Thank you, operator, and good morning, everyone. Welcome to the Fourth Quarter 2019 Conference Call for Slate Office REIT.

I'm joined this morning by Scott Antoniak, Chief Executive Officer; Michael Sheehan, Chief Financial Officer; and Steve Hodgson, Chief Operating Officer. Before getting started, I'd like to remind participants that our discussion today may contain forward-looking statements, and therefore we ask you to familiarize yourself with the disclaimers regarding forward-looking statements as well as non-IFRS financial 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 Q4 2019 investor update, which is available now. I will now hand over the call to Scott Antoniak.

Thank you, Brandon. Good morning, everyone, and thank you for joining the call.

Slate Office REIT remains focused on owning and operating a portfolio of well-located quality office assets that deliver meaningful total returns to unitholders through an attractive monthly yield and continued growth in net asset value. Throughout 2019, the REIT completed a number of initiatives that enhance our operating performance and positioned us for growth both organically and through acquisitions.

These initiatives will allow the REIT to build value for unitholders in 2020 and beyond. This morning, I would like to discuss the measures that we believe will continue to drive value creation for the REIT.

First, the operating performance inside office REIT continues to be strong. During the fourth quarter the team completed over 190,000 square feet of leasing.

On a year-to-date basis, we completed 719,226 square feet of leasing at an attractive leasing spreads of 18.8%, highlighting strong demand across our core leasing markets. As a result of this strong leasing occupancy in the quarter increased 80 basis points to 87.1% with in-place rents across the portfolio at a 12% discount to market on average the REIT is well positioned to generate organic growth going forward.

The REIT's IFRS net asset value increased to $8.99 per unit at December 31, 2019 an increase the $0.45 or 5.3% year over year. When combined with monthly distribution, the REIT has provided unitholders with an attractive total return of 10.7% in 2019.

During 2019 the REIT completed five transactions as part of our previously announced capital recycling program. These transactions generated $171 million of net proceeds which enhanced the REIT's liquidity and ability to acquire new assets, reinvest in our existing portfolio and reduce leverage.

These transactions along with the disposition of 4211 Young Street, were completed an average levered internal rate of return in excess of 22% and at a $55 million premiums acquisition costs improving our ability to generate compelling returns for unitholders. At the beginning of 2019, we set out to reduce the overall loan to value ratio of the REIT.

During the year the REIT's loan to value ratio declined by 440 basis points to 58.7%. We expect this trend to continue to actually through debt amortization and value creation within the portfolio until we reach our target ratio 55%.

With the completion of the capital recycling program, and it strengthens our sheet we believe the REIT is well positioned for growth as we head into 2020. The REIT has a significant acquisition pipeline in the United States and Canada.

And we expect to deploy capital into new opportunities that will strengthen the quality of the REIT's portfolio and create incremental value for unit holders. Lastly, the REIT has received board approval further unit repurchases of up to $10 million under our normal course of issue.

We believe that allocating a portion of our available liquidity to repurchase units will increase unit holder value and that such repurchases constitute a prudent use of the REIT's resources. In summary we continue to believe that Slate Office REIT represents a compelling total return investment opportunity for unit holders.

With strong organic growth driven by leasing and market [indiscernible] upside, consistent operating performance and a strengthened balance sheet, Slate Office REIT is very well positioned for the future. In addition to our existing portfolio of quality assets, we have a robust pipeline of accretive acquisition opportunities and available ability to acquire new assets and will continue to drive value creation for unit holders.

There needs to be no better time to invest in Slate Office REIT and we remain excited for our future. Look forward to continuing to execute on our strategy and we thank you for your continued support.

I'll now open the call for questions.

I guess just starting up with your commentary at the end in terms of value related to the stock price relative to I guess your book value is even approved to execute on the NCIB again but also would Slate asset management plan consider increasing its investment in stock given the deep value trading at, at this trading price?

No plans to do that at the present time Brad. We're happy with the investments that we have in Slate Office REIT.

Okay. In terms of organic growth expectations this year, what are the expectations for the REIT?

What would that, what would be the bigger driver that in terms of growth this year?

Yes. So, if you look at our weighted average lease term, it's approximately 5.6 years.

So that basically means you're turning year-over-year portfolio, but once every year. We believe that our rents are below 12% discounted to markets currently.

So that would give you an increase year-over-year 1.5% to 2% organically. Furthermore, with the initiatives we've completed in 2019, we have available liquidity to purchase up to 150 million in assets this year.

So that will further contribute to the growth in 2020 and beyond.

I guess for this year, what's your expectation for occupancy within the forecast if you're assuming let's say 1.5% to 2%?

Hey, Brad, Steve, so we increased occupancy by 80 basis points in Q4. We've completed a significant amount of leasing to date in 2020.

