Thank you Gwyneth and good morning everyone. Welcome to the Q1 2021 conference call for Slate Office REIT.

I'm joined this morning by Steve Hodgson Chief Executive Officer; Michael Sheehan Chief Financial Officer; and Lindsay Stiles Chief Operating 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 Q4 2020 investor update which is available.

Now. I will now hand over the call to Steve Hodgson.

Thank you Braden and thank you to everyone for joining the call. I would like to focus my comments on three key areas.

One the durability of our cash flows to our current trading discount; two net asset value and three are scalable platform for growth on the durability of our cash flows. 60% of our portfolio is comprised of government or credit rated tenants who paid investors in annualized distribution of 9.3% in the first quarter which was well-covered with a pale ratio of 79%.

We completed over a hundred thousand square feet of leasing with positive rental spreads. We have continued to demonstrate organic rental rate growth in our portfolio and average leasing spreads of 13.6% since January 2020.

Subsequent to quarter-end we completed a 10 year lease renewal with the province of new Brunswick for over a hundred thousand square feet; highlighting the improving market fundamentals in Atlantic Canada. Our weighted average lease term is 5.3 years with only 2.9% of our portfolio remaining to be renewed in 2021 on our trading discount to net asset value there continues to be a disconnect between public and private office real estate values.

We are trading at a 49% discount to our net asset value. However our net asset value is supported by recent comparable transactions and 74% of the portfolio was externally appraised in 2020.

Finally on our scalable platform for growth our best in class team and the strength and reach of the slate asset management platform combined to create a tremendous opportunity to grow our business. We intend to focus on more transformative acquisitions and growing markets in the United States Canada and Europe growth is critical for the REIT's long-term success as it will further diversify and stabilize our portfolio attract more institutional investors reduce our cost of capital and further strengthen our balance sheet given the attractiveness of the investment opportunity and the improving operating fundamentals in our markets.

The future is bright on behalf of the slate office REIT team. We thank you for your continued support and I will now hand it over for Q&A.

Thanks Good morning. Europe -- is Europe a new market for you?

I don't think you guys have previously talked about that and what markets over there would you specifically be looking at?

Thank you for the question Jonathan. We it is a new market for Slate Office REIT.

Slate Asset Management however has been investing in Europe since 2016 and we have about 12 people on the ground in Germany the UK and Luxembourg. So the idea here is we have a special meeting later today to amend our declaration of trust to include the ability to invest in Europe.

And it's really just because we have people on the grounds there. There's some interesting deals nothing imminent but there's some interesting deals that we've seen and we wanted to provide The REIT the flexibility to potentially do something exciting and creative in those markets.

And to your question about which markets specifically it would be likely the UK Germany or France where we sort of have a presence now.

Okay and your leverage is still fairly elevated. Would you be looking to sell some assets here and in order to fund acquisitions going forward?

No I think like what we're looking to do from a growth perspective is we have some liquidity. But we don't intend to use all of that liquidity to just buy one or two assets.

We'd rather use that liquidity to support a more transformative acquisition whether that's a share dealer of some sort or a merger of some sort. So it's not really we probably will always continue to recycle capital as we've fully valued assets and look to redeploy that equity to more creative opportunities.

But it's not really about selling from one market to another it's just about growth.

Okay. And then and just on the government renewal what sort of uplift did you get on a hundred thousand square feet?

So we we're as Steve said we're really pleased that we were able to complete this 10 year extension with the province of New Brunswick in Fredericton. We don't disclose that spreads for specific deals but what I will say is they had been in place for 10 years so certainly there was an adjustment to bring that rate closer to what we feel is current market.

we're happy with their commitment to the location and the market long-term and we're starting to see that from other tenants and the other markets we're operating in as well.

Okay. So we should be able to back into that next quarter though right.

I assume that's going to be the bulk of your releasing spread that you reported when you report Q2?

