Good morning, ladies and gentlemen, and welcome to the Slate Office REIT's third quarter 2022 financial results conference call. At this time, all lines are in listen-only mode. Following the presentation, we'll conduct a question and answer session. At any time during the call, if you require immediate assistance, please press star zero for the operator. This call is being recorded Wednesday, November 2nd, 2022. I would now like to turn the conference over to Paul Wolanski, Senior Vice President of National Sales and Investor Relations. Please go ahead. Thank you, operator, and good morning, everyone. Welcome to the Q3 2022 conference call for Slate Office REIT. I'm joined this morning by Steve Hodgson, Chief Executive Officer, and Charles Peach, Chief Financial Officer. Before getting started, I would like to remind participants that our discussions today may contain forward-looking statements, and therefore we ask you to review the disclaimers regarding forward-looking statements as well as non-IFRS measures, both of which can be found in management's discussion and analysis. You can visit Slate Office REIT's website to access all of the REIT's financial disclosure, including our Q3 2022 investor update, which is now available. I will now hand over the call to Steve Hodgson for opening remarks. Thank you, Paul. Good morning, everyone. In the face of sectoral headwinds, including a rapid rise in interest rates not seen in many years, Slate Office REIT continues to demonstrate its resilience, offering unit holders a stable and attractive distribution yield, trading upside to its well-supported net asset value and a best-in-class management platform. Our conviction in the office sector remains strong. We know that physical workspace enables collaboration, culture, and innovation. At the same time, we understand that in a post-pandemic era, certain tenants and industries will be more significant users of office space than others. As such, we'll continue to position our portfolio to focus on opportunities that align with tenant demand. We believe well-located, high quality and modern office buildings with growing strong credit tenants will continue to outperform. The REIT's investment activity during and subsequent to the quarter is a great example of portfolio repositioning. We disposed of a very attractive price an older property in Toronto that has tenant and capital risk, and we purchased a higher yielding newer asset in Chicago, anchored by a long-term lease with Pfizer, which also has further upside on occupancy. This type of transaction enhances the REIT's ability to provide stable performance. Notwithstanding the REIT's attractive assets and longer-term upside, our board of trustees recognizes that market disruptions related to the pandemic and elevated levels of inflation continue to weigh on the valuations of publicly traded REITs, creating a divergence between asset values and unit price. As a board and management team, it is our responsibility to consider every possible opportunity to surface value for our unit holders. To this end, after quarter end, the board formed a special committee of independent directors to oversee a review of strategic alternatives for the REIT. As we continue to navigate a highly volatile macroeconomic environment, the strategic review will play a key role in identifying additional ways to maximize value for all unit holders. All of our routine operations and investment activity will carry on as normal during this period, and we intend to provide an update once the process is completed. I will now hand it over to Charles for some additional highlights on the quarter. Thank you, Steve. In the third quarter of 2022, the REIT had a distribution yield of 9.2% and has provided an AFFO payout ratio of 75.9%. Loan to value was reduced to 58.4%, while net operating income rose by CAD 500,000. While disposition costs reduced FFO and core FFO from the prior three months, AFFO for the quarter remained at CAD 0.13 per unit. FFO, core FFO each fell CAD 0.02 to CAD 0.12 and CAD 0.13 respectively on a per unit basis due to disposition costs on the aforementioned appraisal value sale of 95 and 105 Moatfield, while AFFO per unit was CAD 0.13, unchanged from the prior quarter. Both during the quarter and subsequently, the REIT has continued to refinance its upcoming debt maturities, having extended its Canadian dollar and US dollar revolving credit facilities while reducing and extending its largest single debt facility at 120 South LaSalle. There are CAD 12 million of refinancing remaining for 2023, which is progressing well. I'll now hand over for questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touch tone phone. You will hear a three-tone prompt acknowledging your request. If you'd like to withdraw your request, please press star followed by two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment for your first question. Ladies and gentlemen, as a reminder, should you have a question, please press star followed by one. If there are no further questions, please proceed. There should be questions. Operator, we believe that there's a queue of questions that we're seeing in the system. Oh, your first question comes from the line of Bernie John. Please go ahead. Why did the AFFO per unit decrease? Operator, I'm not sure we're seeing the same questions as you. The first question should be from Sai from Cormark Securities in the queue. Sairam Srinivas from Cormark Securities. Please go ahead. Yeah. Thanks, operator. Hey, Steve. Hey, Paul, and hey, Charles. Hi. So- Hey, Sai. Hey. The