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Unlocking liquidity in real estate: The strategic case for REITs

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A dedicated REIT strategy–alongside legacy private strategies–allows a real estate allocation to grow while becoming more nimble and efficient over time.

Real estate has earned a place in institutional portfolios because of its capacity to deliver attractive long-term returns. But individual real estate assets–land and structures–exist over time horizons well beyond the strategic planning and investment process of most investors, and this presents a few challenges. For example, the need to take profits, rebalance portfolios, pay benefits or provide institutional support demands periodic liquidity that individual physical assets cannot easily provide. In addition, the slow yet constant change in demand for various geographies and sectors means that investors would benefit from transactional flexibility and liquidity to optimize their portfolio exposures over time.   

Large, diversified real estate investors can manage around these challenges within their portfolios, although at a measured pace that reflects the need to buy and sell individual properties. To reach a higher level of liquidity, financial markets have solved this challenge by transforming these illiquid assets into liquid securities that can be freely traded. The real estate investment trust (REIT) structure was created decades ago for precisely this purpose: It offers liquid exposure to underlying real estate assets that are diversified across sectors and geographies as well as up and down the capital structure ( Exhibits 1A and 1B ). 

REITs offer liquid exposure to real estate assets that are diversified across sectors as well as up and down the capital structure

Exhibit 1A: U.S. public real estate sector distribution       Exhibit 1B: U.S. public real estate capital structure 

Source: J.P. Morgan Asset Management; data as of September 30, 2021. 

Despite these benefits, REITs represent only a modest percentage of the capital allocated to real estate–approximately 15% of the total; the remainder is private. This suggests that real estate investors are comfortable with illiquidity and see value in traditional private vehicles, as they should. Yet at the same time, the lack of liquidity has been a constraint on the size of real estate in institutional portfolios: Few investors have more than a 10% to 20% allocation to real estate, despite historically attractive returns.

This preference for private vehicles is particularly interesting because investors have the liquid option of REITs at their disposal; there are also some benefits of REITs that cannot be easily replicated in traditional private funds. In this article, we articulate the strong case for an active public real estate strategy serving as a complement to existing private allocations and therefore as a strategic asset class in its own right. 

Complementing traditional private approaches

The baseline approach for most real estate investors is to participate in the equity ownership of real properties via a private fund manager with skill in developing, managing and transacting in these assets. This model achieves a balance between the extended time horizon required to realize value from the assets and the investor’s own need for a somewhat predictable return of capital.

Private real estate investors use two common approaches, either separately or in combination:

• Internally diversified open-end funds can invest across geographies and sectors. This approach is more commonly used with stabilized core assets, where income is the primary source of the expected return rather than a future sale. Although not as liquid as public market securities, open-end funds do allow greater flexibility around the timing of investment and redemption.  
• Diversified portfolios of closed-end funds invest independently across sectors and geographies.  With substantially less liquidity, closed-end funds are better suited to value-add or opportunistic investments that derive returns through an eventual exit at a higher valuation. These strategies offer little or no liquidity to investors beyond the timing of distributions at the conclusion of the investment period.

We suggest that there should be a third path to including real estate investments in a portfolio, one that leverages the transparency and liquidity of the public markets, allows for dynamic diversification across sectors and geographies, and incorporates flexibility to move across the capital structure. This is active REIT investing, and it offers a natural complement to moderately liquid open-end and illiquid closed-end private vehicles.

REIT volatility can be a source of opportunity for focused real estate investors

Whether the long-term trend of valuations in real estate is up or down, publicly traded REITs will exhibit greater volatility around the trend line than private investments (Exhibit 2) . This is sometimes characterized as a shortcoming of the REIT asset class, as investors tend to prefer less volatility to more. But it is critical to recognize that this price volatility can actually be a valuable attribute because it offers a level of price discovery and transactional flexibility that private investments cannot match.  

While exhibiting greater short-term volatility, long-term returns for public real estate are consistent with private real estate returns

Exhibit 2: Public real estate market (WILRESI1) vs. private real estate market (NFI-ODCE2): 10-year cumulative returns

Source: Security Capital, Wilshire, NCREIF. Past performance is not a reliable indicator of current or future results. The above chart is for illustrative and discussion purposes only and is based on cumulative returns.

For a skilled manager, this flexibility can be deployed to optimize real estate exposures in real time rather than across the months or years needed to make similar changes at the underlying asset level. The potential for alpha is enhanced further because many players in the public markets are not seasoned real estate investors, and this can lead to frequent–and sometimes substantial–deviations between REIT share prices and the value of the underlying real estate assets.

Optimizing REIT allocations

The transparency and flexibility of the public real estate market can help investors optimize their REIT allocations in the context of broader real estate investments. We explore how investors can gain insights into valuations by looking across several dimensions of the public real estate market.

Public vs. private

Public and private real estate transactions can be directly compared on a number of levels: the discount (or premium) of REIT shares to the net asset value (NAV) of the underlying assets (Exhibit 3) ; the relative performance of public vs. private funds; and the relative level of cap rates and the spread to Treasuries of public and private assets. Collectively, these metrics can provide a nuanced view of REIT valuations that can guide investors in the timing and sizing of public market investments.

The discount or premium of REIT shares to the NAV of the underlying assets provides insight into REIT valuations that can be useful in allocation decisions

Exhibit 3: Premium or discount to NAV for all property types

Source: J.P. Morgan Asset Management; data as of October 31, 2021. 

Capital structure

REITs offer investors access to various entry points across the capital structure, including equity, preferred (mezzanine) and senior debt. This flexibility allows public market investors to optimize their exposure with higher or lower risk positions in response to changing valuations and perceptions of risk. For instance, an active REIT investor looking to reduce risk could shift capital from equity to preferred or senior debt instead of simply moving defensively to cash. Examining current yields and spreads on preferred and senior debt, relative to historical levels and each other, assists in the tactical repositioning of a portfolio toward the most attractive portions of the capital structure.

Sector and geography

Because many REITs target specific sectors of the real estate market, active investors can adjust positions relative to various market sectors and specific REITs in real time. Comparing REIT and private valuations across each sector, along with the discount to NAV at the sector and individual security level, can highlight areas where public markets may have adjusted prior to private markets, either in terms of tighter valuations (a potential sell signal) or relative cheapness (a potential buy signal). Further, while REIT investors cannot select the underlying assets themselves, they can use the high level of transparency around specific property locations to make informed judgments about the geographic distribution of their capital.

The common thread across each of these dimensions of allocation flexibility is that the liquidity of REITs, along with their dynamic valuations and the granularity of the investible universe, creates a steady flow of investment opportunities for a skilled manager.

Public real estate as an asset class

Investors looking to justify a permanent, strategic role for public real estate in their asset allocations can point to several benefits that persist across market cycles. 

First and foremost, the flexibility and transparency of REIT pricing across sectors, geographies and the capital structure offer exposure to real estate beta and a powerful alpha opportunity that is differentiated from traditional private strategies. This is not a replacement for the skill of private managers but a complement to it.

Second, the ability to shift from equity to less risky senior securities (such as preferred equity or debt) can de-leverage a REIT investment to a level of risk comparable to traditional private core real estate.  This liquid version of a core exposure can be deployed tactically to move capital into and out of core investments as market opportunities change–without a lengthy investment or redemption process.

Third, a diversified REIT strategy can serve as a liquid “staging portfolio” for both private real estate and other core real asset sectors, such as infrastructure or transportation. By providing a shock absorber for capital calls and distributions, a REIT allocation can allow investors to hold less cash and keep their capital invested productively.

Enhancing a real estate portfolio

For many investors, REITs are closely linked to the equity allocation because they trade on equity exchanges, but this narrow, vehicle-focused perspective undervalues the benefits that a diversified strategic allocation to active REITs can deliver. 

When viewed alongside the value drivers of traditional private real estate investments, the additional benefits of liquidity, transparency and diversification are clear. Long-term assets need long-term capital, but the vehicle through which that capital is deployed need not be limited to illiquid private funds.  Public markets exist in part to solve the challenge of liquidity transformation. A dedicated REIT strategy–alongside legacy private strategies–allows a real estate allocation to grow while becoming more nimble and efficient over time.       

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What Is a REIT?

Types of reits, picking the right reit, the bottom line.

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• Real Estate Investing

The REIT Way

Investopedia contributors come from a range of backgrounds, and over 24 years there have been thousands of expert writers and editors who have contributed.

The abundance of investment vehicles out there creates a challenge for the average investor trying to grasp what they're all about. Stocks are the mainstay of investing, bonds have always been the safe place to park your money, options have increased leverage for speculators , and mutual funds are considered one of the easiest vehicles for investors. One type of investment that doesn't quite fall into these categories and is often overlooked is the real estate investment trust , or REIT.

Key Takeaways

• A real estate investment trust (REIT) is a company that owns, operates or finances income-producing properties.
• Equity REITs own and manage real estate properties.
• Mortgage REITs hold or trade mortgages and mortgage-backed securities.
• REITs generate a steady income stream for investors but offer little in the way of capital appreciation.
• Most REITs are publicly traded like stocks, making them highly liquid—unlike most real estate investments.

A REIT trust company that accumulates a pool of money, through an initial public offering (IPO), which is then used to buy, develop, manage and sell assets in real estate . The IPO is identical to any other security offering with many of the same rules regarding prospectuses , reporting requirements and regulations; however, instead of purchasing stock in a single company, the owner of one REIT unit is buying a portion of a managed pool of real estate. This pool of real estate then generates income through renting, leasing and selling of property and distributes it directly to the REIT holder on a regular basis.

REITs, like most investments, come in a variety of flavors. These funds have classifications that indicate the type of business they do and can be further classified depending on how their shares are bought and sold.

Equity REITs  is the most common form of enterprise. These entities buy, own and manage income-producing real estate. Revenues come primarily through rents and not from the reselling of the portfolio properties.

Mortgage REITs , also known as mREITs, lend money to real estate owners and operators. The lending may be either directly through mortgages and loans or indirectly through the acquisition of  mortgage-backed securities  (MBS). MBS are investments holding pools of mortgages issued by government-sponsored enterprises (GSEs). Their earnings come primarily from the  net interest margin —the spread between the interest they earn on mortgage loans and the cost of funding these loans. Due to the mortgage-centric focus of this REIT, they are potentially sensitive to interest rate increases.

Hybrid REITs  enterprises hold both physical rental property and mortgage loans in their portfolios. Depending on the stated investing focus of the entity, they may weigh the portfolio to more property or more mortgage holdings.

