Q2 2024 Dream Office Real Estate Investment Trust Earnings Call

August 12, 2024

Speaker Change: Welcome to the Dream Office REIT Q2 2024 conference call for Monday, August 12, 2024.

Operator: Conference call for Monday, August 12, 2024. 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 REIT's control that could cause actual results to differ materially from those that are disclosed in or implied by such forward looking information. Additionally, there is additional information about these assumptions and risks and uncertainties contained in Dream Office REIT's filings with securities regulators, including its latest annual information form and MD&A.

Operator: Call for Monday, August 12, 2024. 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 REIT's control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information.

Operator: Call for Monday, August 12, 2024. During this call, management of Dream Office REIT may make statements containing forward-looking information within the meaning of applicable securities legislation. Such 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 REIT's control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information.

Speaker Change: During this call, management of Dream Office REIT may make statements containing forward-looking information within the meaning of applicable securities legislation.

Speaker Change: Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties.

Speaker Change: Many of which are beyond Dream Office Reits control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information.

Operator: Additionally, additional information about these assumptions and risks and uncertainties is contained in Dream Office REIT's filings with securities regulators, including its latest annual information form and MD&A. These filings are also available on Dream Office REIT's website at www.dreamofficereit.ca. Later in the presentation, we will have a question and answer session. To queue up for a question, please press star 1 on your telephone keypad. Your host for today will be Mr. Michael Cooper, Chair and CEO of Dream Office REIT. Mr. Cooper, please go ahead.

Operator: Additionally, additional information about these assumptions and risks and uncertainties is contained in Dream Office REITs filings with securities regulators, including its latest annual information form and MD&A. These filings are also available on Dream Office REITs' website at www.dreamofficereits.ca. Later in the presentation, we will have a question and answer session. To queue up for a question, please press star one on your telephone keypad. Your host for today will be Mr. Michael Cooper, Chair and CEO of Dream Office REIT. Mr. Cooper, please go ahead.

Speaker Change: Additionally, there is additional information about these assumptions and risks and uncertainties is contained in Dream Office REITs filings with securities regulators.

Speaker Change: including its latest annual information form and MD&A.

Operator: These filings are also available on Dream Office REIT's website at www.dreamofficereit.ca.

Speaker Change: These filings are also available on Dream Office REIT's website at www.dreamofficereit.ca

Operator: Later in the presentation, we will have a question-and-answer session. To queue up for a question, please press star 1 on your telephone keypad.

Speaker Change: Later in the presentation, we will have a question and answer session.

Speaker Change: To queue up for a question, please press star 1 on your telephone keypad. Your host for today will be Mr. Michael Cooper, Chair and CEO of Dream Office REIT. Mr. Cooper, please go ahead.

Michael Cooper: Your host for today will be Mr. Michael Cooper, Chair and CEO of Dream Office REIT.

Michael Cooper: Mr. Cooper, please go ahead. Thank you, operator, and good morning, everybody.

Michael Cooper: Thank you, operator. Good morning, everybody.

Michael Cooper: Thank you, operator. And good morning, everybody. Today I'm here with Gordon Wadley and Jay Jiang, who will both speak about operations and finance. I just want to start by making a couple of comments on what's happening in the office market, particularly in Toronto, just the last few weeks and in conversations I've had with business leaders. One very large organization said that they redid all their space after COVID, and they did a hybrid. They probably accommodate people for two and a half days a week, and now they have people want to come in four days a week. So, they've got to re-figure out how to use their space.

Michael Cooper: Did I meet with Gordon Wadley and Jay Jank, who will both speak about operations and finance.

Michael Cooper: Thank you, operator, and good morning, everybody. Today, I'm here with Gordon Wadley and Jay Jiang, who will both speak about operations and

Michael Cooper: I'm here with Gordon Wadley and Jay Jiang, who will both speak about operations and finance. I just want to start with a couple of comments on what's happening in the office market, particularly in Toronto. Just in the last few weeks and in conversations I've had with business leaders, one very large organization said that they redid all their space. After COVID, and they did a hybrid, they probably accommodated people for two and a half days a week.

Michael Cooper: I just want to start by a couple of comments on what's happening in the office market, particularly in Toronto. Just the last few weeks and conversations I've had with business leaders, one very large organization said that they redid all their space after COVID, and they did a hybrid. They probably accommodate people two to two and a half days a week, and now they have people who want to come in four days a week. So they've got to re-figure how to do their space.

Michael Cooper: Finance

Speaker Change: I just want to start by a couple of comments on what's happening in the office market, particularly in Toronto. Just in the last few weeks in conversations I've had with business leaders, one very large organization said that they redid all their space.

Michael Cooper: And now they have people who want to come in four days a week. So they've got to re-figure out how to use their space. Meanwhile, you know, traditionally in office leases, from time to time, a tenant says they want a right to terminate. And over the last couple of years, those termination options have been exercised more frequently than they otherwise would have been. And then sometimes we try to sublet space; some of it's successful; some have taken it back.

Speaker Change: After COVID, and they did a hybrid, they probably accommodate people two, two and a half days a week, and now they have people who want to come in four days a week, so they've got to re-figure out how to do their space.

