Q4 2023 Dream Office Real Estate Investment Trust Earnings Call

Operator: Good afternoon, ladies and gentlemen. Welcome to the Dream Office Suite Q4 2023 conference call on Thursday, February 15. 2020, During this call, Management of Dream Office REIT may make statements containing forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond dream office rates control that could cause actual results to differ materially from those that are disclosed in or implied by such forward locations. Additional information about these assumptions and risks and uncertainties is contained in Dream Office REITs' Filings and Securities Regulations. Class A Real Estate Investment Trust Quinone Race Casino. These filings are also available on Dream Office Reads' website at www.dreamofficereads.com. We will have a question and answer session later in the presentation. If you have any questions, please press star then 1 on your telephone keypad. Your host for today will be Mr. Michael Cooper, Chairman and CEO of Dream Office Real Estate. Cooper, please go ahead.

Good afternoon, ladies and gentlemen, welcome to the Dream Office REIT Q4, 2023 conference call for Thursday February 15th.

24.

During this call management of Creme office suite may make statements containing forward looking information within the meaning of applicable securities legislation forward looking information is based on a number of assumptions and are subject to a number of risks and uncertainties. Many of which are beyond dream office suites control that could cause actual results.

To differ materially from those that are disclosed in or implied by such forward looking information.

Additional information about these assumptions and risks and uncertainties is contained and dream office REIT filings and securities regulators, including its latest annual information form and MD&A.

These filings are also available on Dream office suites website at Www Dot Dream office REIT That's C. A.

Later in the presentation, we will have a question and answer session to queue up for questions. Please press Star then one on your telephone keypad.

Your host for today will be Mr. Michael Cooper to chair and CEO of Creme Office REIT. Mr. Cooper. Please go ahead.

Michael Cooper: Thank you, operator. And good evening, everybody. Today, I'm here with Gord Wadley, our Chief Operating Officer, and Jay Jiang, our CFO. I'm going to say a couple of words about our update tonight, then I'm going to turn it over to Gord and then Jay, and then we'd be happy to answer your questions. I want to start by saying that business continues to go as we've expected for the business plan for 2023. There's been a slight increase in occupancy pretty much every quarter, but barely like a slight increase. We've been achieving our internal budgets and our cash flows, and we've achieved our debt refinancing as planned, so that's all good. Over the last four years, it's been very tough in the office sector. About four years ago, I said, like, next month, it's been four years since... everything shut down because of COVID. And at the time, there was an immediate halt to the use of office space. Um, it's probably been two years since.

Thank you operator, and good evening, everybody did out in here with Oh God.

Gordon wildly, our chief operating officer, and J J <unk> our CFO.

I would say a couple of words about our update Tonight on the general the Gore and then Jay and then we'd be happy to answer your questions.

I wanted to start by saying the business continues to go as we expected for the business plan for 2023.

There's been a slight increase in occupancy pretty much every quarter, but barely like a slight increase.

Achieving our internal budgets and our cash flows and we've achieved our debt refinancing as planned so that's all good.

Over the last four years.

Been very tough in the office sector.

About four years ago exactly next month, it's four years since.

Everything shut down because of Covid and the Guy there was an immediate halt or use of office space.

It's probably been two years since.

Michael Cooper: Public health has been an issue for the use of office space, but it's been a slow recovery since then, and I think we're seeing improvements in the number of people coming downtown. But there's still a tremendous amount of flux in the way people are using office space, businesses are making slow decisions, and, Aside from a very uncertain geopolitical environment, the Canadian economic environment, specifically in the office sector, we're seeing a very uncertain environment. So, together with our board, We decided that given the environment that we're in, retaining cash is valuable. We decided to effectively reduce the distribution and retain about another $18 million a year just to give us more shock absorbers in an uncertain environment. Now on September 6th, we had an Investors Day, and we did say that the way we look at the office rate for three years, we think occupancy will be about the same, and leasing costs will be about the same. And then in the fourth and fifth year, we get slightly better.

Public health has been an issue for the use of office space, but its been a slow recovery since then.

I think we're seeing improvements there and then people coming downtown.

But there's still a tremendous amount of.

Lux blocks at how people are using office space businesses, they're making slow decisions and.

Aside from the very uncertain geopolitical environment.

Our Canadian economic environment.

Pacifically in the office sector, we're seeing a very uncertain environment. So together with our board, we decided that given the environment that we're in retaining cash is valuable.

We decided to effectively.

Reduce the distribution and retained about another $18 million a year just to give us more a shock absorbers environment now in September six we had an investors day and we did say that the way we look at the office REIT is for three years, we think occupancy would be about the same and.

Leasing cost will be about the same and then in the fourth and fifth year, we get slightly better we might end up at the end of five years, which would be the end of 2020 eight.

Michael Cooper: We might end up at the end of five years, which would be the end of 2028, with occupancy of around 93% better than it is now but not as good as pre-COVID, and leasing costs being about the middle between what they were before, and then we'd end up with pretty good values. So in the last six months, you know, we haven't seen any improvements, but even still, we sort of think that. With all the news and all the frustration around the office, it's better to keep cash. So, it's not that things haven't changed. We just think that the board has a responsibility to prudently look at what the best use of capital is. In this case...

You have occupancy of around 93% better than it is now but not as good as pre COVID-19 and leasing costs being about the middle between what they were before and then we would end up with a pretty good value.

So in the last six months, we havent seen improvement, but even still we sort of think that.

Yeah.

With all the news and all the frustration around office, it's better to keep cash. So it's a lot of things that change, we just think that the.

The board has a responsibility to prudent prudently look at what the best use of capital is in this case.

Michael Cooper: Containing capital to have more flexibility in such an uncertain environment is a good idea; distribution policy, the intrinsic value of the company doesn't change. Our view of it is it doesn't go to the value of the company, and in fact, the company is stronger, retaining more cash. We're focused on how we maintain the value and increase the value of the company over the longer term. So we think this is a good long-term decision, and we'd like to see some more improvements in the environment, and see some of that progress to what we talked about on September 6th with increasing occupancy and reducing leasing costs. And we'll be watching that, and as we feel like there's less uncertainty and we're making progress, we'll continue to look at the dividend policy, and hopefully, we'll see an opportunity to raise the distribution as we're more certain about the conditions. So I think that that's where we are. We're going to answer questions, but Gord, do you wanna give us an update on what the operations are like? Yeah, no problem.

Maintaining capital to have more flexibility in such an uncertain environment.

Is a good idea.

Regardless of the distribution policy the intrinsic value of the company doesn't change. So you know our view of it is it's not a.

It doesn't go to the value of the company and in fact, the company is stronger retaining more cash and where we're focused on how do we maintain the value and increase the value of the company over the longer term. So we think this is a good long term decision and we'd.

We'd like to see some more improvement in the environment.

See some of that progress to what we talked about on September six with increasing occupancy and.

Reducing leasing cost and we'll be watching that and as we feel like there's less uncertainty and we're making progress. We will continue to look at the dividend policy and hopefully.

We will see an opportunity to raise the distributions as were more certain about the conditions.

So I think that that's where we're at we're going to answer your questions, but the God you only give us an update on what the operations are like.

Yes, no problem, Thanks, Michael and hope everybody on the line is doing well, it's good to speak to you speak to everyone today.

Gord Wadley: Thanks, Michael, and I hope everybody on the line is doing well. It's good to speak to everyone today. I'd start by saying none of us are immune to the headlines, and nothing's been more polarized in the impact of value and negative sentiment around non-core markets, specifically the Class B and C office market. However, one thing is undisputable, and that's that Toronto downtown is regarded as the best office market in Canada for occupancy and rents due to a very talented workforce, a vibrant urban lifestyle with some of the best retailers nationally We own and manage nearly 85% of our assets from a value perspective in central and irreplaceable locations in downtown Toronto.

I'd start by saying none of us are immune to the headlines and nothing has been more polarizing and the impact of value and negative sentiment around noncore markets, specifically the class B and C office market.

However, one thing is undisputable.

Toronto downtown is regarded as the best office market in Canada for occupancy and rents due to a very talented workforce a vibrant urban lifestyle with some of the best retailers nationally, making it an attractive destination for business is seeking a prime location and competitive rates by any global standard.

We own and manage nearly 85% of our assets from a value perspective in central and irreplaceable locations in downtown Toronto as such 2023 was our most active year of leasing for Toronto with both direct and sublet space being absorbed market wide.

Gord Wadley: As such, 2023 was our most active year of leasing for Toronto with both direct and sublet space being absorbed market-wide. I'm pleased to say that we brokered approximately 800,000 square feet of deals in 2023. This compares to 659,000 square feet completed in 2022. But of equal importance, which I want to highlight, rents held up very well across the board. Net rents have continued to be strong at around $30 to $35 and in line with our business plan. This resulted in a spread of about 20% against expiring rent. However, as discussed in our last conference call, higher material and labor costs combined with higher commissions have continued to compress NERs, and we're averaging about $17 to $18 a square foot.

I am pleased to say that we paid approximately 800000 square feet of deals in 2023.

This compares to 659000 square feet completed in 2022.

But of equal importance, but I want to highlight as rents held up very well across the board net rents have continued to be strong at around 30% to $35 and in line with our business plan.

This resulted in the spread of about 20% against expiring rents.

However, as discussed in our last conference call higher material and labor costs combined with higher commissions has continued to compress any ours and we're averaging about 17 to $18 a square foot.

