Good morning, ladies and gentlemen. Welcome to the Dream Office REIT Q4 2024 Conference Call for Monday, February 24, 2025. During this call, management of Dream Office REIT may make statements containing forward-looking information within the meanings 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 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 form 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. To queue up for a question, please press star one on your telephone keypad. Your host for today will be Mr. Michael Cooper, Chair and CEO of Dream Office REIT. Mr. Cooper, please go ahead. Thank you very much, and welcome everybody to Dream Office's Q4 Conference Call. Today, Gordon Wadley, the Chief Operating Officer, and Jay Jiang, the Chief Financial Officer. Before they speak, I just want to say a couple of things, including we're very pleased to have about 60% of our entire debt coming up in 2025, and virtually all of that has now been taken care of in terms that we're very pleased with. In addition, we've made progress on the sale of 438 University, as now that one is firm. On the capital side, things are going very well. On the leasing side, Gordon will share some success stories with you regarding 74 Victoria in terms of re-leasing of it, how many deals we've been leasing, and generally, the new statistics that are out show that on peak days in downtown Toronto, we're now up to 86%. Just as I said, there's been a huge increase in traffic count and the work from home's receding. Overall, it's been five years since [audio distortion]. Pardon me, ladies and gentlemen. It appears we have lost connection to our speaker line. Please stand by while we reconnect. Thank you for your patience. Pardon me, this is the operator. I have reconnected the speaker line and will continue. Please proceed. Thank you, operator. I'm sorry about the connection. Gordon, do you want to continue? Yeah, thanks, Michael. It's really nice to be with everyone again today. As you know, downtown is continuing to experience one of its highest vacancy rates in its history. As of today, it currently stands at almost 20% across all classes. This is due to the potential for even more space entering the market as tenants either right-size or expire. This obviously makes a difficult operating environment for commercial space in Canada. All that being said, our team continues to get deals done and find very creative opportunities to maintain and grow our occupancy. Tours have picked up year over year, due in large part to no new supply in the pipeline. Couple this with the fact that we greatly improved our assets during a trough market. As we discussed on previous calls, we made an effort to invest and isolate quick, rent-ready suites to catch demand and compete on timing. As a result, our portfolio continues to lead the market on sheer numbers of transactions, and this year, we did more total deals than any of the previous four years. From a pure volume perspective, 2024 marked our most active leasing year in terms of deal velocity since pre-COVID. This past year, we did 114 deals total, of which 54 were direct new deals and 60 renewals, totaling over 635,000 sq ft. The 114 deals completed this year was higher than the 98 in 2023 for 780,000 sq ft and the 93 in 2022 for 600,000 sq ft. Notably, rental rates remained strong and increased across the board, with net rents holding steady in Toronto at CAD 30–35 a sq ft, aligning very well with our business plan, ultimately yielding a 20% spread against expiring rents. However, it's important to note that we continue to see the combination of higher material and labor costs, along with increased commissions, which on new deals compressed net effective rents to the mid-teens in Toronto. This was offset by our renewals that performed much better than budget, with NERs in the mid to high 20s. Our committed occupancy in downtown Toronto, which constitutes the vast majority of our assets, stands at just under 85% to close out the year. This includes the drop in occupancy quarter over quarter due to the known vacate we had of 206,000 sq ft at 74 Victoria, of which we were able to successfully mitigate and renew 64,000 sq ft. I am also really excited to talk a little bit later on the call about all the commitments and things we have going forward with that asset. From a macro perspective, this compares favorably to the overall market Class A occupancy at 83% and the B and C C lass occupancy at 72%. Our team has excelled in tenant retention, moving tenants throughout the portfolio to accommodate their fluctuating size requirements. A great example of this is a large law firm tenant from 438 University that we moved to Adelaide Place and signing a large media tenant at 30 Adelaide, which is a full building, so we can start relocating some tenants over to 74 Victoria and fill that asset way ahead of plan. We have accomplished our ground floor retail goal of backfilling all retail vacancies with premium restaurants, some of the best in the city, all of which will be opened by this quarter. Late last year, we launched our modified suites program, renovating and furnishing over a dozen units in good existing structures at a low cost. Since their completion last September, several of these modified suites have already been leased, and a few are in the process of being leased. As we move into 2025, we now have a selection of renovated model and modified suites within the Bay Street Collection that should drive leasing and have greatly improved tour velocity. These suites, coupled with our 100% completion of retail in the core, have been a real catalyst for our uptick in tour activity and give us the optimism to continue to hit our guidance in the years to come regarding absorption, occupancy, and ultimately NOI growth. The one thing I'm really excited to talk to you about is last year we identified the 206,000 sq ft of government departure at 74 Victoria. We identified this as a major risk. They expired at the end of 2024, and in that short period, we renewed 64,000 sq ft of the space at very high rents with minimal capital investment. We are very pleased on the call today to share that we have also secured an additional commitment of 55,000 sq ft, as well as another conditional lease for another 50,000 sq ft, and we are in negotiations for an additional floor as well. I want to emphasize that