When you buy a share of a REIT, you are essentially buying a physical asset with a long expected life span and potential for income through rent and property appreciation. This contrasts with common stocks where investors are buying the right to participate in the profitability of the company through ownership. When purchasing a REIT, one is not only taking a real stake in the ownership of property via increases and decreases in value, but one is also participating in the income generated by the property. This creates a bit of a safety net for investors as they will always have rights to the property underlying the trust while enjoying the benefits of their income.

Another advantage that this product provides to the average investor is the ability to invest in real estate without the normally associated large capital and labor requirements. Furthermore, as the funds of this trust are pooled together, a greater amount of diversification is generated as the trust companies are able to buy numerous properties and reduce the negative effects of problems with a single asset. Individual investors trying to mimic a REIT would need to buy and maintain a large number of investment properties , and this generally entails a substantial amount of time and money in an investment that is not easily liquidated. When buying a REIT, the capital investment is limited to the price of the unit, the amount of labor invested is constrained to the amount of research needed to make the right investment, and the shares are liquid on regular stock exchanges .

The final, and probably the most important, advantage that REITs provide is their requirement to distribute nearly 90% of their yearly taxable income , created by income-producing real estate, to their shareholders.   This amount is deductible on a corporate level and generally taxed at the personal level. So, unlike with dividends , there is only one level of taxation for the distributions paid to investors. This high rate of distribution means that the holder of a REIT is greatly participating in the profitability of management and property within the trust, unlike in common stock ownership where the corporation and its board decide whether or not excess cash is distributed to the shareholder . 

As with any investment, you should do your homework before deciding upon which REIT to purchase. There are some obvious signs you should look at before making the decision:

1. Management It's always important when buying into a trust or managed pool of assets to understand and know the track record of the managers and their team. Profitability and asset appreciation are closely associated to the manager's ability to pick the right investments and decide upon the best strategies. When choosing what REIT to invest in, make sure you know the management team and their track record. Check to see how they are compensated. If it's based upon performance, chances are that they are looking out for your best interests as well.

2. Diversification REITs are trusts focused upon the ownership of property. As real estate markets fluctuate by location and property type, it's crucial that the REIT you decide to buy is properly diversified. If the REIT is heavily invested in commercial real estate and there is a drop in occupancy rates , then you will experience major problems. Diversification also means the trust has sufficient access to capital to fund future growth initiatives and properly leverage itself for the increased returns.

3. Earnings The final item that you should consider before buying into a specific REIT is its funds from operations and cash available for distribution . These numbers are important as they measure the overall performance of the REIT, which in turn translates to the money being transferred to investors. Be careful that you don't use the regular income numbers generated by the REIT as they will include any property depreciation and thus alter the numbers. These numbers are only useful if you have already looked carefully at the other two signs, since it's possible that the REIT may be experiencing anomalous returns due to real estate market conditions or management's luck in picking investments.

With so many different ways to invest your money, it's important that any decision you make is well informed. This applies to stocks, bonds, mutual funds, REITs, or any other investment. Nevertheless, REITs have some interesting features that might make a good fit in your portfolio. 

U.S. Securities and Exchange Commission (SEC). " Investor Bulletin: Real Estate Investment Trusts (REITs) ."

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What is a REIT and how does it work?

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Investing in real estate can be an attractive way to put your money to work for you — but what if you don’t have enough money to buy property outright? One way to start investing in real estate without the need for a large chunk of capital is to buy shares of a real estate investment trust, or REIT. They pay out substantial dividends , which can make them a great pick for income investors, although they come with a fair share of disadvantages, too.

Here are the details on REITs, their pros and cons and how much you could earn on them.

In this article

What is a real estate investment trust (REIT)?

How reits work, types of reits, how to find reits, how to invest in reits, do reits have a good track record.

• Advantages and disadvantages of REITS

Should you invest in REITs?

A real estate investment trust (REIT) is a company that owns, finances or manages properties and then is required by law to pay most of that income to investors. This income can come from the rents that the properties’ tenants pay or even from mortgage payments on loans owned by the REIT.

In exchange for paying out most of its taxable income, the REIT is able to avoid taxation on its earnings at the corporate level. This legal structure makes it easier and cheaper for REITs to acquire real estate, meaning they can acquire property more easily than non-REITs can.

In essence, a REIT profits from its real estate holdings and shareholders have a chance to profit as well. You can enjoy capital appreciation when the REIT’s share price increases as well as benefit from regular quarterly dividend payouts.

Many REITs specialize in a specific type of property but others have more diverse portfolios. With a REIT, you have access to real estate investment opportunities without the need for a substantial amount to actually purchase property or buy into a real estate investment club. Shares of publicly traded REITs can be bought and sold on major exchanges.

In order to be considered a REIT, a company must meet certain criteria :

• At least 75 percent of the company’s assets must be invested in real estate.
• At least 75 percent of the company’s gross income must come from interest on mortgages, sales of real estate or rents received from properties.
• The company must be taxed as a corporation and managed by trustees or a board of directors.
• There must be at least 100 shareholders, and no more than 50 percent of its shares can be held by five or fewer people.
• At least 90 percent of a REIT’s taxable income each year must be paid out to shareholders as dividends.

As long as it meets these criteria, a company can elect to be treated as a REIT, though it doesn’t have to. Then it may enjoy no corporate taxation and generate hefty dividend payouts.

There are two main types of REITs:

• Equity REITs – These REITs actually own properties that produce income, such as apartment buildings, commercial buildings and other types of properties, like storage facilities. They own these assets and make money as their tenants pay rent, or when they sell properties at a gain.
• Mortgage REITs – Rather than buying properties and charging rent, mortgage REITs (mREITs) provide financing for real estate. They might purchase mortgages, or even originate them, or buy mortgage-backed securities , to produce income.

REITs can also be classified on whether they’re publicly traded, non-traded or private:

• With a publicly traded REIT, any investor can purchase the REIT’s stock on an exchange.
• Non-traded REITs, also called public non-listed REITs , don’t trade on exchanges, even though they’re registered with the Securities and Exchange Commission (SEC)
• Private REITs aren’t registered with the SEC and can be bought without going through an exchange. However, these might be less liquid and transparent than public REITs, so they come with serious risks.

Along with their status, a REIT can fall into the following property sub-sectors :

• Data centers
• Diversified (or a combination of properties)
• Industrial (e.g., warehouses)
• Infrastructure (e.g., energy pipelines)
• Mortgage (mREIT)
• Residential
• Self-storage
• Specialty (e.g., casinos)

And new sub-sectors may develop at any time, as the industry evolves.

If you’re looking to find a list of all REITs, you’ll find them on the website of NAREIT , an association that represents REITs. You’ll be able to filter them on basic criteria such as their filing status, returns and sub-sector.

You’ll also be able to find information on any REIT registered with the SEC, including non-traded REITs and publicly traded REITs. Each type of REIT files financial disclosures with the SEC, so investors and others can see how they are performing. You can find the filings in the SEC’s EDGAR database , which goes back more than two decades.

Investing in REITs is fairly straightforward, especially if you focus on publicly traded companies. In that case, all you need to know is the ticker symbol. You can then go to your broker and buy shares, placing an order like you would for any other stock. You can also buy shares in REIT ETFs, including one of the most popular, the Vanguard Real Estate Index Fund (VNQ).

On top of that, you might be able to allocate a portion of your regular 401(k) contribution to a REIT. Some plans include a REIT fund as an option. However, while individual equities aren’t always included in a 401(k), if your administrator does allow them, you can purchase REITs.

REITs have a good track record over time. The FTSE Nareit All Equity REITs index recorded annualized returns of approximately 11.5 percent over the 40-year period ending June 2021, according to Nareit. By comparison, the S&P 500 historically sees annualized returns closer to 10 percent. While some indexes, like the Russell 2000 , outperform REITs over shorter periods of time, REITs tend to see better performance in the long run.

It’s important to note, however, that past performance isn’t a guarantee that REITs will perform well in the future.

Advantages and disadvantages of REITs

REITs can be an attractive investment, but like all investments, they can also come with their own risks and disadvantages. Here are some key advantages and disadvantages of REITs:

Advantages of REITs

• High dividend yields: REITs typically offer some of the highest yields in the stock market, because they’re obligated to make payouts and they have consistent cash flow from their rentals.
• Diversification: By owning a REIT you may own dozens, even hundreds, of properties, meaning that your own risk is reduced by diversification, unlike if you owned one or two properties in a single geographic area.
• Lower correlation with other assets: With less correlation to other assets, REITs can add some lower volatility to your portfolio. When stocks zig, REITs may zag, or at least zig a little less than stocks.
• No self-management: If you’re managing your own property, you may be called on at any point to fix something, which may require you to get out and do it or otherwise pay someone else to do it. You may also be on the hook for serious money if something breaks. So REITs can be a great alternative to investing directly in real estate .
• No commissions (on publicly traded REITs): Unlike real estate and private and non-traded REITs, you can move in and out of REITs with effectively no commissions. That’s a huge contrast with traditional real estate, where you can expect to pay 6 percent every time you sell.

Disadvantages of REITs:

• High debt loads: It’s normal for REITs to operate with high debt loads, just like regular homeowners do. But investors need to check to make sure the REIT can sustain the debt load and keep on paying its dividend, or the stock will fall.
• Beholden to market to grow: Because REITs pay out so much of their cash flow, they must raise money from the market to acquire more buildings and grow. When the market is uncooperative – with low stock prices or high interest rates – then it’s hard for REITs to make attractive deals.
• Unsustainable dividends: Investors must remain on the lookout for unsustainable dividends. A dividend cut (or a potential one) will hurt the REIT stock price quickly.
• Rising rates: Rising rates may hurt REITs in a few ways, by raising the cost of their financing, reducing the value of their assets (buildings) and depressing their stock price.
• Governance issues: Non-traded REITs and private REITs have potentially serious governance issues and don’t have the same higher standards as publicly traded REITs.
• High commissions and no secondary market: If you’re buying non-traded or private REITs, you should also watch out for massive sales commissions and understand that it will be difficult for you to exit the position, regardless of what the salesperson says.

REITs can be an attractive investment, but you’ll want to steer clear of the biggest mistakes in investing in them .

Depending on your risk tolerance and portfolio goals, adding some real estate exposure through REITs could help you further diversify and provide exposure to another asset class that may lower risk in your portfolio. Carefully consider your individual situation and consult with an investment professional to decide if investing in REITs makes sense for you, and how much you should allocate to them.

— Miranda Marquit wrote a previous version of this story.

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Slate Office REIT Reports Third Quarter 2023 Results and Announces Portfolio Realignment Plan

Slate Office REIT (TSX: SOT.UN) (the "REIT"), an owner and operator of high-quality workplace real estate, reported today financial results and highlights for the three and nine months ended September 30, 2023 and announced a Portfolio Realignment Plan that will reposition the REIT’s portfolio for long-term stability and performance and raise liquidity to reduce the REIT’s borrowings.