Gord Wadley: Ultimately, we completed approximately just over 100 deals this year, which half were renewals and half new deals across the portfolio. For some additional context, we did one transaction over 190,000 feet, and we did six deals over 25,000 feet. These key indicators support our optimism that deals of scale are getting done, and more importantly, companies are making major commitments to their office accommodations coupled with the reality that our rates have been very resilient to our guidance. It's a real testament to the quality and location of the buildings we own, the efforts of our operating team, and ultimately staying true to our asset and capital strategy, which I'll touch on a bit shortly. Despite having a strong year of leasing in 2023, we're being very cautiously optimistic for 2024 with 299,000 square feet already committed versus the 590,000 square feet of approximate square footage expiring. Of the 590,000 square feet of expiring space, only one asset makes up 200,000 square feet, and that's 74 Victoria.

Ultimately, we completed approximately just over 100 deals this year, which have were renewals and half new deals across the portfolio for.

For some additional context, we did one transaction over 190000 feet and we did six deals over 25000 square feet. These.

These key indicators support our optimism that deals of scale that are getting done and more importantly companies are making major commitments to their office accommodations, coupled with the reality that our rates have been very resilient to our guidance.

It's a real testament to the quality and location of the buildings, we own the efforts of our operating team and ultimately staying true to our asset and capital strategy, which I'll touch on a bit shortly.

Despite having a strong year of leasing in 2023, we're being very cautiously optimistic for 2024 with 299000 square feet already committed versus the 590000 square feet approximate square footage expiring.

590000 square feet expiring only one asset makes up 200000 square feet in that 74, Victoria.

Gord Wadley: The team is actively working on over 150,000 square feet of active prospects with varying stages of negotiation in the court and will report more on these in the coming quarters. We feel we're very well positioned to meet our guidance and hope to see additional improvements as the year goes on. As a management team, we're focused on liquidity, given that the cost to improve suites has dramatically grown over the last four years. Gone are the days when you could do carpet and paint and ceiling tiles.

The team is actively working on over 150000 square feet of active prospects with various stages of negotiation in the core and we'll report more on these in coming quarters, we feel we're very well positioned to meet our guidance and hope to see additional improvements as the year goes on.

As a management team, we're focused on liquidity given that the cost to improve sweeps is dramatically grown over the last four years.

Gone are the days when you could do carpet and paint ceiling tiles tenants are dramatically more sophisticated and expectations for a suite.

Gord Wadley: Tenants are dramatically more sophisticated, and expectations for a suite have now been replaced by HR and facility managers. Front and center is HVAC quality circulation, tech hubs, and smart building software. All of these cost drivers have seen market NERs compressed on average by about 20%. This is coinciding with material and soft cost increases, as well as some supply chain and procurement challenges to deliver. I am very proud of our team to date as they have helped mitigate costs. We often self-perform the work and have consistently delivered on time and on budget. This reputation has been a real catalyst in helping us win deals and outperform the market. Covenant is key.

<unk> have now been replaced on tours by HR and facility managers front and center as HVAC quality circulation tech hubs in the smart building software.

All of these cost drivers have seen market any RSP compressed on average by about 20%.

This coinciding with material and soft cost increases as well as some supply chain and procurement challenges to deliver.

I am very proud of our team to date as to help mitigate costs, we often self perform that work and have consistently delivered on time and on budget. This reputation has been a real catalyst in helping us win deals and outperformed the market.

Covenant as key much like our management team lenders are very actively reviewing their office loan exposure and theyre, becoming much more selective based on properties location and quality. In addition to the covenant of the borrowers.

Gord Wadley: Much like our management team, lenders are very actively reviewing their office loan exposure, and they're becoming much more selective based on properties, location, and quality, in addition to the covenant of the borrower. They're evaluating tenant profiles and leases carefully, and loan sizes are getting upsized more conservatively. Getting back to my previous point on any air compression, tenants, too, are much more sophisticated in their demands and are acutely aware of their own balance sheet and liquidity position. Hence many are trying to push traditional costs on landlords on transactions to induce their tenancy, and this is having a real impact in a high-interest environment.

They're evaluating tenant profiles and leases carefully and loan sizes are more getting upsized more conservatively.

Getting back to my previous point on any of our compression tenants two are much more sophisticated in their demands and are acutely aware of their own balance sheet and liquidity position and many are trying to push traditional cost with landlords on transactions to reduce their tenancy and this is having a real impact and a high interest environment.

Gord Wadley: Jay can touch on this a little bit more, but in light of these challenges, we've proactively addressed most of our near-term debt maturities and put hedges in place to reduce our floating interest rate exposure. Our Downtown Toronto Committed Occupancy continues to be very resilient, and our pipeline remains strong, which will continue to support healthy cash flows at our building. Covenant wise, we have large commitments with the federal, provincial, and municipal tenants. We continue to work hard, improve, and leverage our stronger lender relationships to ensure that the balance sheet is well protected through what we believe will be a tough trough in the office lending market. Being honest, I think our reputation, ability to manage, coupled with our well-located assets, has helped us secure some of the best covenant tenants for arguably some of the biggest deals in a very competitive sub market. We're very pleased to announce this quarter that we've been able to secure DBRS Morningstar for a very large renewal and expansion at Adelaide Place, as well as deals with BFL Insurance. Paramount Films' new office at 36 Toronto.

Jay can touch on this a little bit more but in light of these challenges we have proactively addressed most of our near term debt maturities and put hedges in place to reduce our floating interest rate exposure.

Our downtown Toronto committed occupancy continues to be very resilient and our pipeline remains strong which will continue to support healthy cash flows at our buildings.

Covenant wise, we have large commitments with the federal provincial and municipal tenants, we continue to work hard improve and leverage our stronger lender relationships to ensure that the balance sheet is well protected through what we believe will be a tough trough in the office lending market.

Being honest I think our reputation ability to manage coupled with our well located assets has helped us secure some of the best covenant tenants arguably some of the biggest deals in a very competitive market. We're very pleased to announce this quarter that we've been able to secure <unk> Morningstar for a very large renewal and expansion at Adelaide place.

As well as deals with BSL insurance and Paramount films, New office at 36 Toronto.

Gord Wadley: This is on top of doing ICICI Bank's new headquarters at 366 Bay and doing Citco Bank's new National Head Office at 20 Toronto. All on top of securing IO for their largest renewal of the year at 438 University. With our Bay Street collection now finished, the optimism in our offering is further supported by the 40 deals that we did in that specific project in 2023, with strong rents averaging over $38 a square foot on average. But keep in mind that we're replacing rents in the low 20s and high teens on new space. This is a new class of boutique trophy assets that don't compete with large towers.

This is on top of doing IC ICI Bank, New headquarters at $3 66 day, and doing CCAR banks, New National head office at 20 Toronto.

All on top of securing Io for their largest renewal of the year at 438 University.

With our phase III collection now finished the optimism on our offering is further supported by the 40 deals that we did in that specific project in 2023 with strong rents averaging over $30 $38 a square foot on average.

Keep in mind that we're replacing rents in the low twenties and high teens on new space.

This is a new class of boutique trophy assets that don't compete with large towers, they're low rise the walkable. They both small private floor plates, all new base building systems and they have a level of luxury finish that's very unique to our market.

Gord Wadley: They're low rise, they're walkable, they build small private floor plates, all new base building systems, and they have a level of luxury finish that's very unique to our market. In addition to the Bay Street Collection, in our current pipeline, all across the country, we're actively negotiating and trading paper on about 55 deals totaling just over 400,000 square feet. This is both in Toronto and other markets. There's a lot of press and focus around shadow vacancy in the state of the subleased market in Toronto and Canada as a whole. This has not been an issue or something we're seeing in the region.

In addition to the base Street collection and our current pipeline all across the country. We're actively negotiating trading paper on about 55 deals totaling just over 400000 square feet. This is both in Toronto and other markets.

There's a lot of press and focus around shadow vacancy and the state of the sublease market in Toronto in Canada as a whole. This has not been an issue or something we're seeing in the REIT currently our portfolio. There's only about 35000 square feet of sublease sublet space available and this totals less than 1% of our portfolio nationally average Watson our portfolio continued to outperform.

Gord Wadley: Currently, our portfolio has only about 35,000 square feet of sublet space available, and this totals less than 1% of our portfolio nationally. Average rents in our portfolio continue to outperform the market at just over five and a half years. Our office utilization rates in Toronto downtown continue to improve gradually each quarter. Year-over-year, our downtown Toronto in-place occupancy rate improved from 82.7% to 85.4%, and in place and committed occupancy improved from 87.7% to 89%. This compares very favorably to downtown Toronto market stats recently published by CBRE Research, where occupancy declined from 4.7% to just over 82% year-over-year in 2023. Since Q3, our occupancy in downtown Toronto has increased 40 basis points from 88.6% to 89% committed. Our retention ratio this past quarter has been quite strong at over 85.7%. Average expiring rates in Q4 were about $24.48 and the new renewal and retention rate was just over $31.

The market at just over five and a half years.

Our office utilization rates in Toronto downtown continued to improve gradually each quarter.

Year over year in downtown Toronto in place occupancy rate improved from 82, 7% to 85, 4% and in place and committed occupancy improved from 87, 7% to 89%.

This compares very favorably to downtown Toronto market stats recently published by CBRE Research, where occupancy declined from 84, 7% to just over 82% year over year in 2023.

Since Q3, our occupancy in downtown Toronto increased 40 basis points from 88, 6% to 89% committed.

Our retention ratio this past quarter has been quite strong at over 85, 7%.

Average expiring rate rates in Q4 was about $24 48.

And the new renewal and retention rate was just over $31. This represents a gain of about 30% and rents.

