slate office reit · 2020-07-30 · percentage of portfolio expiring average expiring rent market...
Post on 12-Aug-2020
3 Views
Preview:
TRANSCRIPT
Slate Office REITInvestor UpdateQ2 2020
Slate Office REIT | 2
Slate Office REIT
Pure playNorth American office REIT
High quality assets and tenancies with strong operating histories
Well aligned9.5% ownership interest held by Slate Asset Management
Slate Office REIT | 3
1 Presented at 100% of the building’s gross leasable area, without taking ownership percentage into consideration.
Slate Office REIT
TSX SOT.UN
36 Properties
6.9M Square feet1
$1.7B Total asset value
61.9% Q2/20 AFFO payout ratio
Slate Office REIT | 4
What We Do
Strong track record of realizing gains at net asset value and generating double digit internal rates of return
Focus on Cost Basis
Acquire quality assets at a discount to replacement cost with below market in-place rents
Hands-on Asset Management
Reposition assets, grow rents, extend lease term and increase occupancy to create value
Recycle Capital
Sell fully valued assets and reinvest funds into new attractive opportunities
COVID-19Business Update
Slate Office REIT | 6
COVID-19 Response
Transition to working remotely• Existing IT infrastructure and systems
allowed for smooth transition
Portfolio risk assessment• Engaged with key partners to understand
potential impacts on our portfolio
Portfolio and market tracking• Monitoring government support
available for tenants and performing ongoing liquidity analyses
March April May
Consistent tenant outreach and dialogue
SOT remains committed to ensuring the safety and well-being of our team, tenants and partners
Re-integration planning• Working with partners to prepare for
responsible re-entry and the gradual increase in economic activity
Public market updates• Issued press releases updating key
stakeholders on rent collection
Slate Office REIT | 7
SOT’s cash collections compare favourably across REIT sector averages1
1 Source: NBF as at June 24.
Rent Collection
Slate Office REIT | 8
1 As a percent of total base rent.
High Quality Tenant Base
Quality office portfolio with a diversified tenant roster
Tenant composition1
61%Base rent derived from government and credit rated tenants
10%Exposure to financial industry, the largest exposure to any one industry in the portfolio
Government and Credit Rated Tenants
61%
Other Office Tenants37%
Other Retail Tenants2%
Slate Office REIT | 9
7.3%7.1%
6.7%
4.5%
3.7%3.3%
3.0%
2.3%2.1%
1.9%
CanadianImperial Bank of
Commerce
Bell CanadaEnterprises
SNC-Lavalin Government ofCanada
Thales RailSignallingSolutions
Province of NewBrunswick
Medavie BlueCross
Kraft Canada JohnsonInsurance
Province of NovaScotia
42% of base rent is derived from SOT’s top ten tenants
1 Source: DBRS, Moody’s and S&P.
High Quality Tenant Base
Credit Rating1 AA BBB+ BBB (low) AAA A2 A+ Unrated BB+ A AA-
Industry Financial TelecomPower & Utilities
Government Engineering Government Insurance Manufacturing Financial Government
Operational Update
Slate Office REIT | 11
Proactive Asset Management Strong operating results achieved through the REIT’s strategic and hands-on asset management
9% in-place discount to market rent will continue to drive organic earnings growth
Total Leasing Spreads (New and Renewal)
Total Leasing Activity (New and Renewal)
In-Place vs. Market Rents
225,233
441,222
258,248
158,339
254,409
149,226 124,697
190,894
304,571
103,827
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020Average
14.0%
9.2%6.0%
11.1%
18.5%
23.0%25.4%
13.4%
28.6%
13.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020Average
$15.81
$16.67
$15.46
$16.77
$19.21
7.1%5.2%
13.0%
5.9%
55.6%
$19.80
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
$20.00
$22.00
2020 2021 2022 2023 2024+Percentage of Portfolio Expiring Average Expiring Rent Market Rent
Slate Office REIT | 12
Value Creation Case Study: Maritime Centre
• 24% increase in committed occupancy
• 27% increase in weighted average base rent
• Increased weighted average remaining lease term by 1.5 years
• Expected value upon completion of $130 million ($240 per sq. ft.)
• Gross value creation of $70 million, resulting in an IRR of 30%
• Centrally located office tower in downtown Halifax, Nova Scotia
• Acquired for $60.6 million in June 2015 ($112 per sq. ft.)