“We have made steady progress over the last quarter toward shoring up the REIT’s balance sheet, completing over $577 million of refinancings and loan amendments to preserve liquidity and financial flexibility for the REIT,” said Brady Welch, Interim Chief Executive Officer of Slate Office REIT. “We have also maintained stable portfolio occupancy, supported by our positive leasing momentum at longer lease terms. Through the Portfolio Realignment Plan we are introducing this quarter, we believe we can further improve the REIT’s liquidity, strengthen its balance sheet through reduced debt, and improve portfolio composition to position the REIT for long-term stability and performance.”

For the CEO’s letter to unitholders in respect of the quarter, please follow the link here .

• On August 23, 2023, the REIT announced the refinancing of the mortgage loans on two of its Greater Toronto Area assets, collectively totaling approximately C$127.7 million
• The REIT refinanced an additional C$138.6 million of total debt on two properties located in Mississauga, ON and Chicago, IL
• The REIT also completed an amendment to the terms of its existing revolving credit facility to provide borrowing base availability, providing the REIT with additional liquidity to execute on its Portfolio Realignment Plan
• The REIT has only one remaining debt maturity of C$34.0 million in the balance of 2023 on its Gateway Centre property in Toronto, ON, which it expects to refinance in the fourth quarter
• The REIT completed 277,599 square feet of total leasing in the quarter at a Weighted Average Lease Term (“WALT”) of 5.0 years, which reflects an increase over 4.8 years in the prior quarter; new leases were completed at a WALT of 7.3 years, up from 5.7 years last quarter
• Occupancy remained stable at 78.6%
• Less than 1.0% of the portfolio’s Gross Leasable Area (“GLA”) remains to be renewed in the fourth quarter of 2023, and only 5.5% of the portfolio’s GLA is in discussion for renewal in 2024
• The REIT has a strong leasing pipeline with over 200,000 square feet of potential new deals under discussion with major users
• On September 12, 2023, the REIT’s external manager, Slate Asset Management, announced that it increased its ownership interest in the REIT to over 10.0% of the outstanding units reflecting management’s confidence in the REIT’s capital allocation decisions and strategy

Portfolio Realignment Plan

The REIT’s senior management, together with the Board of Trustees (the “Board”), have considered a number of potential strategies to preserve value for unitholders in the current macroeconomic and office environments, while also ensuring the REIT will be in a stronger position when it emerges from this economic cycle. Management and the Board have determined that the best course of action for unitholders is to execute a Portfolio Realignment Plan that will improve the REIT’s liquidity, strengthen its balance sheet through reduced debt, and improve portfolio composition.

The Portfolio Realignment Plan will see the REIT divest assets to reposition its portfolio for long-term stability and performance, as follows:

i. Disposition Assets: Management and the Board have identified non-core assets in certain Canadian markets for strategic disposition with the intention of realizing capital for the repayment of debt and general liquidity for the REIT (such assets being the “Disposition Assets”). These assets comprise approximately 40.0% of the REIT’s total GLA.

ii. Continuing Portfolio: The Continuing Portfolio will be made up of assets that are similar in terms of their quality, occupancy, tenant profile and cash flow and are located in markets with strong economic drivers and stable office demand. Management and the Board believe these assets, when separated from the remainder of the portfolio, will constitute a more focused and resilient REIT with stronger portfolio KPIs and lower funding requirements and thus intends to retain these assets as long-term holdings.

To execute the Portfolio Realignment Plan, the REIT is undertaking a process to divest the Disposition Assets and expects that the process will continue through to 2025. Management and the Board will actively monitor the Disposition Assets, as well as the Continuing Portfolio, and depending on changes in leasing activity or local market conditions, the classification of these assets is subject to change. The proceeds generated from the sale of the Disposition Assets will be used to reduce the REIT’s leverage and actively manage the Continuing Portfolio.

As at October 31, 2023, approximately two-thirds of the Disposition Assets are either listed for sale, under discussions, or at varying stages of contract negotiation. The remainder of the Disposition Assets will be brought to market in 2024, with consideration for local market conditions. In addition to focusing on the execution of the Portfolio Realignment Plan, the REIT will continue to implement active asset management strategies to preserve the long-term stability and performance of the Continuing Assets.

Management and the Board believe that the Portfolio Realignment Plan will ultimately reconstitute the REIT’s portfolio with assets that have higher cash flow, stronger occupancy, and a higher proportion of government and high-quality credit tenants.

Distribution Suspension

The REIT also announced today that the Board has determined to suspend the REIT's monthly cash distribution. The distribution suspension is expected to provide the REIT with an additional C$10.2 million of cash annually, which will be used for the paydown of debt and the funding of ongoing business operations. The suspension of the REIT’s distribution will be effective beginning with the REIT's distribution that would have otherwise been declared for the month of November 2023 and would have otherwise been payable to unitholders in December 2023. The Board will continue to monitor the REIT’s financial performance, operating environment, and progress with its Portfolio Realignment Plan to determine when it is appropriate to reinstate a regular cash distribution.

Declaration of Trust Amendment

On November 13, 2023, the REIT filed a notice of meeting and record date on SEDAR+ in connection with a proposed special meeting of the REIT (the “Special Meeting”). The Special Meeting is expected to occur on December 29, 2023. The purpose of the Special Meeting is to seek approval from the REIT’s unitholders of a special resolution approving an amendment to the REIT’s Declaration of Trust to remove the restriction in the REIT’s Declaration of Trust, which currently provides that the REIT’s indebtedness cannot exceed 65.0% of gross book value (which is defined as total assets less restricted cash). If the special resolution is passed, the Board intends to adopt operating guidelines, pursuant to which the Board will determine the appropriate financial leverage of the REIT. This proposed change to the Declaration of Trust is intended to provide greater flexibility, while management pursues the Portfolio Realignment Plan and seeks to use the proceeds generated from the Portfolio Realignment Plan to reduce the REIT’s leverage and actively manage the Continuing Portfolio.

Summary of Q3 2023 Results

Conference Call and Presentation Details

Senior management will host a live conference call at 9:00 a.m. ET on Wednesday, November 15, 2023 to discuss the results and ongoing business initiatives of the REIT.

The conference call can be accessed by dialing (416) 764-8658 or 1 (888) 886-7786. Additionally, the conference call will be available via simultaneous audio found at https://viavid.webcasts.com/starthere.jsp?ei=1636214&tp_key=fa2c2e128c . A replay will be accessible until November 29, 2023 via the REIT's website or by dialing (416) 764-8692 or 1 (877) 674-7070 (access code 068482#) approximately two hours after the live event.

About Slate Office REIT (TSX: SOT.UN)

Slate Office REIT is a global owner and operator of high-quality workplace real estate. The REIT owns interests in and operates a portfolio of strategic and well-located real estate assets in North America and Europe. The majority of the REIT’s portfolio is comprised of government and high-quality credit tenants. The REIT acquires quality assets at a discount to replacement cost and creates value for unitholders by applying hands-on asset management strategies to grow rental revenue, extend lease term and increase occupancy. Visit slateofficereit.com to learn more.

About Slate Asset Management

Slate Asset Management is a global alternative investment platform targeting real assets. We focus on fundamentals with the objective of creating long-term value for our investors and partners. Slate's platform has a range of real estate and infrastructure investment strategies, including opportunistic, value add, core plus, and debt investments. We are supported by exceptional people and flexible capital, which enable us to originate and execute on a wide range of compelling investment opportunities. Visit slateam.com to learn more.

Supplemental Information

All interested parties can access Slate Office REIT's Supplemental Information online at slateofficereit.com in the Investors section. These materials are also available on SEDAR or upon request at [email protected] or (416) 644-4264.

Forward Looking Statements

Certain information herein constitutes “forward-looking information” as defined under Canadian securities laws which reflect management’s expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance, business prospects and opportunities of the REIT. The words “plans”, “expects”, “does not expect”, “scheduled”, “estimates”, “intends”, “anticipates”, “does not anticipate”, “projects”, “believes”, or variations of such words and phrases or statements to the effect that certain actions, events or results “may”, “will”, “could”, “would”, “might”, “occur”, “be achieved”, or “continue” and similar expressions identify forward-looking statements. Some of the specific forward-looking statements contained herein include, but are not limited to, statements relating to the impact of the COVID-19 pandemic. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations.

Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable by management as of the date hereof, are inherently subject to significant business, economic and competitive uncertainties and contingencies. When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements. Additional information about risks and uncertainties is contained in the filings of the REIT with securities regulators.

Non-IFRS Measures

We disclose a number of financial measures in this news release that are not measures used under IFRS, including NOI, same property NOI, FFO, Core-FFO, AFFO, FFO payout ratio, Core-FFO payout ratio, AFFO payout ratio, NAV, adjusted EBITDA, net debt to adjusted EBITDA ratio, interest coverage ratio, debt service coverage ratio and LTV ratio, in addition to certain measures on a fully-diluted per unit basis.

• NOI is defined as rental revenue, excluding non-cash straight-line rent and leasing costs amortized to revenue, less property operating costs prior to International Financial Reporting Interpretations Committee 21, Levies ("IFRIC 21") adjustments. Rental revenue for purposes of measuring NOI excludes revenue recorded as a result of determining rent on a straight-line basis and the amortization of leasing costs in revenue for IFRS. Same-property NOI includes those properties owned by the REIT for each of the current period and the relevant comparative period.
• FFO is defined as net income adjusted for certain items including transaction costs, change in fair value of properties, change in fair value of financial instruments, change in fair value of Class B LP units, deferred income taxes, distributions to Class B unitholders, depreciation and IFRIC 21 property tax adjustments.
• Core-FFO is defined as FFO adjusted for the REIT's share of lease payments received for a data centre in Winnipeg, Manitoba (the "Data Centre"), which for IFRS purposes is accounted for as a finance lease.
• AFFO is defined as FFO adjusted for amortization of deferred transaction costs; de-recognition and amortization of mark-to-market ("MTM") adjustments on mortgages refinanced or discharged; adjustments for interest rate subsidies received; recognition of the REIT's share of lease payments received for the Data Centre, which for IFRS purposes, is accounted for as a finance lease; amortization of straight-line rent; and normalized direct leasing and capital costs.
• FFO payout ratio, Core-FFO payout ratio and AFFO payout ratio are defined as aggregate distributions made in respect of units of the REIT and Class B LP units divided by FFO, Core-FFO and AFFO, respectively.
• FFO per unit, Core-FFO per unit and AFFO per unit are defined as FFO, Core-FFO and AFFO divided by the weighted average diluted number of units outstanding, respectively.
• NAV is defined as the aggregate of the carrying value of the REIT's equity, Class B LP units, deferred units, and deferred tax liability.
• Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, fair value gains (losses) from both financial instruments and investment properties, while also excluding non-recurring items such as transaction costs from dispositions, acquisitions or other events.
• Net debt to adjusted EBITDA is defined as the aggregate amount of debt outstanding, less cash on hand, divided by the trailing twelve month adjusted EBITDA.
• Interest coverage ratio is defined as adjusted EBITDA divided by the REIT's interest expense for the period.
• Debt service coverage ratio is defined as adjusted EBITDA divided by the debt service requirements for the period, whereby the debt service requirements reflects amortizing principal repayments and interest expensed during the period. Payments related to defeasance, prepayment penalties, or payments upon discharge of a mortgage are excluded from the calculation.
• LTV ratio is defined as total indebtedness divided by total assets less restricted cash.

