Slate Office REIT Reports Second Quarter 2024 Results

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 six months ended June 30, 2024.

To access the REIT's Management Discussion and Analysis (MD&A), please follow the link here.

Highlights

• The REIT completed 381,595 square feet of total leasing in the quarter
  • New deals were completed at 2.1% above average in-place rent, and renewals at 6.7% above expiring rent
  • The REIT has over 389,000 square feet of potential new leases and renewals in the pipeline with high-quality credit tenants in the Greater Toronto Area, Atlantic Canada, and the US, which would add to net operating income beginning in late 2024 and into 2025
  • 2.1% of the portfolio’s Gross Leasable Area (“GLA”) is set to mature in the balance of 2024, with renewal negotiations ongoing
• Made further progress on the REIT’s Portfolio Realignment Plan, completing nearly $50.0 million at share in dispositions as at July 31st, 2024
  • In May, the REIT completed the sale of 84-86 Chain Lake, located in Halifax, NS, for a gross purchase price of $10.4 million, and a Walmart located in Flin Flon, MB, for a gross purchase price of $4.0 million
  • Subsequent to quarter end, the REIT completed the sale of 570 Queen Street in Fredericton, NB, for a gross purchase price of $5.2 million
  • As of July 31st, the REIT has an additional $149.9 million at share in assets under contract, Letter of Intent, or in advanced negotiations, representing 16.3% of the REIT’s GLA
  • Additionally, the REIT is engaged with a number of potential purchasers on assets marketed for sale and the REIT plans to formally launch marketing of assets totaling 0.5 million square feet or approximately 7.0% of the REIT's GLA in the coming weeks
• The REIT revalued its property portfolio as at June 30, which resulted in a $154.4 million negative fair value adjustment in the second quarter as a result of third-party appraisals received, the REIT's own estimates, and property sales

Summary of Q2 2024 Results

Conference Call

Senior management will be foregoing the previously announced live conference call scheduled for 9:00 a.m. ET on Friday, August 9, 2024. The REIT’s financial results and supplemental materials have been filed on SEDAR+ and are also available on the REIT’s website in the Investors section. For any questions related to the REIT’s financial results or ongoing business initiatives, please contact the REIT’s investor relations team at ir@slateam.com or (416) 644-4264.

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. We focus on fundamentals with the objective of creating long-term value for our investors and partners. Slate's platform focuses on four areas of real assets, including real estate equity, real estate credit, real estate securities, and infrastructure. 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, and follow Slate Asset Management on LinkedIn, X (Twitter), and Instagram.

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, tax on gains on disposals of investment properties, 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.

SOT-FR

Calculation and Reconciliation of Non-IFRS Measures

The tables below summarize a calculation of non-IFRS measures based on IFRS financial information.

The calculation of NOI is as follows:

The reconciliation of cash flow from operating activities to FFO, Core-FFO and AFFO is as follows:

The calculation of trailing twelve month adjusted EBITDA is as follows:

The calculation of net debt is as follows:

The calculation of net debt to adjusted EBITDA is as follows:

The interest coverage ratio is calculated as follows:

The following is the calculation of IFRS NAV on a total and per unit basis at June 30, 2024 and December 31, 2023:

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