3 is probably going to be our trough in terms of the occupancy. Just looking at the existing renewals and new deals, and maybe some expectation that we'll be able to convert some of those leases, we think by year-end, we'll probably be around where we are at today. Towards next year, we're quite optimistic that the occupancy is going to pick up. That's great color. Thanks, Jay. Finally, my last question is around, I know there's a fleeting mention in the press release about repositioning the assets in other markets outside downtown and essentially enhancing their liquidity. Can you throw some color into, are you seeing more deal activity coming out in those markets, or am I reading too much into it? Yeah, sure. That's a good question. In those markets, our key goal is to drive up the occupancy. Getting the occupancy up has many benefits. You get the recoveries on the operating costs. You make it more desirable for a private market sale. In fact, we're getting more interest now throughout the summer, so we hope we can probably sell one or two assets maybe by end of the year or early next year. Third, even if we can't sell the assets when your occupancy is higher, we have a great group of lenders, and they'll be able to give us a pretty good LTV and terms on the property. On a lever basis, you have those properties now that are in a positive cash flow position and also with pretty attractive financing rates. It provides a pretty good levered return to the company until the day we're able to sell them. We sold a lot of assets already. We're certainly not concerned at all if we sell the remaining ones. If we do, it's great. If not, it's not going to hurt us. We plan our budget and liquidity and debt on the assumption that we don't. If we do, it's extra capital. Well, that's great color, Jay. Thanks for that, and I'll turn it back. Thank you. Our next question is from Sam Damiani from TD Securities. Thanks, good morning, everyone. Gord, your comments were very helpful on the sort of the trends and addressing the occupancy decline. I know that some of the occupancy decline in the portfolio is due to some redevelopment activity going on. Just wondering if you're hearing some of the specific reasons why some of the latest departures took place, what these tenants are deciding to do. Are they consolidating space, reducing their space needs, relocating to other landlords? How would you, I guess, compare some of the tenants' decisions that have happened most recently to pre-pandemic? Yeah. Good question, Sam. What we're seeing is a couple. We've got a good roster of private sector clients, and we've got some government clients at all levels. We had one or two government clients downsize due to funding, and then also relocate to suburban locations. We haven't really lost any tenants to competitive landlords or competitive situations. What we're seeing is on the government side, we're seeing some pressure in terms of funding, which has influenced their decisions. What we've seen on the private sector side, we've done a couple of larger deals, blend-and-extends, get some extra term in exchange for taking back a little bit of space. The space that we do take back is usually quite usable. Some of the space that we've taken back, we're actually in negotiations with tenants to backfill that space. The irony, I was talking about this with Michael the other day, the irony about some of the space that we got back from the private sector tenants was that we started those negotiations or those discussions even before COVID. We knew that some of that space would come back. Right now we're just backfilling it. On the government side, it's mostly been around sensitivities on funding. The private sector side, we've seen some right-sizing. That being said, in the same vein, we've seen some private sector clients expand. We have a great partner and a client out in Saskatchewan, took another 30,000 sq ft from us. We're talking to a few clients on our Toronto Street portfolio that are looking to expand. Our sublease, it's kind of the general consensus throughout the market, but our tenants that are subleasing are taking their space back off because they're starting to realize that they actually do need the space. We've seen that drop. Actively being sublet in our portfolio now is just a little under 1.5%. That's been reassuring. I hope that helps, Sam. That is helpful. Also just looking at the lease expiry schedule, in terms of the forward commitments that you have today versus. Let's say a year ago or pre-pandemic, it's clear that tenants are waiting longer to make renewal decisions. Is that dynamic starting to reverse? Are you starting to hear from tenants earlier on about renewals, or is that not happening yet? Yeah, no, that's a good point. We're starting to hear from them, and we're starting to hear from their brokers. I think brokers have been a pretty good catalyst in the market to try and get these discussions going early. We've had a couple of larger tenants where we're already engaged a bit earlier now. I think it's twofold. I think people are starting to realize that the market is starting to shift, they're being a little bit more quick and proactive to try to put a deal together now. We have been fielding a lot of those calls. That's kind of what we've been seeing