Thank you, operator, and good morning, everyone. Welcome to the Q1, 2022 conference call for Slate Office REIT.

I am joined this morning by Steve Hodgson, Chief Executive Officer; Lindsay Stiles, Chief Operating Officer; and Charles Peach, 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, 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 2022 Investor Update, which is available now. I will now hand over the call to Steve for opening remarks.

Thank you, Paul and good morning everyone. This quarter marked the closing of a transformative acquisition for Slate Office REIT that is emblematic of our growth strategy going forward.

We are seeing that well operated, well located and high quality real estate remains in demand, particularly among tenants who recognize the importance of the office and fostering innovation, collaboration and culture. We're well positioned to capitalize on investment opportunities coming out of the pandemic that will further align our portfolio with these tenants, assets and markets and enable us to continue providing stable long-term income to unitholders.

I'm very proud of the team's performance this quarter. And I will now hand it over to Charles to walk through some of the highlights.

Thank you, Steve. In the first quarter of 2022, the REIT continued to pay an industry leading distribution yield of 8%, which is well covered with an AFFO payout ratio of 84%.

The Irish portfolio and team have been on boarded and we look forward to the opportunities their pipeline provides. Our occupancy rates have improved to 84.7% and WALT to 5.6 years, asset values and units and issue have increased, and our property and financing sources have widened over the quarter.

The Irish transaction demonstrates the team's ability to apply Slate Office REIT's capital to under rented assets purchased below replacement cost with credit worthy tenants. Cash flows from these assets will diversify and support the REITs distributions while providing opportunities to grow the value of the properties and NAV for the REIT.

We are very aware of the ESG responsibilities we at property investors and operators have to people, our partners and the environment. These are outlined in our recently updated ESG policy.

I will now hand over for questions

Thanks, operator. Good morning, Steve.

Good morning, Charles and thanks for the update. My first question timely on the leasing front for West Mall, can you give any color on what led to that downsizing?

Has it like and - are you seeing such similar trends play out with any other leases in your portfolio over the summer?

Sairam good morning, so I guess there is some background here, you know, the tenant occupied all of 195, The West Mall, as well as some space at 191, The West Mall. So we've renewed them in place at 191, The West Mall for 10 years and as part of that transaction, there'll be significantly updating the space at 191.

And as part of that, you know, in order to build up the space at 191, there'll be over holding in 195 from now until the end of September. Currently occupying about half the building and then giving it back in tranches thereafter while covering operating costs and realty taxes.

So there's really a business decision for them, they didn't take space anywhere else, we maintain them in the portfolio in the footprint that they require for their business going forward.

Yes, and the other thing I would add size, as you know, they continue to be a strong utilizer in the other properties, we have them at where their nuclear division exists. And they own an adjacent research facility to - our buildings there.

They still have a lot of term there. And we believe that they continue to consolidate people there as well, because they view that as a strategic location and in location, they've got significant investment in.

Thanks for the color Steve, Lindsay. So just on the [indiscernible], because obviously, as the leasing pressure you're seeing and that side of the market can give some color on the kind of traffic you're seeing there and your ability to kind of release the space that's going to be taken by September?

Yes absolutely so you know, activity in - since the GTA portfolio increased significantly quarter-over-quarter, deal volumes - sorry we increased 20%, quarter-over-quarter in terms of deals done in the GTA, because the Toronto market was so much slower to reopen than all of the other markets we operate in. That pent up demand really started to come on stream sort of end last year and has been really strong carrying into this year.

We've got a very unique location, excellent proximity to the Highway 427, the airport, the great rooftop signage, the space is in excellent condition, easily multi-tenant if that's necessary. You know and frankly, the tenant was paying below market rent.

So this provides us with an opportunity to get someone new in the door, you know, and increase our rental rate going forward.

Thanks for the color Lindsay and maybe just switching gears to the U.S. market we saw a bit of occupancy drop this quarter over there, can you give some color on that one?

That would have just been normal course we - there were a couple of known vacates. And so that would just be that coming off stream.

