Dream Office Real Estate Investment Trust

Jane Gavan – CEO Ana Radic – COO Mario Barrafato – SVP & CFO

Mark Rothschild - Canaccord Genuity Mike Markidis - Desjardins Capital Markets Matt Kornack - National Bank Financial Mario Saric – Scotia Capital Sam Damiani - TD Securities

Thanks very much. Good morning everybody and welcome to the third quarter conference call for Dream Office REIT.

With me today are Mario Barrafato, CFO and Ana Radic, COO. I'll make a few comments and then turn the call over to Ana and Mario.

Overall the REIT had a good year in terms of leasing activity and had a 3.1 million square feet of expiries in 2014, we've leased up $2.8 million square feet. We expect good leasing velocity till the end of the year as we continue to see good tour activity and our leasing pipeline remains robust.

Our results for the quarter were in line with our expectation and as we’ve been discussing since the beginning of the year. There have been a few expected vacancies this quarter but we’re dealing with those with our active leasing program.

Our year-over-year NOI remained relatively flat notwithstanding the decline in occupancy resulting from the commencement of vacancies like National Energy Board in Calgary and WorleyParsons. We expect our leasing metrics will improve next quarter as we’ve completed lease deals equivalent to 95% of our Q4 expiries.

In addition, of the 2.5 million square feet expiring in 2015, we've already completed lease deals for one-third of those expiries. In an average year we leased approximately three million square feet across the portfolio and we see no reason why this won't continue next year.

The story for the REIT for the next two years is going to be leasing, leasing, leasing. Aggressively filling vacancies and realizing those opportunities to intensify their use.

Our focus is on tenant retention making the buildings competitive and desirable for tenants to stay because we know they have choices. Today we've spent almost $20 million on capital improvements with another $15 million to be spent by year end.

We are in the process of finalizing our capital strategies for the assets for the next years to upgrade lobbies, elevators, washrooms, HVAC and sustainability programs all the things that translate into improving competitiveness. In other words improving those things is visible and meaningful for attracting and retaining tenants and improving the quality of the experience in the Dream Office building.

We believe as we prioritize the use of our capital, the highest priority is reinvestment in our own real estate. We’ll continue with our disposition program of noncore assets with proceeds used primarily to upgrade our buildings.

There is not a lot of activity in the office market in respect to sales, but for those well located office properties that have traded, there’ve been multiple bids and aggressive pricing. With few large properties on the market right now, we continue to see evidence as the REIT assets are valuable and are hard to acquire particularly in Downtown, Toronto.

I'm going to turn the call over to Ana right now, to talk about our operating performance.

Thank you, Jane. The overall Canadian market continue to show improvement in the third quarter with just under 1.7 million square feet of space absorbed.

Downtown Toronto led the country, thanks to steady demand for expansion space particularly in the financial sector with net absorption of over 650,000 square resulting in an 80 basis point increase in occupancy. The Downtown Calgary market was the second best performing market with 368,000 square feet of net leasing activity due to sound demand from the energy sector.

Other Downtown markets like Vancouver, Edmonton, Montreal and Kitchener Waterloo experienced some negative absorption while the balance of the markets remained flat. The suburban markets of Vancouver, Edmonton and Calgary also performed well during the third quarter recording over 530,000 square feet of combined positive net absorption.

In Suburban Toronto 62,000 square feet of space was absorbed as well and occupancy remained unchanged. The suburban office market is typically tentative by a large proportion of American companies and the improving U.S.

economy should support continued demand for suburban office space. Turning to our portfolio just under a 0.5 million square feet of lease transactions were completed in the quarter, the majority of which commenced in 2015 or later.

In most markets, we continue to lease space at rates at or above our estimated market rents. Rental rates in Downtown Toronto have remained strong.

40,000 square feet of renewals completed in the quarter were done at an average rent of $23.80, 4% above our market rent estimates. 17,000 square feet of renewals were completed at an average rent of just under $25 representing rents 7% above expiring and 7.5% above market.

