Thank you, operator, and good morning everyone. Welcome to the Q3 2020 conference call for Slate Office REIT.

I'm joined this morning by Steve Hodgson, Chief Executive Officer and Michael Sheehan, Chief Financial Officer. 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, which can be found in management's discussion and analysis. You can visit Slate Office REIT's website to access all the REIT's financial disclosure, including our Q3 2020 investor update, which is available now.

I will now hand over the call to Steve Hodgson.

Thank you, Braden and good morning, everyone. We're pleased to report strong third quarter results which reflects the continued stability of our portfolio.

Tenant credit quality is fundamental to our investment strategy, approximately 60% of our income is generated from government and credit rated tenants and we have very little exposure to retail or the energy sector. We continue to have strong conviction in the office sector and believe the potential adverse impact, the work from home experiment could have on office demand is overblown.

We share the view of many Fortune 500 office users that ad hoc interaction with colleagues and an overall sense of community is critical to workplace culture. With 85% of our assets in suburban locations in major markets or urban locations in secondary markets, we are encouraged by the number of tenants returning to offices across our portfolio, especially relative to our peers who have assets in downtown locations within major markets.

Now a few comments on our results. The REIT's industry leading cash rent collections continued in the third quarter.

The REIT has now collected between 96% and 98% of rent and each month since April 2020. We expect to substantially collect the residual rent through short term deferral agreements.

In September and October, the REIT completed C$395.7 million and US$161.1 million of debt refinancing, including our revolving credit facilities and certain term loans, which enhance the REIT's liquidity and address all of 2020 debt maturities and the maturity of 2021 debt maturities. As part of these refinancing, 40% of our asset base was externally appraised which further validates our net asset value.

The REIT also completed a 142,000 square feet of leasing in Q3, comprised of approximately 93,000 square feet of renewals and 50,000 square feet of new lease deals. In 2021, only 5.6% of the portfolio is maturing, which we view as a positive in the current environment.

The REIT finished the quarter with a well-covered payout ratio of 62%. Looking forward, we expect renewal volumes to be strong for the remainder of the year and into 2021 and duly seen will be constrained by the logistics of touring space with COVID related restrictions.

We view these disruptions as short term in nature and expect the occupancy to grow from current levels in 2021. Slate Office REIT has a compelling total return investment opportunity.

We're paying a distribution of over 11% that is well covered with AFFO payout ratio of 62%. We're also trading at an approximately 60% discount to net asset value, providing unit holders with the potential for significant capital appreciation.

We're feeling optimistic about the future of our business. And we look forward to finishing the year on a strong note.

On behalf of the entire Slate Office REIT team we wish you good health and thank you for your continued support. I'll now hand it over for Q&A.

Thanks. Good morning.

Morning.

First questions is just on Office utilization, can you maybe give us an update, and I realized that it is an estimate. But I'm trying to see if there's much of a difference between what you're seeing in Atlantic Canada versus the rest of the markets that you're in?

Yeah, consistent with prior quarter around 30% to 40% across the portfolio, I will caveat that to your point it is difficult to measure. The difference, the Atlantic Canada would be on the higher end of that range, Jonathan, and I would suspect it would actually be higher.

But some of the tenants that we have out there are national tenants that adhere to the guidelines that are driven out of their Toronto office. So we expect, utilization rates will continue to outperform in our portfolio given we're in secondary markets and we're in suburban locations.

Okay. And then just turning to the leasing spreads in the quarter, a little bit lower than in the past, was that just a function of the space that was leased or the market rents sort of step back a bit?

No, I don't think it's indicative of any change in market rents. And just to clarify, so our overall spread was about three and a half percent.

On new deals, we were over 10% and on renewals, we're basically flat. And I think that's, that's consistent with what's going on in the market.

Because you also have to look at the weighted average lease term on our renewals was about 3.5 years, and on new deals was about seven and a half years. And what we're finding is that tenants that are maturing are looking to do short term renewals on an As Is Basis.

And so what we're doing is we're offering short term renewals to tenants at a similar rent to what they were paying before.