Michael Cooper: Meanwhile, you know, traditionally in office leases, from time to time, a tenant says they want a right to terminate. And over the last couple of years, those termination options have been exercised more frequently than they otherwise would have been. And then sometimes we try to sublet space; some have been successful, some have taken it back. And we still have a lot of leases that haven't rolled over since 2020. So what I would say the fundamental issue we struggle with is that our customers are trying to figure out how they use office space. We've got a lot more people coming back to the office. And I think that, generally, it looks quite positive.

Michael Cooper: Meanwhile, you know, traditionally in office leases from time to time in Tennessee, they want to write to terminate. And over the last couple of years, those termination options have been exercised more frequently than the other weeks would have been. And then sometimes we're trying to sublet space; some of it successful, some of it taking it back. And we still have a lot of leases that haven't rolled over since 2020. So what I would say, the fundamental issue we struggle with is our customers are trying to figure out how to use office space. We've got a lot more people coming back to the office.

Speaker Change: Meanwhile, you know, traditionally in office leases, from time to time, a tenant says they want a right to terminate. And over the last couple of years, those termination options have been exercised more frequently than they otherwise would have been.

Michael Cooper: And we still have a lot of leases that haven't rolled over since 2020. So what I would say the fundamental issue we struggle with is that our customers are trying to figure out how they use office space. We've got a lot more people coming back to the office, and I think that, generally, it looks quite positive. But it's just a slow process to get to the point where people have decided how they're going to use office space, what their demand is, and they can make decisions, and we can make decisions.

Speaker Change: And then some tenants have been trying to sublet space, some have been successful, some have taken it back. And we still have a lot of leases that haven't rolled over since 2020. So what I would say the fundamental issue we struggle with is

Michael Cooper: And I think that generally it looks quite positive, but it's just a slow process to get to the point where people have decided how they're going to use office space, what their demand is, and they can make decisions, and we can make decisions. But overall, on a quarter-over-quarter basis, things that we're going quite well; we're making a lot of progress on all fronts. And we're quite pleased. And I expect that over the next 12 to 18 months, we'll start to get a little bit more clarity.

Michael Cooper: But it's just a slow process to get to the point where people have decided how they're going to use office space, what their demand is, and they can make decisions, and we can make decisions. But overall, on a quarter over quarter basis, things have been going quite well; we're making a lot of progress on all fronts. And we're quite pleased. And I expect that over the next, you know, 12 to 18 months, we'll start to get a little bit more clarity. But that's just a general comment.

Speaker Change: And I think that generally it looks quite positive.

Speaker Change: But it's just a slow process to get to the point where people have decided how they're going to use office space, what their demand is.

Michael Cooper: But overall, on a quarter over quarter basis, things have been going quite well, we're making a lot of progress on all fronts, and we're quite pleased. And I expect that over the next, you know, 12 to 18 months, we'll start to get a little bit more clarity. Gor, do you want to give some specifics? Yeah, definitely.

Speaker Change: and they can make decisions and we can make decisions. But overall, on a quarter-over-quarter basis, things have been going quite well. We're making a lot of progress on all fronts and we're quite pleased. I expect that over the next 12-18 months, we'll start to get a little bit more clarity.

Gordon Wadley: But that's just a general comment, Gord. Do you want to give us specifics? Yeah, definitely. Thanks very much, Michael. What I'd say is when you look across the industry at every asset class, nothing's been more polarizing, I guess, than the impact of value and negative sentiment around non-core markets and, in particular, B&C class office markets, which make up a large majority, the overall inventory in North America, but also Toronto. I said, you know, essentially none of us are immune to these headlines and hot takes, but a dream office, you know, our team continues to work really hard and keep our buildings full with tenants that are generating good income, strong covenants, and long waltz.

Gordon Wadley: Yes, definitely. Thanks very much, Michael. What I'd say is when you look across the industry at every asset class, nothing's been more polarizing, I guess, than the impact of value and negative sentiment around non-core markets, and in particular B and C class office markets, which make up a large majority of the overall inventory in North America, but also Toronto. Said, you know, essentially, none of us are immune to these headlines and hot takes.

Gordon Wadley: Gor, do you want to give some specifics? Yeah, definitely. Thanks very much, Michael. What I'd say is when you look across the industry at every asset class, nothing's been more polarizing, I guess, than the impact of value and negative sentiment around non-core markets, and in particular, B and C class office markets, which make up a large majority of the overall inventory in North America, but also Toronto. Said, you know, essentially, none of us are immune to these headlines and hot takes

Speaker Change: But that's just a general comment. Gord, do you want to give some specifics?

Gord: Yep, definitely. Thanks very much, Michael.

Gord: What I'd say is when you look across the industry at every asset class, nothing's been more polarizing, I guess, than the impact of value and negative sentiment around non-core markets.

Gord: and in particular, B and C class office markets.

Gord: which make up a large majority of the overall inventory in North America, but also Toronto.

Gordon Wadley: But at Dream Office, you know, our team continues to work really hard and keep our buildings full of tenants that are generating good income, strong covenants, and long walls. We often outperform the market. And in the process, we're doing some really good deals for the portfolio and, ultimately, the industry in Toronto as a whole. You know, supporting our results this quarter, we've seen some substantial growth year over year since 2021 on total square feet leased annually, with last year being our strongest, where we did approximately 100 deals for 775,000 square feet, which, said differently, represented about 13% of our portfolio.