in a market where B and C and overall stock is sitting vacant, our team has proactively leased 170,000 sq ft in less than six months, taking over an asset that has been 23% occupied at the lease expiry to what we think is going to be closer to 86-90% in a very short period of time by all industry accounts. I am really proud of the team's efforts on all this work. We expect to see the continued lease-up of Adelaide Place and our Bay Street assets, along with the improved tour traffic at 67 Richmond. Couple these with our retail being 100% leased to new restaurants. We're very confident NOI will continue its growth trajectory per our guidance. Given market uncertainty, we use a bottom-up approach to forecast property-level cash flows by reviewing suite conditions, tenant profiles, and renewal likelihoods in the next 18 to 24 months. Beyond 2026, we rely on broad market assumptions. We anticipate average in-place downtown occupancy to dip to 81% in 2025 before rising up to the high 80s in 2026 and stabilizing above 90% in 2027. Despite having a very strong year of leasing in 2024, we're being cautiously optimistic, but feel we're in good shape for 2025 with a good portion of renewals already addressed. We're targeting approximately 275,000 sq ft of speculative leasing in Toronto, made up of new deals and renewals this year to hit our committed occupancy goal of high 80s. For some context, we've done about 550,000 sq ft over the past two years on average, so I feel really good about our forecast to further support. The team is actively working on over 30 deals in Toronto, currently representing about 300,000 sq ft. These are very active prospects in various stages of negotiations, and we'll have more exciting news to come on these in subsequent quarters. Based on the criteria, I feel we're very well positioned to meet our guidance and hope to see additional improvements as the year goes on. Look, we all recognize the costs associated with closing deals have risen significantly. Prospective tenants increasingly expect turnkey office space from landlords, including Dream Office. We're accommodating this demand by offering cash inducement packages to cover fit-up capital costs ranging from CAD 75-CAD 125 a sq ft, or by completing these upgrades speculatively to enhance leasing velocity. Leasing commissions have also escalated, with landlords providing higher commissions to entice brokers to direct their deals to our buildings. The one silver lining to the increased costs is the associated increased lease term that comes with it, often by simply spreading the costs and amortization to the tenant. As such, we're seeing our average WALE for the portfolio grow, and they're now a very healthy almost five and a half years on average. This outperforms the market. Given the costs and emphasis on liquidity, we always remain hypersensitive on covenant, always. We work in lockstep with our debt team and lenders to ensure we have the appropriate security and guarantees to support the costs, but ensure term value and stable cash flows for our assets. We remain very cautious and thoughtful with all our capital expenditures, ensuring that every dollar is allocated towards driving more leasing activity and maintaining the life and safety of our buildings so our tenants have a great experience. Reflecting on our past decisions, we're very pleased that we upgraded most of our properties prior to COVID, as they're now well-positioned and well-located to capitalize on an office market recovery. Overall, we're pleased with the progress our team has made in maintaining the portfolio's occupancy and rental rates. We look forward to the coming year, where we anticipate an improvement in the office leasing environment, which ultimately should translate to higher occupancy rates and improved cash flows. I want to close today by sharing that we've made substantial progress in a very challenging operating environment by successfully renewing and replacing loans, which Jay is going to speak about shortly, divesting non-core assets, and always maximizing leasing opportunities in absolutely every way we can. Our business is now more secure with increased liquidity, and we will continue to seek strategies to enhance business value and manage risks effectively in 2025 and beyond. I honestly could not be more appreciative of our team's efforts. I am always very grateful for our clients' commitment to us, and I want to thank you all for your interest and support in the good things we are doing at Dream Office REIT. I am going to turn it over to my good friend, Jay Jiang. Thank you, Gordon. Hi, everyone. Good morning. I'll start off by giving an overview of our financial results and then share some insights on how we're forecasting our business for 2025. We reported diluted funds from operations of CAD 0.72 per unit, down from CAD 0.75 per unit in the Q4 of 2023. This drop was mainly due to higher total interest expense of about CAD 0.07, which is partially offset by lower tenant provisions of CAD 0.03 and higher FFO from our investment in Dream Industrial REIT units of CAD 0.01. Included in the CAD 0.72 are roughly CAD 0.07 of non-recurring cash adjustments, with CAD 0.04 reported in our MD&A line item other income and CAD 0.03 in income from sold properties. Our total 2024 reported FFO per unit was CAD 2.98, which is about 4% higher than 2023. If we exclude all the non-recurring income items during the year, the recurring FFO was around CAD 2.88, which is on the higher end of the guidance we gave in February 2024 of between CAD 2.80 and CAD 2.90. Total compared to properties NOI was flat compared to the same quarter last year, or 2% higher for the year relative to 2023. Similarly, we have delivered SP NOI that aligns with our forecast. Despite managing through another challenging year in the office sector, we're pleased to deliver stable financial and operating results exceeding the midpoint of our communicated guidance. Our net asset value per unit was CAD 59.47, down about 3% from Q3 of CAD 61.24. The decrease includes CAD 39 million of fair value write-downs on investment properties. During the year, we externally appraised CAD 894 million, or 41% of our income portfolio. In addition to the valuations process as part of our quarterly reporting, lenders also internally review values and engage third-party appraisers as part of their credit approval process. Over CAD 800 million of properties were reviewed and appraised last year as part of the refinancing program, which also supports our carrying values. In addition to meeting our financial targets, we're happy to have executed on several key initiatives to reduce risk across our business. 