Okay, so if we look at 2021, would you expect the same sort of and I know there's not a lot of space rolling, but would you expect the same sort of thing on renewals kind of flattish rents and then some uplifts on any new leasing ado?

Well, I think until like the reason that the shorter-term renewals are happening right now is because of the overall uncertainty in the economic environment and tenants understandably not wanting to make long term commitments. I think when that changes, we'll revert to a more conventional deal structure that includes longer term deals with some inducements.

That'll push rents up to close the gap between in place rents and market rents.

Okay, so maybe for the beginning of the year, similar dynamics and then hopefully as starts to open up in the middle of backup next year more normal environment?

Yeah, I think that's fair.

Okay, thanks, I'll turn it back.

Hi, good morning. Just taking a look at no five and I think you referenced the appraisals for the quarter.

For IFRS purposes, you got appraisals for 16 properties from a $700 million. Can you just maybe elaborate a little bit on those appraisals in terms of cap rates?

And, where the bulk of the properties were, that were underwritten? And sorry, - and how that would maybe compare to pre-COVID valuations?

Yeah, so it all start for Brandon and Mike can jump in. Just to go to context on our IFRS values, and in Q1 of this year, we took a hard look at what the impact of the pandemic would do to our new leasing activity.

And we took a small write down in our IFRS values, reflecting the current leasing environment and our expectation that new leasing would be lower than a typical year. So, and then through the refinancings that we just completed, we had externally appraised about 40% of the investment value of our portfolio.

Those are the assets that are part of the credit facility as well as the assets that we just recently did term financing on. A bulk of the bulk of them are in Atlantic Canada and a number of them in Toronto and, I think the view of the external appraisers was that we appropriately reflected the value based on the amendments we made in Q1.

Okay…

Yeah, and then…

Sorry, go ahead.

No, just to further context or clarity, 11 of those 16 assets that were appraised were in Atlantic Canada. And then the rest as Steve's pointed out have been GTA.

There's one in Chicago and the rest would make up the balance. Correct.

Okay, that's helpful. And then, just one other follow-up for me, I saw you dispose of the small asset in Yellowknife.

Just wondering if any other dispositions are targeted or any anything else you would deem non poor to dispose of going forward? Or you feel that the bulk of the dispositions have been already completed?

Well, both I mean, yeah, absolutely. The bulk of dispositions have already been completed.

The property in Yellowknife was a retail property with a Tim Hortons and Mark's that we recently renewed both tenants on a long-term basis. So both it was not strategic to the Office REIT long term.

And, as an opportunistic time to sell, given the leasing we had done there, we sold that property at an 8% - roughly 8% cap rate, $400 a foot and generated a 16% IRR. So we're quite pleased with that outcome.

There are a couple other non-office assets within our portfolio that are pretty de minimis to overall value. But we'll look to dispose of at the appropriate time.

Thanks. Okay that's helpful, I'll turn it over.

Thanks.

Morning, maybe turning from the disposition to acquisitions, just wanted to see if you've had any update in terms of how investment volumes are looking for you and how active you think you might be over the next six months or so?

Yeah, I think similar to last quarter, we're still seeing a lot of deal activity in the broader pipeline, that Slate asset management is looking at. Most of the volume that we're seeing is outside of Canada.

There are some deals in Canada. And just recently, there's been a few more put on the market that would be comparable to some of our GTA suburban assets.

We have an abundance of liquidity right now. But we think it's still very prudent to preserve cash.

It's difficult to price risk in this environment. There's not a lot of trades happening, both on the VC side, which, speaks to the fundamentals of the assets, and what that looks like from a cash flow perspective going forward.

And then, cap rates, I think, will be more resilient, because interest rate environment is still low. But it's still early days.

And, our view on this is still consistent with last quarter.

Okay, got you. And then any update at all on '20 statement?

None, I mean, so we're fortunate in Q2 having completed the deal with the Government of Canada to bring the committed occupancy to 52%. The balance of the building is one floor 60,000 square foot floor plate, which lends itself to a larger tenant user.

