Good morning, ladies and gentlemen, and welcome to the Slate Office REIT Second Quarter 2023 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, August 2nd, 2023. I would now like to turn the conference over to Paul Wolanski, SVP, National Retail Sales and Investor Relations. Please go ahead. Thank you, operator. Good morning, everyone. Welcome to the Q2 2023 Conference Call for Slate Office REIT. Today, I am joined this morning by Brady Welch, Interim Chief Executive Officer, Charles Peach, outgoing Chief Financial Officer, and Robert Armstrong, incoming Interim Chief Financial Officer. Before getting started, I would like to remind participants that our discussion today may contain forward-looking statements. 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 disclosures, including our Q2 2023 Investor Update, which is now available. I will now hand over the call to Brady Welch for opening remarks. Thank you, Paul. In a challenging operating environment, our team remains focused on positioning the REIT's portfolio for stability and long-term performance. This quarter, we continued to assess opportunities to strengthen the REIT's balance sheet and liquidity. In April, the special committee of the board completed its review of strategic alternatives and announced a value preservation plan, under which the REIT amended its monthly distribution, distribution to retain $24 million of cash annually. The REIT's board unanimously approved this plan as the most prudent way to preserve value for unitholders in the current macroeconomic environment, while also positioning the REIT for long-term success. The REIT's leasing activity continues to show improved rental rates for both new leases and renewals. Looking ahead, our team remains focused on leasing vacancies, extending lease terms, increasing occupancy, and growing in-place rental revenue. Long term, we continue to look for opportunities to reposition the REIT's portfolio away from capital-intensive assets towards stable cash flowing assets with lower capital requirements. We believe the office plays an essential role in workplace culture, productivity, and innovation, and we continue to evaluate opportunities to align our portfolio with stable tenants, assets, and markets. I'll now hand it over to Charles for some additional highlights. Thank you, Brady. Leasing in the quarter continued to capture increased rental spread, with a weighted average rental rate spread of 12.1%, and the portfolio has a 3.5% weighted average discount to current market rent. The next 12 months maturing leases have in-place rents 9.1% below market rates, providing the opportunity to further capture this. Central banks in the REIT's markets of Canada, United States, and Ireland have continued to raise interest rates over the quarter, which has made financing more expensive, while the market sentiment towards the broader office sector has made credit less available. The strength of the REIT's rental revenue from its high-quality tenant base continues to assist with the refinancing of the REIT. Following the refinancing of unsecured debt in the first quarter, in the second quarter, we've completed the refinancing of Commerce West and progressed three other senior refinancings, all with different finance providers. I'll now hand over for questions. Thank you. Ladies and gentlemen, if you do wish to register for a question, please press the star followed by the one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. If you would like to withdraw your request, please press the star followed by the two. Once again, to register for a question, it's star followed by one. Our first question comes from the line of Sairam Srinivas from Cormark Securities. Please go ahead. Your line is now open. Thank you, operator. Good morning, guys. Congrats on the good spreads this quarter, but I see that vacancy has kind of also gone up on a quarter on quarter basis. Sorry. Can you give some color on, you know, the vacancy you're seeing in Ireland and Atlantic Canada? Yeah. Good question. I think, you know, for us, we're actually optimistic on the activity that we're seeing in our buildings. I think, you know, it, it's just, you know, a matter of timing. We've got some large potential users that are looking at space right now. We're actually doing some good leasing in Ireland, specifically. We've done a couple of deals in Atlantic Canada. You know, so it gives us some hope that we can continue along that momentum. The great thing for us is, I think we own the real estate at a very attractive basis on a per square foot, and where rental rates are, we're not seeing the softening of rental rates. I think it's competitive out there to get tenants, and we're doing everything that we can to be competitive. I, I think, you know, the, the vacancy, the way, the way it is, I look at it as upside for us, to, to continue to like, to increase