37,000 of new transactions were also completed in Downtown Calgary in the quarter at an average rent of $28.60 which was 2% above market. Some pressure on rental rates is being felt in Suburban Vancouver, Suburban Toronto and Downtown Edmonton as new lease transactions were completed at rents below our expectations.

Significant transactions completed in the quarter include a 241,000 square foot renewal with TD Bank, which is 96,000 square feet at our own share extending 53% of the space until 2027 and the balance until 2025. Average rents will increase 105% from an in-place rent of just over $5.50 per square foot.

We are investing non-recoverable capital to replace the windows of the complex as well as additional recoverable capital over the next 10 years all of which enhance the long-term value of this asset. We also concluded a 35,000 square foot lease transaction with Enercon Canada at 700 de la Gauchetiere's in Montreal.

This space was previously occupied by an existing tenant at a rent of $11.25 per square foot. This tenant had not planned on renewing the space in 2016 when it naturally expired and we were able to negotiate a surrender whereby we received a termination fee and then secured a new tendency with Enercon for a seven-year term at $23 per square foot generating over $400,000 of additional annual NOI through the existing tenants expiry.

Two key renewals were also completed this quarter at HSBC bank plc. in Edmonton, the first being with Aviva Canada for 17,000 square feet and the second for Australian for 11,000 square feet.

These deals were down at an average rental rate of $19.80 per square foot. The largest deal completed in our Vancouver portfolio this quarter was the 12,000 square foot renewal and 14,000 square foot expansion of the industry training association at 8100 Granville in Richmond.

The lease was extended until 2024. Let’s go to Plaza.

Subsequent to quarter end we expended the Bank of Nova Scotia into 6100 square feet of additional space. Throughout the loss we've been strong at Scotia Plaza with over 150,000 square feet of perspective tenants having towards the building.

In order to lease our upcoming vacant space, significant capital investments will be made over the next several years. Thees include commenta area upgrades and sustainability projects as well as the modernization and interior cap renovation of the elevators.

Designation dispatch will be installed at the start of the project which will immediately improve performance. The new elevators will greatly enhance the tenant experience, support increased densification, and move occupants at much faster speeds.

We are also finalizing design details and pricing to construct a marketing suite on a 69th floor of Scotia Plaza all leasing towards will begin in this space where we will communicate the key attributes of the building, its prime location in the center of the financial core, the plant physical improvement to the Plaza including details on the elevator modernization projects, the benefit and efficiency of the column-free floor plate and our recommitment to the environment by pursing lead platinum certification. Also in Downtown Toronto we learned this quarter that loyalty one have made the decision to reallocate from 438 University in 2017.

In our discussions with them, they have shared that the prospect of reconfiguring their existing space well in occupancy put us at a significant disadvantage. We of course are very disappointed with his decision, however are optimistic about our ability to find a replacement tenant given the strength of 438 University.

438 is one of the only three lead goal certified buildings in the Downtown north market and after the Merck Discovery Center, it is the newest building in this node. Growth occupancy cost below $50 per square foot represent an excellent value for large users, while the location offers excellent transit access with interior access to Dundas station from the lobby of the building.

Extensive building signage and branding opportunities can be offered to large tenants with excellent exposure on University Avenue in Dundas Street. Immediate proximity to the Court House, Queens Park, University Health Network, University of Toronto, and the financial core will attract a variety of users including law firms and government tenants.

Future tenants may also be able to utilize loyalties improvements, the majority of which are very high quality and includes unique tenant leading spaces, a gym, and café style lunch area. In the short period, since learning of LoyaltyOne's decision, we've contacted large users such as banks, the provincial and federal government and hospitals and have toured users in need of upward of 100,000 square feet.

We remain confident about the Downtown Toronto market, and are encouraged by tenants such as Apple, EMEA and Amazon planning to move downtown, as well as the demand we are seeing for financial service firms. According to CB Richard Ellis, the big five banks are currently or will soon be in the market for space totaling 1.5 million square feet.