In this currently seen environment, large tenant users are not very active. We think there'll be a buildup of demand for that type of space, once post COVID world and so, we're optimistic that it'll be leased up but our horizon for that is pushed up.

Right. So kind of if you look at occupancy in the near term, kind of we've slid throughout the year here.

Part of it we knew about is there anything in the - on the horizon, any known departures that we should be aware of?

So we saw the bulk of it in Q3 with the vacancies we incurred in Atlantic Canada. I think, and those decisions private tenants predated COVID, I think you'll see in Q4 another small tick down in occupancy, and in 2021 will see it ramp up.

Okay, that's it for me. Thanks.

Good morning, guys. Just a quick follow up on the last point that you made with regards to the ramp up in 2021.

Is that based on contractual sort of leasing that's already been done?

No, not yet. It's based on the pipeline that we're seeing and, the backfill strategy for some of these vacancies that we've known of for quite some time now.

Okay, that makes sense. And with regards to in the quarter, can you clarify the amount, but it seemed like there was some lease termination income in this quarter?

What would that have related to? And is that space under negotiation or what's happened there?

Yeah, so the lease termination income and I'm glad you asked the question, because we did want to clarify, this was related to decisions tenants made prior to COVID. And the bulk of it is, is axon.

Okay. And is it 1.3?

There was one comment of 400,000, one was 1.3 million in the same property figures, sequential versus the year over year, and I wasn't sure what the actual number was.

Yeah. So one 1.3 is the total for the quarter.

That other number you referred to is the non-axon, which is just forward vacancies but again, to Steve's point, decisions that were made pre COVID.

Okay, no, that's perfect. And then, lastly, with regards to capital allocation,

How are you thinking about CapEx that you've discussed, I guess acquisitions and you'll be patient and see where things go on that front? But is there an opportunity to spend less?

I mean, if you're doing these leases at sort of that prior rent levels, are you putting any CapEx into the deals? Are they non-CapEx leases at this point?

No, and to clarify on those on those renewals that are happening at similar rents to prior, I think that's the short-term dynamic, because there is no CapEx in those deals. When tenants are looking to commit longer term, there will be CapEx and there will be increases in rent.

Overall, our capital allocation strategy, we've, been very prudent, really, the bulk of the CapEx that we're spending in our portfolio is one on maritime center, two on a parking garage, three development in in Toronto, that's the life safety project. And the third is really just leasing capital.

And, 2021, we do intend to ramp up our occupancy. So there'll be leasing costs, in parallel with that.

Right. And I take it no sense of doing unit buybacks at this point even with the liquidity that you have available?

Yeah, we have the ability to do so. We believe that there's still some uncertainty in the overall economic climate.

And the most prudent capital allocation for us and our Board agrees is to maintain a cash position.

Sure, that makes sense. Thanks, guys.

Thank you, and good morning. One quick question for me, just in terms of the same property and why, what would be the contribution from the Chicago properties in U.S.

if possible and what are your views generally speaking on the Chicago market for today? Thank you.

Yeah, so the Chicago properties are usually about 15% of our total contribution on a somewhat run rate basis. So you can kind of attribute it to that in terms of same property, and it's a tough question to answer, exactly.

We'd have to dig into that Fred. But what I can say is that the occupancy of both buildings we bought at 84% occupied, 120 South Parks now at 87% occupancy and 120 cells that are there 90% occupancy and both have higher weighted average rents than they did when we acquired them.

So if that's kind of the nature of the question, now we've seen an increase in same property NOI from those two properties.

Okay, so you did see an increase in same probability?

I can't speak to the exact, the numbers for this quarter. But I'll just try to give you an overall trend of where we bought them to what we've achieved today.

Okay, okay, great. And what will be your expectations from the next six, 12 months?

Well, so at 120 sell-for-sell, last quarter we had completed a 40,000 square foot new deal that has not yet started paying rent. So, I think overall the U.S.

portfolio will see positive same property NOI growth.

That's great. Thank you.

Thanks.

Thank you, everyone for joining the Q3 2020 conference call for Slate Office REIT. Have a great day.