Yeah. I mean what I'll say is since January 2020 our leasing spreads of average 13.6% of growth and Q2 is pacing well ahead of that number.

Hi good morning everyone. I'm not sure if it's disclosed in the MG&A.

Maybe I missed it but what's been the kind of retention rate within the portfolio over maybe over the last few quarters?

Yeah. So I mean w we have some known vacancies hit us in Q4 and Q1 which were really at the end of Q4 that hit the occupancy in Q1.

So over the last couple quarters those known vacancies in Atlantic Canada, did hit us and so I would suggest that our retention rate was lower than usual. But we sort of normalize that 85% retention rate.

Right. Okay.

That's helpful. And with occupancy where it is currently and project projected on a state-by-state basis being much higher where do you see I guess the opportunities in the portfolio maybe over the next 12 months to meaningfully move up occupancy is there one or two assets where you think you could really drive occupancy higher?

Okay I think we're really encouraged by the momentum we've seen across the portfolio in all of the markets this quarter. Certainly as we as we mentioned in Q4 we really viewed Atlantic Canada as a leading indicator for the rest of our markets.

And to give you some indication for Q1 the bulk of the leasing activity we completed was specific to the GTA, certainly still solid numbers in Atlantic Canada and a few smaller deals in the U S and our Western portfolio but we are really starting to see an uptake in the GTA and also lots of momentum and paper trading in Chicago as well. So I don't think I would I would pinpoint any specific assets but certainly the fact that we've got 85% of that portfolio located in suburban and secondary markets we haven't seen the same impact of the rising vacancy and sublet space availability that a lot of the downtown core markets are struggling with right now.

Okay. That's helpful.

And just last one for me before I turn it over I'm just wondering if you could comment on kind of the TEI environment right now within your sub markets and you have maybe that would have compared to kind of pre COVID environment?

Yeah I think so tenants that are doing deals today are either renewing long-term or they're looking to put the least amount of capital investment into a new deal that they can that they can. So what we're seeing is that renewals from a TA perspective are happening pretty much in line with what they were before because tenants are a little stickier and more apt to stay in place than to move in this market.

And then from a new leasing perspective there are some additional incentives more so on the free rent side to get tenants to make decisions now versus waiting until the conclusion of the pandemic. But otherwise the TEI packages are pretty similar to what they were before and further it's different because we don't have 85% of our assets are not in downtown cores and major markets.

we're not seeing the same sublet activity that that Lindsay noted. And so we don't have that competitive pressure from a TA perspective.

Right. Okay.

That's helpful. I'll turn it over.

Hey guys. Good morning.

Just broadly on the leaving side are you seeing more stand-ins getting into discussions in terms of changing off full plans and kind of requiring you to invest more capital in your properties?

That's a great question. So we can't cite a specific example where we've seen that.

Certainly I would say as a general rule a lot of the conversations we're having are just about when tenants are returning, at the moment it sounds like with the quick vaccine rollout and things picking up we expect a lot of our larger tenants to come back to the office sort of later in Q2 Q3 and certainly by the end of this year certainly some based on corporate direction may look to do some reconfiguration of their space. But I think in a lot of instances what's more likely to happen is a select few employees will choose to continue to work from home and that will allow some additional space for the necessary social distancing requirements to be implemented within existing premises.

Having said that we have had some discussions with groups who feel that they will need more space in order to accommodate social distancing. So it's a little early on to know exactly how that's all going to shake out but I think we'll have a better sense in the next couple of quarters.

Thanks for the color Lindsay and I'm using the second question is around the weighted average in place rent as he's kind of trickled down a bit in Q1 and said we need a 6 versus 795 I think in the last quarter. And any specific reason why the downtrend is because of lower spreads on the news?

No the way so the way that average in place rent would be exactly that a weighted average based on the buildings and the various rent. So it's likely that where we had some vacancy arrived or some new leasing arrived either moved up or down that that weighted average but from a building by building perspective we're not seeing a decline in a weighted average rent.