Our anticipation of occupancy by year-end is approaching 90%.

Not including expected vacancies?

Correct. Just to comment quickly, because I'm sure the question will come up on the expected vacancies so 129,000 square feet coming back in Q2 of 2020 in Atlantic Canada.

Atlantic Canada we've made significant progress on leasing. 70% of the leasing we did in Q4, '19 was in the Atlantic region.

Most notably, we completed a 15,000 square foot deal at Maritime Center with the province of Nova Scotia and we did a new deal in St. John's Newfoundland at Fortis place for 13,000 square feet.

In addition, the vacancies is coming back in St. John's is well below market rents.

Okay. So when we look at the expectations for occupancy trending towards 9% by the end of the year, what's your view of what that occupancy would be in Atlantic Canada and where where's the growth really coming from is that outside of Atlantic Canada.

The growth would be coming from Atlantic Canada and the lease up of some of our vacancy in Toronto, including 2599 Speakman where subsequent to quarter-end we completed a 40,000 square foot new deal with PWGFC to bring that building to 50% committed occupancy.

And finally, just leasing spread expectations for this year. I think in the MD&A highlighted that rents are well below, the inplacements are well below estimated market rent.

So where do you see that ending up this year?

Yeah, it's difficult to predict because spreads that we do are both renewals that may not be in the year for the year and renewables in the year of course too. So it really depend on any that leasing that we do in advance of expiry.

But as Mike noted our portfolio is still 12% below market rent. So we expect not necessarily every quarter to achieve 13.4 that we achieved this quarter, but somewhere in that range.

Okay. Great.

Thank you.

Thanks. Good morning.

Just following it up on Brad's last question there. So the 24% mark to market.

And I'm sure that's a sticker shock to many of the tenants like would you expect to incur turnover, tenant turnover to get to those market rents?

Apologies. The 20 can you clarify with the 24% refers to?

Page 19 of the MD&A says the in place rent of the 2020 maturities is approximately 24% below market rent.

Right. I don't think we anticipate anything.

That's in our forecast we've made assumptions around tenants that will be vacating and tenants that have a high renewal probability. So that's all embedded in the weighted average calculation that we've done.

So the 20 -- so you think you can get 24% on the 8% returns this year?

Yes.

Okay. And generally speaking, how, like how do you guys think about that, like pushing as much market rent as you can versus obviously some tenants will move?

Yeah, we generally don't lose a tenant over deal structure. It's primarily because of other objectives that the tenant has such as in St.

John's where Exxon elected to own its own real estate. So I would say that that we push is as far as the market allows us to.

Okay.

Strategy, right, Jonathan we're actually buying assets at a low cost base that has that relationship between market rents and in place rent. That's an important part of every single thing that we do so that's why we've seen that consistently over a kind of our five year period and we expect more of that to continue as really kind of our bread and butter on the leasing side of acquisition, right, like to buy buildings and have that dynamic in place.

Yeah, I know I get those just 20% to 25%. A big number and I'd expect to, not all tenants would just take that 25% increase.

It's skewed by a couple of larger deals in Atlantic Canada, where you'd have say a government tenant rolling over at a rent that was set 10 or 15 years ago. And they're pretty, they're already the denominator on that calculation is not a large number.

We're not talking 20 net deals, we're talking $10 net deals. So, the increase on a nominal dollar basis is less.

Okay, fair enough. Turning to the acquisitions, I think you said in the MD&A, you guys are underwriting about $3 billion worth of deals right now.

Is that, so US I don't know, would that go, like all across here Arizona and Texas and in states like that?

It could Jonathan, would be the short answer, and the longer answer, I mean, southeast, specifically, we spent a lot of time there over the last 12 months. We continue to like Chicago, we think the experiences out there is very good, that million square feet bought on the pieces where it was under occupied and has been borne out with 84% acquisition is now pushing 90% on an occupancy basis.

This was some more leasing, to go there. So we really continue to like Chicago and the other markets will be in southeast.

I think, as I said, in a letter Florida, specifically, from a tax perspective, through the sense of this climate actually doesn't matter, cost of living, there's 900 people a day, immigrating into Florida, either from other parts of the US or around the world. So that's a strong growth market we think very positive demographics like more.

So, that's where we spent the bulk of our time, but other markets where we can find those kinds of demographics and dynamics we look at as well.

Okay. And then how do you look at accretion on acquisition, because the cost of capital is, we don't have a very favorable cost of equity right now.

How do you think of that?

We have existing liquidity to purchase up to 150 million assets currently. So we'd be able to do that without accessing the markets.