Gord Wadley: This represents a gain of about 30% in rents, and committed rents increased from $29.26 in December 2022 to $29.99 in September 2023 to $31.23 this quarter. We sign leases totaling over 781,000 square feet in downtown Toronto alone, 25% of our entire portfolio. At a weighted average initial rent of $3047 per square foot, or said differently, $13.7% higher than the weighted average prior.

Our in place and committed rents increase from 2009.

2000 1926 in December 2022 to 29 99 in September 2023 to $31 23 this quarter.

We signed leases totaling over 781000 square feet in downtown Toronto alone. This is 25% of our entire portfolio.

At a weighted average initial rent of $30 47 per square foot or said differently 13, 7% higher than the weighted average prior for all net rents in the same space.

Gord Wadley: For all net reds in the same space, For 2024, we're tracking toward being approximately mid to high 80s in current and committed occupancy, with mid 80s being a conservative number due to the number due to the following criteria. For additional context, we only have just over 300,000 square feet of expiries to lease by the end of the year, but the bulk of that number is attributed to one single tenant at 74 Victoria Street. They expire in November, and they make up almost 200,000 square feet.

For 2024, we're tracking toward being approximately mid to high Eighty's and current and committed occupancy with mid to <unk> been conservative number due to the number due to the following criteria.

For additional context, we only have just over 300000 square feet of expiring lease by the end of the year, but the bulk of that number is attributed to one single tenant at 74, Victoria Street, they expire in November and they make up almost 200000 square feet.

Gord Wadley: Our team is working through various options, including extensions, attracting other tenants, and looking at reconversion. Even if we retain a portion, lease some to a third party, or extend it, the result will be upside to the mid-80s guidance we provided. So we're being very proactive and cautiously optimistic. In addition to our leasing and operating metrics, we made tremendous strides in the back half of 2023 pertaining to our ESG operating sustainability strategy. I mentioned on our last call that we're working hard to secure a viable Gresby rating. We're pleased to report that last quarter we had among the highest in Canada, at about 87. We also had the country's top sustainable index score and are still among the top 10% in this ranking globally.

Our team is working through various options, including extensions attracting other tenants and looking at reconversion.

Even if we retain a portion at least some to a third party or extended the result will be upside to the mid eighties guidance. We provided so we're being very proactive and cautiously optimistic.

In addition to our leasing and operating metrics, we made tremendous strides in the back half of 2023 pertained to our ESG operating sustainability strategy mentioned.

We mentioned on our last call that we're working hard to secure a viable <unk> rating. We're pleased to report last quarter, we had among the highest in Canada about 87. We also had the country's top sustained Olympics score and are still among the top 10% in this ranking globally. In addition, we were again recognized as a grease green lease leader platinum.

Gord Wadley: In addition, we were again recognized as a platinum green lease leader, having spent the better part of the past two years taking our well-located assets in downtown Toronto and transforming them into a new standard of boutique trophy assets. This commitment to decarbonize takes our offering even further to ensure we will exceed the highest standards of environmental stewardship and responsible operating standards our clients and stakeholders have come to expect and covet. As we move forward, our team is very committed to our goals in operating an income. We're very passionate about the impacts we're making on our tenants, the community, and the environment.

We spent the better part of the past two years taken our well located assets in downtown Toronto, and transforming them into a new standard of boutique trophy assets and this commitment to Decarbonize takes our offering even further to ensure we will exceed the highest standards of environmental stewardship and responsible operating standards our client.

And stakeholders have come to expect and Kevin.

As we move forward our team is very committed to our goals and operating and income we're very passionate about the impacts we are making to our tenants the community and the environment now.

Gord Wadley: Now for the coming years, it's incumbent on our team to capitalize on these initiatives and continue to position ourselves as a landlord that really does build better communities to work in while driving occupancy, driving rental growth, and adding value to our portfolio. Just in closing, I couldn't be more pleased with how the whole team navigated through some of the challenges that Michael touched on earlier. Their efforts and dedication to not only our company but to our clients is what I'm most proud of. At the end of the day, it's the combination of having irreplaceable assets coupled with a quality, high-character team of people we have operating and leasing those buildings that gives me the greatest confidence going forward into 2024 and beyond. As always, if any time or anyone would like to tour or see firsthand all the great work we've done, please reach out. We're always really proud to showcase them here.

Now for the coming years and comment on our team to capitalize on these initiatives and continued to position ourselves as a landlord that really does build better communities to work in while driving occupancy driving rental growth and adding value to our portfolio.

Just in closing I couldnt be more pleased with how the whole teams navigated through some of the challenges that Michael touched on earlier their efforts and dedication not only our company, but to our clients is what I'm. Most proud of at the end of the day. It is a combination of having irreplaceable assets, coupled with a quality high character team of people, we have operating and leasing those buildings that give me the.

Our greatest confidence going forward into 2024 and beyond.

As always if any time or anyone would like to tour see firsthand all the great work. We've done please reach out we're always really proud to showcase it thanks, everybody and I'll turn it over to my friend Jay.

Jay Jiang: Thanks, everybody. And I'll turn it over to my friend, Jay. Thank you, Gordon. I will start off with an overview of our financial results and then provide some guidance on how we are internally forecasting and thinking about our business for 2024. We reported diluted one-term operations of $0.38 per unit, up 2% from $0.37 per unit in the fourth quarter of 2022. We have approximately $0.02 per unit of lease termination and other non-recurring income in both comparative periods, so on a recurring basis, we are about $0.01 higher. Total comparative property NOI was flat compared to the same quarter last year.

Thank you Gordon.

We'll start off with an overview of our financial results and then provide some guidance on how we are internally forecasting and thinking about our business for 2024.

We reported diluted funds from operations of <unk> 38 per unit up 2% from 37 per unit in the fourth quarter of 2022.

We had approximately two cents per unit of lease termination and other nonrecurring income in both comparative periods. So on a recurring basis, we are about one set higher.

Hello, Comparative property NOI was flat compared to the same quarter last year and downtown Toronto, one 5% higher rent at one 3% higher occupancies were offset by lower operating recoveries due to our decision to limit amortization of value add capital into additional rents for certain buildings.

Jay Jiang: In downtown Toronto, 1.5% higher rent and 1.3% higher occupancies were offset by lower operating recoveries due to our decision to limit amortization of value-added capital into additional rents for certain buildings. In other markets, CPNOI was also flat, as higher rent steps and parking income were offset by lower occupancies in Regina and Saskatoon. Our net asset value per unit was $33.15, down $1.27 or 3.7% from Q3 NAV of $34.42. The decrease consists of $29 million attributed to fair value adjustments on investment properties as a result of increases in weighted average cap rates of our portfolio to 5.75%. As part of our valuation process, we obtained external appraisals on $647 million of properties this quarter, or 28% of the portfolio, and we recorded a loss of $8.1 million. Our lenders also appraised $755 million of properties over the course of the year for purposes of financing, which generally came in at or higher than carrying value.

In other markets CP NOI was also flat at higher rent steps and parking income was offset by lower Occupancies and Regina and Saskatoon.

Our net asset value per unit was $33 15.

The $1 27, or three 7% from Q3 NAV up 34 42.

The decrease consists of $29 million attributed to fair value adjustments on investment properties. As a result of increases in weighted average cap rate of our portfolio to 575%.

As part of our valuation process, we obtain external appraisals on $647 million of properties this quarter or 28% of the portfolio and we recorded a loss of $8 1 million or.

Our lenders also approved $755 million of properties over the course of the year for purposes of financing, which generally came in at or higher than carrying values.

Jay Jiang: The other reduction announced this quarter was attributed to a $14 million loss on mark-to-market of our swap contracts to fix approximately $365 million of debt from flowing to fix between 2022 to 2023. These positions are valued by an independent valuation. So while the negative mark reflects their opinion and future decreases in interest rates, we feel it is better to pay a 5.4% fix for our remaining weighted average term of approximately 4 years versus our current flowing rate of over 7%. These swaps save us approximately $6 million of interest expense, or about $0.16 on an annual basis. Since 2021, through these swaps, we have reduced our exposure to variable debt from 24.1% to 6.7%. So even though we incurred a loss on the swaps in the quarter, the swaps remain in the money, the swaps carry a positive value on our books, and continue to generate interest savings.

The other reduction in NAV. This quarter was attributed to $14 million loss on mark to market of our swap contracts to fix approximately $365 million of debt from floating to fix between 2022 to 2023.

These positions are valued by independent Valuator, so while the negative mark reflects their opinion and future decreases in interest rates. We feel it is better to pay five 4% fix for a remaining weighted average term of approximately four years versus our current floating rate of over 7%.

Swaps save us approximately 6 million of interest expense or about 16 on an annual basis.

Since 2021 through the swaps, we have reduced our exposure to variable debt from 24, 1% to six 7%. So even though we incurred a loss on the swaps in the quarter. The swaps remain in the money the swaps carry a positive value on our books and continue to generate interest savings.

Office remains a complicated sector to model and forecast we think over time. Our view is that more people will return to work interest rates will normalize a bit over the next two years improvements will gradually happen in occupancy and rental rates as a sector finds equilibrium we.

Jay Jiang: Office remains a complicated sector to model and forecast. But, we think over time, our view is that more people will return to work, interest rates will normalize a bit over the next two years, and improvements will gradually happen in occupancy and rental rates as the sector finds its equilibrium. We think it is still difficult to predict occupancy and ROI for 2024, but we have shared the key assumptions we use in our model. Court has already covered leasing and occupancy forecasts in its prepared remarks.

We think it is still difficult to predict occupancy NOI for 2024, but we have shared the key assumptions we use in our model.

Has already covered leasing and occupancy forecast in his prepared remarks.

We think we will deliver flat to low single digit C. P. NOI in 2024.