in the market to date. Okay. That's great. I think that's it for me now. Thanks so much. Thanks, Sam. Our next question is from Mark Rothschild from Canaccord Genuity. Thanks, and hi, everyone. Obviously, things have worked out really well with Dream Industrial and the industrial sector in general, and it's become, as Michael mentioned, a big part of the market cap of Dream Office. With potential continued buyback of units, to what extent are you comfortable with the industrial stake becoming an even larger part of the market cap? Is there a limit to how much you'd want it to contribute to the REIT, or does it really not matter? Thanks, Mark. We've always said that we hold them for strategic reasons, but not sorry, not for strategic, but to make money, and we started buying stock in addition to the first CAD 18 million at CAD 8.75. Last year, we sold 1 million shares, 1 million units. We continue to make decisions step by step, but we're not overly concerned about what happens. We hope it's incredibly successful. If it becomes a huge part of the market cap, we think that's a good thing, but we're not a pension fund that manages those kind of things. We're going to make the decision we think is right all the time, but we're not going to be making decisions based on weighting. With potential additional unit buybacks at Dream Office, from what I understand, you're saying it could become a much larger relative position in Dream Office, and that's not a problem at all? Correct. Yes. Okay, great. Thanks. Maybe just one other small question. When the pandemic started, obviously parking revenue took a big hit. What are you seeing with the trends in that? To what extent do you expect that to come back as employees come back to the office? Gord? Well, parking has been a little bit slow throughout the summer right now, still. What we did throughout the course of the pandemic is we donated a number of spots as well to first responders that are in the area, people that have been on the front lines of the pandemic. What we suspect in speaking with our clients and talking to them, we should see an uptick by at least 30%- 35% over the course of September and October, and more of a dramatic uptick come November and December as the weather starts to get really cold. We think parking is going to be in great demand. I think in speaking with a lot of our clients and facilities managers, I think there's a bit of a reservation around public transit still with their staff. Like Michael said, it's a war on talent a little bit earlier. A lot of our clients are talking about using parking as inducements and way to woo and win new talent. We feel pretty good about the parking that we have towards the end of the year and going into the Q1 of next year. Okay, great. Thanks so much. No problem. Our next question is from Matt Kornack from National Bank Financial. Good morning, guys. Question for Gord, I guess, with regards to the lower retention in Q2. Did that relate to the tenant dynamics that you were talking about with the government and private sector? Was there any sort of strategic de-leasing related to Bay Street in that as well? Good question. Bay Street, not a lot of de-leasing. We were holding off some occupancy on some of our ground level floors for these retail deals that we're working on. That was a bit of a lag in the forecast. For us, we were caught a little bit by surprise by one tenant at 655 Bay, which was a government-related tenant, where we assumed a renewal, and unfortunately, they had some of their funding pulled. We are on that very same space, which represents just over 35,000 sq ft. We're actively negotiating with an existing tenant. We feel like we can hopefully get that back-filled by no later than the end of Q1 next year. I'll jump in for a little bit. If you look at retention rates by quarter, it's quite lumpy. We, in fact, tracked it over the probably last 20 quarters, on an annual basis, it's always going to settle in around the same mark, which is about between 60%-70%. We don't think this year will be any different, even with the pandemic. Like Q1, we had a higher ratio. We had a lot of renewals, in fact, the government keeping their space. This quarter was down a bit. We expect the rest of the year to pick up and end up in the same spot at year-end. Okay. No, that makes sense. Just on Bay Street more generally, other than 366 Bay, do you anticipate maybe expanding what you're doing there to other buildings, or are you happy with the kind of the configuration of those? Maybe more generally on Bay Street as well, just where are you at in the process of the repositioning and investment in those assets? Those are good questions. We'll start with the repositioning of the assets. We did have some construction delays that set us back just over 10 weeks. On all the outdoor works, our alleyway and our retail will be done by September. Some of the finishing works around the lobby, the vertical transportation upgrades, throughout a few of the buildings will be pushed into early Q1 of next year. We're really happy with the buildings that we've done. We can't wait till it's safe so we can show everyone on the call. We're happy to walk you through. The quality of work's been incredible. The feedback from our clients has been incredible. What's been really