question I had was around the Chicago acquisition. Could you just take us through the thought process behind the capital allocation there and how you guys see that fitting into the broader plan? Yeah, I mean, the Chicago acquisition, as I mentioned in my opening remarks, is really in line with our strategy of repositioning the portfolio. You know, what we've done over the last quarter is effectively reduced our asset base, created some liquidity to pay down debt, but also, you know, traded out of an older building that had some tenant and capital risk in Toronto at a 6.4 cap and bought an office building in Chicago with a long-term lease with an investment grade tenant with upside and occupancy at an 8.4 cap. It's a relatively new building with very little capital required in the near term. It's just consistent with our strategy of repositioning the portfolio. Thanks, Steve. The other question I had was on vacancy. I know this quarter we saw some of that. Is that mainly because of the S&P lease that's expiring at the downsizing that's happening at The West Mall? Yeah, it was a couple of things. The vacancy that we saw in the quarter, I'm assuming you're referring to, it's a couple of things. It is the phased out vacancy of SNC-Lavalin at 195 T he West Mall. In addition, the disposition of 95, 105 Moatfield, being a higher occupied building, had impact on occupancy as well. Just as a reminder, it was a higher occupied building now, but our view was that there was some tenant risk there. In addition, there was the previously mentioned, I believe to you on the previous call, the airline industry tenant on The West Mall property as well that vacated. A few sort of one-off situations. Overall, we're seeing some very positive momentum going forward and particularly in Atlantic Canada as noted in our results. Excellent. I'll I'll see you on turn back. Your next question comes from the line of Jonathan Kelcher from TD Securities. Please go ahead. Thanks. Good morning. Morning. Just staying with, I guess, the leasing. Have you guys noticed or seen any change in sort of the length of time tenants are taking to make decisions or any slowdown in touring or anything like that? No, I don't think so. I think you see a little bit of that naturally in the summer quarter. I would say it's actually the opposite of that, Jonathan, in that we've started to see tenants commit to longer term deals. You know, like the deals, the new leasing that we did in our portfolio had a 9.2 average term, 9.2 years of average term. So that's clearly a sign that tenants are committing long term to office space. In terms of tour activity, I think that's where it generally slows down in the summer. With that said, some of the vacancy that we have along the 427 that's recent and transitional, that space had not been vacant for a long time. You know, we're getting a lot of interest in from other users. You've seen touring activity slowed down in the summer, and you've seen it pick up again in the fall? Yeah, that's right. Okay. Then you had, I think, roughly 15 leases that didn't renew in the quarter. Were those you talked about some, but were the rest of those mostly spread all around the portfolio, or was there one geography that was better or worse than others? Yeah, there was nothing. There was just those three. There was three that were over 5,000 sq ft. The rest were spread out among the portfolio and small in nature. Okay. The lease termination income you had in the quarter, was that one big one or a bunch of little ones? That was related to S&C. Okay. Thanks. I'll turn it back. Your next question comes from the line of Brad Sturges from Raymond James. Your line is open. Hi. Good morning. Just to follow up on the question on the lease termination income. Would there be any more income you're expecting for the rest of the year, or would that be kind of it after Q3? Not anticipating any more lease termination income the balance of the year. Given where you are from an occupancy rate perspective today, where do you kind of see that trending the next two, three quarters? We still have the last phase of SNC-Lavalin vacating in Q4, which is just over 40,000 sq ft. We do have some new leases coming online in the quarter, but I would expect occupancy at the end of the year to be relatively flat. 'Cause any new leasing we've done, you know, even this quarter and next, won't be in occupancy until the new year, just given time to retrofit space, et cetera. Just on the SNC-Lavalin space that you got back, you know, it sounds like you're getting good activity there. Just curious at this point what your timeline might be to re-lease that space. Which was at the SNC-Lavalin space? Yeah. In The West Mall. They're going through a phased exit of that building. But we've been marketing it. There's several larger users that have toured. There's several sort of full floor users as well. We have some vacancy at 191, in which, you know, I think we'll get some traction on putting the full floor tenants there. In 195, you know, our immediate marketing strategy is try to get the larger users in there, given it is a full building opportunity with naming rights and signage rights. Last question, just to go back to the Chicago acquisition. Maybe I missed it, but where within Chicago would that building be located? Can you just talk through the lease-up potential a little bit more in terms of the prospects for leasing up the rest of the building? The location of the building's in Lake Forest. It's adjacent to a lab building that Pfizer owns, so it's very strategic for