2025 was a significant year for refinancing, as we had CAD 744 million of mortgage and credit facility commitments maturing. This represents almost 60% of our total debt stack. We're pleased to announce that today we refinanced or received credit approval for CAD 711 million of maturing debt without any paydowns and at terms attractive to the REIT. This includes the CAD 375 million revolving credit facility that expires in September of this year, for which we've received conditional approval for extension to September of 2027. We're in advanced negotiations for the remaining CAD 30 million of mortgages and expect this to be completed in a few months. In 2026, we have CAD 165 million of mortgages maturing across six properties at a weighted average interest rate of 4.8%. Based on the cash flows of these assets, we think the loan-to-value is quite conservative, and we're very confident in our ability to refinance these loans. Overall, we feel great that we've been able to address all the refinancing risks in our business for at least two years. On January 24th, we announced the sale of 438 University for gross proceeds of approximately CAD 105 million, or about CAD 327 per sq ft. As part of the transaction, we were able to secure additional benefits for the REIT, including relocating tenants at 438 University to other buildings in our portfolio and securing rights to unencumber our building at 250 Dundas, which is one of our best development sites. We also earned a property management contract to earn fees for Dream Office for at least three years. We think these benefits are worth at least CAD 20 million. We're closing the transaction this week, and we will use the proceeds to pay out the CAD 69 million of mortgage and pay down part of our revolver. This quarter, we also announced the potential conversion of our 126,000 sq ft office building at 606 Fourth Avenue in downtown Calgary into a brand new 166-unit rental apartment building. We're in the process of relocating several office tenants within 606 Fourth to the adjacent building at 444 Seventh Street that we also own. This means we end up with a substantially full office building and a new apartment rental. We think we can achieve a 6% development yield on the apartment project, but more importantly, this conversion reduces leasing and financing risk at 606 Fourth. Also, it improves our overall income profile and quality of our portfolio in Calgary. We're currently finalizing the grant and government financing. We're in advanced stages of securing a grant of up to CAD 11 million from the City of Calgary to complete the conversion. We're also in the process of securing government financing for a 10-year loan, and we are looking at bringing in a partner on the project to further reduce our risk and equity requirements. We're excited about the project and look forward to providing updates over the course of the year. We'll continue to look for opportunities and strategies to reduce risk in our business and find creative asset management and leasing strategies to improve our income profile. The office sector remains a complicated sector to model and forecast. We're seeing touring activities improve since the new year, and we think that will benefit from a better leasing market over the next 24 months, resulting in improved rents and occupancy and a reduction in tenant inducements. We think it's still difficult to predict occupancy and NOI for 2025, but we've shared the key assumptions we use in our model. Gordon has spoken extensively about our occupancy projections. On a steady-state basis, assuming no transaction activities, our model expects to produce between CAD 2.60-CAD 2.70 of recurring FFO per unit in 2025. We expect our comparative properties NOI to remain flat to positive low single-digit growth in 2025. After the close of 438 University, we expect to deploy cash proceeds to repay the mortgage and the credit facility outstanding, and we expect leverage to improve by 200 basis points. We will continue to look for opportunities to continue to reduce debt and improve the occupancy. We will expect CAD 11 million of G&A and to maintain our CAD 1 per unit of annual distributions. The renovation programs at our best buildings are substantially complete, so we do not expect to have significant capital outlays over the next three to five years. These buildings are well-positioned to improve occupancy in a competitive market. We look forward to providing more updates on our progress over the course of the year. Thank you for listening, and now we'll turn the call back to Michael to answer any questions that you may have. Operator, can you please let them ask questions? Absolutely. We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then two. We will pause for a moment as callers join the queue. Your first question today will come from Mark Rothschild with Canaccord. Please go ahead. Thanks, Dan. Good morning, everyone. I'm not sure this comment is more for Gordon or for Michael. You spoke about tours being up and some optimism on improving occupancy. Would you make these comments just about your portfolio, or do you think this is reflective of some improvement in the market overall and maybe just expand on how you see the market evolving over the next year? That's for Gordon. That's a great question, Mark. Inevitably, if we're getting more tours, any broker worth their salt would be showing other buildings as well, too. I think the more traction we're seeing, it's probably safe to say that it's picking up predominantly market-wide. A lot of the tours that we're seeing are on our Bay Street collection. 