Our large blocks of present and upcoming vacancy in the Downtown Calgary market are also in well-located buildings with large floor plate in our largest vacancy for 4447th Avenue, there has been steady interest. Improving our vacant space and investing in this asset will be a key driver of leasing success.

Demolition of the space commenced in September, and is now in open playing condition that showcases the size and functionality of the floor plate. A new building amenity fitness center and conference facility to be shared with 606, 4th street is progressing through detailed design phase.

Additionally, an upgrade of the main fore lobby is being finalized in order to update the entry and presence of the building. At Telus Tower, where we have approximately 290,000 square feet at owned share expiring in 2016, we’ve had some indication that a significant portion of the space maybe required by an existing occupant beyond 2016.

In addition, we continue to respond to large RFPs in the market, several of which range between 100,000 square feet to 300,000 square feet. We are confident that Telus Tower will appeal to large tenants in the market.

It is well located, cost effective, connected to the bow, and offers a large efficient floor plate. It's like the majority of our Calgary portfolio also benefits from more generous parking ratios than the new developments.

We've also just completed extensive renovations of the common areas and exterior of the building. Several strategies to drive tenant retention and increased occupancy are being implemented across all markets.

We’re going to invest in our buildings, having identified building upgrades that include, lobby, washroom, elevator and exterior work, as well as sustainability initiatives that are necessary to keep our buildings competitive. We also remain focused on building and maintaining a strong relationship with our tenants and are working to secure lease renewals with those tenants who expire in 2015 through to 2019.

Engagement with the tenants at all levels of the organization is a top priority. Our operations and leasing teams all have targets to meet with our tenants on a regular basis, and to ensure tenant feedback is being captured and auctioned.

We continue to explore opportunities to upgrade the quality of our existing retailers and add new retail space to our portfolio. At 357 Bay, where we are combining second floor office space with ground floor space to create a unique 9,000 square foot retail opportunity, we issue the request for proposal and expect to receive interest from retailers that we hope will result in a new flagship location that will anchor Temperance Street and Bay Street.

At 83 Yonge Street and 10 King Street East, we have considerable interest in our street level vacancies and believe we will secure new tenants before the year end. Several additional retail intensification opportunities we have identified include an opportunity to convert to 13,000 square feet of the low grade storage space to retail space Ottawa, on our RevPAR growth side, we have the ability to build a 10,000 square foot retail pad.

And we’ve had discussions with the CAG among others to build them a two storey restaurant. In Downtown Montreal, we are actively negotiating an offer with the fitness center operator to lease 10,000 square feet to 15,000 square feet of the below grade storage space at rents that would add just under $400,000 of annual NOI.

We continue to work with Dream Unlimited Development Group to bring several new development opportunities to market. In Saskatoon, where we have density of approximately 200,000 square feet on a surface parking lobby we owned, we are now in a position to respond to any RFP that comes to the Saskatoon market.

We’ve completed building specifications and marketing package in two renderings. We will have a full marketing launch by the end of the year.

In Markham, where we have just over five acres of excess land on the site of our existing building 60 Columbia Way, geotechnical field work has been completed and we are working on creating a detailed development budget. Design and marketing, drawings will follow shortly.

In Kitchener, where we have a small parking lot on Kitchener’s Main Street, King Street, we are proactively marketing 100,000 square foot LEED Gold core-and-shell urban leasing opportunity. This development opportunity has been listed with one of the top brokers in the Kitchener market, and will be brought directly to the attention of growing tenants.

We are encouraged by our leasing to date, and improving fundamentals particularly in Toronto and Calgary, and expect to complete new leasing consistent with our historic levels as well as see improved tenant retention next year. I will now turn the call over to Mario, to speak to our financial result.

Thank you, Ana. Good afternoon everyone.

Our third quarter results are in line with our expectations. Excluding the impact of onetime items, pre unit AFFO and FFO amounts are consistent with the prior quarter.