them. A lot of the COVID vaccine lab development R&D was done in that facility. This is new space to the market. Pfizer previously occupied the entire building. It's a beautiful building. It's certainly the best in that immediate area, and probably the second best in the region. Lake Forest, as you may know, is a great demographic area. A lot of the tech and life science executives live there. We've been quite pleased. Even during due diligence, we had a couple of tours for the space. I think, you know, our plan of having bought it at an 8.4 cap rate on in-place income. We put in financing as well, that Charles can speak to, that allows us future funding to fund the lease-up. You know, if we're able to execute on that in short order, it's just an amazing real estate transaction for us. Okay. Great. I'll turn it back. Thanks a lot. Your next question comes from the line of Jenny Ma from BMO Capital Markets. Please go ahead. Hi. Thank you, and good morning. Hi, Jenny. Hi, Jenny. Just wanna follow up on the question about the Chicago assets. For the space that is available for lease right now, is it ready to go, or is there any work that you need to put into it or any sort of specialized, you know, fit-out that a potential tenant might require, or is it a fairly short timeline to get it going, when you find a new tenant? No. The acquisition closed yesterday. Today we've started work on the retrofit of the lobby. Because it was a single-tenant building, we need to retrofit the lobby to make it dual access for multi-tenant. That's really the only change, Jenny. There's two wings of the building, of which one is where the vacancy is. It actually lays out quite well for multi-tenant. What differentiates this building is the amenities. There's incredible conference space, fitness facilities. It's adjacent to, you know, food and shops and, you know, we expect quite a bit of demand. Pfizer doesn't have any exclusives on in their lease preventing us from leasing to any other life science or pharmaceutical companies. We expect some strong demand. Okay, great. I just wanted to ask about the Irish portfolio. It looks like there's been an improvement in the overall occupancy, but it would appear there's a couple of assets that have occupancy below 50%. Could you remind us, you know, what the story is there and whether there's an update on when that space could be released? Yeah. I mean, we purchased the buildings with that vacancy, so we view that as an opportunity. The new lease that we did, as well, was a 20-year deal and so at about 7,000 sq ft. We're quite pleased having executed on that. The vacancy that you're referring to is at some pretty small buildings. You know, it's only gonna take one tenant of each of those buildings to rectify that. Mm-hmm. One of those in Cork in particular, we've had some interest, and you know, we're just working through that. As you can imagine, having taken over this portfolio, you know, we've made some changes to the teams in place as well as the third-party sales teams in place. We're sort of relaunching it in a marketing campaign more in line with what Slate's accustomed to, elsewhere. Okay, great. Then moving to the debt stack, could you provide what you're seeing for indicative mortgage rates for, I guess it would be the 2023 renewals that you're looking at, and if it's mostly concentrated in Canada or if there's any U.S. or Irish mortgages in that mix as well, and whether or not those rates are different. Happy to come on that. Over the period so far, over the third quarter and what we've just seen as you noted in the subsequent events, we've done over CAD 500 million equivalent of refinancing, some of which is lengthier, some of which is particularly shorter. For some of those, we have rolled at exactly the same rates that have been there before. For some of the others, we have looked at some of the slightly higher rates that are there too. What we have is the benefit of some of the swaps that we have in place extend, in some instances, beyond where the refinance debt was refinanced at. Effectively, we've got the benefit of cheaper swaps being in place from that point on. If I look at sort of all-in rate of where things are in next year, on the swap side of things, we're down to the 3.7 or thereabout. At the other end of the spectrum, I think at the highest end, our projection is around the 6.5% is what we see of those maturities coming up next year. I would say that is based on projection we see from counterparties of where we expect rates to be and similar. There could be a fair amount of movement there given the shape of the curve and just the movement we've seen in absolute rates, both from a U.S. perspective and Canadian perspective. I wouldn't also underestimate the fact that we have euro exposure there too. On the European side of things, we have a floater outstanding at the moment. We are significantly progressed in looking at fixing that exposure. If we were to do so, that would reduce our floating rate exposure by over 50%. Okay. That 6.5% that you mentioned, Charles, is that a result of spread and/or term? Is that on the Canadian or the U.S. side? Sounds a bit high. I know we can't predict rates, but just based on what we know, still sounds a bit high. That's on the Canadian side of things. Okay. What we see there is we have an asset where they had a swap against it. That swap, well, essentially matures at the maturity date. We have to take into context not only the spread component, but also where the actual underlying rate component is as well. Okay. Great. My last