We use these measures for a variety of reasons, including measuring performance, managing the business, capital allocation and the assessment of risk. Descriptions of why these non-IFRS measures are useful to investors and how management uses each measure are included in Management’s Discussion and Analysis, which readers should read when evaluating the measures included herein. We believe that providing these performance measures on a supplemental basis to our IFRS results is helpful to investors in assessing the overall performance of our businesses in a manner similar to management. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with IFRS. We caution readers that these non-IFRS financial measures may differ from the calculations disclosed by other businesses, and as a result, may not be comparable to similar measures presented by others.

Calculation and Reconciliation of Non-IFRS Measures

For Further Information Investor Relations Tel: +1 416 644 4264 E-mail: [email protected]

View source version on businesswire.com: https://www.businesswire.com/news/home/20231114188976/en/

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How To Write a Business Plan for Real Estate Investment Trust (REIT) in 9 Steps: Checklist

By alex ryzhkov, resources on real estate investment trust (reit).

• Financial Model
• Business Plan
• Value Proposition
• One-Page Business Plan

Welcome to our blog post on how to write a business plan for a Real Estate Investment Trust (REIT) focused on sustainable and eco-friendly commercial properties in emerging markets. With the growing demand for environmentally conscious investments, the REIT industry has seen significant growth in recent years. According to the latest statistics, the global REIT market reached a value of $1.7 trillion in 2020, and is expected to grow at a CAGR of 3.1% from 2021 to 2028.

Whether you're an experienced investor or just starting out, creating a business plan is crucial for the success of your REIT. It not only helps outline your investment strategy, but also attracts potential investors and lenders. In this article, we will guide you through nine essential steps to write a comprehensive business plan for your sustainable and eco-friendly REIT. So, let's dive in!

Research The Real Estate Market

Before embarking on any real estate investment venture, it is crucial to thoroughly research the market you are planning to enter. This research will provide you with valuable insights and data that will help guide your investment decisions and set realistic expectations for the success of your REIT focused on sustainable and eco-friendly commercial real estate properties in emerging markets.

Here are some important steps to follow when researching the real estate market:

• Evaluate the current state of the real estate market in your target location, including key factors such as property prices, demand and supply dynamics, rental rates, and vacancy rates.
• Closely examine emerging markets and identify the potential for growth and profitability in those areas.
• Research local regulations and policies that could impact your investment, such as zoning laws, building codes, and environmental regulations.
• Consider the economic and demographic trends in the area, including population growth, job opportunities, and income levels, to gauge the demand for commercial real estate properties.
• Analyze any potential risks or challenges associated with investing in the chosen market, such as political instability, currency fluctuations, or legal complexities.
• Connect with local real estate professionals, brokers, and industry experts to gain valuable insights and gather additional information about the market.

Tips for Researching the Real Estate Market:

• Utilize online resources and databases that provide market reports and data on real estate trends.
• Attend industry conferences, seminars, and workshops to network with professionals and stay updated on the latest market developments.
• Join relevant real estate associations or organizations to access industry-specific resources and gain exposure to industry best practices.
• Consider hiring a market research firm or consultant specializing in real estate to conduct a detailed analysis and provide expert insights.

By conducting thorough research on the real estate market, you will be equipped with the necessary knowledge and information to make informed investment decisions, effectively manage risks, and position your REIT for long-term success.

Identify Target Market and Investment Strategy

When starting a real estate investment trust (REIT), it is crucial to define your target market and investment strategy. This step will guide all your future decisions and ensure that you are focused on the right opportunities.

1. Research potential markets: Begin by researching emerging markets that align with your goal of investing in sustainable and eco-friendly commercial real estate properties. Look for regions that have a growing demand for such properties and offer favorable market conditions.

2. Determine your target audience: Identify the specific groups or individuals who are most likely to be interested in your sustainable real estate offerings. This could include environmentally conscious businesses, investors looking for sustainable investment opportunities, or even government entities focusing on eco-friendly initiatives.

3. Define your investment strategy: Develop a clear investment strategy that outlines the types of properties you intend to invest in, such as office buildings, retail spaces, or industrial complexes. Consider factors like location, size, and potential for sustainable renovations or upgrades.

4. Assess the market demand: Evaluate the demand for sustainable properties in your target market. Look at factors such as vacancy rates, rental and occupancy rates, and growth projections for the commercial real estate sector. This analysis will help you determine if there is sufficient demand to support your investment strategy.

• Consider partnering with local real estate professionals or sustainability experts who can provide valuable insights into the target market.
• Stay updated on the latest sustainable real estate trends and regulations to align your investment strategy accordingly.
• Explore opportunities to leverage government incentives or grants for sustainable real estate development in emerging markets.

Conduct A Competitive Analysis

An essential step in creating a solid business plan for a Real Estate Investment Trust (REIT) focused on sustainable and eco-friendly commercial real estate properties in emerging markets is conducting a thorough competitive analysis. This analysis allows you to gain important insights into the competitive landscape and identify the strengths and weaknesses of your potential rivals.

Begin by researching other REITs that operate in the same market or have a similar investment focus. Look into their investment strategies, target markets, and performance track record. This will help you understand their competitive advantages and the key factors that have contributed to their success.

Identify Key Competitors:

Analyze investment strategies:, assess market positioning:, evaluate financial performance:, identify competitive advantages and weaknesses:.

By conducting a comprehensive competitive analysis, you can refine your investment strategy and marketing plan, ensuring that your REIT stands out in the market and offers unique value propositions to potential investors.

Determine Funding Sources And Financial Projections

Securing adequate funding for your real estate investment trust (REIT) is crucial to its success. To determine the funding sources and create accurate financial projections, you need to conduct thorough research and analysis. Here are the steps to follow:

• 1. Assess your capital needs: Evaluate the amount of initial capital required to launch your REIT and support its operations until it generates a stable revenue stream. Consider factors such as property acquisition costs, renovation expenses, marketing expenses, and administrative costs.
• 2. Explore funding options: Look into various funding sources that align with your investment strategy. These can include personal savings, partnerships, bank loans, private investors, and crowdfunding. Analyze the pros and cons of each option to determine the most suitable ones for your REIT.
• 3. Create a financial projection: Develop a detailed financial projection that outlines your REIT's anticipated revenue and expenses over a specified period, typically five to ten years. Consider variables such as rental income, property appreciation, operating expenses, and taxes. This projection will help you determine the feasibility of your investment strategy and attract potential investors.
• 4. Seek expert advice: Consult with financial advisors or real estate professionals specialized in REITs to gain insight into the industry and obtain guidance on financial projections and funding sources. Their expertise can save you from costly mistakes and help you secure the necessary capital for your REIT.
• Consider incorporating sustainability and eco-friendly practices into your financial projections. This can attract socially conscious investors and differentiate your REIT in the market.
• Ensure your financial projections include realistic assumptions about market conditions, rental rates, and vacancy rates to increase their credibility.
• Regularly review and revise your financial projections as market conditions and economic factors change to adjust your funding strategy accordingly.

By determining your funding sources and creating accurate financial projections, you can demonstrate the viability of your REIT to potential investors and stakeholders. This step is essential in securing the necessary capital to launch and grow your sustainable and eco-friendly commercial real estate investment trust.

Develop A Detailed Investment Strategy

Developing a detailed investment strategy is essential for a real estate investment trust (REIT) focused on sustainable and eco-friendly commercial real estate properties in emerging markets. A solid investment strategy will help guide your decision-making process, maximize returns, and mitigate risks.

When developing your investment strategy, consider the following key factors:

• Type of properties: Determine the types of sustainable and eco-friendly commercial real estate properties you want to invest in. This could include office buildings, retail spaces, or industrial properties that meet specific environmental standards.
• Geographic focus: Identify the emerging markets where you believe there is a high demand for sustainable real estate properties. Conduct thorough market research to understand the potential for growth and profitability in these markets.
• Profitability analysis: Analyze the financial viability of potential investment properties. Consider factors such as rental income potential, potential for capital appreciation, operating expenses, and vacancy rates.
• Risk assessment: Assess the potential risks associated with investing in sustainable real estate properties in emerging markets. Consider factors such as political stability, regulatory risks, environmental risks, and market volatility.
• Sustainability criteria: Set clear criteria for what qualifies as a sustainable and eco-friendly property. Consider factors such as energy efficiency, green certifications, water conservation, and waste management practices.

Tips for developing a successful investment strategy:

• Stay updated with the latest industry trends and news related to sustainable real estate investment.
• Network with industry professionals and attend conferences and events to gain insights and knowledge about emerging markets and investment opportunities.
• Consider partnering with experienced professionals or firms that specialize in sustainable real estate investment to leverage their expertise.
• Regularly review and adjust your investment strategy based on market conditions and performance.

Developing a detailed investment strategy requires careful analysis and consideration of various factors. It is crucial to stay informed, conduct thorough research, and adhere to your defined criteria for sustainable and eco-friendly properties. By following a well-thought-out strategy, you can increase the likelihood of success for your REIT focused on investing in sustainable real estate in emerging markets.