We did see decline in our third quarter occupancy, primarily due to the departure of two large tenants. However, our leasing pipelines have been very active in greater stability and improved tenant retention will be reflected in our Q4 occupancy metrics.

Our AFFO for the period was [$0.626 per unit, down $0.012] [ph] from the prior quarter. This quarter reflects NOI growth, interest cost savings offset by non-recurring income that was recognized in Q2.

Basic FFO for the period is $0.712 per unit, down $0.019 [ph] from prior quarter for the same reasons impacting AFFO, plus a onetime write off of straight line brands of $700,000 due to tenant bankruptcy. Year-to-date our AFFO is $1.89 per unit, which is up $0.04 or 2% over prior year.

And our basic FFO is $2.17, up $0.01 over prior year. The FFO growth was muted compared to AFFO due to non-cash G&A charges and straight line rent adjustments recorded in the current year.

Our overall comparative property NOI increased by $120,000 or 0.1% over the prior quarter, which really doesn’t reflect the strong performance in certain markets. In Downtown Toronto, our largest market compared to NOI increased by $541,000 or 1.6%.

Our Quebec portfolio increased by $413,000 or 5.6%, and our Suburban Calgary portfolio increased by $169,000 or 5.9%. These increases were offset by $616,000 decline or 3.8% in suburban Toronto, and 3.5% or $200,000 decline in Vancouver.

On the year-over-year basis our nine months compared to NOI growth is 0.3%. Our Downtown Toronto and Downtown Calgary nodes have 1% and 3% growth respectively offset again by significant declines in Suburban Toronto.

Excluding Suburban Toronto, the NOI growth for the year is approximately 1%. Our third quarter occupancy decreased to 93% from 94.1% in the prior quarter.

The largest decreases were in Downtown Calgary a 170,000 square feet and Suburban Toronto with 85,000 square feet. In addition, we lost 60,000 square feet due to early surrenders initiated by us to accommodate better and longer tendencies.

We had 649,000 square feet of total leasing take effect in the quarter. Of that 298,000 square feet were renewals and they are completed with a positive leasing spread of 8.8%.

Overall, total portfolio in place rents have increased 0.4% to 18.21 versus 18.14 at Q2 and remains 8.2% below our estimated market rents. We will fill our leasing metrics improve next quarter, occupancy will be stable as we have already completed lease deals equal to 95% of our Q4 expires.

Our tenant retention ratio will return to normal levels as it currently stands at 55% and rental rate growth will be evident as renewals were competed at 8% above the expiring rents. So overall most of our portfolio is performing very well.

Certain markets are challenging and overscheduled the gains made out in the portfolio. This was a quite quarter in terms of capital activity.

We sold four properties to Dream Industrial REIT for gross proceeds of $33 million and also sold a 50% interest in the JV Property for approximately $12 million. Collectively these properties were sold at 6.6 cap rate.

Year-to-date we sold $72 million of properties generating net cash proceeds of $28 million. These proceeds were used to pay down debt.

Our debt metrics remains consistent with the prior quarter. Our leverage declined slightly to 46.9% from 47.3% in Q2.

Our weighted average phase interest rate remains at 4.2%. Interest coverage ratio and debt to EBITDA ratios remained strong at 2.9 times and 7.8 times respectively and our pool of encumbered assets remains at almost $800 million.

The most significant matter we're dealing with right now is the refinancing of Adelaide Place. We're currently in advance stages with an institutional lender for a 10 year $200 million mortgage.

At today's rate, the all-in coupon will be approximately 3.8%. The loan reflects the 59% loan to value based on an appraisal of $340 million.

The financing will replace the existing $144 million mortgage that has a rate of 4.3% and incremental cash will be used to pay down further debt maturities. The overall change to our IFRS property value was nominal.

This quarter though we had 35% of our Downtown Toronto portfolio appraised and reported a $30 million increase in value. The primary driver was at 10 basis point decrease to the cap rate that we had been using internally for several properties in the portfolio.