question is, and I'm not sure if you can fulsomely answer this, but I'll try anyway. With regards to the review of strategic alternatives, how long do you expect the process to take? Yes. Thanks, Jenny. You know, as you mentioned, we're not really commenting on specifics beyond what we said in the press release, but I can speak more generally and provide some context. It's very clear that, you know, these market disruptions related to the pandemic and elevated inflation continue to weigh on valuations of publicly traded REITs, particularly in the office sector. That's created a divergence between asset values and unit price. You know, our board has a responsibility to the REIT and all of our unit holders to consider every possible opportunity to surface value, and they're taking action to do that. The review, which is led by the independent trustees and supported by an external financial advisor, will provide another layer of analysis and evaluation as we look to surface value creation for the opportunities for the REIT. They'll be looking at a broad range of options that could include acquisitions to dispositions, corporate transactions, and other partnership opportunities. Okay. It sounds like a fairly fulsome review then, right? We're talking a matter of probably months? Yeah. Is that fair? Yeah. Okay. Okay, great. Thank you very much. I'll turn it back. Your next question comes from the line of Matt Kornack from National Bank Financial. Please go ahead. Hi, guys. Hey, Matt. Just wanted to quickly follow up on Jenny Ma's line of questioning, and I apologize if you already touched on it. With regards to the near-term debt maturities, is the expectation that you would get at least the amount that you have outstanding or are there refinancing opportunities at this point? Just wanna get a sense as to liquidity and if you'd even maybe potentially have to reduce the size of some of those. The fact that we have liquidity at the moment and we continue to keep that liquidity, I think allows an important amount of flexibility when it comes down to some of those debt refinancings. You will have noted that we gained additional CAD 8 million in financing since the period end. It's moves like that, which is on a particular asset that we owned already and financed already, which allows us flexibility when we come around to other assets in the future. If we see that there's a benefit in taking a lower leverage on an asset in order to pay a lower spread to that, we'd like to have that flexibility as we go forward into the next period. I think an example of our thoughts around what might be along that is the 120 South LaSalle. Mm-hmm. Where we had CAD 101.075 million outstanding, of which we paid down CAD 20 million with a view that in going forward, that should help significantly around spread availability and number of counterparties willing to provide financing on that asset. I think that's an example of how we might use our liquidity and our capital to improve the cost and availability of financing we have over the next year. Is it possible to quantify maybe what the benefit would've been on a relative basis? I'd rather not at the moment because. Okay. We're looking at further financing around those assets coming up within the next four or five months. Okay. Nope. That's perfectly fair enough. Okay. With regards to The West Mall, if someone were to take a large space, what would be your expectations in terms of kind of signing a lease to ultimate cash payment? Does work need to be done in those spaces, or is it in pretty good shape for leasing? No, it's in very good shape. You may recall the history of that building. It was overbuilt in the Nortel days. SNC-Lavalin did some incremental work to make it work for them. Most of the walls are demountable wall systems, which, you know, provide some flexibility in layout for project space, et cetera. But also provides flexibility for future tenant use. The building shows really well, Matt. You know, yes, there will be some inducements and, you know, some time required for tenants to make it their own. Not a significant amount of time. Yeah. Okay. Just as a reminder too, S&C vacated at a rent of CAD 16.50. The starting rents that we have in The West Mall now are, you know, CAD 18-19 dollars. Okay. That sounds like, I mean, if you find someone, if someone takes the space, you could potentially have them in and paying cash rent at some point in 2023. Yes. Yes. Okay. Last one, maybe you can provide a ballpark if it's competitive disclosure that you don't wanna give, but with regards to the recent acquisition in Chicago, what would be your hope in terms of achieving market rents at that property? We think the rent that Pfizer has leased is probably at or just maybe slightly below market. Our anticipation and what we're underwriting for the balance of the space is very similar. Is that sort of mid-teens, high teens? It's CAD 18 rent net, fully net, triple net, with CAD 0.50 escalations per year. Okay. I mean, I guess if you could get to 100% occupancy, that's an 18% cap rate. Am I thinking of that correctly? Certainly mid-teens. Yeah. Okay. Yeah. Fair enough. Okay. Thanks, guys. Ladies and gentlemen, as a reminder, should you have a question, please press star followed by one. There are no further questions at this time. Please proceed. Thank you everyone for joining the Q3 2022 conference call for Slate Office REIT. Have a great day. Ladies and gentlemen, this concludes your call, conference call for today. We thank you for participating and ask you to please disconnect your lines.