Speaker Change: I said, you know, essentially none of us are immune to these headlines and hot takes, but at Dream Office, you know, our team continues to work really hard and keep our buildings full with tenants that are generating good income, strong covenants, and long vaults.

Gordon Wadley: We often outperform the market, and in the process we're doing some really good deals for the portfolio, and ultimately the industry in Toronto as a whole. You know, supporting our results as quarter, we've seen some substantial growth year over year, since 2021 on total square feet least annually. Would last year be in our strongest, where we did approximately 100 deals for 775,000 square feet, which said differently represented about 13% of our portfolio. I'm pleased to say that already for this year, we're on pace with already 60 deals for approximately 360,000 square feet. This has been a real key catalyst in dream maintaining a market leading current and committed occupancy versus our peers.

Speaker Change: We often outperform the market and in the process we're doing some really good deals for the portfolio and ultimately the industry in Toronto as a whole.

Speaker Change: You know, supporting our results this quarter, we've seen some substantial growth year over year.

Speaker Change: Since 2021 on total square feet leased annually, with last year being our strongest, where we did approximately 100 deals for 775,000 square feet.

Gordon Wadley: I'm pleased to say that already for this year, we're on pace with already 60 deals for approximately 360,000 square feet. This has been a real key catalyst and dream, maintaining a market-leading current committed occupancy versus our peers. We continue to be cautiously optimistic for the remainder of this year with another 14 high probability deals for an additional 270,000 feet that are either conditional or in advanced stages of negotiation. And we still have two quarters to go.

Gordon Wadley: I'm pleased to say that already for this year, we're on pace with already 60 deals for approximately 360,000 square feet. This has been a real key catalyst and dream, maintaining a market-leading current and committed occupancy versus our peers. We continue to be cautiously optimistic for the remainder of this year with another 14 high probability deals for an additional 270,000 feet that are either conditional or in advanced stages of negotiation, and we still have two quarters to go.

Speaker Change: which said differently represented about 13% of our portfolio. I'm pleased to say that already for this year, we're on pace with already 60 deals for approximately 360,000 square feet. This has been a real key catalyst in Dream maintaining a market-leading current and committed occupancy versus our peers.

Gordon Wadley: We continue to be cautiously optimistic for the remainder of this year, with another 14 high probability deals for an additional 270,000 feet that are either conditional or in advanced stages of negotiation, and we still have two quarters to go. On a gross leasing perspective, we've been outpacing our annual average deal volume and absorption year over year, and I want to say this is a testament to a slowly improving climate and the hard work and dedication of our team as a whole. Our reputation and ability to manage a couple 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, very competitive sub-market.

Speaker Change: We continue to be cautiously optimistic for the remainder of this year, with another 14 high probability deals for an additional 270,000 feet that are either conditional or in advanced stages of negotiation, and we still have two quarters to go.

Gordon Wadley: On a gross leasing perspective, we've been outpacing our annual average deal volume and absorption year over year. And I want to say this is a testament to a slowly improving climate and the hard work and dedication of our team as a whole. Our reputation and ability to manage, coupled with our well-located assets, have helped us secure some of the best covenant tenants for arguably some of the biggest deals in a very, very competitive submarket.

Speaker Change: On a gross leasing perspective, we've been outpacing our annual average deal volume and absorption year over year, and I want to say this is a testament to a slowly improving climate and a hard work and dedication of our team as a whole.

Gordon Wadley: Our reputation and 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, very competitive sub-market. We've been able to secure our largest tenants for renewals right across the portfolio, including IO, BFL, DBRS, and State Street Bank. We've highlighted our largest expiry at 74 Victoria in previous calls, and that will transpire in Q4 of this year.

Speaker Change: Our reputation and ability to manage, coupled with our well-located assets.

Speaker Change: has helped us secure some of the best Covenant tenants.

Gordon Wadley: We've been able to secure our largest tenants for renewals right across the portfolio, including IO, BFL, DBRS, and State Street Bank. We've highlighted our largest expiry at 74 Victoria in previous calls, and that will transpire in Q4 of this year. We assumed the building would be coming back essentially vacant as of November 1st of this year, and that would result in an NOI hit of about $11 million per annum. Our team is very pleased to say that we've conditionally secured over a third of this expiring revenue well in advance of the termination date, and moreover, we're in very active conversations to add another 40 to 50,000 square feet to that building by the end of the year. Please keep in mind this is all much earlier than we had forecasted for 74 Victoria.

Gordon Wadley: We've been able to secure our largest tenants for renewals right across the portfolio, including Ayo, BFL, DBRS, and State Street Bank. We've highlighted our largest expiry at 74 Victoria in previous calls. And that transpires a cue for this year. We assumed the building would be coming back essentially vacant as of November 1st of this year. That would result in an NOI hit of about 11 million per annum. Our team is very pleased to say that we've conditionally secured over a third of this expiry in revenue, well in advance of the termination date. Moreover, we're in very active conversations to add another 40 to 50,000 square feet in that building by the end of the year.

Speaker Change: for arguably some of the biggest deals in a very, very competitive sub-market. We've been able to secure our largest tenants for renewals right across the portfolio, including IO, BFL, DBRS, and State Street Bank.