And so we'd be looking to do that and in terms of capital allocation questions, we're always looking to whether we reinvest in our current portfolio of assets, which we've done in the past and generate outsized returns by doing versus acquiring new or in this situation right now is potentially being active on our NCIB.

And I add Johnson, I think the simple way that we are looking at this now to a certain extent, as you know, we disclosed the 4211 to a user at a sub 4% cap rate, a lot of that $3 billion pipeline that we're currently underwriting and looking at in these markets in the US. The cap rates would be, we start with a 7.

So that's a pretty good or we would take and we have a similar building quality, tenant credit profile, lease term, et cetera, to what we have now with that upside that we can do look forward and that competitive cost base. So I think that's a pretty good trade and part of our job is to be opportunistic green owners and look around and find these deals so we can don't trade out of it full value plus into new opportunities where we can over the longer term will do that.

Good morning. Just turning back to the questions regarding the acquisitions.

Are you looking at more kind of one-off acquisitions? What you did in Chicago?

Are you looking more at portfolios?

We will evaluate both types of opportunities Chris in both markets, right and again, it's never been that kind of exiting Canada, if you will, for the US. So we continue to look here and in markets in the US for either individual assets, portfolio asset opportunities.

And then within Canada, I just looking at GTA or are there other markets that you're considering?

So we're looking at all markets all the time we think, as with the 540 to 11 I think the GTA is obviously in high demand right now and that's impacted on the pricing. But yeah, we look at all markets across Canada and the United States.

So just maybe where in Canada right now, are you seeing an opportunity that's kind of fits your profile?

It would, be GTA potentially Ottawa, we looked in Montreal. That's where we're happy with our existing asset base in Atlantic Canada.

We think there's great value in Calgary but not necessarily for a vehicle with the structure that pays on a monthly distribution, but we think the long term plays there's volume there wouldn't be for the reason. So I think probably Ontario and maybe Montreal would be the simple answer.

Okay, great. And then with respect to your leverage come down a bit, the 35% being your kind of midterm target.

How if you executed that 150 of liquidity, where would you see leverage going or where are you comfortable taking it in the near term to get these transactions over line?

As Mike said, Chris, and I think -- first of all, we're committed to the 55% number of goal for Slate Office REIT. I think we're confident that we can execute on the acquisitions that we've outlined and continue that LTV trajectory in 2020.

We have available pretty decent liquidity to do up to $250 million worth of acquisitions. We think we can see that driving towards that 55% number.

So there's 150 to 250 basis points of just natural amortization that fits down on an annual basis. So it comes down that way.

And we think there are a number of value creating initiatives within the existing portfolio via Maritime Center in Chicago such that haven't been fully realized yet. So the denominator of the overall portfolio we still see will be increasing as we get closer to completion on Maritime Center and finish up leasing in Chicago.

So we think there's a natural downward trend in it. And we are confident that we can do both.

Okay, great. And then with respect to 2599.

You mentioned the lease that got signed subsequent to year-end. What about traffic outside of that?

How is just that, overall lease up going now that this one's been signed?

Yeah, so the remaining vacancy is 60,000 square feet on the second floor of that building. tour traffic has been strong, particularly as recent.

And I think having completed some lease deals with that building, make it more attractive to tenants.

Okay. Thanks.

I'll turn it back.

Hi, good morning, everyone.

Good morning.

Maybe just on the capital allocation perspective, how are you guys thinking about balancing that external growth through acquisitions that you've talked about so far on the call versus obviously the significant discount between unit pricing your IFRS book value?

Yeah, I mean, we've completed a number of initiatives through 2019 that provide us with liquidity to go and acquire new assets and we want to grow the REIT to your point there is a discount between our NAV and trading price and that's why we have the approval from the board to go and be active on the NCIB. Our investment in our current portfolio also would likely not be dissimilar to what it has done in the past.

Through doing that we've been able to generate outsized returns for unit holders, and so we'll continue to do that in the future.

Okay. I guess there's just a question being that presumably $1 spend on an acquisition is being done in and around fair value versus your unit price at a significant discount to the fair value?

Yes.

Exactly. Again, the intention here is to grow the REIT.

So, we're obviously aware of the discount and again, we will be active on the NCIB. But longer and midterm we do like to see the REIT growing.

Okay. If you can just remind us again, through the 4211 scale, how does the 63 million growth proceeds, what was the net amount that would have been applied to debt repayment?

Approximately $20 million for the REIT or 75% interest.

Okay. And then just last question for me, Steve, I think you referenced it earlier in the call just in terms of the leasing in Atlantic Canada.

Can you just provide an update on I guess the two, I guess more significant spaces the Irving Oil and I guess the Imperial Oil coming up?

Yes, so Irving Oil and St. John, New Brunswick.

We have completed a 6000 square foot lease there. We have some significant prospects.