our occupancy. That's how we're gonna create more cash flow for, for the unitholders. Brady, in terms of the, especially the Atlantic Canada portfolio, I know in the last couple of years, the strategy was to kind of get those short-term leases over there in place and fill that in. Then essentially therefore kind of fill the vacancy. Are those the leases that are coming up? You know, we don't-- We have a small percentage of short-term leases in the portfolio. I think, you know, we always look to put term in to any deals that we do. I think, you know, we have most of like our 10 largest tenants in the portfolio represent 40% of the cash flow. We will always look for, you know, long-term commitments in our buildings, not shorter term deals. I don't know if I answered your question right, but we're, we're, we're intentionally looking for, you know, good tenants, good covenants, and commitments to our buildings. Right. To your point on, focusing on occupancy, where do you see occupancy trending over the next six months? Yeah, I think, I think, you know, where we're at, I, I would say we're hopeful that we can, we can continue to add, like we're just around 80%. It's, it's as I said, it's, it's a market right now that, I mean, an asset class where hopefully we feel that people are coming back to the office. I think if we look at the markets that we operate, even in Greater Toronto area, we don't own any assets downtown Toronto. We, we have seen a lot of actually leasing activity in the suburbs of Greater Toronto area, and those markets seem to be performing better than downtown, and that's where our assets are. In Ireland, you know, that market is performing very well. It's a different market than Canada. You know, Ireland has, you know, the best GDP in the EU, a lot of foreign direct investment, where we have assets that are located in markets where there's a lot of skilled labor and a lot of life sciences. And we, you know, continue to see, even though that the vacancy might have dropped, we're, we're like 88%-89% occupied, and we actually see some uptick there. You know, I can't, I would say we'll gradually chip away and be, and there's some, as I said, there's some large potential deals that could make a significant difference for us if we're able to make that happen. That's good color, really. Just probably changing gears to financing. I know you discussed you made some progress on refinancing some of the debt coming up. Can you give some color on the upcoming maturities and where you see those things getting refinanced? Yeah. So, as Charles mentioned, it's a market right now where access to credit has tightened. That being said, we are in the process of refinancing approximately $130 million right now on two assets, which we hope to close in the next few days. We are continuing discussions with our lenders, and, you know, we're having constructive conversations with them. So I think for us, that is our focus right now, is liquidity in the company, making sure that we retain cash, and work closely with our lenders, you know, in a challenging credit environment for office. That's awesome. Thanks for the color, Brady. I'll turn it back. Thank you. Our next question comes from Jonathan Kelcher from TD Cowen. Please go ahead. Your line is open. Thanks. Good morning. Just, just going back to the occupancy, it did dip a little in the, in the quarter. How much of that would be non-renewals versus tenants renewing but, but taking less space? That's a good question, Jonathan. I think it's a combination of both, where we've seen, we've seen some tenants, renew and, and, and basically contract on the amount of space they're taking, which I think is a broader macro issue for office. Then there were a couple of known vacancies, so it's just, so I, I think it's, it's a combination, but now we're looking, we're, we've done some, like subsequent to June 30th, we, we've actually done some, some positive leasing on larger deals, both in Atlantic Canada and in Ireland. So... Okay, good progress. Yeah. Like, you don't have a lot maturing over the next little bit, but good progress on that. Yes. Yeah. Yeah. Okay. Generally, more generally speaking, how would, how would you compare renewal rates now, versus what they would have been pre-pandemic? Are you getting similar renewals? Yeah, we're You know what? Our rates, we, we haven't seen slippage in our, in our base rates, in the markets where we're operating. Whereas, you know, that's where, that why I made that comment about downtown Toronto. I don't know whether that's the same case, but, like, our, our, all of our leasing spreads, both on new deals and renewals, have been, have been positive. I think that's, you know, intentionally, like, when we've always bought assets, we always focus on what's our per square foot basis and where are rents, and there's our organic growth. In the markets we have, we, we, we, we