cathartic for us is, it's not quarter related, but we just finished and closed a deal last week at one of our Bay Street Collection buildings where we had expiring rents at CAD 20. Our average net rents in this new building, or sorry, at 80 Richmond, are now over CAD 44. We've seen a huge lift in the deals. Our asset thesis is paying off on the deals that we're doing, and people are really excited with the quality of the work that we're doing as well, too. On the actual work itself, we did get some delays in timing, but we're starting to see a real pickup. People seem really excited about the retail alleyway as well too, which is a great amenity. Okay. No, great. Appreciate that color. Jay, on the lending environment, you've addressed the 2021 maturities. Looked like some of them were a bit shorter in duration. Was that rate driven, or is there something strategic to the terms that you went with on the refinancings? A little bit of both. Some of the lower maturity deals were actually, for example, 2200 Eglinton, 250 Dundas. On those ones, I think we're still going through the pre-development phase, and we wanted to keep the optionality open. The loan, the value, and the rates were really good. That was really the main reason. Everything else was pretty standard, and we're going for three years again on our credit facility like before. Okay. Because you mentioned it on 250 Dundas, there's been a bit of a trend towards healthcare usages that's obviously in close proximity to the hospitals here in Toronto. Any thoughts as to maybe changing or approaching more healthcare-related tenancies there, whether it's lab space or medical office, et cetera? It's not just the office space, also the residential space. We're located beside SickKids, Toronto General, Mount Sinai, the rehab hospital, and Princess Margaret. I think that there's strategic relations we could have, and we are talking to the hospitals about what we can do together. One of the things is the hospital system, the health system in Ontario, is going through a lot of change right now. We thought it's a good idea to be patient as they sort of make their own changes. What we expect that there's going to be great opportunities with that building, plus the other three that we own in the Hospital District, 438 University, 655 Bay, and 720 Bay. Okay, great. Thanks, guys. Appreciate it. Our next question is from Mario Saric with Scotiabank. Hi, just maybe a couple of operational questions for Gord. You mentioned the sublet space now less than 1.5% of the portfolio. That's down from 2.2% at quarter end. Is there any trend in terms of the type of tenant that's taking back the space? Secondly, would you correlate taking back space with decision making, i.e., that tenant is deciding on kind of their longer term office space need by taking back the sublet space? Is it just simply taking it back and then figuring out what to do six to 12 months from now? Yeah. Good question. It's predominantly tech related that we're seeing that had put their sublease space on the market initially. I think when the pandemic hit, in fairness to everyone, there's cash sensitivities and cash restraints that people were being sensitive about. Now that people have kind of worked through the worst of it, and there's a general sentiment that the worst is over, I think people are looking at their longer term plans. What we're hearing is there's a real demand on labor. They want to be able to attract and retain new labor. What we're seeing is people, when they take their space back, they've been working in construction with our construction teams to kind of repurpose the space a little bit, making some Zoom specific rooms or some amenity related rooms. It kind of serves a great purpose for us because they get the sublease space off the market. Then we also work with them on construction and get some fees through construction as well too. We're happy to have those conversations. Our team's working really hard to communicate with our clients pretty frequently. The other areas where we've done quite well, I've noticed over the course of the last few quarters, is we had some tenants that were subleasing space, and now we're in direct negotiations with those tenants. Space that would have come back to us, I can think of about 44,000 sq ft right now with two tenants where we're actively working on extending them directly for longer terms than what the natural expiry was of their sublease. Yeah, we're seeing people do it really for operational purposes. The overall consensus is that they want to hold onto their space for the longer term. Just one minor clarification for you, Mario Saric. The 2.2% in the press release is the amount of space in our portfolio that's sublet. The 1.5% that Gordon's referring to is the percentage of space that's on the sublease market. Both numbers are low interestingly enough. Both numbers are declining. Yeah. Got it. Okay. Just, I think Michael mentioned the war on talent. I think Gord, you mentioned one incremental data point in terms of the desire for additional parking. Whether it's Dream, the entity, or kind of your tenants. Are there any other incremental trends that you're seeing that employers are using to really capture that highly coveted talent in the market today relative to what you've seen