330 Bay, for example, has seen the biggest uptick in tours. I think we attribute it to Milos being completed, but we also have four deals that we're currently working on at 330 Bay right now. We don't know if that's one building in isolation, but the brokers and the managing directors that I speak to throughout Canada, they say Toronto is picking up right across the board for tours in general. Okay, great. Thanks. Maybe just one for Jay. With the debt that is coming up more in 2026, it is not like there is going to be a problem with refinancing the debt, but can you just talk a little bit more about the cost that you would expect based on current rates? Maybe are you planning on upsizing the debt to pull out capital, or how will that impact the overall balance sheet? What are the targets there? Yeah, great question. Mark, you're right. There are just five very small mortgages, so I don't think LTV is certainly the issue there. If anything, we could look for opportunities to up-finance. We said that the weighted average interest rate expiring is 4.8%. Interestingly, CORRA has been dropping. That's the benchmark. If we look at five-year debt today, typically the spread is 200-225 basis points. We'll see where that goes. We still have a couple more months, but if we were to lock them in today, it's probably in the low fives. Five and a quarter would be safe. Okay, great. Thanks so much. Your next question today will come from Sam Damiani with TD Cowen. Please go ahead. Thank you. Good morning, everyone. First question, just to clarify, Gordon, on the sort of occupancy guidance and outlook that you provided, were those on committed basis or in place? I guess just what gives you the, I guess, confidence to meet the 81% this year? I think you said high 80s next year. Yeah, it's on a committed basis, Sam. And it's just pure numbers. We got to do about 275,000 sq ft of new leasing from this point now till this point next year. We've got some renewals where we're on the pipe. Just on average, if you take on aggregate the last three years of gross leasing we've done, we've done 600,000 sq ft per annum. Based on everything I'm seeing in the pipe, we've got 30 deals for about 300,000 sq ft that we're trading paper on now. I feel really good about hitting those numbers. Yeah. To clarify, Sam, Gordon's commentary was on committed occupancy. Our guidance that we provided, the way we model it, because we track against in-place NOI, so the metric we use internally is weighted average in-place occupancy, we think that will be relatively flat across 2025 in our market, but we're going to be seeing improvements on leases signed. We typically already have 200-300 basis points of a spread, but towards the second half of 2025, we expect velocity to pick up and position us well for 2026. Yeah. If a deal gets done today too, Sam, I think we've talked about this before, but if a deal gets done today, it usually does not commence until eight, 10, or 12 months after, once you work in the free rent or how you structure the deal. So the Jay's point, we'll get the deals done, but there's a bit of a downtime until the NOI picks up. That's exactly how we laid it out for everybody. Okay, that's helpful. Thank you. Just on the lease expiry in the U.S. this year, can you shed some light on what your expectations are there? Yeah, sure. Just for everybody's benefit, the lease Sam's talking about is 185,000 sq ft at our building in Kansas City. The lease matures in December of this year. The rents in place are about $18, so the annualized NOI is about $3.5 million US. We're seeing touring and utilization pick up in states. You could probably read some of that in the reports. Kansas City is one of those markets that we're seeing an increase in activity. We're actively working on a couple different paths right now. One is renewal for a partial portion with existing tenant that wants to be there. We also have prospective tenants that have also reached out to us on our space, and we've been actively working with a broker. Thirdly, it's interesting, we also have some unsolicited interest to acquire the building for tenant usage. We feel pretty good right now that we have two to three options to look at. We're going to continue to work on it over the next quarter or two, and we'll probably report progress in the summer for you guys. It sounds like missing from those options is 100% renewal of the space with the existing tenant. Is that accurate? Yes, that's right. That was consistent with a lot of the financial service users in the States. They have reviewed the operations downside. Those conversations are fluid, but they do want to be in the building in the market. They just do not need as much space as they did before. For us, we have the option to say, "Hey, what's the best path for us to realize the best income and value for the building?" We think we'll have opportunities to consider both leasing and disposition path. Okay. Last one for me is, I guess, combo question on, I guess, for CapEx for 2025. I think you've provided that with some detail last year in terms of numbers. And you did say debt would decline about 200 basis points this year. I'm just wondering if you have a year-end debt to EBITDA target. Yeah. We are certainly looking at reducing it. If we see opportunities to deleverage through asset dispositions at a good value, we will look at that. Internally, we are looking at debt to EBITDA in the 11s, but we are always hoping to do better. Now, there are two parts in the equation. One is to reduce debt. We have been very good on the capital side. The other is to increase the EBITDA. If the leases are signed, that is great because even though our in-place EBITDA for 2025 is still a bit higher, you will see that come down in 2026. Thanks. Just any other thoughts on CapEx numbers for this year in total? Yeah, sure. Most of our buildings, as we said, have their programs substantially complete. We allocated some, and then we also have some pre-development work at the 606 Fourth. General rule of thumb is about, in our portfolio, CAD 1- CAD 2 per sq ft per year. I think we're going to be comfortable within that. Gordon mentioned we're doing a bottom-up approach, and we look at the CapEx reports across every single building, every single major component. Based on that, I think most of the larger items have already been addressed over the past five years. We're pretty confident in this estimate for at least three years. Great. Thank you. I'll turn it back. Your next question today will come from Sairam Srinivas with Cormark Securities. Please go ahead. Thank you, Alberto. Good morning, guys. Hi. Just for clarification’s sake, are you guys expecting any major leases that could probably either expire or you could renew? Yeah, thanks for your question, Sai. On the last question from Sam, if you have not