Create A Comprehensive Marketing Plan

A comprehensive marketing plan is crucial for the success of your Real Estate Investment Trust (REIT). It will define how you will attract investors, promote your sustainable and eco-friendly commercial real estate properties, and differentiate yourself from competitors in the emerging markets. Here are the key steps to create an effective marketing plan:

• 1. Define your target audience: Clearly identify the individuals or organizations you want to attract as investors for your REIT. Understand their needs, preferences, and motivations to tailor your marketing messages accordingly.
• 2. Establish your unique selling proposition: Determine what sets your REIT apart from others in the market. Highlight the sustainable and eco-friendly aspects of your commercial real estate properties and emphasize the financial benefits of investing in your REIT.
• 3. Develop a branding strategy: Create a strong brand identity for your REIT that aligns with your values of sustainability and eco-friendliness. This includes designing a visually appealing logo, selecting appropriate colors and fonts, and consistent messaging across all marketing materials.
• 4. Choose the right marketing channels: Identify the most effective channels to reach your target audience. This may include online platforms such as websites, social media, and email marketing, as well as traditional methods like print advertisements, direct mail, and industry conferences.
• 5. Craft compelling content: Develop high-quality content that showcases the benefits and value of investing in your REIT. This can include informative articles, case studies, videos, and testimonials from satisfied investors or tenants.
• 6. Utilize digital marketing strategies: Implement search engine optimization (SEO) techniques to improve your website's visibility on search engines. Consider running targeted online advertising campaigns and engaging with your audience through social media platforms.
• 7. Build strategic partnerships: Collaborate with other sustainable and eco-friendly organizations, such as green building associations or environmental nonprofits. This can help expand your reach, gain credibility, and attract like-minded investors.
• 8. Measure and analyze results: Regularly monitor and analyze the effectiveness of your marketing efforts. Utilize analytics tools to track website traffic, engagement rates, and conversion rates. Identify areas for improvement and make necessary adjustments to your marketing strategy.
• 9. Stay updated with industry trends: Continuously stay informed about the latest trends and developments in sustainable and eco-friendly real estate investment. Stay active in industry forums, attend conferences, and network with professionals to ensure your marketing plan remains relevant and effective.

Tips for Creating a Strong Marketing Plan:

• Invest in professional graphic design and branding services to ensure your marketing materials are visually appealing and consistent.
• Regularly update your website and social media profiles with fresh content to keep your audience engaged and informed.
• Consider offering educational resources or hosting webinars to establish yourself as a thought leader in sustainable real estate investing.
• Collaborate with influencers or industry experts to amplify your marketing efforts and expand your reach.
• Seek feedback from potential investors and adjust your marketing approach based on their input and preferences.

Set Goals And Objectives For The REIT

Setting goals and objectives is an essential step in creating a business plan for a Real Estate Investment Trust (REIT). It provides a clear direction and roadmap for the organization, helping to guide decision-making and measure success. Here are some key considerations when setting goals and objectives for your REIT:

• Define financial goals: Start by identifying your desired financial outcomes. This could include targets for annual income, long-term profitability, or return on investment. It is important to ensure these goals align with the mission and vision of the REIT.
• Establish investment objectives: Determine the specific types of real estate properties and investment strategies that align with your REIT's focus on sustainability and eco-friendliness. Outline the criteria for selecting properties, such as location, size, and potential for growth, as well as the desired risk-return profile.
• Set growth targets: Consider how you want your REIT to expand over time. This could include targets for the number of properties in your portfolio, geographic diversification, or the growth of assets under management. Clearly defining these growth objectives will help guide your decision-making and resource allocation.
• Establish operational objectives: Determine how you want to run your REIT on a day-to-day basis. This could involve setting targets for occupancy rates, rental income, property maintenance standards, or investor relations. Consider the operational processes and procedures that will support these objectives.
• Ensure that your goals and objectives are specific, measurable, attainable, relevant, and time-bound (SMART).
• Regularly review and update your goals and objectives to adapt to changes in the market or organizational needs.
• Communicate your goals and objectives to all stakeholders, including investors, employees, and partners, to ensure alignment and accountability.

By setting clear goals and objectives for your REIT, you can provide a strategic framework for decision-making, measure progress, and rally your team towards a common vision. Remember to regularly review and update these goals to ensure they remain aligned with your REIT's evolving needs and market dynamics.

Analyze Potential Risks And Develop Risk Mitigation Strategies

An important aspect of creating a business plan for a Real Estate Investment Trust (REIT) is analyzing potential risks and developing strategies to mitigate those risks. This step is crucial in ensuring the long-term success and sustainability of the REIT.

One of the primary risks to consider is the fluctuation in real estate markets. As an investor in emerging markets, it's essential to conduct a thorough research of the local real estate market to understand its current state and future potential. This will help identify potential risks such as market saturation, economic instability, or regulatory changes that may impact the value and profitability of the REIT's property portfolio.

Another risk is the potential for environmental factors to impact the sustainable and eco-friendly properties. Climate change, natural disasters, and other environmental risks can have a significant impact on the value and operation of real estate assets. It is important to assess these risks and develop strategies to minimize their impact, such as investing in resilient and adaptive properties or obtaining appropriate insurance coverage.

Here are some tips to consider when analyzing potential risks and developing risk mitigation strategies:

Conduct a thorough risk assessment:

Diversify the portfolio:, establish contingency plans:, monitor and review risks regularly:.

By analyzing potential risks and developing robust risk mitigation strategies, the REIT can enhance its ability to weather market fluctuations, protect its sustainable property investments, and deliver consistent returns to its investors.

Outline The Organizational Structure And Management Team

Once you have determined the investment strategy and goals for your Real Estate Investment Trust (REIT), it is crucial to outline the organizational structure and assemble a strong management team to drive the success of your venture. Here are the key steps to outline the organizational structure and select the right team members:

• Define Roles and Responsibilities: Clearly define the roles and responsibilities within your REIT, including positions such as CEO, CFO, COO, and property managers. Each team member should have a well-defined role that aligns with their expertise and contributes to the overall success of the organization.
• Identify Necessary Skills and Expertise: Assess the skills and expertise required to successfully operate a sustainable and eco-friendly commercial real estate REIT in emerging markets. Look for professionals with experience in these areas, including real estate investment, property management, finance, and environmental sustainability.
• Recruit Top Talent: Use various recruitment channels, including industry associations, job portals, and personal networks, to attract top talent for key positions within your REIT. Conduct thorough interviews and background checks to ensure that you select individuals who are not only qualified but also align with your company's values and long-term vision.
• Consider Board of Directors: A strong board of directors can provide valuable guidance and expertise. Consider including professionals with industry knowledge, financial acumen, and strategic vision on your board. Their involvement can enhance the credibility and decision-making processes of your REIT.
• Develop a Succession Plan: It is essential to have a succession plan in place to ensure a smooth transition in case key members of your management team leave or transition to different roles. Identify potential successors and provide them with opportunities for growth and development within the organization.
• Build a diverse and inclusive team to bring different perspectives and ideas to the table.
• Regularly evaluate the performance of your management team and provide feedback for continuous improvement.
• Establish clear communication channels and encourage open dialogue within the organization.
• Invest in professional development and training programs to empower your team members and keep them up-to-date with industry trends.
• Consider partnering with external consultants or advisors who can provide specialized expertise and guidance when needed.

By carefully outlining the organizational structure and assembling a skilled management team, your REIT will be well-positioned to navigate the complexities of sustainable real estate investment in emerging markets and achieve long-term success.

Developing a business plan for a Real Estate Investment Trust (REIT) focused on sustainable and eco-friendly commercial properties in emerging markets requires thorough research, strategic planning, and a comprehensive understanding of the target market. By following these 9 steps, you can create a solid foundation for your REIT and increase your chances of success.

• Research the real estate market and identify opportunities in emerging markets.
• Define your target market and investment strategy, focusing on sustainable and eco-friendly properties.
• Conduct a competitive analysis to understand the market landscape and position your REIT effectively.
• Determine funding sources and create financial projections to attract investors.
• Develop a detailed investment strategy that aligns with your goals and objectives.
• Create a comprehensive marketing plan to attract potential investors and tenants to your sustainable properties.
• Set clear goals and objectives for your REIT to track and measure your progress.
• Analyze potential risks and develop strategies to mitigate them, ensuring long-term success.
• Outline your organizational structure and assemble a capable management team to drive your REIT forward.

By following this checklist and putting in the necessary effort to create a strong business plan, you will be well-prepared to launch and grow your REIT focused on sustainable real estate investments in emerging markets. With a clear vision and strategic approach, you can make a positive impact while generating significant returns for your investors.

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“ We have made steady progress over the last quarter toward shoring up the REIT’s balance sheet, completing over $577 million of refinancings and loan amendments to preserve liquidity and financial flexibility for the REIT,” said Brady Welch, Interim Chief Executive Officer of Slate Office REIT. “ We have also maintained stable portfolio occupancy, supported by our positive leasing momentum at longer lease terms. Through the Portfolio Realignment Plan we are introducing this quarter, we believe we can further improve the REIT’s liquidity, strengthen its balance sheet through reduced debt, and improve portfolio composition to position the REIT for long-term stability and performance.”

For the CEO’s letter to unitholders in respect of the quarter, please follow the link here .

• On August 23, 2023, the REIT announced the refinancing of the mortgage loans on two of its Greater Toronto Area assets, collectively totaling approximately C$127.7 million
• The REIT refinanced an additional C$138.6 million of total debt on two properties located in Mississauga, ON and Chicago, IL
• The REIT also completed an amendment to the terms of its existing revolving credit facility to provide borrowing base availability, providing the REIT with additional liquidity to execute on its Portfolio Realignment Plan
• The REIT has only one remaining debt maturity of C$34.0 million in the balance of 2023 on its Gateway Centre property in Toronto, ON, which it expects to refinance in the fourth quarter
• The REIT completed 277,599 square feet of total leasing in the quarter at a Weighted Average Lease Term (“WALT”) of 5.0 years, which reflects an increase over 4.8 years in the prior quarter; new leases were completed at a WALT of 7.3 years, up from 5.7 years last quarter
• Occupancy remained stable at 78.6%
• Less than 1.0% of the portfolio’s Gross Leasable Area (“GLA”) remains to be renewed in the fourth quarter of 2023, and only 5.5% of the portfolio’s GLA is in discussion for renewal in 2024
• The REIT has a strong leasing pipeline with over 200,000 square feet of potential new deals under discussion with major users
• On September 12, 2023, the REIT’s external manager, Slate Asset Management, announced that it increased its ownership interest in the REIT to over 10.0% of the outstanding units reflecting management’s confidence in the REIT’s capital allocation decisions and strategy

Portfolio Realignment Plan

The REIT’s senior management, together with the Board of Trustees (the “Board”), have considered a number of potential strategies to preserve value for unitholders in the current macroeconomic and office environments, while also ensuring the REIT will be in a stronger position when it emerges from this economic cycle. Management and the Board have determined that the best course of action for unitholders is to execute a Portfolio Realignment Plan that will improve the REIT’s liquidity, strengthen its balance sheet through reduced debt, and improve portfolio composition.