historically? Clearly, compensation will be one, but what else is really popping up today that you haven't seen in the past? Jay, Gord, I don't really have a lot of insight on that. Although, I'm seeing people recruit earlier in people's university careers, going directly throughout the industry through LinkedIn in a much more aggressive way than they used to. I've been seeing people offering, in the United States. anyways, premiums to prior income. Like, we'll pay you 30% more than your W-2 or whatever it's called, whatever your T4 is in the U.S. Yeah, we are seeing people getting much more aggressive on comp. I think they're also trying more aggressive on their workplace. What's amazing is we're seeing people being very aggressive as well on what they expect from people that they're paying a lot of money to. They expect them to be in the office and to work very hard. Gord, Jay, you have any other insights? Yeah, I think, obviously compensation's a big part of it, but also I think the culture of the workplace. You're going to be spending a lot of time at work each day. You want to be with the people you like. The other one is just the experience of the job. You want to be working on interesting work, interesting deals, and I think they look at it as an entire package as a whole. Office space is another one. They want to have ample space to work in, good lighting, good air, and they want to be in an environment where it creates more of a social experience than just being at work for 12 hours a day. I think we look at all of that, but compensation's increasing. We're trying to keep up at the same time, but we have to give the complete experience. Yeah. One data point we're following, and it's evolving as well too, is the last expansion fit ups that we've done, at least two out of the last four, there's been a real demand for management and kind of executive perimeter offices over the course of the last kind of three to four years. It's been open, real collaboration space. We've seen this, and typically it's been in law firms where you've seen it, but these were professional services firms, where they wanted to build out some offices for their management team, which has been a bit of a change, and we'll keep our eye on it. Yeah. We're hiring. Okay, my one last question just pertains to kind of Dream Office versus Dream Industrial. You sound pretty bullish in terms of repurchasing Dream Office units. Hypothetically speaking, fulfilling the full NCIB going forward, I know in the past there may have been some tax implications with respect to selling Dream Industrial units, but from a tax efficiency standpoint, hypothetically speaking, would you be able to do that, to buy Dream Office units on a tax-efficient basis? Are there other considerations? Yeah. We could buy this year's full amount of stock under the NCIB without any tax issues. We have a variety of ways of paying for it, so we've got a lot of flexibility on that, whether or not Dream Industrial units help fund it or we use other resources. We've got lots of capital, so that's not an issue. Great. Thank you. Our next question is from Jenny Ma from BMO Capital Markets. Thanks. Good morning. I'm just wondering if you are hearing about any Delta-related impacts on your leasing conversations. We all realize that it's still very much evolving, but we've seen some headlines out of the United States, out of large employers in terms of pushing back return to office. I'm just wondering, in the last few weeks, has that come up at all in the conversations? Also recognizing that you've done a lot of work to your office space to make it safe as well, if that's a factor at all. That's a great question. No. Sorry, Gord. We're not seeing anything specific with the Delta variant in terms of people's returning to office plans, other than the fact that people who are vaccinated are getting more nervous about being around people who aren't, and that's what I was referring to earlier. Gord? No, that's a good point. I was just going to add that we spent the better part of 18 months upgrading our buildings, and we've been nationally recognized on a couple different levels, for our work to the base building and also with the WELL Health-Safety Rating. We're looking at it as an opportunity to bulletproof our assets. As we market space now, we market all of the base building upgrades that we've done, all the filtration, all the UV light technologies, everything we're doing to mitigate the spread of germs and viruses and clean air. What we're doing is we're putting that front and center in all of our materials, and we've gotten great feedback. I think we've come up with preparedness and protocol plans throughout our portfolio. We're very vocal with it, how we lease space now, health and safety, to your point, Jenny, it's a huge component of it. It's core to everything that we're doing, and sophisticated tenants now want to know. A year ago, it was heads of HR and the CFO coming on these tours. Now it's facilities managers and health and safety officers coming on these tours. We have to arm ourselves with the right information and touch on the key points to satisfy them. I've been real proud of the team to date for what they've done. That's great to hear. In these conversations, have you seen any changes in what they're looking