<unk> 366 Bay will be online by Q4 of this year and it is estimated to contribute $1 5 million of total annualized NOI by 2025.

We've all heard mothballing approximately $11 million of G&A. This year, which is relatively in line with $10 7 million reported for 2023.

For our investment in Dream Industrial REIT units, we are using the S. F O per unit guidance of mid single digit growth that the DIR management team provided on their conference call.

Jay Jiang: We think we will deliver flat to low single-digit CPNOI in 2024. In addition, 366 Bay will be online by Q4 of this year, and it is estimated to contribute $1.5 million of total annualized NOI by 2025. We are modeling approximately $11 million of GNA this year, which is relatively in line with $10.7 million reported for 2023. For our investment in Dream Industrial Reunits, we are using the FFO per unit guidance of mid-single-digit growth that the DIR management team provided on their conference call. Our Q4 annualized interest expense was approximately $63.5 million. We do not forecast any increases or decreases in rate movement in 2024.

Our Q4 annualized interest expense was approximately $63 5 million, we do not forecast any increases or decreases in rate movement in 2024.

But should rates decline each 50 basis points of decrease in rates would have a 450000 or approximately $1 two sets of annualized improvement to our <unk>.

Without assuming any investment transaction activities, our model will produce between $1 40 to $1 45 of <unk> per unit in 2024 on a recurring basis and priority unit is consolidation.

Our current leverage is 50% and debt to EBITDA is about 11 five times, we would like to reduce our leverage and continue to derisk our business in 2024.

We announced a two for one consolidation of units, while maintaining our distribution at one dollar or effectively reducing our distribution by 50%. This preserves approximately $19 million of cash a year to reduce debt and fund leasing costs.

Jay Jiang: But should rates decline, each 50 basis points of decrease in the rates would have a $450,000 or approximately 1.2 cents of annualized improvement to our FFO. Without assuming any investment transaction activities, our model would produce between $1.40 and $1.45 of FFO per unit in 2024 on a recurring basis and prior to unit consolidation. Our current leverage is 50%, and debt to EBITDA is about $11.5. We would like to reduce our leverage and continue to de-risk our business in 2024. We announce a 241 consolidation of units while maintaining our distribution at $1, or effectively reducing our distribution by 50%. This preserves approximately $19 million of cash a year to reduce debt and fund leasing costs.

Given market conditions and the negative sentiment for office, our board believes retaining more cash while continuing to pay a reasonable yield on our stock price as a prudent distribution policy.

We will look to sell assets opportunistically at the right price and the net proceeds can make the business more valuable and deliver higher risk adjusted returns in the long term.

It is tough to get disposition guidance today as we are looking at both income properties and development sites for sale.

Generally speaking for every $50 million of assets, we sell proceeds will be used to pay down debt and we expect leverage to decline up to a 100 basis points and debt to EBITDA by one point and long term.

We have various options so in making our disposition decisions, we will consider the cash flow income and future value of the asset we sell versus the proceeds and how that will make the business safer.

Michael Cooper: Given market conditions and a negative sentiment toward office, our board believes retaining more cash while continuing to pay out a reasonable yield on our stock price is a prudent distribution policy. We will look to sell assets opportunistically at the right price if the net proceeds can make the business more valuable and deliver higher risk-adjusted returns in the long term. It is tough to give disposition guidance today as we are looking at both income properties and development sites for sale. Generally speaking, for every $50 million of assets we sell, proceeds will be used to pay down debt, and we expect leverage to decline up to 100 basis points and debt to EBITDA to decline by 0.1%. We have various options. So, in making our disposition decisions, we will consider the cash flow, income, and future value of the asset we sell versus the proceeds and how that will make the business safer. We will provide more updates on our progress over the course of the year. I will now turn the call back to Michael.

We will provide more updated on our progress over the course of the year I will now turn the call back to Michael.

Thanks, Jay So I hope that what you hear is that.

Our business is generally going according to the plan that we discussed on September six.

And.

Our results are more or less as we expected, but theres an increased uncertainty for office sector, specifically and generally in the economy. So we've decided to reduce our payout by half.

Consolidated our stock. So we will go from about 38 million shares to 19 million shares.

But we'll still pay a dollar a share in the 19 million shares for $19 million that we would gain.

That's really helpful. We can at least an extra 200000 square feet to new tenants with that money or other thought wise volumes excellent uses for the capital it.

It would be great to answer any questions at this point.

Okay.

We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.

He had a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.

Michael Cooper: Thanks, Jay. So I hope that what you hear is that our business is generally going according to the plan that we discussed on September 6, and our results are more or less as we expected, but there's increased uncertainty in the office sector specifically and generally in the economy. So we've decided to reduce our payout by half. We're going to consolidate our stock, so we'll go from about 38 million shares to 19 million shares. But we'll still pay a dollar a share on the 19 million shares.

Our first question comes from Lauren Palmer, but does that Dan. Please go ahead.

Thanks, Good evening everyone.

Good evening, just just quickly can you just remind me of the rationale behind the unit consolidation.

We just thought it trades at a better.

You know better range.

That.

15 to $30 or something like that that's a little bit better where we are now.

We've done this a number of other companies Dream Unlimited consolidated went really well since I don't think we've been.

Operator: The 19 million dollars that we retained... You know, that's going to be helpful. We can lease an extra 200,000 square feet to new tenants with that money or otherwise find excellent uses for the capital. It would be great to answer any questions at this point. We will now begin the question and answer session. To join the question queue, you may press Star, then 1 on your telephone keypad.

At the same prices we were before <unk>.

Impac has traded down, but we think office will trade.

Trade well in terms of having a price that is not in single digits.

Okay, and then you guys talked a little bit of dispositions I believe you got a 212 king or that.

That aggregation of assets there and then I believe you also listed 438 University I was just wondering if you guys could give us a little insight on how the sale process is going buyer profiles and maybe expectations.

Lorne Calmer: You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any key. To withdraw your question, please press Star then 2. The first question comes from Lorne Calmer with Desjardins; please go ahead. Thanks. Good evening, everyone. Good evening. Just, just quickly, can you just remind me of the rationale behind the unit consolidation? We just thought it trades at a better, you know, better range. We're up at, you know, $15 to $30 or something like that. That's a little bit better where we are now. You know, we've done this with a number of other companies. Dream Unlimited, Consolidated has gone really well since. I don't think we've been.

Okay I'll give you some more general and impact we also have <unk> and 340 that Ontario, three car lot that we're selling marketing.

Couple of things are interesting number one we've had a tremendous number of confidentiality agreements confidentiality agreements signed for both <unk> as well as.

438 University I would say it's.

Significantly more than would have been signed last year and I think that our intermediaries are very pleased with that when you look at the makeup of the buyers they're almost all for the buyers own account and high net worth individuals.

Michael Cooper: At the same price as we were before, Impact has traded down, but we think Office will trade well in terms of having a price that's not in single digits. Okay, and then you guys talked a little bit about dispositions. I believe you've got 212 King or that aggregation of assets there. And then I believe you also listed 438 University.

So we haven't gone through getting bids yet on either of them. So that somebody is going to happen over the next six weeks, we don't have specific information, but it is interesting how many good.

Good quality.

Buyers are looking at those two assets at.

At 212, King that's a development asset not an income property, we have a partner there and decided to play complicated we've got interest that.

Michael Cooper: I was just wondering if you guys could give us a little insight into how the sale process is going, buyer profiles, and maybe expectations. Okay, I'll give you some more general. In Impact Trust, we also have 10 Lower Spadina and 349 Ontario, 349 Car Law that we're selling and marketing. A couple of things are interesting. Number one, we've had a tremendous number of confidentiality agreements signed for both 10 Lower Spadina as well as 438 University. I would say it's significantly more than would have been signed last year, and I think that our intermediaries are very pleased with that. When you look at the makeup of the buyers, they're almost all for the buyer's own account and high net worth individuals.

It's quite reasonable, but execution of our developments that I usually comes with a lot of different conditions about theres, noting how somebody wants to maybe change with the zoning is in working with our partner. So we're making progress on that one but it's going to take another couple of quarters before that's finalized if everything works out, but we will have more information I think on 438 universe.

City, and Ken Lewis Medina sooner, but they look quite good.

Okay. Thank you for that color and then maybe just quickly for for Gordon.

You guys are obviously outperforming the market in terms of leasing what what types of tenants are you seeing the demand from.

Yeah, Great question. So we're talking about this today the provincial government.

Michael Cooper: So we haven't gone through getting bids yet on either of them, so that's something that's going to happen over the next six weeks. We don't have specific information, but it's interesting how many good quality buyers are looking at those two assets. 212 King is a development asset, not an income property. We have a partner there, and the site's quite complicated.

Is that on the street for about 1 million square feet right now actively touring with a number of RFID. So we're seeing a lot of government some crown Corp.

Coming off the new year, we've been seeing a lot of tech firms as well too we're starting the year on tours that some tech firms are starting to get some more funding.

Which bodes well for foregoing going into 2024, but the bulk of the tours have been tech professional services and a big driver on a provincial government and municipal government.

Michael Cooper: We've got interest that is quite reasonable, but execution of a development site usually comes with a lot of different conditions about the zoning and how somebody wants to maybe change what the zoning is and work with our partners. So we're making progress on that one, but it's going to take another couple of quarters before that's finalized, if everything works out. We'll have more information, I think, on 438 University and 10 Lower Spadina sooner, but they look quite good. Okay, thank you for that color.

Okay. Thank you very much I will turn it back.

Okay.

The next question comes from Mario <unk> with Scotiabank. Please go ahead.

Hey, good evening and thanks for taking the questions.

Just wanted to talk about it in the press release.