heard it, the one at Overland Park in Kansas City is a larger one. With regards to the rest, we do not have a lot of maturity. If you look at our MD&A disclosures, over 50% have already been addressed. With the remaining tenant expiries, I do not think anything is over 20,000, so it is quite manageable and relatively smaller pockets of space compared to the last three or four years. Yeah. No, everything Jay is saying is accurate. Just for some extra context for you, Sai, two of the deals that we are actively negotiating are over 50,000 feet, and we have got another couple of pockets that are over 20,000 feet. There are some pretty scaled deals that should help us move the needle to hit our guidance. That's pretty clear, Gordon. Thank you for that. Probably a question for you. You mentioned increasing touring activity this year and a lot of new people looking at the space. Can you give me some color on the kind of tenants you're seeing here? Are these companies that are already in downtown? Are they moving in from outside? Can you give some color on that one? Yeah. They are predominantly downtown tenants. We are still seeing a lot of professional services firms. One group we are not seeing as much as we used to is tech firms. We usually keep track of who is coming through the buildings. We are not seeing a ton of tech come through. It is mostly professional services firms. Government still is quite active in the market, the province being one of the most active groups, and law firms. We always see a steady stream of law firms, either partners leaving from bigger firms to start their own firms. Bay Street is a perfect portfolio for them because they can get a full floor for about 5,000 sq ft on some of these assets. Mostly professional services firms, Sai. Jay, when it comes to these tenants looking for spaces, because I'm trying to differentiate your portfolio versus the larger big floor plans out there in the market, would you say that these are more specifically tailored to these smaller tenants versus the larger spaces meant for, let's say, Scotiabank of sorts? Yeah, that's a great point. Yeah. Our portfolio, our core portfolio, caters to the smaller tenants. You can go to a building in one of these triple-A towers where you're 5,000 sq ft on a 30,000 sq ft floor plate, or you can get your own floor plate from 5,000-7,000 sq ft, come off the elevator, get in your space, and have a Bay Street address with Dream. I think that's a compelling feature for everybody. The other thing that we've done a good job, we were talking about a bottom-up approach, is we've been very pragmatic with our capital. We've been improving model suites and quick rent-ready suites. When tenants come, they're not looking at something in base building condition. They're looking at something that's improved that they can see themselves in. It also helps us compete on timing. When all things are being equal and there's another landlord at the table, our suites are ready to turn over quicker, and often we're able to catch tenants as a result. It's been a pretty fruitful program for us. Actually, on that program, Gordon, logistically, when a new tenant was coming in, if it was a hard shell, they could probably design it and customize it to their own use. How are you guys thinking about this, the model suite program? If, let's say, a tenant comes in and does need some bit of customization in there, does that increase, decrease the lead time? How are you guys thinking about that? Yeah, great question. About four years ago, we started our in-house project management and self-performance team for construction. These groups, we have internally architects, designers, people that can work and quickly improve space, bespoke for tenants. It's been a great differentiator for us. Oftentimes, they go in, we have one conversation, our team can go and self-perform the trades and get the work done much faster than if we took it to a GC, ran a process. It's really helped us. It's been a competitive advantage. When we're planning these model and modified suites, we usually tap designers, get their feedback, and just go ahead and perform. Yeah. One other observation to that is, actually, we know the larger tenants want more of a customization. They're committing for a longer period of time for more square footage. In a lot of our Bay Street and boutique buildings, tenants often make decisions sort of closer towards the lease expiry. When they're looking for space, they often want something that's plug and play. To Gordon's point, our designers have a lot of experiences with smaller tenant requirements. It's more functionality of the space, how many employees could be in there. You have your common things that you need, like kitchen and washrooms, all of that. The design is uniquely tailored to the smaller tenant sizes, but it meets their needs, and they're ready to sign within two to three months. That makes sense, Jay. Maybe my last question is more on a broader transaction market. You guys mentioned a broader you're going to see a dip in occupancy downtown, and then probably recovery heading towards 2026. How is the private market seeing this? Now, you're seeing a lot of people now actually trying to do the math and trying to get more active behind transactions. Yeah. Good question. We think that the smaller buildings tend to have more markets. You have high-net-worth purchasers, so that market is fairly liquid. The larger Class B buildings are tougher to sell. What we found interesting is a lot of the buildings that we have sold in the Health and Science District, they have unique users for those buildings. For example, two years ago, we sold 720 Bay to a user for conversion. This building that we sold, 438 University, was also to facilitate a tenant's use. Oftentimes, there are synergies with these transactions because we're able to relocate the tenants. At the end of the day, when we add up all the value together, the pricing's good. We'll see. Oftentimes, the transaction market follows up with the cash flows and the occupancy. If we see improvements there, the interest rates are also lower now than they were two years ago. Hopefully, it's thawing out a little bit, but we're focused on keeping the buildings occupied. If they're occupied, they're attractive to both investors and purchasers. Thank you for that colour Jay. Thank you guys for turning