Offering this was a decline in our Western Canada portfolio primarily in Edmonton CBD market with the market data we had reflected an increase in the cap rates and a slight decline to market rents. Overall the total portfolio of cap rate decreased two basis points again primarily from Downtown Toronto Looking to the remainder of 2014, we expect Q4 occupancy to remain stable and possible increase and will continue to benefit from rental rate increases captured to date.

However, we will see the impact to lower occupancy in Q3, reflected in our Q4 NOI. As a result, we expect our cash NOI to decrease by approximately $750,000 and are forecasting our fully diluted FFO to be approximately $0.70 per unit for Q4 and $2.86 per unit for the year.

On an AFFO basis, we expect to end the year at $2.51 per unit up $0.04 or 1.6% over the prior year. I would now like to turn the call back to Jane.

Thanks Mario. Now we'll open up the call for questions.

Hi Good afternoon. In regards to the $35 million of capital that you spent that you talked about in the call, can you maybe break that down into, are you spending more on this tenant improvement cost or leasing commission, or was this more of a revenue enhancing CapEx?

And maybe you can also speak about any trends you see and if you need to spend more on leasing costs now as it is a little more competitive.

I guess I will take a shot at that first. Right now we are spending a lot on value enhancement, a bit more on sustainability and also some general stuff that identified on acquisition, but our focus is value enhancement, items that are going to be notable to the tenant and further tenant experience and generate strong and higher rent.

On the TI side, it's interesting. Right now, we aren’t seeing significant higher TIs if I look at the leasing, we did 550 transactions this year and we had four or five that were significant that were partly transformational to the building and if we exclude those, overall our average TI cost is just slightly higher than what we use for our reserves and most of that is really because of the mix we had lower retention rate and so new leasing is more expensive than retention.

So right now we're not seeing a big change in our TIs.

Okay. Ana, you give quite a bit of information on the leasing.

And I didn't really get this if you spoke about it -- maybe talk about where you expect the occupancy to be in 2015. And are there any major vacancies coming that you know of or that you guys are concerned about?

Yeah Mark, we expect to see occupancy improve in the first two quarters. We don’t have a lot of roll-over exposure.

Only $700,000 square feet in Q1 and Q2 and we've done leasing both renewals and new leasing equivalent to like 55% of that exposure. In Q3 however, we do have winners, they are caving their space and so that will reduce our occupancy.

They occupied just under $200,000 square feet and then -- it’s a very low roll over year for us 2.5 million square feet rolling. So we anticipate that leasing volumes will remain strong and will end the year at present levels or slightly up.

Great. And lastly, maybe this is more for Jane.

You guys have been abnormally quiet on the acquisition front. How much of this is tied to the cost of capital?

Or is it just the acquisition environment, the cap rates are low and you're not comfortable buying anything? What would it take to change that for you for Dream to start growing again externally?

You can just seen there haven’t been a lot of things on the market we looked at what's come on for various reasons those buildings haven’t worked for and so it’s a bit of a combination of both. We haven’t seen a lot that works for us in the market has been quite.

I guess we started to see a lot more product will get interested again and will see as we intensify our selling efforts next year what could be deployment capital into other, it's going to be an building so it will be stuff that improves the overall portfolio.

Okay thanks.

Thank you.

Hi, there. I was just hoping we could just focus in a little bit on the Toronto market.

Obviously the suburbs have been a source of weakness for you so far this year. Maybe you can just speak to the demand you're seeing there currently.

And do you expect that the dynamic there would get worse before it gets better?

Hi Mike. I don’t think that dynamics, are worsening and with the improvement U.S.

economy we are seeing more activity in the suburban nodes where there is a higher concentration of the U.S. companies and that makes it hopeful that we will see much stronger demand in those market, particularly in the airport where there is large concentration of American companies, and so we've actually had some good activities this year some success on the road with some paid leases north of -- DB Schenker -- north of 50,000 square feet and we are maintaining occupancy on 427 which are our biggest notes in the suburbs.

Okay. And one of the dynamics that's talked about a lot is the migration of suburban tenants into the urban core.