The Portfolio Realignment Plan will see the REIT divest assets to reposition its portfolio for long-term stability and performance, as follows:

i. Disposition Assets: Management and the Board have identified non-core assets in certain Canadian markets for strategic disposition with the intention of realizing capital for the repayment of debt and general liquidity for the REIT (such assets being the “Disposition Assets”). These assets comprise approximately 40.0% of the REIT’s total GLA.

ii. Continuing Portfolio: The Continuing Portfolio will be made up of assets that are similar in terms of their quality, occupancy, tenant profile and cash flow and are located in markets with strong economic drivers and stable office demand. Management and the Board believe these assets, when separated from the remainder of the portfolio, will constitute a more focused and resilient REIT with stronger portfolio KPIs and lower funding requirements and thus intends to retain these assets as long-term holdings.

To execute the Portfolio Realignment Plan, the REIT is undertaking a process to divest the Disposition Assets and expects that the process will continue through to 2025. Management and the Board will actively monitor the Disposition Assets, as well as the Continuing Portfolio, and depending on changes in leasing activity or local market conditions, the classification of these assets is subject to change. The proceeds generated from the sale of the Disposition Assets will be used to reduce the REIT’s leverage and actively manage the Continuing Portfolio.

As at October 31, 2023, approximately two-thirds of the Disposition Assets are either listed for sale, under discussions, or at varying stages of contract negotiation. The remainder of the Disposition Assets will be brought to market in 2024, with consideration for local market conditions. In addition to focusing on the execution of the Portfolio Realignment Plan, the REIT will continue to implement active asset management strategies to preserve the long-term stability and performance of the Continuing Assets.

Management and the Board believe that the Portfolio Realignment Plan will ultimately reconstitute the REIT’s portfolio with assets that have higher cash flow, stronger occupancy, and a higher proportion of government and high-quality credit tenants.

Distribution Suspension

The REIT also announced today that the Board has determined to suspend the REIT's monthly cash distribution. The distribution suspension is expected to provide the REIT with an additional C$10.2 million of cash annually, which will be used for the paydown of debt and the funding of ongoing business operations. The suspension of the REIT’s distribution will be effective beginning with the REIT's distribution that would have otherwise been declared for the month of November 2023 and would have otherwise been payable to unitholders in December 2023. The Board will continue to monitor the REIT’s financial performance, operating environment, and progress with its Portfolio Realignment Plan to determine when it is appropriate to reinstate a regular cash distribution.

Declaration of Trust Amendment

On November 13, 2023, the REIT filed a notice of meeting and record date on SEDAR+ in connection with a proposed special meeting of the REIT (the “Special Meeting”). The Special Meeting is expected to occur on December 29, 2023. The purpose of the Special Meeting is to seek approval from the REIT’s unitholders of a special resolution approving an amendment to the REIT’s Declaration of Trust to remove the restriction in the REIT’s Declaration of Trust, which currently provides that the REIT’s indebtedness cannot exceed 65.0% of gross book value (which is defined as total assets less restricted cash). If the special resolution is passed, the Board intends to adopt operating guidelines, pursuant to which the Board will determine the appropriate financial leverage of the REIT. This proposed change to the Declaration of Trust is intended to provide greater flexibility, while management pursues the Portfolio Realignment Plan and seeks to use the proceeds generated from the Portfolio Realignment Plan to reduce the REIT’s leverage and actively manage the Continuing Portfolio.

Summary of Q3 2023 Results

Conference Call and Presentation Details

Senior management will host a live conference call at 9:00 a.m. ET on Wednesday, November 15, 2023 to discuss the results and ongoing business initiatives of the REIT.

The conference call can be accessed by dialing (416) 764-8658 or 1 (888) 886-7786. Additionally, the conference call will be available via simultaneous audio found at https://viavid.webcasts.com/starthere.jsp?ei=1636214&tp_key=fa2c2e128c . A replay will be accessible until November 29, 2023 via the REIT's website or by dialing (416) 764-8692 or 1 (877) 674-7070 (access code 068482#) approximately two hours after the live event.

About Slate Office REIT (TSX: SOT.UN)

Slate Office REIT is a global owner and operator of high-quality workplace real estate. The REIT owns interests in and operates a portfolio of strategic and well-located real estate assets in North America and Europe. The majority of the REIT’s portfolio is comprised of government and high-quality credit tenants. The REIT acquires quality assets at a discount to replacement cost and creates value for unitholders by applying hands-on asset management strategies to grow rental revenue, extend lease term and increase occupancy. Visit slateofficereit.com to learn more.

About Slate Asset Management

Slate Asset Management is a global alternative investment platform targeting real assets. We focus on fundamentals with the objective of creating long-term value for our investors and partners. Slate's platform has a range of real estate and infrastructure investment strategies, including opportunistic, value add, core plus, and debt investments. We are supported by exceptional people and flexible capital, which enable us to originate and execute on a wide range of compelling investment opportunities. Visit slateam.com to learn more.

Supplemental Information

All interested parties can access Slate Office REIT's Supplemental Information online at slateofficereit.com in the Investors section. These materials are also available on SEDAR or upon request at [email protected] or (416) 644-4264.

Forward Looking Statements

Certain information herein constitutes “forward-looking information” as defined under Canadian securities laws which reflect management’s expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance, business prospects and opportunities of the REIT. The words “plans”, “expects”, “does not expect”, “scheduled”, “estimates”, “intends”, “anticipates”, “does not anticipate”, “projects”, “believes”, or variations of such words and phrases or statements to the effect that certain actions, events or results “may”, “will”, “could”, “would”, “might”, “occur”, “be achieved”, or “continue” and similar expressions identify forward-looking statements. Some of the specific forward-looking statements contained herein include, but are not limited to, statements relating to the impact of the COVID-19 pandemic. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations.

Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable by management as of the date hereof, are inherently subject to significant business, economic and competitive uncertainties and contingencies. When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements. Additional information about risks and uncertainties is contained in the filings of the REIT with securities regulators.

Non-IFRS Measures

We disclose a number of financial measures in this news release that are not measures used under IFRS, including NOI, same property NOI, FFO, Core-FFO, AFFO, FFO payout ratio, Core-FFO payout ratio, AFFO payout ratio, NAV, adjusted EBITDA, net debt to adjusted EBITDA ratio, interest coverage ratio, debt service coverage ratio and LTV ratio, in addition to certain measures on a fully-diluted per unit basis.

• NOI is defined as rental revenue, excluding non-cash straight-line rent and leasing costs amortized to revenue, less property operating costs prior to International Financial Reporting Interpretations Committee 21, Levies ("IFRIC 21") adjustments. Rental revenue for purposes of measuring NOI excludes revenue recorded as a result of determining rent on a straight-line basis and the amortization of leasing costs in revenue for IFRS. Same-property NOI includes those properties owned by the REIT for each of the current period and the relevant comparative period.
• FFO is defined as net income adjusted for certain items including transaction costs, change in fair value of properties, change in fair value of financial instruments, change in fair value of Class B LP units, deferred income taxes, distributions to Class B unitholders, depreciation and IFRIC 21 property tax adjustments.
• Core-FFO is defined as FFO adjusted for the REIT's share of lease payments received for a data centre in Winnipeg, Manitoba (the "Data Centre"), which for IFRS purposes is accounted for as a finance lease.
• AFFO is defined as FFO adjusted for amortization of deferred transaction costs; de-recognition and amortization of mark-to-market ("MTM") adjustments on mortgages refinanced or discharged; adjustments for interest rate subsidies received; recognition of the REIT's share of lease payments received for the Data Centre, which for IFRS purposes, is accounted for as a finance lease; amortization of straight-line rent; and normalized direct leasing and capital costs.
• FFO payout ratio, Core-FFO payout ratio and AFFO payout ratio are defined as aggregate distributions made in respect of units of the REIT and Class B LP units divided by FFO, Core-FFO and AFFO, respectively.
• FFO per unit, Core-FFO per unit and AFFO per unit are defined as FFO, Core-FFO and AFFO divided by the weighted average diluted number of units outstanding, respectively.
• NAV is defined as the aggregate of the carrying value of the REIT's equity, Class B LP units, deferred units, and deferred tax liability.
• Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation, fair value gains (losses) from both financial instruments and investment properties, while also excluding non-recurring items such as transaction costs from dispositions, acquisitions or other events.
• Net debt to adjusted EBITDA is defined as the aggregate amount of debt outstanding, less cash on hand, divided by the trailing twelve month adjusted EBITDA.
• Interest coverage ratio is defined as adjusted EBITDA divided by the REIT's interest expense for the period.
• Debt service coverage ratio is defined as adjusted EBITDA divided by the debt service requirements for the period, whereby the debt service requirements reflects amortizing principal repayments and interest expensed during the period. Payments related to defeasance, prepayment penalties, or payments upon discharge of a mortgage are excluded from the calculation.
• LTV ratio is defined as total indebtedness divided by total assets less restricted cash.

We use these measures for a variety of reasons, including measuring performance, managing the business, capital allocation and the assessment of risk. Descriptions of why these non-IFRS measures are useful to investors and how management uses each measure are included in Management’s Discussion and Analysis, which readers should read when evaluating the measures included herein. We believe that providing these performance measures on a supplemental basis to our IFRS results is helpful to investors in assessing the overall performance of our businesses in a manner similar to management. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with IFRS. We caution readers that these non-IFRS financial measures may differ from the calculations disclosed by other businesses, and as a result, may not be comparable to similar measures presented by others.

Calculation and Reconciliation of Non-IFRS Measures

For Further Information Investor Relations Tel: +1 416 644 4264 E-mail: [email protected]

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Boston Properties Releases Robust Health Security Strategic Plan

Owen Thomas, CEO of Boston Properties (NYSE: BXP), participated in a video interview in conjunction with Nareit’s REITweek: Virtual Investor Conference (held June 2-4).

Thomas said that because it was clear to Boston Properties at the outset of the pandemic that workers would eventually return to the office, the REIT began efforts on a robust health security strategic plan early into quarantine. The company formed a task force that included representatives from all Boston Properties departments and regions as well as external medical experts.

“Dr. Joseph Allen from Harvard’s School of Public Health is part of our committee because whatever solutions we came up with [for] customers, we wanted them grounded in science,” Thomas said.

He added that the resulting plan, shared with customers as well as externally on its website, highlights the high-level reopening issues Boston Properties will be dealing with post-pandemic, including cleaning and disinfecting of spaces; air recharging and filtering; spacing in common areas like lobbies and elevators; the importance of health screenings and PPE; and communication with customers.

Thomas said that two of the biggest changes he sees all office buildings making post-pandemic is an increased focus on healthy building policies surrounding light and air, and de-densification. He also discussed the regional differences that Boston Properties sees among its five markets.