Gordon Wadley: We assumed the building would be coming back essentially vacant as of November 1st of this year, and that would result in an NOI hit of about $11 million per annum. Our team is very pleased to say that we've conditionally secured over a third of this expiring revenue well in advance of the termination date, and moreover, we're in very active conversations to add another 40 to 50,000 square feet to that building by the end of the year. Please keep in mind this is all much earlier than we had forecasted for 74 Victoria.

Speaker Change: We've highlighted our largest expiry at 74 Victoria in previous calls.

Speaker Change: and that transpires at Q4 of this year.

Speaker Change: We assumed the building would be coming back essentially vacant as of November 1st of this year.

Speaker Change: that would result in an NOI hit of about $11 million per annum.

Speaker Change: Our team is very pleased to say that we've conditionally secured over a third of this expiring revenue well in advance of the termination date.

Speaker Change: And moreover, we're in very active conversations to add another 40 to 50,000 square feet in that building by the end of the year. This is all, please keep in mind, this is all much earlier than we had forecasted for 74 Victoria.

Gordon Wadley: This is all; please keep in mind, this is all much earlier than we have forecasted for 74 Victoria. From an income perspective, we're seeing very healthy trends. Year to date on the 360,000 square feet of leasing signed, we saw net rents carrying a healthy spread of 14% higher than expiry. With an average weighted average lease term of about 5.5 years, this is much higher than the market average. As mentioned over previous quarters, not much has changed in terms of net effective rents. Any errors continue to be compressed, given the challenges with inflation, rising broker fees, increased costs of materials and labor to build suites.

Gordon Wadley: From an income perspective, we're seeing very healthy trends. Year to date, on the 360,000 square feet of leasing signed, we saw net rents carrying a healthy spread of 14% higher than expiry with an average weighted average lease term of about 5.5 years. This is much higher than the market average. As mentioned in previous quarters, not much has changed in terms of net effective rents. NERs continue to be compressed given the challenges with inflation, rising broker fees, and the increased cost of materials and labor to build suites.

Gordon Wadley: From an income perspective, we're seeing very healthy trends. Year to date, on the 360,000 square feet of leasing signed, we saw net rents carrying a healthy spread of 14% higher than expiry, with an average weighted average lease term of about 5.5 years. This is much higher than the market average. As mentioned in previous quarters, not much has changed in terms of net effective rents. NERs continue to be compressed given the challenges with inflation, rising broker fees, and the increased cost of materials and labor to build suites.

Speaker Change: From an income perspective, we're seeing very healthy trends. Year-to-date on the 360,000 square feet of leasing signed, we saw net rents carrying a healthy spread of 14% higher than expiries, with an average weighted average lease term of above 5.5 years. This is much higher than the market average.

Speaker Change: As mentioned over previous quarters, not much has changed in terms of net effective rents. NERs continue to be compressed given the challenges with inflation, rising broker fees, increased cost of materials, and labor to build suites.

Gordon Wadley: Ultimately, net rents, though, have been quite resilient, and I feel good about the trajectory of our in-place NOI. I feel that 2022 was the peak of the construction and supply impact costs. They had grown by almost 20% year over year. I remember Jay and I sitting down to talk about ways to mitigate the costs of construction, stay competitive and tendering, but also get competitive advantage on our peers and generates an important fee revenue. We started an in-house construction management and materials procurement team as a way to mitigate GC charges, self-performed fit-ups and, of equal importance, to be a trusted provider for our clients that's accountable and on demand to deliver the space that they come. As a result, last year we generated approximately 2.4 million in construction fees, and we continue that trend in 2024, all while performing work in creating beautiful environments for some of the most sophisticated clients in banking, government, and professional services.

Gordon Wadley: Ultimately, Net Rent still has been quite resilient, and I feel good about the trajectory of our in-place NOI. I feel that 2022 was the peak of the construction and supply impact costs, which had grown by almost 20% year over year.

Speaker Change: Ultimately, Net Rent still have been quite resilient and I feel good about the trajectory of our in-place NOI.

Gordon Wadley: I remember Jay and I sitting down to talk about ways to mitigate the cost of construction, stay competitive and tendering, but also gain a competitive advantage over our peers and generate some really important fee revenue. We started an in-house construction management and materials procurement team as a way to mitigate GC charges, self-perform fit-outs, and, of equal importance, be a trusted provider for our clients that's accountable and on demand to deliver the space that they covet.

Speaker Change: I feel that 2022 was the peak of the construction and supply impact costs. They had grown by almost 20% year-over-year.

Speaker Change: remember Jay and I sitting down to talk about ways to mitigate the cost of construction, stay competitive and tendering, but also get competitive advantage on our peers and generate some really important fee revenue.

Speaker Change: We started an in-house construction management and materials procurement team as a way to mitigate GC charges Self-performed fit ups and of equal importance be a trusted provider for our clients That's accountable and on demand to deliver the space that they covet

Gordon Wadley: As a result, last year we generated approximately $2.4 million in construction fees, and we will continue that trend in 2024, all while performing work and creating beautiful environments for some of the most sophisticated clients in banking, government, and professional services. For some quick context, our construction team has been actively working on marquee projects with Paramount Films, at their national head office. We also completed this quarter the new ICICI Bank headquarters on Bay and have turned over the space for the very highly anticipated restaurant Milos to put their finishing touches on what will be a spectacular opening later this year.