Perfect. But that's only I was talking about.

Thank you. And good morning just back on the topic of a potential opportunities in Europe I guess given where the liquidity is at and I get desired to not sell property to fund it.

Would you consider doing any JVs with the Slate Asset Management to pursue any deals?

We would consider joint ventures not necessarily with Slate Asset Management though, if there was a compelling opportunity and that's the way we had to structure it then it's a possibility but it's certainly not part of our going in investment thesis.

Okay. And would you be looking for a managing partner on the ground or would you have the desire to actually take up the management with the team that you have there?

No. We would be looking for a management team on the ground to support us but I mean in addition to the team that we have from an oversight perspective.

Okay. And I'm just wondering like is that I'm sure it's early days and you haven't gotten the declaration change yet but are you starting to kick any tires there or sort of how far along are you on that process of exploring potential expansion to Europe?

Yeah I mean yeah we we've been investing in Europe since 2016 and well in advance of that had started kicking tires in Europe. So the team's very well versed.

As you may know Brady Welch now lives in London and he's a founding partner of Slate and has a team with him there that are sourcing opportunities for the entirety of the of the platform. As you may know the way that we originate deals is Slate Asset Management looks at all kinds of real estate transactions that fit our profile of buying below replacement costs and being able to leverage our platform to create value.

And some of those will fit more opportunistic type funds some will fit more core type funds and some might fit the core plus type returns and profile that the office REIT is looking for. So in those in that event played office REIT would like to participate in that.

And again this is just about this. Isn't about we have a deal and we're going to talk about it in the next few weeks.

This is about positioning ourselves to have more opportunities in the future.

Okay. Now I guess what I'm trying to drill down to is whether or not you've seen anything in the office space that was compelling because I know the Asset Management Group has looked at a variety of asset classes but is there anything that's really emerging that fits into the Slate Office bucket which I presume would be primarily office

Yeah. And there are deals and that's definitely why we're interested in exploring it further.

So it's just not nothing imminent at the moment that we're acting on but there are deals that are coming in the pipeline or that we've seen transact that we think could be interesting and fit our profile.

Okay great. My next question is about the discussion about the U S my bore transition.

I'm wondering if you could give us more color around that what rates are you paying now? And I guess what is the risk around this transition?

when you're talking about transitioning away are you able to find another get another lender in place or go into fixed rate debt? Like how should we think about this?

Yeah quite honestly there isn't going to be a material impact to the business. So that's the expectation at this point in time.

Our counterparties on those transactions are Canadian banks and we've had numerous discussions with them. There's fallback protocols.

And you may be aware of that basically outline at what point in time the event is triggered that you transition away from [ph]LiDAR and for us live or it's actually 20, 23 for the one month LiDAR. That's the expected timing at this point.

And based on discussions with our counterparts on all those transactions we're expecting to be economically equivalent in terms of a benchmark rate once that transition does happen.

Okay. And how much time do you have left on those pieces of debt from the U S properties?

There's one that's up this year and then the other one is next year.

Okay. I guess it's sorry go ahead.

Well I was just going to say Jenny the one that's up this year is one 20 South West South. And as a reminder it's almost 90% occupied and growing and the lead tenant is a CBC with nine years left of lease term.

So it's from a REIT perspective it's very stable and we're comfortable.

Okay. And given that the maturities are fairly short term would you be looking to fix these pieces of debts and sort of eliminate this [ph] US LiDAR transition?

I guess discussion not so much on the economics.

Yeah. It's a possibility certainly an option on the table but what everyone's doing now is continuing to run their businesses and have provisions by which you would transition from LiDAR to the [indiscernible] which is the expected replacement rate before that the library loans currently.

So we have flexibility there and it's being contemplated by a number of counterparties in the market. So fixed rates always an option the floating rates and option as well with transition provisions when [indiscernible] is a viable option as an alternative rate.

