Good morning, ladies and gentlemen and welcome to the Slate Office REIT First Quarter 2024 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Friday, May 3, 2024. I would now like to turn the conference over to Jennifer Pyper, Investor Relations. Please go ahead.

Thank you, operator and good morning everyone. Welcome to the Q1 2024 conference call for Slate Office REIT. I am joined this morning by Brady Welch, Interim Chief Executive Officer; Robert Armstrong, Interim Chief Financial Officer; Evan Meister, Managing Director; Sarah Jane O'Shea, Vice President; Andrew Broad, Vice President; and Jeremy Kaupp, Vice President. Before getting started, I would like to remind participants that our discussion 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 Q1 2024 investor update, which is now available. I will now hand over the call to Brady Welch for opening remarks.

Thank you, Jen and hello everyone. I am pleased to report a number of operational, financial and transaction highlights from the first quarter. While the office sector continues to face headwinds, our team has remained focused on taking the necessary steps to position the REIT’s portfolio for long-term stability and growth through a focus on its balance sheet, value preservation and hands on asset management. Our team continued to drive steady leasing volumes in the first quarter converting interest and demand from high-quality credit tenants into new leases and renewals at positive leasing spreads and longer lease terms. We completed over 270,000 square feet of total leasing in the quarter, which is up 120% from the first quarter of ‘23. We believe this highlights a trend of steadily rebounding tenant demand. Leasing was completed at positive spreads and weighted average lease term of over 10 years. Additionally, we have built a robust leasing pipeline with over 350,000 square feet of new potential lease deals and renewals in the works with high-quality credit tenants in the Greater Toronto area, Atlantic Canada and Ireland, which would add to the net operating income beginning in late 2024 and into 2025. Only 3.6% of the portfolio’s gross leasable area is set to mature in the balance of the year. And we are leveraging our positive relationship with our tenants to sign renewals and extensions. We also continue to make progress on the REIT’s portfolio realignment plan this quarter. To-date, we have completed over $40 million at share in dispositions through strategic sales of assets in Canada and Ireland. We currently have an additional $109 million at share of assets under contract or in letter of intent. And we are actively engaged with a number of potential purchases for single assets and small portfolio transactions across Canada. Finally, our team continues to prudently manage the REIT’s balance sheet to ensure financial flexibility and stability for the REIT. In January, the REIT’s unitholders passed a special resolution approving an amendment to the REIT’s Declaration of Trust to temporarily remove the restriction imposed on the REIT to not exceed financial leverage of 65% of its gross book value. This amendment provides the REIT with greater financial flexibility, while management continues to execute on the portfolio realignment plan and actively manage the REIT’s portfolio. We are encouraged by the green shoots we are seeing in the global office market and we continue to have conviction in the value of our office portfolio and the actions the REIT has taken to retain cash, pay down debt and proactively create value. On behalf of the Slate Office REIT team and the Board, I’d like to thank the investor community for their continued support. And now I will hand it over for questions.

Thank you. [Operator Instructions] Your first question comes from the line of Sairam Srinivas of Cormark Securities. Your line is now open.

Thank you, operator. Good morning, guys. Can you give us a little bit more color on the asset sales you’ve done so far and the ones that are under contract? And what that means for your debt position?

Yes, certainly. So we’ve sold a few assets in the Greater Toronto area. We closed an asset in Ireland, which on an opportunistic basis. And we are in either a form of negotiation on contracts or in LOI stage with a bunch of assets in Canada right now, both in Atlantic Canada and the GTA.

So really, if you look at the sales, is that in line with – like how far or how close is it to your IFRS expectation?

Relative to IFRS, the sales are decently inside, probably on average, 30%, 40% just given where the market is. I think some of those decisions we made and the Board made in order to dispose of those are really for realizing proceeds to repay debt, which we have done. So as part of your first question, as it relates to debt, all debt would be – have been used to repay debt from those sales.

So would you say is it 30% to 40% of the IFRS value?

In some cases. 30% is a good number.

Okay, alright. I will turn back on. Thank you.