Speaker Change: As a result, last year we generated approximately $2.4 million in construction fees, and we continue that trend in 2024, all while performing work and creating beautiful environments for some of the most sophisticated clients in banking, government, and professional services.

Gordon Wadley: Just for some quick context, our construction team has been actively working on marquee projects with our amount of films, their national head office. We also completed this quarter the new ICI Bank headquarters on Bay and have turned over the space for the very highly anticipated restaurant Nilos to put their finishing touches on what will be a spectacular opening later this year.

Speaker Change: Just for some quick context, our construction team has been actively working on marquee projects with Paramount Films, their national head office. We also completed this quarter the new ICICI Bank Headquarters on Bay.

Speaker Change: And I've turned over the space for the very highly anticipated restaurant Milos to put their finishing touches on what will be a spectacular opening later this year.

Gordon Wadley: Although we at Dream Office continue to see tempered improvements from an overall performance perspective, the Canadian office market, as Michael's mentioned in the past, can still be described as erratic. For example, while one performance metric sees improvements for an indication of stability, such as overall vacancy rates or absorption, and then you see in term a bit of a leveling of cap rates, some improving interest rates, and some renewed interest in buyers, you'll see another metric like the amount of new vacant space arriving, sublet space, and pressure on any iris take effect. You often hear sublet space is being absorbed, but then the same week you'll hear about another large tenant adding sublet space to the supply.

Gordon Wadley: Although we at Dream Office continue to see tempered improvements from an overall performance perspective, the Canadian office market, as Michael has mentioned in the past, can still be described as erratic. For example, while one performance metric sees improvements or an indication of stability, such as overall vacancy rates or absorption, and then you see in the term, a bit of a leveling of cap rates, some improving interest rates, and some renewed interest in buyers, you'll see another metric, like the amount of new vacant space arriving, sublet space, and pressure on any heirs take effect.

Gordon Wadley: Although we at Dream Office continue to see tempered improvements from an overall performance perspective, the Canadian office market, as Michael has mentioned in the past, can still be described as erratic. For example, while one performance metric sees improvements or an indication of stability, such as overall vacancy rates or absorption, and then you see in term a bit of a leveling of cap rates, some improving interest rates, and some renewed interest in buyers, you'll see another metric, like the amount of new vacant space arriving, sublet space, and pressure on any heirs take effect.

Speaker Change: Although we at Dream Office continue to see tempered improvements from an overall performance perspective, the Canadian office market, as Michael has mentioned in the past, can still be described as erratic.

Michael Cooper: For example, while one performance metric sees improvements or an indication of stability, such as overall vacancy rates or absorption,

Michael Cooper: And then you see in term a bit of a leveling of cap rates, some improving interest rates, and some renewed interest in buyers. You'll see another metric, like the amount of new vacant space arriving, sublet space, and pressure on any heirs to take effect.

Gordon Wadley: You often hear sublet space is being absorbed, but then the same week you'll hear about another large tenant adding sublet space to the supply. It honestly feels like a game of snakes and ladders, but our team remains laser focused on doing a good job with the assets we own and the variables in our control around leasing and property management. And I would say our results this quarter illustrate those efforts right up until the end. Overall vacancy this quarter stabilized across all classes in downtown Toronto at around 18%. This is a number not seen since the early 1990s.

Michael Cooper: You often hear sublet spaces being absorbed, but then the same week you'll hear about another large tenant adding sublet space to the supply.

Gordon Wadley: It honestly feels like a game of snakes and ladders, but our team remains laser focused on doing a good job with the assets we own and the variables in our control around policing and property management, and I would say our results as quarter illustrate those efforts right up until the end. Overall, they can see this quarter stabilized across all classes and downtown Toronto at around 18%. This is a number not seen since the early 90s. It's buoyed largely by a very low vacancy rate in the Class A assets. Although the vacancy rates themselves did not see much movement quarter over quarter, our managed and re-property saw some positive absorption, and in doing about 580 basis points better than the market with a current and committed occupancy of almost 88% in our downtown assets.

Speaker Change: It honestly feels like a game of snakes and ladders, but our team remains laser focused on doing a good job with the assets we own and the variables in our control around leasing and property management. And I would say our results this quarter illustrate those efforts right up until the end.

Gordon Wadley: It is buoyed largely by a very low vacancy rate in the Class A assets. Although the vacancy rates themselves did not see much movement quarter over quarter, our managed and re-property saw some positive absorption and was doing about 580 basis points better than the market with a current and committed occupancy of almost 88% in our downtown assets. Many spectators on the sidelines for office space have commented on concerns over the sublease market. Sublet space has continued to decline as office users are beginning to make decisions to return to office and or right size their business.

Speaker Change: Overall vacancy this quarter stabilized across all classes in downtown Toronto at around 18%. This is a number not seen since the early 90s. It's buoyed largely by a very low vacancy rate in the Class A assets.

Gordon Wadley: It is buoyed largely by a very low vacancy rate in the Class A assets. Although the vacancy rates themselves did not see much movement quarter over quarter, our managed and reaped property saw some positive absorption and is doing about 580 basis points better than the market with a current and committed occupancy of almost 88% in our downtown assets. Many spectators on the sidelines for office space have commented on concerns over the sublease market. Sublet space has continued to decline as office users are beginning to make decisions to return to office and or right size their business.