There was.

Okay.

24 focus I think it was noted as leasing reducing risk.

Liquidity exploring delivering long term value to unit holders very challenging office Mark.

Gord Wadley: And then maybe just quickly for Gord. You guys are obviously outperforming the market in terms of leasing. What types of tenants are you seeing the demand from? Great question, Lorne.

Right.

So it looks like the distribution reduction goes to addressing the liquidity.

<unk> talked about the leasing momentum.

And the target occupancy levels in 'twenty four and he is working on some near term debt refinancings.

Gord Wadley: So we're talking about this today. The provincial government is out in the street for about a million square feet right now, actively touring with a number of RFIs. So we're seeing a lot of government, some Crown Corps, coming off the new year; we've been seeing a lot of tech firms as well. And we're starting to hear on tours that some tech firms are starting to get some more funding, which bodes well for going into 2024. But the bulk of the tours have been tech, professional services, and a big driver for provincial government, and municipal government. Okay, thank you very much. I will turn it back. The question comes from Mario.

On the balance sheet side, and say look at the silicon out well so to the extent possible.

These items can you talk about option.

To explore that long term value embedded senior at $43 out of political.

Yes.

Hum.

I mean, I think any options you can think about it on the table. So we're pretty open minded I mean, it's a challenging time.

Dream Unlimited has a big stake in office would like to retain it and.

I would just say that we're looking at all of our assets and saying, what's the long term value how much liquidity should we get how do we make the company safer and get data have increased.

Mario: Bank. Please go ahead. Good evening and thanks for taking the questions. I just wanted to talk about, in the press release, I think there was a note really focused on your 2024 focus. I think it was noted as leasing, reducing risk, Preserving liquidity, and exploring delivering long-term value, you know, holders in a very challenging office market. So it looks like the distribution reduction goes to investment liquidity. Gore talked about the leasing momentum, and the target occupancy level is at 24, and Jay is working on some near-term debt refinancing on the balance sheet side, and you're looking to sell some assets as well. So to the extent possible, outside of those items, can you talk about options that may exist to explore that long-term value embedded in your $33 and a half today? I mean, I think any options you can think about are on the table. So, we're pretty open-minded. I mean, it's a challenging time.

Increasing upside so you know we're doing it asset by asset and seeing where the value is but.

I think I think we're feeling pretty good about the company, but there's a lot of risk. So you know.

I wouldn't say that there's a house view that.

I've consistently espoused that liquidity is important it's a risky environment and throughout all of our businesses. We've been looking for more liquidity I don't know.

Listeners were aware, but last Monday, we announced that dream unlimited.

And entered agreements to sell Arapahoe basin was creating a tremendous amount of liquidity that throughout the business. We're just saying hey, it theres a lot of uncertainty at every level and our liquidity is primary and I think with office, it's obviously different in apartments or industrial so we feel it's a little bit more significant to to look at different ways to raise capital.

The company safer.

But it's not it's not a specific thing its just because this is a very unusual environment.

Michael Cooper: Dream Unlimited has a big stake in office. We'd like to retain it. And I would just say that we're looking at all of our assets and saying, what's their long-term value? How much liquidity should we get? How do we make the company safer and continue to have, you know, increasing upside? So, you know, we're doing it asset by asset and seeing where the value is. But. I think we're feeling pretty good about the company, but there's a lot of risk, so I would say that there's a house view. I've consistently espoused.

Sticking to liquidity quoted $187 million is about 100 million that's related to the CIB facility.

That is focused on retrofit super comfortable with that 100 million give or take you were looking at call it $90 million or so.

We're given the risks out there in the market where would you like to see that look we're still in 'twenty four.

Yeah.

A cautionary word saying that the higher the better obviously and we're doing lots of things to try to explore ways of increasing that number.

Michael Cooper: That liquidity is important because it's a risky environment. And throughout all of our businesses, we've been looking for more liquidity. I don't know if listeners are aware, but last Monday, we announced that Dream Unlimited, Inc. introduced agreements to sell Arapaho Basin, which created a tremendous amount of liquidity. And throughout the business, we're just saying, hey, there's a lot of uncertainty at every level, and liquidity is primary. And I think with Office, it's obviously different than apartments or industrial buildings. So we feel it's a little bit more significant to look at different ways to raise capital, make the company safe. But it's not a specific thing. It's just, it's a very unusual environment.

Very focused on refinancing and we've made good progress. This year, we only have a $73 million of mortgages, which were in advanced stages.

Stages on.

We listed a couple potential assets are already in the market. So we'll look at those and.

As Michael said, we value liquidity quite a bit.

Lot better to have that to cash and liquidity in the balance sheet and I'll provide more opportunities in the future and things do get better sooner or business is well positioned and I would say specifically because I know you like specific answers.

The $19 million savings this year is good.

$90 million of liquidity on the books is good and I think we had another 50 or $60 million of liquidity that would be a pretty good position to be in.

Jay Jiang: Sticking to liquidity, I think the quoted $187 million has about $100 million that's related to the TIB facility that is focused on retrofits. So if we kind of strip out that $100 million, give or take, you're looking at call it $90 million or so. Where, given the risk out there in the market, where would you like to see that liquidity go in 2025? Good question, Mario.

But I don't think it's 200 million I think it's another 50 or 60 would be good.

Thank you for the specific response, Michael I do appreciate that.

Just sticking to that theme can you give us an update in terms of what's happening.

Lieutenant Birch Mt.

Michael Cooper: We're saying the higher the better, obviously, and we're doing lots of things to try to explore ways of increasing that number. We're very focused on refinancing, and we've made good progress this year. We only have $73 million in mortgages, which we're in advanced stages on.

The corporate remote or I'm not sure what you call them out I can't remember, but I.

I don't know if we change things all the time when it was there, but I think in a birch Mt is really apropos of this conversation because.

We're dealing with the city historically getting zoning has been controversial and getting site plans approved hasn't been that difficult, but we got the zoning wanted it was a difficult process with a bunch of other landlords, including real Gan and choice.

Jay Jiang: We've listed a couple of potential assets that are already in the market, so we'll look at those. And, as Michael said, we value liquidity quite a bit. It feels a lot better to have that cash and the liquidity and the balance sheet, and that will provide more opportunities in the future. And if things do get better sooner, our business is well-positioned. And I would say specifically because I know you like specific answers.

And we all got our zoning, but now on the site plan.

It is true it's been tremendously difficult, we hope to get closer to being in a position on the plan of subdivision and access another point that go all the way from a picture of the Victoria Park, the Birch mountain, but it's holding everybody up so everything is just delayed so I would say the last 90 days, we are exactly the same.

Michael Cooper: The $90 million savings this year is good. The $90 million of liquidity on the books is good. And I think if we had another $50 or $60 million of liquidity, that would be a pretty good position to be in. But I don't think it's 200 million. I think another 50 or 60 would be good.

Jay Jiang: Thank you for the specific response, Michael; I do appreciate that. Just sticking to that theme, can you give us an update in terms of what's happening at Lieutenant Birchmount or the former, or I'm not sure what you call it now. I can't remember.

Mount of time away from having it ready to go and hopefully over the next 90 days with the city will be able to get closer to having it ready to go but it's incredibly frustrating.

I appreciate that Okay. This is my last question then on liquidity.

One.

One item or.

Michael Cooper: But I don't know, we change names all the time. What I would say, but I think Birchmount is really appropriate for this conversation because we're dealing with the city. Historically, getting zoning has been controversial, and getting site plans approved hasn't been that difficult. But we got the zoning we wanted. It was a difficult process with a bunch of other landlords, including Rio Can and Choice. But we all got our zoning, but now on the site plan. It has been tremendously difficult.

Question is with the distribution reduction implemented does that change at all your view on your existing ownership.

Cream industrial units.

And the strategy and it's one of those lines.

Well I mean, I think we'd like to keep the industrial units and we'd like to get liquidity effectively out of what we already own.

Because the industrial units there are excellent investment so.

I think like for US, we look and say Oh, well you know we raised $50 million in the industrial units are on the line that would be $100 million that we can keep the industrial units for.

Michael Cooper: We hope to get closer to being in a position on the plan of subdivision and access and other points that go all the way from Victoria Park to Birchmount, but it's holding everybody up. So everything is just delayed. So, I would say, in the last 90 days, we are exactly the same amount of time away from having it ready to go. And hopefully, over the next 90 days with the city, we'll be able to get closer to having it ready to go. But it's incredibly frustrating.

For Eternity. So I think that you know that's a big part of why it'd be great to have liquidity from office buildings or from some of the development land.

We will keep the industrial units.

Okay.

That's it for me thank you for the responses.

The next question comes from Pamela <unk> with RBC capital markets. Please go ahead.

Michael Cooper: I appreciate that. Okay. My last question then on liquidity. One, one item, or the question is, like with the distribution reduction implemented, does that change at all your view on your existing ownership unit of dream industrial? in terms of the strategy or which one, Well, I mean, I think we'd like to keep the industrial units and we'd like to get liquidity effectively out of what we already own because the industrial units are an excellent investment.

Thanks, Hi, everyone.

Just on the mortgage refis that you're working on with what sort of rates and terms are you seeing and I'm curious as well with the with the loan to value ratios on those is including the 2025 maturities.

Sure depends on the type of mortgage generally we're trying to get long term and the conversations we've been having with a light codes and the schedule. One banks are typically five 710 years and on the spreads were looking at about <unk> 200, 250 <unk>.