What I would say about the Chicago market is similar to Toronto. It was a little bit slower to recover, but actually, just last week, there was a city wide events held downtown called - Chicago returns, created a ton of buzz in the market was providing.

You know really great exciting events downtown and drawing people and businesses back into the office across the portfolio as a whole our utilization rate, so actual number of people in the properties increased 12%, quarter-over-quarter. And we've seen really a lot of increased tour activity in Chicago.

It's still a story of, you know, amenities and quality space that's ready to go. We're really focused on making sure we have that product available so we can capitalize on the activity in the market going forward

Thanks Lindsay and before I turn it back, my last question probably be on debt maturities coming up this year. Can you give us any color on, you know, the exposure to variable trades and how you are seeing these maturities play out?

Absolutely I mean, what we do, even though we're talking about debt maturities come in the later part of this year, we have already this year, refinanced some of our debt, given that the bridge loan, which we took on to purchase the Irish portfolio has already been refinanced out to five years. So we've shown within that our ability, not only to do effective refinancing, but at the same time to widen the universe of finances, financing available to us.

We are very aware of the financing to come in the fourth quarter later this year. And we work on both that and at the same time in looking at our revolver as well, which is due to come up in maturity next year as well.

So it's the front of our mind, but I can't say anything more on detail than that.

Thanks Charles I'll join back.

Thanks Sairam.

Good morning, folks. Can you talk about the operating cost structure a bit?

Especially where and if you're seeing inflation hit the cost structure?

Yes, so inflation is one of the key focuses that we have at the moment. And in some ways it's difficult to measure, but we're keen to do so.

First of which is, the majority of our leases and net lease. So that provides an element of protection against rising costs.

We do not have significant developments underway currently, we finished one recently within Ireland, but that was on a fixed price contract which we put in specifically to prevent against inflation - pressure, as that continued. So we have an element of insulation there.

One of the things that we are noticing as well is having some vacancy in the portfolio allows us to compete well, for those looking for space, who currently might have thought of some elements of development space, but at the moment, that development could be either more expensive or taking longer to complete. So in some way, we may have a following wins there.

At the same time, one of the key metrics that we think of, and this is aided from an inflationary perspective, is we buy assets below rebuild cost. And what we see at the moment is we see the rebuild cost as well as the rebuild time extending out and increasing.

As such that metric will be increasingly protected by those - pressures that we see at the moment. Last of all I think is, we can think about our portfolio, but we also think constantly about the credit worthiness of our tenants themselves.

And one of the things that we look across our tenants is the sensitivity of those tenants to those pressures. And that's one thing that is a sort of evolving monitoring that we're doing at the moment.

Okay, thanks. And on the space that's vacant do you anticipate significant or any or basically much capital to renew it or bring it up to a standard that is equivalent to the market?

I would say - normal course Scott, the space you're referring to the space that just is coming back to us from on The West Mall. As Lindsay said, it's in very good condition.

The building's in very good condition. I think there's, some things, the wall systems are demountable wall systems so can be moved around to suit tenants.

There's, some things we'll probably do from a model suite perspective, and refreshing the lobby. But you know, those - are in an aim to reposition the buildings so that we can grow market rent, as Lindsay mentioned, the tenant was paying about $16.50 market is $19 to $20.

That's great. Thanks, Steve I'll turn it over.

Thanks.

Thanks good morning, everybody. Maybe just flipping back to The West Mall?

What do you expect sort of the NOI impact to be of the vacancy there over the course of 2022?

Yes I mean, I mean you can kind of derive it with the net rent that I just provided in the square footage that we provided in the in the MD&A. Because, you know, instead of doing [indiscernible] call, there's a section of the MD&A, where we wrote out the different tranches and when things are coming back.

Fair enough. Yes I guess rent that makes it a little bit easier.

Any other known vacancies you guys or I guess there's, some material known vacancies, you guys - have coming down the pipe at the moment?

There's just one in New Brunswick, we had a - we have one floor coming back at same place, but it's - in pretty good condition. And we've been actively marketing it since we knew it was coming back.