continue to see the same trends. Okay. Then just switching to the balance sheet, Charles. Like, the total debt, your total debt increased a little bit quarter-over-quarter. Was that mostly a function of FX rates or? No, we had one on our financing on Commerce West. We financed at a slightly higher amount than we had before, so that showed the ability to up finance on some of the assets that we may have. We had a slight drawing on the revolver as well. I mean, if I look in totality at the amount of change in debt, let's say from the end of December, I think it was just over 1%. It wasn't a significant increase of the amount of debt that we have outstanding at the moment. Okay, just from looking, looking ahead on that, with the lower distribution level, should we expect the total amount of debt to tick down over the next few quarters? I think the amount of debt outstanding is, is going to be a function of what happens on the operational side of the portfolio. So at the moment, there are two things. One of which is, as Brady's mentioned so far, the ability to increase that rental revenue that we have by working on in-place rents, and also by working on occupancy as well. And that comes in, and that supports the quantum of debt we have outstanding. At the same time, there may be opportunities to release capital from certain assets, by dispositions, for example. And if so, then that's down to the board and management on the decision of how that might be best applied, whether that might be best applied towards accretive leasing, for example, or for example, in reducing what the debt might be on the company. Okay. That's, that is helpful. That's it for me. I'll turn it back. Thanks. Thank you. Once again, to register for a question, please press star followed by the one on your touchtone phone. Our next question comes from the line of Brad Sturges from Raymond James. Please go ahead. Your line is open. Hi there. Good morning. Just to follow up on the, on the questions on the balance sheet there, just, from my understanding, in terms of the upcoming maturities that you're working on, at this stage, would you be expecting to repay down some debt, or would you be refinancing basically at similar levels, based on your expectations today? I think we, we have a mixed environment. We have certain times where we've, as I mentioned before, the opportunity to up finance our assets. There are other assets at which we will look to pay down that debt. We did similar towards the end of last year on 120 South LaSalle in Chicago, with a fairly significant pay down there. It swings around about across each of our assets, and partly because each of our our assets are financed generally, with the exception of our revolving facility, individually. It's an opportunity for us to optimize what amount of debt we have against each one. It's really on an asset-by-asset perspective about whether we'd look to gain further financing or essentially gain further financing on one asset in order to look to pay down the debt against another asset. It's, it's individually based. Okay. just based on, I guess you have been reviewing your portfolio in a pretty comprehensive fashion and considering asset sales. I guess, where would you be at that stage? Are we potentially getting closer to seeing some assets being listed for sale? Do you think it's not quite the time to be doing that quite yet? Yeah. It's a good question, Brad. You know, we are always looking at our assets in terms of have we completed our business plan? Is this the right time to sell? You know, generally, it's a tough market out there today to go sell assets, but we, we will look at, at the opportunities to sell assets if we feel we can. And so I, I would say, you, you, you'll probably see us, you know, consider some sales on assets that we feel are not core for us long term. You know, we, we need to do it in a kind of a programmatic way and, and, and, and see what's the best, you know, for the unitholders to sell assets, and then, and as, as opposed to selling in a forced market. I think that's, that's kind of what we weigh. Yeah, makes sense. Just to, just to go back to the, the, I guess, leasing occupancy discussion, you know, as you're, I guess, seeing new, new activity from, I guess, new users potentially into your portfolio, are you seeing any further extension on timelines for negotiation or just, in terms of touring activity to get a deal done, or has that, has that stabilized to the best of your knowledge right now? Yeah, I. We haven't seen that. I think, you know, people, you know, our tenants, when we talk to our tenants, they, they, they are looking long term and where they want to be and what type of office space they want to be. You know, whether it's they're only there three or four days a week, they, they need to have a place, and they're putting in long-term strategies. We haven't seen kind