Have you any notable examples of that occurring in your portfolio?

No I mean the tenants that we have in the suburbs have essentially moved within the suburbs. So when we look at winners and we look at Aviva, they both stayed suburban tenants.

Within our portfolio we've seen some smaller tenants move from the 427 there is a couple I can think of that one of them actually moved into one of Downtown buildings, but there hasn’t been anyone of size within our portfolio.

Okay. And just lastly, maybe just focusing in on some of the intensification and potential development opportunities that you spoke to, has there been any thought given to how that arrangement would work?

Would you do that development on your balance sheet and just Dream would get a fee for managing the development itself? Or would you entertain a mezz loan structure?

What are your thoughts on that?

No I think for the amounts we're talking about we would do that ourselves. Dream would get a fee for managing the projects that's what the expertise says but right now these aren’t very significant and so we would do it ourselves for now.

I think as it increases we look at different structures may be but for now, I think we would do it ourselves.

Okay. That's it for me.

Thanks very much.

Hi, guys. Quickly, you mentioned that TIs aren't increasing on some of the space that's being renewed.

But in terms of the vacant space, are you seeing an impact in terms of net effective rents for that versus what you're doing on renewals, or can you give any color there?

Yes, the net effective rents generally and that's historic as well as presently tend to be lower on new tenants because of the significant capital investment that they need to make in the space and generally when they're making that investment, as a landlord you participate but then that capital investment has a life beyond that initial tenancy and that's why you tend to see higher rents on the renewals and the leasehold are still in good shape and don't require anywhere that kind of capital investment. And as we have more as we do more new leasing, you're going to see our TI cost increase.

Great. And in terms of where tenants have more power versus less, are you seeing certain aspects of your portfolio that tenants are ultimately in command and if so where are those areas versus where you're seeing sort of competition for space?

It varies, in the suburban markets they're generally are more options for tenants. So there is greater pressure on rental rates and on TIs.

Other markets like in Downtown Toronto right now where there are fewer options for tenants who need immediate space, I still think landlords have a strong position with respect to negotiation.

Okay. And Mario in terms of the timing of the National Energy Board they can see one was the during EBITDA quarter, just from North America NNOI perspective?

At the end of August yes.

Okay. And from the write down on straight line rents is that just a onetime item, so that it's revert back to where it was previously on run rate basis?

It was down a little I think 900 for the quarter, 700 was the onetime write off, the 200 is the burn, so it allows -- it will be less than the normal run rate, but not a factor of the 700.

Okay. We shouldn’t use the current one as a run rate thought.

Okay, we will adjust the seminar if that makes sense and then just finally in terms of the asset sales I know you sold some of the flex industrial properties to Dream Industrial, is there anything else on that front in terms of I know you had mentioned that you're trying to decrease your risk profile through assets sales. Have you made any progress on that front?

Well I think that's certainly going to be the plan for next year. We're going through all our asset strategy planning right now looking at how we view the portfolio.

By this of this year, we will have probably done for the year.

Okay. Thanks guys.

Hi. Good afternoon.

Just on Royalty 1, can you share with us where they decided to go?

Yes, they went to the global mill site. The new development that First Gulf was building.

Okay. And I think you mentioned that one primary impediment was just kind of the renovation work we're not wanting to live through that, was there certain price at which they were willing to stay or whether it's simply purely a function of that?

It was purely a function of that. The renewal was lower cost option.

But they were pretty committed to -- they started communicating to their employees creating a new culture. They couldn’t really get to that in the building in a way that was going to work for them, live through a renovation to -- so they're moving to a building that really they think can swing their culture.

Okay. And then Ana in your remarks you mentioned that you're looking to keep or you're hoping for occupancy to be flat, you have to little bit at the end of next year or should be north of $2.5 million to a feet of leasing, which historically you're going closer to next three, were those comments based on committed occupancy or in place occupancy.

That's in place, I am referring to in place.