So that's at least six months now. So, that's not a concern and certainly you know just a….

Yes, I would say that's just kind of normal course slippage, Lorne like, I think the theme is what we're seeing, and what I know our office peers are seeing is that there's a lot of momentum right now and where it started in Atlantic Canada for us. We're seeing it in Chicago, downtown and we're seeing in Toronto now as well.

So, we've done some deals subsequent to the quarter ends that are favorable and new deals. We expect occupancy even with the SNC vacate and The West Mall.

We expect occupancy to be at or better where we are, where we're at now, by the end of the year.

Within the Irish portfolio, it's an example of what has happened within that though that's a relatively new addition. Even within the period ownership by Slate Office REIT, what we've seen as we've seen lessing of the development that I mentioned beforehand was led to a life science tenant.

And we should see the benefits of that coming through rental of that in the second quarter. And at the same time, we have seen interest in some elements of the other vacancy within the portfolio.

So that market continues to show interest in the vacancy that we have, which we don't have that.

Charles you stole my next question. Okay maybe - I'll switch gears any update on the disposition front I think there was some talk about that last quarter?

Yes, and we're still in the same. We're still planning the $100 million of dispositions that we had announced alongside the Ireland announcement.

And working through that and expect we'll have some updates in the next few months.

Okay, great. And then one last quick one, I guess maybe for Charles, how much NOI do you guys have coming on for that Irish development?

What are you talking about additional NOI?

Yes, yes from the development that you guys just completed?

That I think in absolute figure terms is around the €800,000, the amount is coming through from that particular one. I mean that's I think, is an example of having a good credit worthy tenant within the portfolio.

In a sector we're keen on, with an asset on a park where we earn other assets and we know there is interest as well and having the ability to increase revenue from those in-place tenants. And one of the things I would mention about that portfolio is throughout the pandemic, the lowest and worst we got to was a 96% collection rate.

And that's looking at things on a monthly basis. That we've got high collections, high credit quality tenants, and increasing the rental flow from those is something we're keen to do when we come across the opportunities to do so.

Perfect. Thank you guys so much for all the color.

I'll turn it back.

Thanks.

Hi, good morning, everyone. I just want to touch quickly on the floating rate debt that you guys have it looks like it's gone up quarter-over-quarter.

And I'm just wondering, you know what your philosophy is on that probably a bit too expensive to fix now, but how are you viewing that position and managing throughout a rising interest rate cycle?

Thank you, Jenny. If I look at our floating rate debt and increase over the period that effectively comes, the vast majority of that is from the debt that was taken on to the purchase of the Irish portfolio.

So it's euro denominated floating rate debt, there is an element of protection in that euro - in that that floats over three months your LIBOR and three months your LIBOR when I looked a couple of days ago. I think it was less 42 basis points, which is higher than when it was when it has been historically around the less 56 less 58 basis points.

So there'll be some direction to travel. Before that comes to a point at which there is a cost to us.

I think you're correct in the view that it is a focus for us as well. We have insulated the vast majority of our Canadian dollar in U.S.

dollar floating rate debt from rate rise, and we will be looking to do so, on our euro debt when the time is appropriate.

Okay so, on that note, with the Irish portfolio, I think there is a disclosure the loan to value on that just - a north of 50% or so. Is there any more room within the Irish portfolio to secure additional debt at a more advantageous interest rates than on Canadian property?

There could, I think one of the things that we are very cognizant of is where the absolute loan to value is on the portfolio that sits as at the end of the quarter at 60 spot one. I would say that does include within a $14 million of restricted cash.

And we would expect to see at least $10 million that become unrestricted. So that would help us from a metrics perspective.

But at the same time when it looks to taking on further debt, when we do so, we do so very much through the lens of the entire portfolio itself. I'd say that the - universe of providers of financing on the Irish portfolio is not as great as we find within the Canadian and U.S.

markets. But that is a market that continues to expand and it's one we've been involved in for the last eight years and continue to work on.

Right, so I guess conventionally what sort of a max loan to value in Ireland for you know, the average property?