back. Thanks, Sai. Take care. Your next question today will come from Sumayya Syed with CIBC. Please go ahead. Thanks. Good morning. Just firstly, following up on the occupancy outlook, high 80s by 2026. It sounds like that's basically predicated on what's under discussion, or are you factoring in any expectations for just a broader market recovery on the back of better RTO and just the passage of time? Yeah. Good question, Sumayya. It's a combination of both. Our pipeline's pretty robust right now. The team's working on some good deals. As Michael said when he started off the call, utilization's been picking up to 86% on peak days. We're starting to see that continue to grow a little bit as more time goes on. One thing to keep an eye on is we'll probably have a new government at some point this year. What's their mandate going to be? The federal government in every major market makes up a pretty large portion of the denominator in terms of office space. Depending on what that return to office mandate's going to be, I think it's going to help spur even more on non-peak days, Mondays and Fridays. It's a combination of both our leasing targets and our optimism in people coming back. Right. It does sound like tours are picking up and just leasing volume is up generally. When would you expect TIs to start to come down? Is that more of a 2026 improvement? Where do you think market vacancy should be to cause TIs to start to inflect downwards? That's a great question. I actually spoke about this with an investor last week, and it's interesting. Usually, a landlord's market starts to turn at about 90%. Once you start getting in the mid-90s, you have a little bit more leverage to push back on some of these requests. That being said, while there's still vacancy in the market and while there's still uncertainty around unit prices, so materials, labor, all these different things with what's going on from a macroeconomic perspective, I think there's still some uncertainty in the market. Also, two brokers are getting paid more. And brokers getting paid is much like taxes. They never go back down once they hit a certain hurdle. I foresee that cost always kind of staying where it is. With the uncertainty around unit costs for materials, things like that, I suspect they'll continue on a per square foot basis to stay relatively high for at least another 18-24 months. Once the general overall market occupancy starts to tighten a little bit, you'll probably see better NERs. Okay. Lastly, curious if and how the sale of 438 University, how that informs your overall fair values. Is there much to read through for values for the balance of your portfolio? Yeah. That's a good question. In the prepared remarks, we said that for IFRS accounting valuation cycle, we appraised 41% of our portfolio this year. In addition to that, for financing, we almost did equal amounts. The way that appraisers look at it is on a discounted cash flow basis over 10 years. The values are quite sensitive to the reversionary cap rates. There is an expectation that especially as you get through the next two years or so, there is a normalization to the office market. On 438, I think it was important to point out that in addition to just the CAD 105 million, we got CAD 20 million of incremental benefits. Those are real value because if we move tenants from one building to another, that was about CAD 1 million of NOI. To us, that was quite meaningful. If you looked at the forward projection of NOI at 438 University, the cap rate would have probably been in the high fives. With that said, I mean, the second part of it is that there were other data points of assets sold, not only by us, for example, 720 Bay. There were other assets sold to users, and those were very attractive cap rates. Of course, overall, we acknowledge that the investment market is tough. It will be interesting to see. We will follow the appraisers quite closely with all these data points coming in. We will be tracking them to see how they are reflecting that in the assumptions. Thus far right now, what we are seeing is rents are holding up. If anything, rents are probably going up a bit higher. TIs are reflected, but you cap the rents and you take the present value of the TIs. Your building, as long as they can maintain high occupancy, which is what we've seen, the values will hold. Yeah. Got it. All from me. Thank you. Turn it back. Thanks. Your next question today will come from Pammi Bir with RBC Capital Markets. Please go ahead. Thanks. Hi, everyone. Just coming back to the conditional or the leasing done at 74 Victoria, when would those conditional leases take effect? To clarify, did you say that one of the tenants was relocating from 30 Adelaide? I may have misheard that, but just some clarity there would help. Yeah. We're potentially going to move one tenant from 30 Adelaide over to 74 Victoria. That lease would start towards Q4 of this year. The balance of the leases would start, probably the tenant would be in place by the end of the year, but start cash flowing by the end of next year. The other prospect that we're working with for another floor would probably see rents commence towards Q3 or Q4 of next year as well too. I would say that we've got a tenant to take the space in 30 Adelaide that we're moving, so that'll be placed. Okay. Yeah. That was actually the part of the next question, so that helps. Just coming back to the Calgary office conversion, what can you share perhaps in terms of the timing of when that project could start and then the total expected costs? You have that. Sure. Just at a high level, things are still moving right now. Generally speaking, we're hoping to commence on the redevelopment construction portion by the end of this year. The conversion itself will probably take 18-24 months. That is a timeline that we're working with for Q3 2027 occupancy commencement. With regards to the cost, just very high level because we're still working through some things. Our expectation is that the hard and soft cost will come around CAD 70 million. We'll get the grant from the city. For the financing, it's interesting based on the metrics, we're able to potentially target a 10-year loan around CAD 60 million. There is very little equity that's required. Nevertheless, we're looking at bringing in a partner to share in the risks of this project. Right now, it's looking good, but