Michael Cooper: I think for us, we look at it and say, oh, well, we raised $50 million, and the industrial units are on the line. That would be $100 million that we can keep in the industrial units for eternity. So I think that's a big part of why it would be great to have liquidity from office buildings or from some of the development land. We'll keep the industrial unit. Okay, that's it for me. Thank you for the response. The next question comes from Pammy Burr with RBC Capital Markets. Please go ahead.

In 2024, we have actually two trial came as a mortgage that had been amortized for nine years. So it's got a pretty small balance and given that we're in currently in a process we might just.

Extended on a variable.

Generally we're looking at all in about just over 6%.

Okay, sorry was that a two tone quick king was that.

One of the 2020 fives or.

Pammy Burr: Thanks, everyone. Just on the mortgage refi that you're working on, what sort of rates and terms are you seeing? And I'm curious as well about what the loan to value ratios on those are, including the 2025 maturity. Sure. It depends on the type of mortgage.

The 212, King six Alley, and small building in Calgary at 2020 for 2025, we are looking at ally place.

And that's and that's the big one for for next year then.

That's right.

Yeah.

Jay Jiang: Generally, we're trying to get long-term, and the conversations we've been having with the lifecoats and the Schedule 1 banks, typically 5, 7, 10 years. And on the spreads, we're looking at about GOC 200 or 250. In 2024, actually, 212 King is a mortgage that has been amortized for nine years, so it's got a pretty small balance. And given that we're currently in the process, we might just extend it on a variable. But generally, we're looking at all in about just over 6%. Okay, sorry. Was that Two-Tailed Creek King, was that one of the 2025s, or?

And then just with respect to the to the distribution cut how did you decide on the 50% you know more or less more or.

Why not more I guess and then just how much cushion.

Does that provide relative to your internal forecast.

I'll answer the first one and Jay can answer the second one.

I would love to tell you that we have a machine that tells us exactly what the rate cut is.

Through the conversations I think the view is that the business is in good shape and that we should be able to have a decent distribution, 11% yield kind of reflects that.

Jay Jiang: The 212 King, 6th Alley, and small building in Calgary is 2024. In 2025, we are looking at Alley Place. And that's, that's the big one for next year. That's right.

People know that it's a high level of distributions for what we're producing and I think that based on the internal work, we've had and discuss it with the board the view of the.

50% payout from where we were provides shareholders with a decent return and the company with decent liquidity. So I think I think it's a qualitative not quantitative thing within that range, yeah, yeah, well I mean with regard to your question on <unk>. So we only disclose the <unk> and the reason for that is we have 28 bill.

Michael Cooper: Okay. And then just, you know, with respect to the distribution cut, how did you decide on 50%, more or less? Well, or why not more, I guess? And then just how much cushion does that provide relative to your internal AFFO forecast? I'll answer the first one, and Jay can answer the second one.

<unk>, you're all quite unique and when you're you have a hunter 80 buildings, it's easier to try to apply our reserve and we put a lot of capital and over the years for example on base III, we put $50 million to really enhance the tenant experience I will say that how we look at it if you and I'm, referring to the MD&A disclosures when you look at the <unk> in our guidance.

Jay Jiang: I would love to tell you that we have a machine that tells us exactly what the right cut is. But from the conversation, I think the view is that the business is in good shape and that we should be able to have a decent distribution. The eleven percent yield kind of reflects that. You know, people know that it's a high level of distributions for what we're producing, and I think that based on the internal work we've had and the discussion with the board, the view of the 50% payout from where we were provides shareholders with a decent return and the company with decent liquidity. So, I think it's a qualitative thing, not a quantitative thing, within that range. Yeah.

<unk>.

Between $1 40 to $1 45, and then you can think about it in a couple of different components of it which is disclosed one is how much does it cost to maintain capital reserves and the building and we're quite focused on only spending money, where we can get a return.

So the way, we think about a general your life safety as adult about $1, a square foot and where the leasing that's where we want to really invest the capital to build the buildings that have tenants in there.

Jay Jiang: Tommy, with regard to your question on AFFO, we only disclose FFOs. And the reason for that is we have 28 buildings; they're all quite unique. And when you have 180 buildings, it's easier to try to apply a reserve. And we have put a lot of capital in over the years. For example, on Bay Street, we put $50 million in to really enhance the tenant experience. I will say that how we look at it, and I'm referring to the MD&A disclosures, when you look at the FFO and the guidance between $1.40 to $1.45, and then you can think about it in a couple of different components, all of which is disclosed. One is how much does it cost to maintain capital reserves in the building.

On a quarterly basis and on an annual basis Youre looking at about six to $8 per square foot Partier. That's what's been happening we're prepared to go more for strategic deals for example in Adelaide place for <unk>, especially at the tenants are willing to invest in that space as well because it preserves the value and the lending value of the building so as Michael.

Referenced before 19 million it could be 200000 square feet or more and we think that there's a lot of good value and return and safety to the REIT.

Of course at the same time, what we're doing is approaching tenants. The CFR they were willing to accept the free rent periods instead of capital and we're working on a pretty creative solutions to.

Both maintain liquidity and so our building. One example at 366 bank, where we worked with the tenant to actually get a credit facility to help with the fixed stream and finishing.

Jay Jiang: And we're quite focused on only spending money where we can get a return. So the way we think about it generally, life safety is about a dollar a square foot. And with the leasing, that's where we want to really invest the capital to build a building to have tenants in there. On a quarterly basis and on an annual basis, you're looking at about $6 to $8 per square foot per year.

And so we have a completed <unk>.

Element, that's fully leased has a great lending value and.

It's funded by by the facility.

Got it.

That's helpful Jay.

Jay Jiang: That's what's been happening. We're prepared to go more for strategic deals, for example, in Adelaide Place for DBRS-BFL, especially if the tenants are willing to invest in that space as well, because it preserves the value and the lending value of the building. So, as Michael referenced before, $19 million, it could be 200,000 square feet or more. And we think that delivers a lot of good value and return and safety to the REITs. But of course, at the same time, what we're doing is approaching tenants to see if they're willing to accept free rent periods instead of capital. And we're working on pretty creative solutions to both maintain liquidity and fill our buildings. One example is 366 Bay, where we worked with the tenants to actually get a credit facility to help with the fixtures and finishes. And so we have a completed development that's fully leased, has a great lending value, and it's funded by the facility. I got it.

Maybe just coming back to your comments on asset sales and leverage where do you want to get it to and over what timeframe are you thinking.

Yeah, So we like to get below 50% that's for sure and.

Ideally the 11 that should go down as well now we're guiding to low to single digit C. P NOI, which will help with the equation as well but.

It also depends on the building we sell so if we sell the development side, particularly that would have lower yield it doesn't cost us a lot on the NOI on a cash front and then it would give us good liquidity as well and reduce debt and on the buildings. We will look at them. One by one what did you say when you ask that question.

Everything's movie, where we're going to start to see more office buildings trade that will start to show maybe a little bit more certainty what values are so he asked about what percentage are we will see how it goes over time I was just saying if we raise an extra $50 million.

Pammy Burr: That's helpful, Jay. Maybe just coming back to your comments on asset sales and leverage, you know, where do you want to get it to? And over what timeframe do you think?

This year, we would have a lot of flexibility to deal with what comes up I don't think we can give you a leverage level over let's say over the next five years, because we're going to have to see how the office values turned out so well.

Jay Jiang: Yeah, so we like to get below 50%, that's for sure. And, ideally, the 11.5 should go down as well. Now, we're guiding to a low to single-digit CPNOI, which will help with the equation as well. But it also depends on the building we sell. So if we sell the development site, typically, that would have a lower yield, it doesn't cost us a lot on the NOI and cash front, and it would give us good liquidity as well as reduce debt. And on the buildings, we'll look at them one by one.

We will work our way through it but we've got lots of capacity to deal with rolling over mortgages rolling over mortgages at reduced loan amounts to pay for our leasing kind of there's a lot of things that are moving at once I hope that helps that can't be more specific.

Yeah, No that's helpful.

Last one for me I'm just curious are you know.

You mentioned Gordon I think you mentioned some some of the larger renewals that you did in Toronto.

Michael Cooper: Yeah, I wanted to say when you ask that question, Everything's moving. We're going to start to see more office buildings trade, and that'll start to show maybe a little bit more certainty what values are. So he asked about what percentage.

In the quarter I'm, just curious what did the without getting into specifics on each on each lease just generally what did the <unk>.

<unk> look like relative to <unk>.

The prior and you are on that same space.

Michael Cooper: We'll see how it goes over time. I was just saying that if we raise an extra $50 million this year, we would have a lot of flexibility to deal with what comes up. I don't think we can give you a leverage level, let's say over the next five years, because we're going to have to see how the office values turn out. So we'll work our way through it. But we've got lots of capacity to deal with rolling over mortgages, rolling over mortgages at reduced loan amounts, to pay for our leasing. But there are a lot of things that are moving at once.

Percentage wise I guess.

So.

Just in the prepared remarks, I'd put it was about 20%.

Definitely.

Okay, sorry, 20% lower than what we had in the budget. So the rents on the renewals were higher but we put in more deal costs to help facilitate the refresh of the space the bigger renewals that we've done both tenants I've been there for quite some time.

So there are so many our compression for that and then just in general just for materials pricing procurement everything any hours across the board have been down by about 30% in the portfolio.

Pammy Burr: I hope that helps. I can't be more specific. Yep, no, that's helpful.

Gord Wadley: Last one for me, I'm just curious, you mentioned Gord, I think you mentioned some of the larger renewals that you did in Toronto, you know, in the quarter. I'm just curious, without getting, you know, into specifics on each on each lease, just generally, what did the NERs look like relative to the prior NER on that same space, percentage wise, I guess.

One thing people don't talk about too is commissions commissions are almost double what they were.