Okay. And some of these tenants that you’ve lost, a lot of them have 2016, 2017 lease expiries, so you still have several years to kind of work through it, I am curious as to what brokers are telling their clients these days in terms of waiting to execute on leases or perhaps test the environment, make it better going forward.

What's the motivation today with respect to tenant signing on to leases that may start three to four years down the road?

Well when you're dealing with larger size tenants, they tend to have a much time horizon when they start planning and making real estate decisions because when you look at the core and there is supply but it can be fragmented across buildings. So when you have a large block of contiguous space in a good quality building, you don't want to -- you want to be able to secure that and you don't want to leave a real estate decision of that magnitude to too late.

So certainly those are the kind of tenants when I say 150,000 square feet of touring activity, it's tenants who are of 60,000 plus square feet size who are looking to make a decision in 2017 and so forth.

Okay. And with respect to that tour velocity, is there any rule of thumb that we should think about in terms of executing tour velocity into actual signed leases, any historical trend?

I have mathematically tried to figure that out myself and so I don't know, not when you were talking about the size of Scotia Plaza. We toured DB Schenker once at Airway and we ended up with a deal and it was once 50,000 tenant.

So I don't have a formula unfortunately.

Okay. Last question just on the Government of Canada and Saskatchewan leases that come due in the next on average that come due in the next three to three and half years any update on those discussions?

Actually we're very close to finalizing a very large renewal in Saskatchewan. So I think that we'll be in a position to announce that next quarter.

We had a little bit of downsizing at T&T. We'll get back about 10,000 square feet there, but the larger renewal should be done shortly.

Okay. Great.

Thank you.

You're welcome.

Thanks. The condo market, as we all know, just keeps going and going here.

And I think across the street from Air Miles Tower there's an office building being converted into a condo. Just wondering if there's any properties in the portfolio that you feel are under-developed given the value of the land, and if there's any opportunities that way?

I think we talked about it last quarter Sam about Victor joining us. I think that's the point of going through our whole portfolio and seeing where the opportunities are to do that.

We've talked about these site before but just generally looking to our portfolio to see where we can intensify and there maybe some redevelopment condo opportunities. That's absolutely what we're looking at right now.

Are you looking at potentially assembling more land around existing properties to pursue such a value creation opportunity, or no?

Yes, if that would make sense, so certainly we look at what we've got and where there are opportunities to add on to it, we're actively looking.

And that's what we did when we bought 83 Yonge. It's a very small building and we bought it because it was adjacent to our King and Yonge Street site.

So, there's a couple of other infill pockets that we are looking at within our Downtown Toronto portfolio.

Fantastic. Just onto Scotia Plaza, you mentioned a number of improvement initiatives there.

What would be the aggregate cost of that program at your share?

The aggregate -- we would be spent over a lengthy period of time, but it would be at our share somewhere in the neighborhood of $40 million to $50 million.

And lengthy period of time being five years to 10 years, or three years to five years?

No, three years to five years and really the elevator modernization being a large, that will commence this next year, but it takes over five years to complete that project.

And by that you mean a full replacement of the systems, I guess?

Yes, all the equipment and then interior cab, renovate upgrades as well.

Okay. Mario, you talked about the Q4 guidance, and I may have missed it but did you say the NOI would drop by $750,000?

Yes, and that's effectively the occupancy drop was primarily at the end of the quarter. So we only felt, for example, National Energy Board was that they were going to only felt one month of that.

So it's the ripple effect, while occupancy will be flat or maybe even up a bit the NOI will feel the effect of the lower average occupancy.

And is that 50,000 on a comparable property basis or does that include the impact of the dispositions?

That's everything a run rate from just from the Q3.

I see. Okay.

Thank you.

Well thanks everyone for joining us on Friday afternoon. The Office REIT has a history of being an astute allocator of capital by acquiring and disposing at the right time and at this time in the cycle if we're going to focus on demonstrating that continued track record by astute allocation and recycling and capital in our own portfolio.

I look forward to reporting back in February. Thank you.