Speaker Change: Although the vacancy rates themselves did not see much movement quarter over quarter, our managed and re-property saw some positive absorption, and in doing about 580 basis points better than the market, with a current and committed occupancy of almost 88% in our downtown assets.

Gordon Wadley: Many spectators on the sidelines for office have commented on concerns over the sublies market. Sublet space continued to decline as office users are beginning to make decisions to the return to office and or right size their businesses. In Toronto, sublet space now represents approximately 6% of the existing inventory. Within Dream Office, sublet space only represents around 3% of our Toronto GLA. We're not too concerned about this overall exposure, but are keeping a close eye on it. No one in the real estate market today is immune to the impact of rising interest rates, and it's become a more challenging lending environment today than three years ago.

Speaker Change: Many spectators on the sidelines for office have commented on concerns over the sub-lease market. Sublet space continued to decline as office users are beginning to make decisions to the return to office and or right-size their businesses.

Gordon Wadley: In Toronto, sublet space now represents approximately 6% of the existing inventory. However, within Dream Office, sublet space only represents around 3% of our Toronto GLA. We're not too concerned about this overall exposure but are keeping a close eye on it. No one in the real estate market today is immune to the impact of rising interest rates, and it's become a more challenging lending environment today than three years ago. We work very well with our banking partners and are in lockstep with the leasing strategy operations and are executing as such. Since the historical low of 40 basis points in the mid-2020s, the 10-year GOC bond yield and cost of debt have risen by over 270 basis points.

Gordon Wadley: In Toronto, sublet space now represents approximately 6% of the existing inventory. Within Dream Office, sublet space only represents around 3% of our Toronto GLA. We're not too concerned about this overall exposure, but are keeping a close eye on it.

Speaker Change: In Toronto, sublet space now represents approximately 6% of the existing inventory. Within Dream Office, sublet space only represents around 3% of our Toronto GLA. We're not too concerned about this overall exposure, but are keeping a close eye on it.

Gordon Wadley: No one in the real estate market today is immune to the impact of rising interest rates, and it's become a more challenging lending environment today than three years ago. We work very well with our banking partners and are in lockstep with leasing strategy operations, and are executing as such. Since the historical low of 40 basis points in the mid-2020s, the 10-year GOC bond yield and cost of debt have risen by over 270 basis points.

Speaker Change: No one in the real estate market today is immune to the impact of rising interest rates, and it's become a more challenging lending environment today than three years ago. We work very well with our banking partners and are in lockstep with leasing strategy, operations, and our executing as such.

Gordon Wadley: We work very well with our banking partners and are in lockstep with leasing strategy operations and are executing this such. Since the historical low of 40 basis points in the mid-2020s, the 10-year GOC bond yield and cost of debt has risen by over 270 basis points. The last quarter, we've seen an easing and rate pressure; however, lenders are actively reviewing their office loan exposure and are becoming more selective based on properties' location, quality, and addition to the covenant of the borrowers. They are evaluating tenant profiles with laser focus and leases carefully. Loans are sized more conservatively, which Jay can speak about a little bit more.

Speaker Change: Since the historical low of 40 basis points in the mid-2020s, the 10-year GOC bond yield and cost of debt has risen by over 270 basis points.

Operator: Conference Call for Monday, August 12, 2024. 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 a subject to a number of risks and uncertainties. Many of which are beyond Dream Office REIT's control that could cause actual results to differ materially from those that are disclosed in or implied by such forward looking information.

Gordon Wadley: In the last quarter, we've seen an easing in rate pressure, but lenders are actively reviewing their office loan exposure and are becoming more selective based on the property's location, quality, in addition to the covenant of the borrowers. They are evaluating tenant profiles with laser focus and leases carefully. Loans are sized more conservatively, which Jay can speak about a little bit more. Tenants, too, are much more sophisticated in their demands and are acutely aware of their own balance sheets and liquidity positions. Hence, many are trying to push traditional costs on landlords on transactions to induce their tenancy, which is having a real impact in a high-interest environment.

Gordon Wadley: In the last quarter, we've seen an easing in rate pressure, but lenders are actively reviewing their office loan exposure and are becoming more selective based on the property's location, quality, in addition to the covenant of the borrowers. They are evaluating tenant profiles with laser focus and leases carefully. Loans are sized more conservatively, which Jay can speak about a little bit more. Tenants, too, are much more sophisticated in their demands and are acutely aware of their own balance sheets and liquidity positions. Hence many are trying to push traditional costs on to the landlords on transactions to induce their tenancy, which is having a real impact in a high-interest environment.

Speaker Change: The last quarter, we've seen an easing in rate pressure, however, lenders are actively reviewing their office loan exposure and are becoming more selective based on properties location, quality, in addition to the covenant of the borrowers.

Speaker Change: They are evaluating tenant profiles with laser focus and leases carefully. Loans are sized more conservatively, which Jay can speak about a little bit more.

Gordon Wadley: Tendons too are much more sophisticated in their demands and are acutely aware of their own balance sheets and liquidity position; hence, many are trying to push traditional costs to the landlords on transactions to induce their tenancy, which is having a real impact in a high interest environment. In light of these challenges, as Jay will further mention, we have proactively addressed nearly all of our near-term dematurities, including our biggest at Adelaide Place. In the same vein, it's also very important to note that we completed all of our biggest capital, maintenance, and base building projects, and are forecasting much less capital required for maintenance and catbacks in the next 24 months, thus in turn helping our annual cash flows, producing our risk and protecting our balance sheet.