Right. Okay, alright, thanks, very much I'll turn it back.

No problem.

The next question comes from Sam Damiani with TD Cowen. Please go ahead.

Thanks, and good afternoon.

First question Gordon I think it was your comment where you see a quote tough trough in the office lending market I just wanted to drill in and see if there was something specific you were alluding to in terms of actual tangible evidence of the Canadian office lending market getting notably tougher in the last short while.

Gord Wadley: So just in the prepared remarks, I put it at about 20% 20% lower than what we had in the budget, so the rents on the renewals were higher, but we put more deal costs in to help facilitate the refresh of the space. The bigger renewals that we've done, both tenants had been there for quite some time, so there was some NER compression for that. And then just in general, just for materials, pricing, procurement, everything, NERs across the board have been down by about 30% in the portfolio. One thing people don't talk about too is commissions. Commissions are almost double what they are, right? Okay. All right. Thanks very much.

Alright.

I think what I meant by that is I don't know if its tough drop I just think there's a lot more scrutiny on the buildings are costly the building's who's managing the building and then a lot more scrutiny just on the income of those assets and I'll turn it over to just before just to be clear Sam we rely on <unk> for many many many things that he is excellent at the things we rely on it.

But we do not rely on him for understanding the banks lending criteria, So I'll turn it over to Jay.

Thanks, Sam Thanks, Gordon Thanks, Michael.

2023 was a good year for us for financing, we had about $250 million of.

Sam Damiani: I'll turn it back. The next question comes from Sam Damiani with TD Cohen. Please go ahead. Thanks and good afternoon.

Mortgages and we apply at 287, we do not budget or forecast and expectation that we'd be able to continue to do a finance we have great relationships with the with our lenders schedule, one banks life calls and some of the foreign lenders now through relationships with their dream group of companies they've been very supportive we've been very transparent and how we deal with the lender.

Gord Wadley: First question, Gord, I think it was your comment where you saw a quote tough trough in the office lending market. I just wanted to drill in and see if there was something specific you were alluding to in terms of actual, sort of tangible evidence of the Canadian office lending market getting notably tougher in the last short while. I think what I meant by that is I don't know if it's a tough trough, I just think there's a lot more scrutiny on the buildings, the quality of the buildings, who's managing the buildings, and then a lot more scrutiny just on the income of those assets. I'll turn it over to Jay. Just before, just to be clear, Sam, we rely on Gord for many, many, many things, and he's excellent at the things we rely on him for, but we do not rely on him for understanding the bank's lending criteria, so I'll turn it over to Jay. Hi Sam,

As well I would say that so far the conversations are still good but we are obviously in a different market today than than pre COVID-19 and if you'd go across and take a poll with all the lenders I don't think very many will say that they have great appetite to increased office exposures. So what we're really focuses on its drilling.

Buildings with great Covenant long lease at investing into the building so that the lenders feel that the lending value and its a portable it makes our job easy to underwrite and then with that we'd be able to have a fair part and visibility on all refinancings.

Gord Wadley: Thanks Gord. Thanks Michael. So 2023 was a good year for us for financing. We had about $250 million in mortgages, and we had finance 287. We did not budget forecast expectation that we'd be able to continue to increase finance.

Yeah I mean, thank you for that that's really good color and I don't think what you're saying is a whole lot different than what we would have heard you say 369 months ago I'm just wondering have you.

Jay Jiang: We have great relationships with the lenders, Schedule 1 banks, Lifeco, and some of the foreign lenders now through relationships with the Dream Group of companies. They've been very supportive. We've been very transparent in how we deal with the lenders as well. I would say that so far, the conversations are so good, but we are obviously in a different market today than pre-COVID, and if you go across and take a poll with all the lenders, I don't think very many will say that they have a great appetite to increase the office exposures. So what we're really focused on is filling the buildings with great covenants, long leases, investing in the buildings so that the lenders feel Yeah, I mean, thank you for that. That's a really good color.

Just a broader market perspective, not specifically to any of your discussions are you sensing.

Notably tougher lending market overall more broadly.

Just three or six months ago.

We're not seeing an overall change in the market, we're actually doing very well across the board with our board what we are seeing is.

That.

In the states, there's a lot of blow ups with the nonrecourse debt and it is having an effect on the regulators. So theres a lot of scrutiny and people are cautious so far we've been going we've got great and any loan we've done I think what Jay has tried to say is.

It makes sense to be cautious going forward.

Yep Okay.

Sam Damiani: And I don't think what you're saying is a whole lot different from what we would have heard you say, you know, three, six, nine months ago. I'm just wondering, from just a broader market perspective, not specifically in any of your discussions, are you sensing, you know, a notably tougher lending market overall more broadly now versus just three or six months ago? Well, we're not seeing an overall change in the market. We're actually doing very well across the board with our borrowing. What we are seeing is that in the states, there's a lot of blow-ups with non-recourse debt, and it is having an effect on the regulators. So there's a lot of scrutiny, and people are cautious. So far, we've been going; we've done great on any loan we've done. I think what Jay is trying to say is It makes sense to be cautious going forward. Yeah, okay. Okay, and the next question is just on the 74 Victoria.

Okay and next question is just on the 74 Victoria.

So you said the lease comes up there November it's about 200000 square feet.

So I guess, the fact that that hasn't been dealt with.

Does that partly is that part of the decision too.

To make the distribution cut.

Well I think it's a good example, and I want to be careful what I say, but as of January I think what I said on the last conference call was we are seeing quite a bit of interest from schools to do leasing.

And on January 22nd oriented schools, and institutional uses I think I recall, saying that that's a good use and my Oh do you have anybody second.

Second the federal government came out and said, they're changing the rules for students to come to Canada, and we had a tenant who we are very advanced with Bayer we had another getting to where the school scores, which are the two schools I was referring to in in November and both of those deals are dead now said that that was a disappointment and it's a significant disappointment.

Michael Cooper: So you said the lease comes up there, November, and it's about 200,000 square feet. So I guess the fact that that hasn't been dealt with yet is that part of the decision to, you know, make the distribution cut? Well, I think it's a good example, and I want to be careful what I say, but as of January, I think what I said on the last conference call was that we were seeing quite a bit of interest from schools. And on January 22nd, schools and institutional uses, I think I can recall saying that that's a good use. And on January 22nd, the federal government came out and said they're changing the rules for students to come to Canada.

It's hard to get tenants.

I'm not commenting in government policy, just saying you know we're pursuing other things and thought we were in good shape there.

Yeah, that's unfortunate if that makes sense.

I think the last question for me Jay You had mentioned you made an amendment in terms of operating recoveries of certain Capex I didn't quite catch what you said there was that something that is going to be meaningfully sort of adjust the NOI run rate in the near term.

Michael Cooper: And we had a tenant who we were very advanced with there. We had another tenant. Two of them were schools, which were the two schools I was referring to in November. And both of those deals are dead now, so that was a disappointment.

Yeah. So just for context, what happened there is we put a lot of capital into some of our buildings to make them better.

Michael Cooper: And it's a significant disappointment because it's hard to get tenants. I'm not commenting on government policy, just saying, you know, we're pursuing other things. We thought we were in good shape there. Yeah, that's unfortunate.

Specifically deal those deals was about four to five buildings on Bay Street and because of the buildings are small at times when you amortize and let's say the lobby washroom renovation that would increase that you saw rent. So it's more in consideration for the lethal strategy in existing tenants that we don't want to overburden the additional rents.

Jay Jiang: That makes sense. I think the last question for me, Jay, you mentioned you made an amendment in terms of operating recoveries of certain CapEx. I didn't quite catch what you said there.

Jay Jiang: Was that something that is going to meaningfully sort of adjust the NOI run rate in the near term? Yeah, so just for context, what happened there is that we put a lot of capital into some of our buildings to make them better, and specifically, this deals with about four or five buildings on Bay Street. And because the buildings are small, at times when you amortize in, let's say, the lobby washroom renovations, that would increase the additional rent. So it's more in consideration for the leasing strategy and the existing tenants that we don't want to overburden them with additional rents, so that's why we did it. I think the total amount is about $300,000 to $400,000 a year.

So that's why we did it I think the total amount is about three to 400000 a year now in terms of the run rate. What we're trying to do right now is to look for opportunities to save on the Opex and we found a couple of ideas already so our hope is that in 2024, we find more savings than in the three to 400, we could pass those savings on to the tenant.

And then we can continue to amortize these capital expenditures.

Okay. Okay.

Okay. Thank you and I think the rest of my questions have been answered. So thank you very much.

Let us know if you want to chat later.

The next question comes from Ross Sandler private private Investor. Please go ahead.

Oh, hi, Thanks for giving me the opportunity to ask a question.

Jay Jiang: Now, in terms of the run rate, what we're trying to do right now is look for opportunities to save on off-ex, and we have found a couple of ideas already. So our hope is that in 2024, we find more savings than the $300,000 to $400,000. We should pass those savings on to the tenants, and then we can continue to amortize these capital expenditures. A A A A A A A. Okay, thank you.

So basically to send it to us.

Post them on I wanted to ask like the unity.

The $9 right now.

Uh huh.

So basically.

Yeah.

Right.

Dealing.

Given the steel units.

It did.

Rav Sindhula: And I think the rest of my questions have been answered, so thank you very much. Let us know if you want to chat later. The next question comes from Rav Sindhula, a Private Investor. Please go ahead.

It is not a defense within the map and the trading price of that unit is $30, they sell and the $17 an hour for these units.

So by selling those units not considering that in CIB.