But coming from a REIT perspective, the REIT rules in Ireland limit loan to value to 50% however, there aren't that many REITs left within Ireland itself. People do look for further leverage that comes with an additional cost to it.

Right.

And there are certain taxation limits within that as well so yes.

Okay [indiscernible].

I would say - in our experience, Jenny 50% to 55% is convention now.

Okay, okay, before it gets more expensive. Okay, that's helpful.

Thank you. And then lastly, from me, there was a press release from an external party G2S2, who had mentioned that they've accumulated 10% of Slate Office stock.

I'm wondering if this is a party that you've had any dialogue with and if there's any, if you have any sense of, you know where the interest in this position might be recognizing of course you can speak on their behalf?

Yes no, for sure, happy to speak to that. I mean I think, they're value orientated investor.

I think they recognize that there's a, disconnect between where we're trading and where our NAV is, and that there's value to be created there. And while collecting a stable, compelling distribution, so you know, and we look forward to engaging with them and other shareholders that are looking for ways to create value.

Have you engaged with them at all yet?

We plan to.

Okay. Do you know when they started…?

Schedule to thank you.

Okay, great. Do you have a sense of when they started accumulating this position?

I'm not going to speak on their behalf on that point, Jenny. I don't know.

Okay, that's fair. Thank you very much.

I'll turn it back.

Just following up on the refinancing or I guess, terming out of the bridge loan? Did you maintain a variable rate on that and if not, what were the terms on a five-year fixed?

We maintained a floating rate on that. The providers - the bank providers are financing for the assets that we have at the moment.

We historically have financed these assets with AIB, AIB were part of the bridge, and they were part of the term facility after that, and they have a good understanding of the assets themselves and the security those assets provide. So we continued with them, the majority of the debt that's available is on a floating rate.

I mean, there are the opportunities for us to turn around and fix that. I imagine that because we've got negative rates at the moment, we'd be looking at doing so with a cat, but that's something for the future.

Okay and could you give us a sense as to what a sort of five-year fixed rate is, at this point in Ireland - very familiar with the market?

I think - for the purposes of that, we'd be looking at something sort of around the north of €3.5, but I would say that's not something that we've looked to source.

Yes not fair enough as well. Okay no, that makes sense.

And then with regards to the new takers of space or this increased velocity that you're seeing on the leasing front, can you speak to whether these are entities that may have been looking for space before the pandemic and put things on hold during the pandemic and are back or they, new users to the market guys looking to upgrade their space and just interested in what the nature of the demand is, at this point? Are on that front by market, but predominantly, maybe in Canada?

They're not. I would say it's a combination of all these things, honestly.

Some people as we've discussed previously, we're completing kind of shorter term renewals earlier on the pandemic. Just wanted to wait and see how this would all play out.

I think a lot of those people are back to the table now. We're seeing a real trend towards five and 10 year lease terms at this point.

And that could be, people who are using space differently and do need more space. People who are looking at more of a hub and spoke type model.

So perhaps wanting locations in different places, but largely operating from the same footprint. And for others, it's a little bit too early to tell, I think a lot of companies, you know, like Google, Scotiabank, they just returned to the office earlier this year.

And so they'll be, wanting bums and seats for a little bit longer before they start making long term decisions. So I think it's all of the above, but the general sentiment is, is very solid.

And as I said, you know, our activity was up 26%, quarter-over-quarter, and then utilization is up 12%, quarter-over-quarter. So, we're really seeing positive momentum from that.

And then I think the balance of the year that will continue.

And I think it's more than just tenants moving from one building to another. There is an element to that Matt, that you hinted at which is, there's a flight to quality.

So in these suburban Toronto markets, for example where we have high quality buildings, we are seeing that benefit. But I think there's also positive absorption happening in this market right now which is the pent up demand for tech and sort of global users that are now seeing through the end of the pandemic and starting to, you know, get space secured.

And are you seeing at this point and again, its early days in terms of the resumption in our slow Toronto? But are you seeing a change in what tenants are asking for I think you hinted at it, but maybe - it's not fully baked at this point in terms of what they are looking for, if they even know.