for in terms of lease terms or increased flexibility in any way, just to, I guess, guard against a heightened number of unknowns in the next few years? To be honest, no, not lately. Earlier in the pandemic, there was a real focus on shorter terms, flexibilities, rights to terminate, things like that in deals. Over the course of the last kind of eight to 12 weeks, we haven't seen as much push. The overall vacancy rate's been declining in the core as well, too, so there's slowly been a little bit less leverage in terms of what you can demand on the tenant side for these deals. It's been trending more towards landlords, a little less towards flexibility over the last course of the eight weeks. We are seeing, from a lease perspective, we're seeing much more sophisticated tenants start to really dictate in the schedules what their expectations are around performance, and base building, and how we kind of co-manage and help support them. Yeah, in terms of flexibility, it's been a bit of a declining trade. Okay. Great. Moving to sort of the return to office, I'm wondering if you guys are formally tracking what your tenants' intentions are or informally tracking that, and whether or not you're seeing any patterns in terms of what the plans are, at least as they stand now. Any differences between government versus private sector tenants or large versus small tenants? Any sort of insight there? We're in constant communication at some of the highest levels with the provincial and the federal government. They're a big client of ours and a valued client. We suspect that we're going to start to see them really reoccupying the offices at least at 50% capacity towards Q1 of next year. Right now, they're probably in around 25%-50% in our buildings. Our private sector tenants, especially on Bay Street, because our average size is a little less than 5,000 sq ft, they've been operating at almost near full capacities. We've got a number of tenants downtown that are private sector that have been, throughout the pandemic, and when they've been allowed to do it, filling their office space. I suspect governments, the banks, you'll see towards kind of Q4, Q1 of next year once there's a little bit more clarity. Okay, great. On the smaller private sector side, have you seen some of your tenants or heard on the street of some smaller operators who've chosen to go virtually, I guess, almost all virtual and really giving back the majority of their space? Yeah. Yes and no. One interesting data point is we've mostly seen it in tenants that are under 1,500 sq ft. If it was an independent office, if it was a tenant that was a professional services firm, medical, things like that, we've seen some of those tenants choose to work from home temporarily. Ironically, we had one of the tenants actually come back and do a deal in another building after it. For the most part, it's the smaller offices where we're seeing them move towards not renewing their space. Great. Thank you very much. I'll turn it back. Thanks. We have a question from Sam Damiani from TD Securities. Thanks. Yeah, two quick follow-ups. Jay, your comments on the parking revenue in your introductory comments, I think it was CAD 0.03. I believe that was a year to date. Can we assume a full return of the parking revenue would boost NOI by about CAD 3.5 million annualized? Yeah. Q3's been a bit quiet. We think, or we hope the utilization picks up after Labor Day. You're looking at one and change per quarter. Once it's back, we'll get that pickup. Interestingly, we're wondering what would be the rates in the garages post-COVID because we think a lot of employers will want their employees to have the perks of the, or the parking passes. We think a lot of people would want to drive to work, and traffic's picking up. We're pretty optimistic about 2022. Makes sense. Gord, you mentioned the sublet stat, and thanks for the clarification on that as well. If it's 1.5% on offer today, and that's down, where was that at the peak during the pandemic, and what would that have looked like pre-pandemic, if you have that? Even pre-pandemic, it was always kind of floating around two, two and a quarter. We really haven't had any deviation throughout our portfolio. Now it's down to 1.5%, it hasn't been that many dramatic swings for us on the sublease market. You would say it's actually below pre-pandemic levels? Yeah. I would. I think a big reason for that is a lot of our tenants are in around the 5,000 sq ft range, and they're not making these huge swings in terms of their occupancy decisions. I think people are taking, early were taking a wait and see approach, and now people are feeling a lot more comfortable about their space. Yeah, we've weathered the sublet storm pretty well. Great. Thanks very much. You're welcome. Once again, if you do have a question, press star then one on your touchtone -phone. [Break] I see no further questions. I'll turn it back over to you, Michael, for closing remarks. Thank you so much, John. I want to thank everybody for their time today and for the continued interest in the company. We look forward to having more to share with you in 90 days. Thank you very much. Enjoy your August. Thank you, ladies and gentlemen. That concludes today's conference. Thank you for participating, and you may now disconnect.