we're focused on really just improving occupancies in both buildings. We're excited because we'll have one full office building and then one full, hopefully, residential rental. I think you guys all know residential is doing quite well in Calgary, and we're excited to bring in residents into downtown Calgary. Great. That's helpful. Just maybe to clarify, does that CAD 70 million aggregate cost that you quoted for the hard and soft, that excludes the land or the value? Yes. Yeah. Excludes the land. Okay. Last one. Just on the relocation of the tenants at 438 University and 250 Dundas, I believe. Can you remind us when that takes effect? Yeah. One of the relocations from 438 takes effect next year at Adelaide Place. We've got another tenant from 438 that would take effect next year as well too, potentially a smaller tenant at Adelaide Place. At 250 Dundas, the benefit of the deal is we have a fully unencumbered redevelopment site now. We had a large tenant that was in that building that we didn't have a right to terminate or do a demo with. As a portion of the sale, we now have the flexibility to do that. That tenant's about 45,000 sq ft. We're actively speaking with them about opportunities to move them in the portfolio. We also got a handful of other smaller tenants at 250 Dundas that we're in various stages of talking to to move in the portfolio as well too. Yeah, it's been quite a benefit for us, that 438 deal. Great. Thanks very much. I will turn it back. Your next question today will come from Matt Kornack with National Bank Financial. Please go ahead. Good morning, guys. Just quickly back to the residential conversion math. Can you give us a sense as to what you'd expect kind of yield on cost-wise? Also, do you have other opportunities similar to this? Would you entertain keeping the residential within Dream Office or sell it or find another vehicle for it? Sure, Matt. I think in the prepared remarks, we said that we like to target a 6% yield. Now, interestingly, we also said that we're looking at relocating some tenants from 606 into our adjacent property that we also own. That 6% does not include any of the potential incomes that we can transfer. So that's upside. With regards to I do think having residential income would definitely improve our income profile, if not in Calgary, but for the whole REIT. And the cap rates are quite attractive as well. But we'll decide closer to the completion day what's best for Dream Office if we want to keep it or sell it. I don't think there'd be any trade within the Dream Group. We have a third-party partner. We'll keep it together or we'll sell it. Then other opportunities within the portfolio, or is this kind of one-off? I guess you have other assets in Calgary, but they're going to house tenants. Yeah. This would probably be a unique one. We have two other assets in downtown Calgary. One is the adjacent office building that will be well occupied afterwards. The other is Kensington House, which is also fully occupied. Down the road, that might be a good redevelopment candidate into residential. The reason for that is a couple of things have to work, right? One is we really focus on the floor plate. 606 Fourth has a very functional floor plate for a residential conversion. It also has a parking lot parkade, which is important as well. I'm sure if you Google it, you could tell that right now the anchor tenant in place is Canadian Western Bank and post-merger with National Bank. We do not know what their strategy will be, but for us, we are trying to proactively reduce the risk of the building having a drop in occupancy. I think this is a really good outcome. If there are opportunities down the road for conversions where it makes sense, not only in Calgary, but other parts of our portfolio, we will certainly look at it. Fair enough. Just on net rental income this quarter, it came in a bit better than we were expecting. Was there anything? I know you mentioned there's some one-time items, but I don't think they're necessarily in that figure. Also, 74 Victoria, would it have been kind of two-thirds out of this quarter, or was there some timing delay in terms of the departure? No. 74 Victoria, 200,000 sq ft maturity, but we released 64,000 sq ft. The rest of it, I think the lease, correct me if I'm wrong, Gordon, was November 1, right? Two out of the three months in the quarter, we would have seen the reduction. In terms of net rental income, yeah, you're right. The income from sold properties and the other income line items would have been the items that were flagged. That would be higher than a typical. Otherwise, the other thing we could think of is Milos' lease. Some of the restaurants are taking commencement, so they're paying rents. Soon enough, 366 Bay, but most of that should still have been in straight line, but they'll flow into NOI starting next quarter. Okay. Last one for me, just in terms of the timing, longer-term FFO growth. It sounds like you're going to be in transition in 2025, 2026. I would assume, given what you said on your occupancy guidance, that you're going to start to at least see it in FFO from a regaining lost ground. Maybe not in AFFO, but is 2027 really kind of a year of stabilized kind of back to, I mean, maybe not normal occupancy, but you should see the full earnings implications of the leasing that you're expecting to do? How should we think about this? I think your general trend is probably right, though timing. We're hopeful that sooner in 2026 and in 2027. One thing to think about is we've been able to increase rents across our portfolio despite the drop in occupancy since COVID. What's happening is our NOI, the guidance we gave on a comparative basis, is flat or higher. We've typically been able to hit that each year despite the drop in occupancy. It's interest expense where we're getting hit of all the loans that have been maturing at low interest rates. We're getting the same amount, and that's great because our income's high. The spreads and the benchmarks are about in total 250-300 basis points higher. If I think we guided on our Q3 call, just on Adelaide Place alone, that could be around CAD 4 million a year. Now, when I say that, what's interesting is when you get through the cycle, what's becoming sort of headwinds right now could become tailwinds in the future in a couple of years. We're already seeing that the benchmark's