• Opportunity to reposition asset through reconstruction of lobby to refresh retail, enhance tenant amenities and add additional parking
• Refinanced the Maritime Centre in April 2020 at a $109 million valuation ($208 per sq. ft.)
• Provides $19.7 million of additional liquidity to finance value-add investments
01 Investment Overview 02 Success to
Date
03 Refinancing 04 Expected Results
Proposed Rendering – Exterior
Proposed Rendering – Interior
The Path Forward
Slate Office REIT | 14
Defensive portfolio with durable cash flows
Liquidity
Growth outlook
• Diversified tenant roster with high credit quality tenants
• Collected 96% to 97% of rent in cash within each month of the second quarter and expect to substantially collect the remaining through short-term deferral agreements
• Current AFFO payout ratio of 62%
• Ample liquidity to fund the ongoing operations of the REIT
• Completed the Maritime Centre refinancing on favourable terms to fund further value-add investment
• Actively managing operating and capital spend
• Monitoring government policies and programs and working with property management partners to maintain safe environments for tenants
• Given the strength of the REIT’s existing portfolio and management team, SOT is well positioned to capitalize on attractive acquisition opportunities post COVID-19
Well Positioned Going Forward
With a defensive portfolio generating durable cash flows and ample liquidity, SOT is well positioned going forward
Additional Information
Slate Office REIT | 16
1 Property under redevelopment.2 Includes a seven-storey office building at 280 Broadway Avenue, a three-storey multi-family residential building located at 70 Smith Street and two parking lots located at 286 Broadway Avenue and 68 Smith Street; excludes occupancy from residential tenants at 70 Smith Street.
Property List
As of June 30, 2020 Property Address Property Name City OwnershipSquare Feet of
GLAOccupancy
U.S. Office
1 20 South Clark Street Chicago, IL 100.0% 381,607 86.6%
2 120 South LaSalle Street Chicago, IL 100.0% 656,033 91.4%
Total U.S. Office 1,037,640 89.6%
GTA Office
3 7030, 7050, 7100 Woodbine Avenue & 55, 85 Idema Road Woodbine & Steeles Corporate Centre Markham, ON 75.0% 359,541 87.1%
4 3000 – 3100 Steeles Avenue East Gateway Centre Markham, ON 75.0% 239,612 91.0%
5 2655 – 2695 North Sheridan Way The Sheridan Exchange Mississauga, ON 75.0% 158,322 85.0%
6 2285 Speakman Drive Mississauga, ON 100.0% 127,419 100.0%
7 2599 Speakman Drive1 Mississauga, ON 100.0% 119,145 15.1%
8 2251 Speakman Drive Mississauga, ON 100.0% 115,580 100.0%
9 1189 Colonel Sam Drive Oshawa, ON 100.0% 103,179 100.0%
10 1 Eva Road Toronto, ON 100.0% 91,963 87.3%
11 185 – 195 The West Mall West Metro Corporate Centre Toronto, ON 75.0% 618,341 91.5%