of reduced time to do deals or make decisions. It's the same. I think they're just considering, you know, how much space do we need? You know, how, how is our business going to operate? I haven't seen any, any kind of delays in making decisions. Got it. And, and just, I know there's not that much, left to roll this year, and then, you know, looking into next year, is there more known vacancies that you're aware of at this point, where there's either downsizing or, a non-renewal, or, you know, do you have pretty good visibility on what your, retention rate would be at this stage? Yeah, we, we, we do have pretty good visibility on that. There's no known large vacancies expected right now. Okay. Thanks. I'll turn, turn it back. Thank you. Our next question comes from Gaurav Mathur, from iA Capital Markets. Please go ahead. Your line is open. Thank you, and good morning, everyone. Just on your MD&A, you know, you've mentioned that you've explored various capital reallocation strategies that you will execute on when the markets become more favorable. Would you be able to provide some color on, you know, what that looks like and how investors should think about the REIT over the next 12-24 months? Yeah. I, I would say for us, right now, you know, it's, it's, it's a challenging market. We're, we're, we're being defensive. We're retaining cash. We're focused on, on, on making sure we have liquidity for the REIT. We will sell assets when we believe we can, at a price that we feel is, is an appropriate price. You know, I think today it's not about growth, it's about, you know, managing your assets, leasing your assets, and, and making sure that we, we have liquidity in the REIT. That's our focus right now. Okay, great. just switching gears to your tenant profile. Are there any tenants or are there a subset of tenants that are causing concern, you know, as you look at the vacancies in the portfolio? No. There's, there's no tenants that, that, that we're concerned with in terms of credit. Like, I mean, I think when we look at our rent roll, most of our tenants are strong covenant. We do have some government tenants, but we have a lot of, I would say, AAA kind of corporate covenants within the, in the, in the portfolio. We're not really seeing any weakness in terms of, of payment, of rents or anything like that with our portfolio. Okay, great. Just, lastly, you know, when you're having discussions on new leases, is there an implication that you'd see your, your leasing costs rise as well, you know, given the state of the office markets currently? Yeah. You know, in, in the markets where, where we operate known assets, you know, we look to provide incentives, if we, if we feel the covenant's there and the tenant's gonna commit long term. Be either a combination of some free rent and some cash. With the environment we're in, we're, we're trying to maybe do some more free rent, some more, I would say, creative deals, where we can spread free rent across. Those are the type of things we're seeing. We, we haven't seen significant increases in total leasing costs in the markets where we are. I know that in, in downtown markets, where you're seeing, you're seeing, like, incentives and TIs increasing significantly, but in the markets where we are, we haven't seen that. Okay, great. Thank you for the color. I'll turn it back to the operator. Thank you. Our next question comes from Jenny Ma, from BMO Capital Markets. Please go ahead. Your line is open. Thank you. Good morning, everyone. I wanted to ask about the hotel asset. It looks like the NOI was down year-over-year. Can you give us some commentary on the performance of the asset in terms of, is it a revenue decline, or is it operating costs going up? How do you see the third quarter shaping up, given that it's the busiest quarter of the year for hotels? I think what we have is, as opposed to an underperformance in this period, I think we had an outperformance in, in the prior periods. Due to specific conferences and certain block bookings there were within the hotel. I don't think we're looking at any particular weakness in that asset, and that asset is actually, from our perspective, a strong cash flowing one, which we're pleased to have. Okay. It looks like Q3 2022 is a fairly strong quarter as well. Was that mostly, regular business, or is, is there some conference revenue in that quarter as well? I think my comparison here is absolute quarter on quarter from 2022 and 2023, within that. There was a stronger performance on the conference and the business side, and those block bookings that we had in that period. We don't see. I'm not. I think that was an outperformance in that period, as opposed to an underperformance. I believe there was the Memorial Cup out there, so there was- Yeah. We saw that hotel experience, I would say, outperformance because of the activity there last year. Okay. Would we