One that is in the sort of 30,000 to 40,000 square foot range, which would be a large tenant for that market. So, things are actually going quite well and things are New Brunswick and the pipeline gets approved that'll be another catalyst for that market.

In Newfoundland, as I mentioned, we completed a new lease that Fortis Place for 13,000 square feet, which essentially stabilizes that building from an occupancy perspective. The two larger vacancies that we're going to experience have requested overhold so we probably will not see them vacate until the end of Q2.

And we're actively touring that space and prospecting.

Okay. How do the, I guess proposed rent compared to be end place of the previous rents and, what would kind of TI on a per square foot basis be?

So Exxon is paying, somewhere between 5% and 15% below market rents and CN and LPB that TD place. They're on a gross rent structure.

And there's about 45% below, where we see market rents even in today's market in St. John’s.

So, we do see some significant upside on the rent rate growth. With respect to, sorry what was your other question?

Just in terms of the leasing costs.

The leasing costs will be highly dependent on what the tenant is looking for from an existing finished perspective. Both these spaces are built out with perimeter offices, which we do find that a lot of these engineering or exploration companies are looking for.

So it's really dependent but I would suggest that, TI packages for five year deals would be in the $20 per foot range and for 10 year deal $40 to $50.

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

Thank you.

Good morning everyone. Scott just wanted to boil down the comments you made on a $3 billion of potential acquisitions.

First, could you talk to us about the geographic mix between Canadian and US assets in that pipeline. And how it's changed over the course of the past year?

Sure I can. So I was say Jenny high level to probably 8% US to 20% Canada right now.

And that would be consistent over the last year. I said I would start to have seen the difference of two years ago, around the time we started to look at the Chicago transactions.

So I think that's a consistent theme now related to scale, obviously overall in the US. With that size of pipeline and the resizes, we don't have to do every single deal we look absolutely can be particularly indiscriminate in our underwriting, etcetera.

So I think at 8 to 20 is a fair number, looking at right now,

And how should we boil down that that $3 billion, because obviously, you won't have the time or the energy to pursue everything that comes across your desk. So how much of it you really dig further into?

At what point do you start having conversations about potential deals, just maybe a rough estimate of how, how all that boils down?

But I think that the pipeline exists on a rolling basis. So we're constantly evaluating real estate opportunities all around the world, frankly.

And in Canada, the US specifically the Slate Office REIT. So, I think our target of $160 million for 2020 is certainly achievable.

And at any given time, a subset of the $3 billion I'd call maybe $250 million to 500 million were more actively in depth underwriting, touring, etcetera. So 15% or 20% ratio where we get actually significantly closer to than just betting deals.

Okay. And then so given that the majority being the U.S.

Just wondering what the mix is as far as suburban versus downtown just because the Chicago assets obviously downtown. The cadence of suburban.

What are you seeing in the U.S. markets?

And I guess specifically in in Florida, where you're initially targeting?

It would be a mix of both. It's probably 50-50 Jenny.

In some suburban markets I call it non-Miami, Florida. So the deal is interesting opportunities in Tampa Bay in Jacksonville and Orlando.

And then mix of suburban as well. And I would say, in Canada that you just said suburban.

It's not a fairly suburban portfolio Canada, GTA would probably be more suburban, certainly the Atlantic Canada would be urban. So it's deal driven opportunity driven and return driven philosophy.So we can find the best opportunities for the region for unitholders.

Would be it suburban or urban, that the theory was always if we could find the right investment characteristics would be flexible in terms of specific location.

Right. Okay.

And then you mentioned that the cap rates are seen in the US are sort of at least 7% or so but with comparable, quality and term. I'm just wondering what your thoughts on would be with regards to disconnect between that number and what we see in some markets in Canada?

Like, what do you think is what do you think is the opportunity in the U.S. that that we're not seeing here?

Well, I think what's happening in Canada is nothing new. I think there's the institutional capital of the numerical system here, and that's what you're seeing certainly for CBD office extremely low cap rates, and similarly square foot pricing, that the net that they have taxes is a little bit wider.

And also the GTA and beneficiary of that. I think, with that much capitals seeking a specific type of asset, you can see what's happening to pricing.

So I think those similar dynamics in the US like there's not vastly discounted deals in midtown Manhattan or Silicon Valley or San Francisco or Washington, but in other markets you can find those opportunities not just so much what we have done in our growth trajectory in Canada. So there's abundance of different opportunities that would shake out the cap rates in that range.

Okay. And with regards that 7%, would you say that sort of stuff you're looking at, it's sort of fairly tight around 7% or is there a range?

There is a range, but I would use 7 as an average.

Thank you everyone for joining the fourth quarter 2019 conference call for Slate Office REIT. Have a great day.