“A big differentiator is going to be public transportation,” Thomas said. “[Workers] are going to feel comfortable in their office space, but they’re going to feel less comfortable getting to work.”

Thomas also noted that due to the pandemic, the U.S. is now in a recession, but that it will be a short-term event.

“I’m confident that the U.S. economy will recover and we’ll be back to a more typical growth environment [and] rents will come back,” he said.

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What's a reit.

REITs, or real estate investment trusts, are companies that own or finance income-producing real estate across a range of property sectors. These real estate companies have to meet a number of requirements to qualify as REITs. Most REITs trade on major stock exchanges, and they offer a number of benefits to investors.

Why Invest in REITs

REITs historically have delivered competitive total returns, based on high, steady dividend income and long-term capital appreciation. Their comparatively low correlation with other assets also makes them an excellent portfolio diversifier that can help reduce overall portfolio risk and increase returns. These are the characteristics of real estate investment.

About Nareit

Nareit serves as the worldwide representative voice for REITs and real estate companies with an interest in U.S. real estate. Nareit’s members are REITs and other real estate companies throughout the world that own, operate, and finance income-producing real estate, as well as those firms and individuals who advise, study, and service those businesses.

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Slate Office REIT (SLTTF) Q3 2023 Earnings Call Transcript

Slate Office REIT ( OTC:SLTTF ) Q3 2023 Earnings Conference Call November 15, 2023 9:00 AM ET

Company Participants

Paul Wolanski - Senior Vice President, National Sales and IR

Brady Welch - Interim Chief Executive Officer

Robert Armstrong - Interim Chief Financial Officer

Evan Meister - Managing Director

Sarah Jane O'Shea - Vice President

Andrew Broad - Vice President

Jeremy Kaupp - Vice President

Conference Call Participants

Jonathan Kelcher - TD Cowen

Sairam Srinivas - Cormark Securities

Gaurav Mathur - Laurentian Bank

Sumayya Syed - CIBC

Good morning, ladies and gentlemen. And welcome to the Slate Office REIT Third Quarter 2023 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions]

This call is being recorded on Wednesday, November 15, 2023. I would now like to turn the conference over to Paul Wolanski, Senior Vice President, National Sales and Investor Relations. Please go ahead.

Paul Wolanski

Thank you, Operator, and good morning, everyone. Welcome to the Q3 2023 conference call for Slate Office REIT. I am joined this morning by Brady Welch, Interim Chief Executive Officer; Robert Armstrong, Interim Chief Financial Officer; Evan Meister, Managing Director; Sarah Jane O’Shea, Vice President; Andrew Broad, Vice President; and Jeremy Kaupp, Vice President.

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 disclosures, including our Q3 2023 Investor Update, which is now available.

I will now hand over the call to Brady Welch for opening remarks.

Brady Welch

Thank you, Paul, and hello, everyone. First, I’d like to start by recognizing and thanking our team for all their efforts over the quarter. We accomplished a lot. We’re operating in a challenging macroeconomic environment.

Interest rates remain elevated, we’re dealing with tighter credit conditions and different regions and subsectors of office real estate are recovering at varying rates from the impacts of the lockdowns.

Through all of this, our team has been working diligently to position our business for strength and stability. The team and the Board are focused on improving the REIT’s liquidity and strengthening our balance sheet. We have made positive strides towards that objective in the last few months.

We refinanced or amended over $577 million of debt, which is nearly half of the REIT’s total debt stack. We are currently have only one remaining maturity in the balance of 2023, a $34 million loan that we expect to refinance in Q4.

We also announced yesterday the Board’s decision to suspend the REIT’s monthly cash distribution. The Board believes its decision will enable the REIT to, one, further preserve capital, two, reduce leverage, and three, ensure the REIT will be in a stronger financial position when we emerge from this economic cycle.

On the operational side, we continue to actively lease vacancies in all markets and are maintaining a stable portfolio occupancy. We completed over 277,000 square feet of total leasing in the quarter at improved rental rates, strong leasing spreads and longer lease terms. Looking ahead, less than 1% of the portfolios GLA remained to be renewed in Q4.

Finally, we are introducing a Portfolio Realignment Plan to reposition the REIT for the long-term. This plan will see the REIT divest non-core assets in certain Canadian markets that are not strategic for the REIT in the long-term. Proceeds from the sale of these assets will go towards repayment of the debt and general liquidity of the REIT’s business operations.

Looking ahead, we want to own high quality assets with strong occupancies, tenants and cash flow and markets with economic tailwinds and stable office demand. We believe the Portfolio Realignment Plan we are introducing will -- not only improve the REIT’s balance sheet and liquidity, but enhance our portfolio composition, resulting in a more focused and resilient REIT.

We continue to have conviction in the value of our office real estate and we are encouraged to see global organization launching return to office mandates and employees spending more time in the office.

On behalf of the Slate Office REIT team and the Board, I’d like to thank the investor community for their continued support.

And I’ll now hand it over for questions.

Question-and-Answer Session

Thank you, ladies and gentlemen. [Operator Instructions] Your first question comes from Jonathan Kelcher with TD Cowen. Please go ahead.

Jonathan Kelcher

Thanks. Good morning.

Good morning, Jonathan.

The first question on the sales that you guys are plan -- actually a couple of questions on the sales you guys are planning to undertake, says, 40% of GLA. What would that roughly be in terms of Q3 fair value.

Yeah. We could get back to you on the exact IFRS component of that. I don’t have that on the top. I don’t have, Bobby, if you do.

Robert Armstrong

Yeah. Jonathan, it’s Bobby Armstrong here. It’s pretty close to around 40% of the total plus or minus a few percentage points. The reason we haven’t gone out and provided a specific dollar number is because we’re in the market. I think we’re trying to ascertain as we go and test the market where we can get liquidity for assets and where we can get the best price per pound for the portfolio.

So, overall, it’s been more of a how do we approach and delever as opposed to specific assets. It’s going to be really kind of working through the next year or two be able to accomplish that. So we wanted to provide a target as far as portfolio size as opposed to a specific dollar figure.

Yeah. It’s more strategic, Jonathan.

Okay. And do you -- would you guys have, like your goal is obviously to reduce leverage, but do you have a target that you’re willing to put out there of where you want to get to either on debt-to-EBITDA or gross book value?

We don’t have a specific target other than, say, it’s less than is now. We’d love to get down to where the 60% level would be in the current market. I think the challenge is that, we don’t necessarily control what the component of that element is. What we want to get down is to have a reasonable approach with our lenders, where we continue to have support. They’re continuing to provide ample liquidity to continue our operations. But that’s really been the goal. Yeah.

Okay. And then you didn’t talk about share repurchases with some of the liquidity you’re going to generate. But what about -- what are your thoughts on buying back parts of your 9% convert?

Yeah. I think everything’s on the table. We take a look at all those things in terms of allocating the REITs capital. We discuss all those options with the Board and it is an allocation of capital. What we feel is the best use of that capital. Right now our focus, as I said, is, is to reduce leverage and create liquidity for the REIT.

Yeah. And I would just add, I think, on a buyback program and we did talk about that internally. The sole and primary goal is the reduction of leverage and increasing liquidity for the REIT. I think the math pencils out very well from a purchase -- repurchase program of units. The convertible debentures is not something we’re looking at right now, but on the unit piece, it’s just not something we’re interested in at this point in time.

Okay. Thanks. I’ll turn it back.

Thanks, Jonathan.

Your next question comes from Sairam Srinivas with Cormark Securities. Please go ahead.

Sairam Srinivas

Thank you, Operator. Good morning, guys.

Good morning.

Just going by the dispositions you guys have been working on so far are the discussions you’ve been holding so far? Can you give us some color on the kind of buyers you’re seeing out there for these assets?

Yeah. I mean, in today’s market, as you know, I think, it’s no surprise, the constraints of debt financing for office is real and the interest is really coming from private, locals, people that can close on a bite size deal.

As you can see in the broader global market, the larger transactions are far and few between because of the lack of debt capital out there. But the smaller bite size deals and the local privates are the ones that are buying right now.

That makes sense. And probably just revisiting what’s happened through the year and the G2S2, etcetera. Has there been a broad discussion from their perspective in terms of their interest in the portfolio or has there been any discussions on that side?

Could you repeat the question? I could not -- are you talking about G2S2’s interest?

Yeah. I mean just going back, like, when G2S2 was prior to being on the Board, they were -- they ran an activist mandate and looking at it from that perspective, have they probably come around with -- and at that point of time, they’d expressed some interest in some of the assets of the portfolio, but is that an option that could be on the table perhaps?

Yeah. I mean, I can’t answer for G2S2 and we are going through a process. Obviously, G2S2 has a representative on the Board and is fully aware of our strategy and is aware of what the Board is approving and direction. But properties are out that we’re going to go and we’re going to get the best and highest price that we can from the market. And if they are interested, then they will go in to that analysis.

Fair point. And my last question is around the change in terms of the credit facility or essentially the amendment of term there. I know the covenant has been brought down to, I mean, the debt cap has been lifted to 70% until March 24th and 65% after that. Can you run us through the thought process behind over there as to, like, is the aim to kind of get it -- get the debt rapidly down through dispositions over the next two quarters, essentially, like, through Q4 and Q1 next year?

We would hope so. The thought process to answer your question specifically was, obviously, given where we’ve repriced our portfolio this quarter, the loan-to-value is over that threshold. So, we’re appreciative of our banking syndicate working with us very constructively to move forward on that point.

But what we have communicated broadly to them and what we’re communicating to the market is that, we want to our first goal is to execute on our disposition and Portfolio Realignment Plan for the purpose of raising capital to repay debt and we’re hoping that that reduces leverage to a more appropriate level that’s acceptable and continues to have the support of our banking partners. But that would be our goal to try to get to that point by that date at Q2.

All right. Thanks for the color, guys. I’ll turn it back.

[Operator Instructions] Your next question comes from Gaurav Mathur with Laurentian Bank. Please go ahead.

Gaurav Mathur

Thank you, and good morning, everyone. Just first question on the fact that around this time last year, you had initiated a strategic review and now we’re talking about disposition program or Portfolio Realignment Program. Could you talk us through the line of thinking about what’s really changed from then versus now?

Yeah. I mean, I’ll start out. Listen, the world has changed immensely over the last 12 months. So I think anyone who’s in this space that you need to adapt to the market. Yes, there was a strategic review that the independent trustees of the Board engaged and hired Bank of Montreal to do that. But then as the world has experienced elevated and I say rapidly increasing, I mean, it’s still low on a historic level, don’t get me wrong on interest rates, but it’s moved quickly. You need to adapt your business model and plan accordingly. So I think that’s what’s happening here. It’s the Board considering what’s going on in the market and what the best thing is for the REIT and for the unitholders.