12 401 – 405 The West Mall Commerce West Toronto, ON 75.0% 412,558 90.6%
13 105 Moatfield Drive Toronto, ON 100.0% 248,981 100.0%
14 95 Moatfield Drive Toronto, ON 100.0% 156,426 100.0%
Total GTA Office 2,751,067 89.2%
Western Office
15 280 Broadway Avenue2 Winnipeg, MB 100.0% 105,341 86.2%
16 114 Garry Street Winnipeg, MB 100.0% 74,246 100.0%
17 1450 Waverley Street Bell MTS Data Centre Winnipeg, MB 100.0% 64,000 100.0%
18 365 Hargrave Street Winnipeg, MB 100.0% 70,719 100.0%
19 1870 Albert Street Saskatchewan Place Regina, SK 100.0% 83,932 73.6%
Total Western Office 398,238 90.8%
Slate Office REIT | 17
1 Includes Delta Brunswick Hotel.
Property List
As of June 30, 2020 Property Address Property Name City OwnershipSquare Feet of
GLAOccupancy
Atlantic Office
20 440 King Street Kings Place Fredericton, NB 100.0% 296,314 89.6%
21 250 King Street Fredericton, NB 100.0% 80,162 100.0%
22 460 Two Nations Crossing Fredericton, NB 100.0% 50,229 100.0%
23 570 Queen Street Fredericton, NB 100.0% 69,137 89.3%
24 644 Main Street Blue Cross Centre Moncton, NB 100.0% 320,154 99.3%
25 81 Albert Street Moncton, NB 100.0% 64,954 100.0%
26 39 King Street1 Brunswick Square Saint John, NB 100.0% 508,118 63.6%
27 4 Herald Avenue Corner Brook, NL 100.0% 73,393 27.5%
28 100 New Gower Street Cabot Place St. John's, NL 100.0% 136,167 99.1%
29 10 Factory Lane The Johnson Building St. John's, NL 100.0% 188,170 100.0%
30 5 Springdale Street Fortis Place St. John's, NL 100.0% 142,973 78.2%
31 140 Water Street TD Place St. John's, NL 100.0% 102,747 71.2%
32 1505 Barrington Street Maritime Centre Halifax, NS 100.0% 528,227 81.9%
33 84 – 86 Chain Lake Drive Halifax, NS 100.0% 77,979 46.5%
Total Atlantic Office 2,638,724 81.9%
Non-Office
34 5404 36th Street SE Doka Building Calgary, AB 100.0% 36,000 100.0%
35 200 Manitoba 10 Walmart Flin Flon Flin Flon, MB 100.0% 63,439 100.0%
36 307 – 311 Airport Road Airport Road Shopping Centre Yellowknife, NWT 100.0% 15,395 100.0%
Total Non-Office 114,834 100.0%
Total Portfolio 6,940,503 86.8%
Slate Office REIT | 18
Analyst Coverage
BMO Capital Markets Jenny Majennys.ma@bmo.com
Echelon Wealth PartnersFrederic Blondeaufblondeau@echelonpartners.com
TD SecuritiesJonathan Kelcherjonathan.kelcher@tdsecurities.com
Canaccord GenuityBrendon Abramsbabrams@cgf.com
National Bank FinancialMatt Kornackmatt.kornack@nbc.ca
Industrial AllianceBrad Sturgesbsturges@iagto.ca
CIBC Capital Markets Chris Coupriechris.couprie@cibc.com
Slate Office REIT | 19
Disclaimer Forward-Looking StatementsThis presentation contains forward-looking information within the meaning of applicable securities laws. These statements include, but are not limited to, statements concerning the REIT’s objectives, its strategies toachieve those objectives, as well as statements with respect to management’s beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performanceor expectations that are not historical facts. Readers should not place undue reliance on any such forward-looking statements. Forward-looking information involves known and unknown risks, uncertainties and otherfactors which may cause the actual results, performance or achievements of the REIT to be materially different from any future results, performance or achievements expressed or implied by the forward-lookinginformation. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained herein. Such forward-looking statements arebased on a number of assumptions that may prove to be incorrect, including, but not limited to, the continued availability of mortgage financing and current interest rates; the extent of competition for properties;assumptions about the markets in which the REIT and its subsidiaries operate; the global and North American economic environment; and changes in governmental regulations or tax laws. Although the forward-looking information contained in this presentation is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-lookingstatements. Certain statements included in this presentation may be considered “financial outlook” for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other thanthis presentation. Except as required by applicable law, the REIT undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Non-IFRS MeasuresThis presentation contains financial measures that do not have a standardized meaning under International Financial Reporting Standards (“IFRS”) as prescribed by the International Accounting Standards Board. SlateOffice uses the following non-IFRS financial measures: Funds from Operations (“FFO”), Adjusted Funds from Operations (“AFFO”), Net Operating Income (“NOI”), and Earnings Before Interest, Taxes, Depreciation andAmortization (“EBITDA”). Management believes that in addition to conventional measures prepared in accordance with IFRS, investors in the real estate industry use these non-IFRS financial measures to evaluate theREIT’s performance and financial condition. Accordingly, these non-IFRS financial measures are intended to provide additional information and should not be considered in isolation or as a substitute for performancemeasures prepared in accordance with IFRS. In addition, they do not have standardized meanings and may not be comparable to measures used by other issuers in the real estate industry or other industries.
Use of EstimatesThe preparation of the REIT financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure ofcontingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Management’s estimates are based on historical experience andother assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates under different assumptions.
Slate Asset Management 121 King Street W, Suite 200Toronto, ON M5H 3T9 slateam.com
top related