Okay great. And then lastly I'm not sure if I missed it but did you disclose your Q1 rent collection or bad debt provisions?

Oh we didn't but I can tell you it's consistent with prior quarters. So 96 98% each a month in cash of rent collections that debt is disclosed as part of G&A.

So we only wrote off $20000 in Q1.

Apologies that I missed this but did you disclose whether there were any was any free rent associated with the lease extension in New Brunswick first quarters?

There was free rent, it's staggered over the term. And we would account for that when we do our rental spread calculations of course.

But that that's typical for the government deals where they don't request TEI and you all you provide free rent in lieu. And but from an overall inducement perspective it's relatively low because it was a renewal and the government didn't have much of a need for dollars to invest into the space.

Okay. Fair enough.

So from an accounting standpoint we should expect that lease to be essentially there's no cash impact to the straight line rent it's amortized essentially?

Yeah.

Okay. Nope.

Fair enough. And then just more broadly I mean you guys have a platform that operates globally, Canada was a little bit behind area.

You have assets in the U.S., where things are a bit ahead but can you speak to sort of leasing dynamics that you're seeing either an underwriting new assets abroad or in your own assets in places where the vaccine rollouts then escalated just want to get a sense we're all our Canadian context here is a little bit lagging but interested in what you're seeing elsewhere.

Sure. And there's a report that Cushman and Wakefield just put out that I could direct you to as well subsequent to the call.

That's pretty fulsome answer to your question but Lindsay maybe you could speak to the return to work in the U S versus Canada and then I can touch on the investment part of that question.

Sure. Yeah.

So I mean as you noted absolutely the role of the vaccine has been a lot faster in the U S and obviously our experience is that specific to Chicago there, from a leasing perspective we've seen activity pickup significantly in Q2 there's a lot of paper trading. There's a lot of tours happening people are eager to get back to the office.

we we've done a survey of our tenants and kind of their back to work plans and a lot of the larger well-known corporate groups that you would you would be familiar with are planning to start to return later in Q2 with a full return to pre-pandemic occupancy levels by the end of Q3. So they're pretty much full steam ahead.

It's getting very close to we expect business as usual towards the end of the year so that's really encouraging and we expect our other markets to follow.

Yeah. And from an investment perspective what we're seeing in general is that institutional has been more focused on residential industrial and other sectors.

But the private markets have still been doing a lot of office transactions and supporting the values but that's limited in deal size with private capital. So for in Toronto for example there's still single asset suburban Toronto deals happening at or above values.

They were pre-pandemic cause there's still liquidity there's still attractive debt financing available and that's consistent in the U.S. too.

It's just that in the in the U.S., I would suggest there's a little bit more dislocation and competitiveness and oversupply situation like if you think of Toronto 70% of the downtown inventory is owned by five landlords and they're all large institutions that can weather the storm. In markets like New York or San Francisco, it's a little bit more bifurcated and there's as a result more competitiveness and more debt on those assets the need to be more competitive.

So it's creating a the fundamentals are not quite as strong as Canada right now. And so we need to be mindful of that when we review opportunities but opportunities will come.

And it just right now the bid-ask spreads are too wide still because of that uncertainty. But once things become more certain we think that gap will close and we're being patient.

And we think there'll be lots of opportunities

From what you said. I mean it doesn't appear that there's any distress at this point in Canada but are there pockets of distress in the U.S.

that would be good from an opportunistic deployment of capital standpoint or are things holding up pretty well in that sense as well?

Yeah like I think there will be and we're not necessarily targeting pure opportunistic type real estate. We're looking for assets with an element of stability but still some upsides for us to leverage our platform and team and create value.

And so those types of deals are still in pretty high demand. So there's not a there's not a lot of distress.

Okay. Fair enough.

Thanks guys. Appreciate it.

Thank you everyone for joining the Q1 2021 conference call for slate office reef.