But yes, also maybe just space per employee as well, any trends on that front or is it just kind of status quo, same as what we we're?

Yes I think there's a, it's a bit of a mixed bag so there's some that are trying out the hybrid model or the hoteling model. And there's, many that are just continuing on as they were before.

And but again, our focus for the REIT is we've always been a stable distribution. And we've always had a high credit quality of tenants.

We want to continue that and augment that. And so, our strategy and buying newer buildings, buying buildings with - even better credit quality tenants, but still staying true to our discounts replacement cost.

It's all exemplified in what we're doing in Ireland, and what we're planning to do elsewhere as well. Because we think those are the themes that will maintain what we've been able to achieve to-date, and into the future.

And then last one from me, I mean, SNC, I think was a bit of a unique situation, but is there a stickiness to some of these government tendencies? And also, just I mean, we believe they will go back to the office in some way, shape or form, but how are they thinking about their footprints in your portfolio at this point?

Yes, I agree they're absolutely sticky. You know, they've been one of the, most impacted groups by the pandemic, they're just not set up to have their staff work from home.

They don't have laptops and cell phones and can easily plug in like - most of the rest of us, you know, just their systems are antiquated. It's not something they've invested in.

We have seen them at government, you know, on a wall across the country start to return. I'd say we're probably they're probably close to kind of 50% utilization at this point.

And we expect the next couple of tranches in Q2 and Q3. So by and large by the end of Q3, they should be, you know, back to what they were early 2019, early 2020.

So yes, I think I think they'll continue to use space likely in the same way. I don't expect that - reimagining their space is how they'll want to allocate their funds.

But you know, we'll see what happens.

And I guess last, last one, any incremental kind of costs associated with bringing back the people that were at the front desk, et cetera that that's all recoverable. Is it not releasing so we shouldn't expect any real change in results of this reopening?

That's right, that's right, we see recoverable.

Okay perfect, thanks guys.

Thanks Matt.

Hello, just based on your comments on occupancy, it sounds like occupancy could be stable to slightly up for the year when you bake in some leasing that you're working on and offset by some of the known vacancies coming is that a fair characterization of where occupancy can turn by the end of the year?

Yes on a sort of existing portfolio basis assuming no disposition or acquisition, yes.

And what would that translate into from a like same-property NOI growth perspective is there a range that you think you could achieve this year?

Well as you know, we don't provide guidance on that. But it will be a mix of rental growth, rental rate growth, rather and occupancy.

So yes, it's a little bit more complicated than that. But I suspect that, you know, our goal is to continue to show accretion as well from the Irish assets.

Because, as you know, we closed that deal on February 7, so first quarter was not a full quarter of results so you know, through Q2, and Q3, we'll see that that benefit and then of course, the benefits from rental growth in the rest of the portfolio.

And in terms of the $100 million in asset sales, I guess you know, since you made that sort of announcement on the plan, the bond market has changed quite dramatically. Do you think that that has any impact on what you think you could achieve on pricing at this point?

How should we thinking about valuation in the private market at the moment?

So it's a good question. And on that like, there hasn't been enough evidence to suggest that the change in interest rates or bonds has impacted pricing at all yet.

But these are unique deals that we're working on. And we expect to transact at a sort of in-place cap rates in the low to mid sixes.

And when we're buying in Ireland or elsewhere, north of seven, you know, with assets that better fit our long-term strategy. We're quite pleased with that.

Right and then, I guess my last question, you know, leverage is obviously ticked up on the back of the acquisition, where - we should we think about leverage trending or where would you like to get through?

Yes I mean, the plan was to bring leverage up to execute on the on the Irish transaction, and then subsequently bring it down with these assets sales. So we expect to be back to where we were pre-transaction, which was in the high 50s.

Okay, I'll turn back, thanks.

Thanks, I had a question on the financing structure, particularly the Irish debt, which Charles answered very comprehensively. So I'll turn it back.

Thanks.

Thank you, everyone for joining the Q1, 2022 conference call for Slate Office REIT. Have a great day.