Yeah. And the only color I would add to that, I think, Brady is spot on that the capital markets and the investment interest around office has obviously changed. I think it’s important to note what -- excuse me, what hasn’t changed and what continues to be the same is that, the underlying portfolio, we’ve actually been very, very pleased with the performance of that in this market. Obviously, there’s a lot of negativity around office.

But what we’re seeing for our portfolio is we’ve got occupancy stabilized. We’ve got a great pipeline of upcoming potential new tenants, which is fantastic. What continues to be a little bit of a headwind is, the interest rate environment at its current elevated levels and the general investment market, but the underlying portfolio, at least for the properties we have and I think downtown real estate in the large urban centers are a little bit different. But we continue to be holding fairly well and we’re quite pleased with the underlying operations of the real estate itself.

Yeah. Yeah. So just to go on, because I think, Bobby, raises a very good point. From an operational point of view, the themes we’re seeing is that there are more people coming back to the office, that businesses are starting to plan now for the future and commit to space across all the regions that we own and operate real estate.

And our real estate is very stable, we don’t have a lot of turnover over the next 12 months and we’ve -- and we’re starting to see more activity. So from things that we can control, we’re very focused on. We can’t control interest rates and then we can’t control the ability of our availability of debt capital that’s out there in the markets.

Okay. Great. Well, thanks for the color. And that does segue into my next question. Now given, as you said, the operational stability is still there in the portfolio. Could you maybe talk us through how you’re thinking about core versus non-core assets?

Yeah. I think at a high level, the way we look at that, which markets do we want to own real estate. In which markets do we believe in the economic drivers where there’s strong GDP growth, there’s strong demand from office users. Those are the markets we want to be in, in long-term. I think we also want to look at assets.

I believe Slate’s done a great job over the past 10 years being able to buy properties, put modest capital in there, fix them up and sell them and make profits today with the world where there’s a little less liquidity, we’re focusing on cash flow and assets with high occupancy, with strong covenant tenants. That’s in markets that we believe in. That’s at a high level. And if those assets don’t fit into that, in our opinion, those are the assets we’ll look to dispose of.

Okay. Great. I guess my last question and just switching gears to the balance sheet here. Your debt-to-gross book value is about 65%. From a lenders perspective, I wonder how they’re thinking about covenants going forward, given that there is a disposition program in place. But these things take time. I’m just wondering if you could provide some color on what the lender thought process here would be.

It’s a great question. I think it’s relevant. I think the world has changed for what the lenders are looking for. We’ve been very fortunate to have great support from our lenders across the Board. And I think you’ve seen that with, we’ve refinanced over the last quarter $0.5 billion worth of debt, which in this market, I’m quite proud of what the team’s accomplished.

But as far as specific covenants and how the world’s changed. I think the debt-to-gross book value is probably relevant, but less relevant than it has been in the past, just given where the investment market has gone.

I think the lenders are more concerned about ability to be repaid, as well as have their -- excuse me, have their debt continue to be serviced, as well as having a partner that they believe in to execute on a plan. I think those are the most important things from their perspective at this point in time.

I think all banks and lenders are probably looking to reduce office exposure as a whole, but that just means that they need to be selective on where they’re putting out capital and who they’re choosing their partners to be and we’ve been fortunate over the last quarter that we’ve made great progress in that respect.

Okay. Thank you for the color, gentlemen. I’ll turn it back to the Operator.

Your next question comes from Sumayya Syed with CIBC. Please go ahead.

Sumayya Syed

Thanks. Good morning. Most of my questions have been answered, but I just wanted to see if you have the loan-to-value handy for the -- for sale assets and if that’s in line with the rest of your portfolio.

Sorry, Sumayya. Can you repeat that again? The long-term value.

The loan-to-value on the for sale assets.

Loan-to-value. Yeah. It’s in around the 60%, 65%...

… range. It’s generally and I think that makes sense, because the 40% target that we’ve highlighted, you start to take out the highs and lows. A number of those assets are on our revolving credit facility, which is in around that range as well. So 60%, 65% is a good range.

Yeah. Yeah. It’s a reflective of the overall portfolio’s LTV.

Right. Okay. Thank you. That’s all I had.

Great. Thank you.

There are no further questions at this time. I will now turn the call over to Paul Wolanski for closing remarks.

Thank you everyone for joining the Q3 2023 conference call for Slate Office REIT. Have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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Slate Office REIT Reports Third Quarter 2023 Results and Announces Portfolio Realignment Plan

Nov 14, 2023, 10:50 pm EST

Slate Office REIT (TSX: SOT.UN) (the "REIT"), an owner and operator of high-quality workplace real estate, reported today financial results and highlights for the three and nine months ended September 30, 2023 and announced a Portfolio Realignment Plan that will reposition the REIT's portfolio for long-term stability and performance and raise liquidity to reduce the REIT's borrowings.

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We aim to grow a portfolio of sustainable grade A developments in progressive areas and sectors prudently selected for its dependable recurring income stream and competitive returns.

Positioned for Steady Growth

Filinvest REIT Corp. (FILRT) is a real estate investment trust backed by Filinvest Land, Inc. (FLI), one of the largest property developers in the Philippines with an established portfolio of residential, office, retail and industrial developments around the country. FILRT was publicly listed on the Philippine Stock Exchange on 12 August 2021 as the first sustainability-themed REIT. As of 31 December 2022, 34.72% of the company is publicly traded while the balance is owned by its sponsor, FLI.

Its original portfolio consists of 17 Grade A and LEED Gold certified office buildings which include green and sustainability-themed features. With over 300,000 square meters of gross leasable area (GLA), 16 of the buildings are in Northgate Cyberzone in Filinvest City Alabang. Another building is Filinvest Cyberzone Cebu Tower 1 located in the gateway of Cebu IT Park in Lahug, Cebu City.

Rounding up the portfolio is 2.9 hectares of land that is being leased to the owner and operator of Crimson Resort & Spa Boracay, bringing total GLA to over 330,400 square meters.

The company’s growth will be driven by assets that conform to its investment criteria. FILRT’s strategy is to expand in key central business districts in Metro Manila and towards major regional hubs in the Philippines with high and stable occupancy from income-generating grade A real estate properties, and deliver additional value by driving more efficient and sustainable cost of operations.

FILRT operates as a Real Estate Investment Trust in compliance with Republic Act No. 9856, otherwise known as the REIT Act of 2009.

The following video is the President and CEO’s Report for 2022.

The Filrt Advantage

FILREIT is envisioned to be one of the largest providers of modern, world-class office spaces in the Philippines that cater to the needs of global and local businesses looking to optimize efficiency and maximize productivity.

Reputation & Track Record

Backed by Filinvest Land, a trusted and leading full-range property developer in the Philippines with a strong track record in commercial developments

Strategic Locations

Office and commercial properties within Philippine Economic Zone Authority-accredited Northgate Cyberzone in Filinvest City, the first CBD in the Philippines to receive Gold Certification from LEED® v4 for Neighborhood Development Plan

Top Rated Portfolio

Office properties rated Grade A by global real estate services firm JLL, with potential for portfolio expansion through Filinvest Land’s extensive land bank in major business process outsourcing (BPO) hubs

Globally Renowned Tenants​

Reputable tenants and multinational brands from the country’s thriving IT and BPO sector, providing stable cashflows

Strong Organic and Inorganic Growth​

Strong organic and inorganic growth, including from fixed rental escalations (5% average growth annually) and infusion of other properties (315,000 sqm gross leasable area in the pipeline)

Experienced Management​

Accumulated 75 years of experience and industry know-how in property development and management

Fully-operational Grade A office buildings

330,400 sqm

Gross Leasable Area

Prime resort lot in Boracay

Average occupancy rate

As of Dec 31, 2022

About Our Portfolio

FILRT features a lineup of office developments that offers an investment opportunity with a stable yield.

A real estate investment trust (REIT) is a stock corporation established for the purpose of owning income-generating real estate asserts such as apartment buildings, office buildings, hospitals, hotels, resorts, shopping centers, and more. It is a booming opportunity for the investing public.

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How to Become a Better Strategic Thinker

• Rich Horwath

Three core behaviors to cultivate.

A common piece of developmental feedback is the need to move from tactical to strategic thinking. But what does that look like?  The author, who has coached thousands of leaders to help develop their strategic thinking capabilities, has identified three core behaviors to work on: acumen (thinking), allocation (planning), and action (doing).

Having worked with more than a quarter million managers over the past 20 years to sharpen their strategic thinking capabilities, I’ve realized that many leaders with wonderful potential are unfairly branded with the “tactical, not strategic” label, causing their careers to stall out. For far too long, determining whether someone was tactical or strategic has been a subjective guess based on job titles, instinctual hunches, and cherry-picked observations.

• Rich Horwath is the founder and CEO of the Strategic Thinking Institute where he serves leadership teams as a strategy workshop facilitator, executive coach, and strategic advisor. He is a  New York Times  and  Wall Street Journal  bestselling author of seven strategic thinking books, including Strategic: The Skill to Set Direction, Create Advantage, and Achieve Executive Excellence.

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Previous One IT Strategic Plans

A look at our past:.

In-depth IT strategic planning began in the Fall of 2016 with Reimagining IT (ReIT): a months-long process involving the entire One IT community. During this time, the Program Planning Group (PPG) was formed to guide the process and to ensure our priority initiatives aligned with Berkeley's  campus strategic plan . 

Since the successful creation of the initial "ReIT Strategic Plan", a newly constituted PPG continues to oversee our annual IT priority setting process and steward strategic technology projects and related campus initiatives. In Spring 2021 we evolved to reflect the new operational phase of our work and renamed this the One IT Strategic Plan. Every year the One IT Community comes together to revise and incorporate new priority initiatives into our Strategic Plan. 

FY23 One IT Strategic Plan

Fy20 one it strategic plan, fy22 one it strategic plan, fy19 one it strategic plan, fy21 one it strategic plan.

Tesla shares skid early Friday after Musk’s amplification of antisemitic tweet

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FMC Adds New Targets to Growth Plan, Plans Strategic Review of Assets

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By Adriano Marchese

FMC on Friday expanded its strategic growth plan to include new medium- and long-term growth targets, driven by new active ingredients in its R&D pipeline and a strategic review of its assets.

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The Office of Innovation and Technology Strategic Plan is designed to maintain the momentum and focus of OIT over the next several months, throughout the mayoral transition, and beyond. The plan identifies a carefully chosen set of strategies to ensure key operational objectives continue and OIT continues to facilitate critical improvements in its fundamental operations.