Jay Jiang: Tenants, too, are much more sophisticated in their demands and are acutely aware of their own balance sheets and liquidity position, hence many are trying to push traditional costs to the landlords on transactions to induce their tenancy, which is having a real impact in a high-interest environment.

Operator: Additionally, there additional information about these assumptions and risks and uncertainties is contained in Dream Office REIT's filings with securities regulators, including its latest annual information form and MDNA. These filings are also available on Dream Office REIT's website at www.dreamofficereit.ca.

Gordon Wadley: In light of these challenges, as Jay will further mention, we have proactively addressed nearly all of our near-term debt maturities, including our biggest at Adelaide Place. In the same vein, it's also very important to note that we have completed all of our biggest capital, maintenance, and base building projects and are forecasting much less capital required for maintenance and capital expenditure in the next 24 months, thus in turn helping our annual cash flows, reducing our risk, and protecting our balance sheet.

Jay Jiang: In light of these challenges, as Jay will further mention, we have proactively addressed nearly all of our near-term debt maturities, including our biggest at Adelaide place.

Speaker Change: In the same vein, it's also very important to note that we completed all of our biggest capital, maintenance, and base building projects, and are forecasting much less capital required for maintenance and capex in the next 24 months.

Operator: Later in the presentation, we will have a question and answer session. To queue up for a question, please press star 1 on your telephone keypad.

Michael Cooper: Your host for today will be Mr. Michael Cooper, Chair and CEO of Dream Office REIT.

Speaker Change: Thus, in turn, helping our annual cash flows, reducing our risk, and protecting our balance sheet.

Gordon Wadley: It's always top of mind, and we continue to improve and leverage our strong lender relationships to ensure the balance sheet is well protected through what we believe as a trough in the office lending market.

Michael Cooper: Mr. Cooper, please go ahead. Thank you, operator and good morning, everybody.

Speaker Change: It's always top of mind and we continue to improve and leverage our strong lender relationships to ensure the balance sheet is well protected through what we believe is a trough in the office lending market.

Michael Cooper: Did I meet with Gordon Wadley and Jay Jank, who will both speak about operations and finance. I just want to start by a couple of comments on what's happening in the office market, particularly in Toronto. Just the last few weeks and conversations I've had with business leaders, one very large organization said that they redid all their space after COVID, and they did a hybrid. They probably accommodate people two to two and a half days a week, and now they have people who want to come in four days a week.

Gordon Wadley: I get asked all the time about 357 Bay. What I'll tell everybody on the call is we work's been a tenant in very good standing; they communicate very well with us, they've never missed a red payment, and have brought in some great clients to our premier asset at 357 Bay. Coupled with all the beautiful renovations done in the building, we have a great deal of confidence and optimism. We work very closely with them during their bankruptcy proceedings, and came up with a fair solution that supports a good tenant, doesn't significantly impact our NOI long term, and ultimately protects the terminal value of one of our best and most in demand assets.

Gordon Wadley: What I'll tell everybody on the call is WeWork's been a tenant in very good standing, they communicate very well with us, have never missed a rent payment, and have brought in some great clients to our premier asset at 357 Bay. Coupled with all the beautiful renovations done to the building, we have a great deal of confidence and optimism. We worked very closely with them during their bankruptcy proceedings and came up with a fair solution that supports a good tenant, doesn't significantly impact our NOI in the long term, and ultimately protects the terminal value of one of our best and most in-demand assets.

Gordon Wadley: What I'll tell everybody on the call is WeWork's been a tenant in very good standing, they communicate very well with us, have never missed a rent payment, and have brought in some great clients to our premier asset at 357 Bay. Coupled with all the beautiful renovations done to the building, we have a great deal of confidence and optimism. We worked very closely with them during their bankruptcy proceedings and came up with a fair solution that supports a good tenant, doesn't significantly impact our NOI long-term, and ultimately protects the terminal value of one of our best and most in-demand assets.

Speaker Change: I get asked all the time about 357 Bay.

Speaker Change: What I'll tell everybody on the call is, WeWork's been a tenant in very good standing, they communicate very well with us, they've never missed a rent payment, and have brought in some great clients to our premier asset at 357 Bay.

Speaker Change: Coupled with all the beautiful renovations done to the building, we have a great deal of confidence and optimism.

Speaker Change: We worked very closely with them during their bankruptcy proceedings and came up with a fair solution that supports a good tenant, doesn't significantly impact our NOI long term, and ultimately protects the terminal value of one of our best and most in-demand assets.

Michael Cooper: So they've got to re-figure how to do their space. Meanwhile, you know, traditionally in office leases from time to time in Tennessee, they want to write to terminate. And over the last couple of years, those termination options have been exercised more frequently than the other weeks would have been. And then sometimes we're trying to sublet space, some of it successful, some of it taking it back. And we still have a lot of leases that haven't rolled over since 2020.

Michael Cooper: Despite some of the macro challenges in the sector, I really couldn't be more pleased with how the whole team's navigated through some evolving challenges to the industry. Their effort and dedication to not only our company but to our clients is what I'm most proud of. At the end of the day, everyone and what I'd say, it's a combination of having near-replaceable assets, coupled with a very high quality, high character team of people. We have operated in releasing those buildings that gives me the greatest confidence closing out of 2024. We're doing a lot of innovative deals that are making our assets better and will be in great shape as demand picks up and on future renewal cycles.