Thank you. [Operator Instructions] Your next question comes from the line of Tom Callaghan of RBC Capital Markets. Your line is now open.

Hi, guys. Maybe just follow-up on the line of questioning there. In your mind, what’s the biggest obstacle or impediment to getting some of these deals across the line? Is it kind of bid as spread? Or has it really come down to kind of financing or maybe other factors?

Yes. Hi, Tom, it’s Brady. I think it all comes down to the ability in this asset class of office is, is financing. There’s limited amount of debt capital available today, which makes it difficult for buyers to step up and close deals. That’s the biggest impediment. It’s not an efficient market as a result of that. And I would say if there was more liquidity on the debt side, you would see more transactions and you’d see better pricing.

Got it. Thanks. And Bobby, maybe one for you. Can you just provide a little bit of an update on where you stand today in terms of discussions with lenders on the credit facility?

Yes, for sure. We’ve been having discussions. And I think just for context there, the focus of ours is around continuing to provide relief in more advantageous terms as it relates to the credit facility. So we’ve been having, what I would call, substantive and good discussions with each one of the lenders in the facility. We continue to make progress, I think substantively on all the individual mortgages where we do have renewals or other matters we’re dealing with. But if I kind of had to characterize it, I think it’s notwithstanding the challenging market. We’re continuing to have good support from all of our lenders. We’re thankful for that as we continue to work through the portfolio realignment plan.

Understood. Thank you.

Your next question comes from the line of Golden Nguyen-Halfyard of TD Cowen. Your line is now open.

Good morning, everyone. Just first on often to – it took a bit of a dip in Q1, although this looks like it was due to the couple of dispositions that you guys did in the quarter. But with the 350,000 square feet of leasing discussions later this year, how do you expect that to impact occupancy for the remainder of the year?

Yes. So, I would say it’s a good question. If we look back over the last kind of four quarters, Q1 ‘24 was the best in terms of new leasing, which is actually important, and that’s what drives an increase in occupancy. And that’s why we are very encouraged about what’s going on on the ground right now because there is a disconnect. There is actually tenants and businesses that are looking long-term to commit to the office space. So, of the 270,000 square feet of leasing we did in Q1, over 200,000 square feet were new deals. And that’s very, very encouraging for us in terms of increasing our occupancy. And the other thing to look at with our portfolio, there is limited amount of renewals or expiries over the next kind of 12 months to 18 months. So, if we can continue to execute and hopefully lock down some of these deals that are in our pipeline, we are encouraged that we hopefully can maintain and increase our occupancy across the portfolio. And that’s across all markets, too, I would add.

Great. Thanks for that. Just one last one from my end. Just on the asset sales, would you be able to provide some color to what you are seeing today in the market in terms of interest from buyers? And maybe how this has changed over the past three months, four months since Q4 reporting?

Yes. I mean I will just add, listen, it’s difficult to get financing today in this asset class. It’s harder to do larger transactions. So, the interest really comes from private buyers in, I would say, bite-sized deals where they have – they can pull the capital together to transact. So, I think that’s really the universe that we are dealing with. There is not a lot of institutional large buyers out there right now. It’s really like local privates that are – is your universe of buyers today.

Yes. And maybe I would add, I think to characterize the change over the last three months, four months in the market, I don’t think we would say there has been a substantial change. I think what has changed is our ability to be in the market. We continue to have – going through our marketing plans, we are getting better traction on that, and we are seeing more robust pipeline. We actually do have a decent amount of activity on the sales side that is a result of the three months to four months of additional work we have been doing over the last Q4, Q1 and into now. But what I would say, the catalyst for the future, we are hoping is if we see some interest rate reductions, that could be a catalyst for better financing a little bit more of a positive momentum to be able to kind of bring more buyers to the market.

Great. Thank you. I will turn it back now.

We don’t have any further questions at this time. Presenters, please continue.

Thank you everyone for joining the Q1 2024 conference call for Slate Office REIT. Have a great day.

This concludes today’s conference call. Thank you for your participation and you may now disconnect.