dropping. If we can refinance it, maybe not as low as before, but even if you can refinance these loans around 4-5%, we'll see support on interest expense savings, and that's quite meaningful. Okay. Makes sense. Thanks. Your next question today will come from Lorne Kalmar with Desjardins. Please go ahead. Thanks. Good morning. Gordon, maybe just flipping back one last time to the guidance side of things. What does that assume in terms of retention? Is it basically the one known non-renewal in Kansas and everyone else kind of renews? It's a combination. The one known non-renewal with U.S. Bank, yeah, that's one in Overland Park. The rest just assumes we retain just a little over 60% of the tenants that we have in place. We've already recovered a good majority of that. Renewals outside of Overland Park do not make up a big component of our guidance. It's new leasing that we have to do. On the new leasing targets for this year, it's about 275,000 sq ft, which is less than we've done in the past few years. I feel pretty good about it, Lorne. Okay. Can you maybe give us a little insight into the conversion rates, how that's been trending over the last couple of years, and where you're sort of expecting it to go? Obviously, tour activity is up, but with more spaces to tour, it may seem a little more tougher to convert, I would assume. Yeah. Tour conversion rates, because there's so much—oh, you still there? Yep. Yeah. Tour conversion, as there's so much supply, is around 20%. As the supply starts to tighten, you'll start to see conversion rates get a little bit better. As a whole, we track it where around 20% of our tours convert to actual deals. A little more than that convert to offers. While live offers are going, it's a competitive environment with other landlords. I'd say we're around 20% for tour conversions. Do you see that trending higher, presumably, in the next couple of years? If so, how do you kind of see it trending? Yeah. I do see it trending higher. The more absorption there is in the market as a whole, the less opportunity there is. When a tenant is touring with lower vacancy, there's a higher chance that they're going to commit. It's really just kind of market-driven, and we just keep tracking it. Okay. Maybe just one last quick one. Would it be fair to assume that the cost per square foot to renovate or to create these model or modified suites would be in that CAD 75-CAD 125 range per square foot? Yeah. I think you got it. Now, that is to convert something that's in base building to sort of turnkey space. How we think about the economics on that is once you do that conversion, often the tenants would not really ask for much of an inducement package. If you do the conversion, we think the physical life of that is at least 10-15 years. If they sign a five-year lease, your NER might be a bit softer for the first five years, but they are really strong from year six to ten. If you do a DCF on that, it looks very attractive. Not to mention that you are not giving up too much on opportunity cost. The downside of not having occupancy means that you are paying for the additional rents. Further to that, that is assuming that the space is in raw condition. A lot of our space across Bay Street and Boutique are in semi-modified suite condition. If you reduce the spend by half of what you just said, that makes the economics look very good. Okay. That is great coverage. Thank you so much. Thanks, Lorne. Once again, if you have a question, please press star and then one. Your next question today will come from Mario Saric with Scotiabank. Please go ahead. Hi. Good morning. Jay, the guidance that you offered for the year excluded any transaction activity. Outside of Kansas, what's the likelihood internally that you're attaching to be able to monetize value in 2025, whether it's selling additional IPP or any of the substantial residential density within the portfolio? Yeah. That's a good question. I would say that's a question we get on our call each February. I got to say that we don't forecast it. One is just we have 26 buildings, and it's hard to forecast transactions in this type of market. I'll also say that each year we've been able to monetize at least one building thus far. We're actively seeking, and hence we're giving guidance without any transaction activities. We'll have to look at each one individually to see what that does for the income, the value, the cash flows, where it makes sense. I think we're good. What do you think is the catalyst for, let's say, broader market transaction volumes to pick up? Is it rates coming down? Is it clarity on the economy? Is it something else? Yeah. I think you answered it. Rates, occupancy, economy, sentiment on the investment volumes. All of that, when people feel better, the investment market will pick up as well. Okay. Just maybe for Gordon, just talking about the economy, has there been any change in tenant behavior with respect to the escalated US tariff discussion and the potential implications for businesses in the economy? Yeah. There has not been a ton. We have had one or two tenants take a bit of a wait-and-see approach until we had one or two deals that were supposed to firm up in February that they wanted to take a bit of a wait-and-see approach till April just to see what that impacts. It has not been as material as many have speculated. Got it. Okay. Just a clarification question on the vacant space in the portfolio today. Dream Office is essentially paying for all of the additional rent? Okay. Thanks, guys. Yeah I would just, Mario, it includes just before you go Gordon, when we say Dream is taking it, it's all our companies that are paying it, not just Dream Office. Got it. it. Okay. I think we have time for one more question, if there's any. If not, guys, then please just feel free to reach out to Jay Jiang if there's anything else after. Showing no further questions, this will conclude our question and answer session. I would like to turn the conference back over to Mr. Cooper for any closing remarks. Thank you, everybody, for participating. As Gordon said, we're happy to answer any questions throughout the day as you may need. Thank you again for spending your time with us. We look forward to talking in the future. Bye-bye. The conference has now concluded. You may now disconnect your lines. Thank you for participating and have a pleasant day.