expect Q3 to come down a little bit year-over-year then? I was just wondering how much exposure there was. I think it's flat. It'd be flat, flattish. Okay, that's helpful. Turning to the credit loss that was booked in G&A, related to the VTB loan, could you remind us what property that was related to, how much it was? I think it's closed- Absolutely For a few quarters. Yeah. How should we think about that going forward? Yeah. This was an asset that was sold by the REIT in September 2018, so five years ago. There's a five-year VTB which was provided against that. If we think about the VTB itself, it was a small amount of the sale price. The sale price of that asset was CAD 17 million. Mm-hmm. The VTB provided was $2.7 million. Okay. What you'll see is the bad debt we have within the G&A in this period was relating to that VTB, was $950,000. Okay. If I think about it, from the sale price, it's $1 million out of $17 million in the initial amount. Okay. Why is the VTB, credit loss being sort of written down in steps, as opposed to, you know, a one-time write-down? Because. Yeah. Because in September, when we first... Actually, in September, what happened is we didn't have repayment of principal, but we continued to have some repayment of interest. Our expectation at that point is that we would be able to receive close to full payment, if not full payment. We took it across a certain amount of cost on that due to expected legal costs we might have in recovery. Since then, in looking further into it, we realized the only way we would be able to recover was through the sale of the security that was there. We sold the security and received $1.4 million on that amount, and we expect that to be the end of the matter. Okay. If I'm hearing correctly, there's $ 1.4 million to come in terms of credit loss? $1.4 million has been received in July in cash and is with us. Okay. Is there any more credit loss to be booked in coming quarters? There is no more credit loss to be booked beyond what was booked when we initially said there would be certain legal costs and similar, and the $950,000 taken within G&A in Q2. Okay, that's very helpful. So I presume there's no more associated interest income that you've received related to this VTB loan. Is that correct? We don't expect to. If there were to be, there might be a little bit of further upside, but I wouldn't be reliant on that. Okay. Okay, that's very helpful. Thanks for the color. Thank you. Our next question comes from Tom Callaghan from RBC. Please go ahead. Your line is now open. Thanks, morning, guys. maybe first question is just on physical occupancy or utilization rates across your portfolio. I know in the past you guys had talked about Ireland and Atlantic Canada as kind of leaders. Just curious on any updated thoughts, you're seeing here across the portfolio, so are some of the other regions starting to kind of close that gap? Yeah, I, I would say each market operates a little bit differently, and I think it's, it's a result of coming out of COVID, and just human behavior. You know, we, we do see generally a trend of, of more activity and people coming into the office. You know, it used to be maybe two or three days, now they're coming in four days. The utilization of space is trending positively. And I would, I would think in Ireland, it's much different than Toronto, for example. I mean, that's just human behavior and where the assets are located. I don't know if that, that answers your question, but I, I would say we see more return to the office space in general. Okay. Just switching gears, with respect to the IFRS values, you took your terminal cap rates up this quarter. Maybe just some, some commentary on, on, on kind of what went into this and, and, you know, are you starting to see a little bit more activity in, in the market between willing buyers or sellers, or, or still pretty sparse at this point? Yeah, I think, we have a methodology and a process for valuation, which we do each quarter, and we do it on an asset-by-asset level. We look at all the data and inputs, you know, in terms of reports from the market, all the data points. Then, you know, that's how we take a look at terminal cap rates, and then we take a look at, you know, 10-year kind of treasuries in each of the markets that we own assets and, you know, apply a spread over that to discount things. Then we look at trades, but it is pretty sparse. There are not a lot of trades in office right now. You know, but we... That's kind of how we do our valuations. Okay, thanks. I'll turn it back. Yeah. Thank you. There appear to be no further questions. I'll return the conference to Paul Wolanski for closing remarks. Thank you, everyone, for joining the Q2 2023 Conference Call for Slate Office REIT. Have a great day. Thank you. This does conclude today's conference call. Thank you all for attending. You may now disconnect your lines.