Rav Sindhula: Hi, thanks for giving me the opportunity to ask a question. So basically, I have two questions to ask. The first one, I want to ask, like, the unit is sitting at $9 right now. And, uh, we don't have the money. So basically, why not? If we are concerned about equity, why should we not sell them? The Dream Industrial Units is not a difference between the NAB and the trading price of that unit. It is $13 right now, and $17 is the NAB for these units.

And now the company is doing post consolidation.

The units.

Pretty hot tomato.

The distribution cut and.

And basically the unit consolidation so the units will be more to come on.

The Mt.

The completions look at does it.

Absolutely.

And the other sort of who does it so they have to go to this year.

Rav Sindhula: So, by selling those units, why are we not considering the NCIB? And now the company is doing post-consolidation. And with that, the units will be hit very hard tomorrow, with the distribution cut and the..., and basically the unit consolidation, so the units will be murdered tomorrow in the month. So the company should look at the shareholders also, the individual shareholder and the other shareholders. So they have to consider the unit price also when taking future decisions. Thank you so much. Yeah, thanks for your question. I'll attempt to answer a couple of them.

Place also Florida, taking future decisions.

So much.

Yep. Thanks for your question I'll attempt to answer a couple of them first of all it has been tough on the the office REIT not just us, but the Canadian sector as well as the U S sector.

So we're we're obviously seeing a large gap between intrinsic value, especially look at replacement cost versus where it is trading at today.

On your comments on the unit consolidation of how we're going to disclose it will flush out the disclosure. So it makes it easier to do comparative and to model our business starting in Q1.

And in terms of servicing value, we listed a couple of ideas that.

Jay Jiang: First of all, it has been tough on office reach, not just us but the Canadian sector as well as the U.S. sector. So we're obviously seeing a large gap between intrinsic value, especially when looking at replacement costs versus where it's trading at today. On your comments on the unit consolidation, how we're going to disclose it, we'll flush out the disclosure so it makes it easier to do comparatives and to model our business starting in Q1. And in terms of servicing value, we listed a couple ideas that we think that if we could sell some of the assets at a fair price, we can improve the liquidity and safety and make the company safer and lease our buildings. We think over time as things reach equilibrium, hopefully, the share price will come back. Q1.

We think that we could sell some of the assets at fair price, we can improve the liquidity and safety and.

Make the company safer at least our buildings, we think over time as things reach equilibrium hopefully the share price will come back.

No.

The question is like if we want to have liquidity when it.

We do.

To create liquidity in buyback as many units as we can because right now the market is not too bad.

So basically the market is very tough there's no that the buildings are really though so.

Every day is the last.

Rav Sindhula: If we want to have liquidity, why don't we sell assets to create liquidity and buy back as many units as we can? Because right now, the market is not rewiring on anything. Unit price means while taking decisions. So even if we sell the asset at fair market value, if we lose 2-3 assets, and with that we create liquidity, pay down debts, and buy back units instead of unit consolidation, that will be 100% better than increasing the value by increasing some FFO or something like that. Nothing is rewired in the market basically. Only those companies which are doing unit buybacks are the ones who are getting rewired. You can say MFC recently; they are trading at $33, previously $23 when they started buying back the units; the market is rewiring them.

20% Okay.

So basically the company has to look at the unit price.

And whilst they can be seasons, so even if we sell that I said that.

Create a market.

The two three assets and that we create liquidity down debts in the buy back units instead of a unit consolidations that will be good.

He has been doing.

It increases the value by increasing some pet food or something like that.

One is in the month basically only those completely stopped doing unit buybacks.

Who's getting any way that you can see MFC recently, they are trading at 30 previously twenty-three, though they started playing in.

The marketing dividing them.

Michael Cooper: So those companies in Canada who are buying units doing FFO and FDIB, those are the companies that are rewired by the market. Otherwise, all these companies, Look, we used to have 113 million shares outstanding. We have 38.

As companies in Canada were buying it.

Okay.

Maybe do it out of the company or otherwise everybody that market either the way you all these companies.

Neither merger.

We used to have 113 million shares outstanding we have 38, so we've been used to buying back stock. So we went from 113 million shares down to 38, we're now with the about the lowest price we've been through that whole time, so I understand about buying back stock I think what we've been saying is.

Michael Cooper: So we're used to buying back stock. So we went from 113 million shares down to 38. We're now at about the lowest price we've been through that whole time.

Michael Cooper: So I understand about buying back stock. But I think what we've been saying is we want to sell assets to raise liquidity in addition to the distribution reduction. And as far as NAV, I said this before, I think as we see more sales, the appraisers will have more information and will get better clarity on net asset values of office buildings. So a lot of that will play out over the next 12 months. But please feel free to call Jay. He's on the press release if you want to talk about this anymore.

We want to sell assets to raise liquidity. In addition to the distribution reduction I mean.

And as far as NAV I've said this before I think as we see more sales. The appraisers will have more information and we'll get better clarity on net asset values of office buildings. So a lot of that will play out over the next 12 months, but please feel free to call Jay but he is on the press release, if you want to talk about this anymore.

Rav Sindhula: Thank you so much. Thank you so much. Thank you. Once again, if you have a question, please press star then 1.

Thank you so much. Thank you so much thank you.

Okay.

Once again, if you have a question. Please press Star then one.

Yeah.

Matt Cornack: Next question comes from Matt Cornack with National Bank Financial. Please go ahead. Hey, guys, just a slightly different tax on that last question, but we've seen employment or sort of employment age population growth of 125,000 people, and building permits were down 25,000. There's a clear need for housing in this country, and I think Dream Office is ultimately a covered land play. And yet, we're seeing assets that have impaired values, which is part of this distribution cut to kind of give you some time till we get to a point where you'll see that additional asset value. Or maybe you're seeing investors that recognize that again, you're sitting on very good land and the best city in the country. So I would say this: if a bunch of us owned this company privately, we would not have specific distributions at a time like this. We would take a look at the business, where we would invest the money, and how much liquidity we have.

The next question comes from Matt Carnac with National Bank Financial. Please go ahead.

Hey, guys, just a slightly different tact on that last question, but.

We've seen our employment.

Or sort of eliminated population growth of 125000 people building permits were down 25000, there's a clear need for housing in this country and I think dream office is ultimately a covered land play and yet we're seeing out the impaired values as part of this distribution cut.

To kind of give you some time until we get to a point where you'll.

You'll see that additional asset value or maybe are you seeing investors that recognize that again, you're sitting on very good land in the best city in the country.

So I would say this.

A bunch of us own. This company privately we would not have specific distributions at a time like this we would take a look at the business wherever we invest the money and how much liquidity. We have so I think we're looking at is much more in light of what is appropriate for the business to produce with regards to housing there is theirs.

Michael Cooper: So I think we're looking at this much more in the light of what is appropriate for the business to produce. With regard to housing, there is a crazy demand for it. Toronto's a very difficult city to get housing starts. It's very difficult to put the pieces together to build.

Crazy demand for it Toronto is a very difficult city to get housing starts it's very difficult to put the pieces together to build there is a lot of things going on with the city Hall, and we are dealing with them.

Michael Cooper: There are a lot of things going on with City Hall, and we are dealing with them. And everybody's making progress, but it's very slow. So I think we're going to see more flexibility in not replacing office space. If you want to redevelop an office building, but we're still not there, but it's coming. I think we're making a lot of progress towards that, and I think we saw the recent announcement of a project that didn't have an office replacement but allowed residential. Is that the beginning of it?

And everybody is making progress, but it's very slow so I think we're gonna see.

More flexibility to not replace office space, if you want to redevelop an office building.

But we're still not there, but its coming I think we're making a lot of progress towards that.

And I think we saw.

Our recent announcement of a project that Didnt have an office replacement in blood residential is that the beginning of it or do you think that there's still hoops to go through to get the city to come to the conclusion.

Michael Cooper: Or do you think that there's still hoops to go through to get the city to come to the conclusion that residential may be the better usage for these? Now, my personal view is the best approach would be to say, here is the pathway to build residential when you have office. What they're doing is they're looking at each one and they're studying the situation. So in that case, they're saying, okay, we can see the reasons for not having office replacements here, but there's no general rule. And then, you know, maybe if you had 200,000 square feet of office, maybe you'd replace it with 100, but it's all one-offs. This is all happening while the city is doing a big study to come up with a plan for how much office space they really need to protect, if any. So they're looking at that now, but the idea of a universal approach will only come after they're finished studying it.

Residential maybe the better usage for these.

My personal view is the best approach would be to say here is the pathway to build residential when you have office.

What theyre doing is theyre looking at each one and they are studying the situation. So in that case, there's no. Okay. We can see the reasons for not having office replacement here, but there's no general rule.

And then maybe if you had 200000 square feet of office, maybe you could replace it with one order, but it's all one offs. This is all happening while the city is doing a big study to come up with a plan for how much office do they really need to protect if any so that theyre looking at that now, but the idea of a universal approach will only come after they finished.

Got it.

Michael Cooper: It's fair enough. Thanks for that, Colin. That concludes the question and answer session. I would like to turn the conference back over to Mr. Cooper for any closing remarks.

It's fair enough thanks for that color.

This concludes the question and answer session I would like to turn the conference back over to Mr. Cooper for any closing remarks.

Michael Cooper: Thank you, operator. Thank you, everybody, for participating in this call. And please feel free to reach out to Gore, Jay, or myself. I look forward to keeping you updated on leasing, refinancing, and getting on with the business. Thank you very much. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day. Class A Real Estate Investment Trust

Thank you operator, thank you everybody for participating in this call.

And please feel free to reach out to GOR, Jay or myself and are looking forward to keeping you updated leasing refinancings and getting on with the business. Thank you very much.

This.

Today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

Okay.

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