Gordon Wadley: Despite some of the macro challenges in the sector, I really couldn't be more pleased with how the whole team's navigated through some evolving challenges in the industry. Their effort and dedication to not only our company but to our clients is what I'm most proud of. At the end of the day, everyone, what I'd say, it's a combination of having irreplaceable assets, coupled with a very high quality, high character team of people. We have operated by leasing those buildings.

Gordon Wadley: Despite some of the macro challenges in the sector, I really couldn't be more pleased with how the whole team's navigated through some evolving challenges in the industry. Their effort and dedication to not only our company but to our clients is what I'm most proud of. At the end of the day, everyone, what I'd say it's a combination of having irreplaceable assets coupled with a very high quality, high character team of people.

Speaker Change: Despite some of the macro challenges in the sector, I really couldn't be more pleased with how the whole team's navigated through some evolving challenges to the industry, their effort and dedication to not only our company, but to our clients is what I'm most proud of.

Speaker Change: At the end of the day, everyone, what I'd say, it's a combination of having irreplaceable assets coupled with very high quality, high character team of people. We have operated and leasing those buildings. That gives me the greatest confidence closing out 2024.

Gordon Wadley: We have operated and are leasing those buildings. That gives me the greatest confidence in closing out 2024. We're doing a lot of innovative deals that are making our assets better, and we'll be in great shape as demand picks up and on future renewal cycles. As always, I always like to throw this out there, but if at any time you'd like to tour or see firsthand the work that we've done or the work that we're doing, please reach out to me directly. I'm always really proud to showcase it, and it would be a great excuse to pop into one of our many great restaurants. Thanks so much, everyone, and I'll pass you over to my friend Jay.

Michael Cooper: So what I would say, the fundamental issue we struggle with is our customers are trying to figure out how to use office space. We've got a lot more people coming back to the office. And I think that generally it looks quite positive, but it's just a slow process to get to the point where people have decided how they're going to use office space, what their demand is, and they can make decisions and we can make decisions.

Speaker Change: We're doing a lot of innovative deals that are making our assets better and we'll be in great shape as demand picks up and on future renewal cycles.

Michael Cooper: As always, I always like to throw this out there, but if at any time you'd like to tour or see firsthand the work that we've done or the work that we're doing, please reach out to me directly. I'm always really proud to showcase it, and it would be a great excuse to pop into one of our many great restaurants.

Gordon Wadley: That gives me the greatest confidence closing out 2024. We're doing a lot of innovative deals that are making our assets better, and we'll be in great shape as demand picks up and on future renewal cycles. As always, I always like to throw this out there, but if at any time you'd like to tour or see firsthand the work that we've done or the work that we're doing, please reach out to me directly. I'm always really proud to showcase it. And it would be a great excuse to pop into one of our many great restaurants. Thanks so much, everyone. And I'll pass you over to my friend Jay.

Speaker Change: As always, I always like to throw this out there, but if at any time you'd like to tour or see firsthand the work that we've done or the work that we're doing, please reach out to me directly. I'm always really proud to showcase it, and it would be a great excuse to pop into one of our many great restaurants. Thanks so much everyone, and I'll pass you over to my friend Jay.

Michael Cooper: But overall, on a quarter-over-quarter basis, things that we're going quite well, we're making a lot of progress on all fronts. And we're quite pleased. And I expect that over the next 12 to 18 months, we'll start to get a little bit more clarity.

Jay Jiang: Thanks so much, everyone, and I'll pass you over to my friend, Jake.

Jay Jiang: Thank you, Gord. Good morning.

Jay Jiang: Thank you, Lord. Good morning. I will provide a review of our financial results and also update on how we are internally forecasting our business for the second half of 2024. We reported diluted funds from operations of $0.76 per unit, an 8.7% increase from $0.70 per unit in the second quarter of 2023, after adjusting for the 2.1 consolidation of units and Q1 of this year. We add approximately $0.04 per unit of these termination income this quarter and also $0.04 per unit of short-term straight line rent for two larger tenants that took possession of their space a few months early.

Jay Jiang: Thank you, Gordon. Good morning. I will provide a review of our financial results and also an update on how we are internally forecasting our business for the second half of 2024. We reported diluted fund term operations of $0.76 per unit, up 8.7% from $0.70 per unit in the second quarter of 2023 after adjusting for the 2-4-1 consolidation of units in Q1 of this year. We had approximately four cents per unit of lease termination income this quarter and also four cents per unit of short-term straight line rent for two larger tenants that took possession of their space a few months early.

Jay Jiang: I will provide a review of our financial results and also an update on how we are internally forecasting our business for the second half of 2024. We reported diluted fund term operations of $0.76 per unit, up 8.7% from $0.70 per unit in the second quarter of 2023 after adjusting for the 241 consolidation of units in Q1 of this year. We got approximately four cents per unit of this termination income this quarter and also four cents per unit of short-term straight line rent for two larger tenants that took possession of their space a few months early.

Gordon Wadley: But that's just a general comment, Gord, do you want to give us specifics? Yeah, definitely. Thanks very much, Michael.

Gordon Wadley: What I'd say is when you look across the industry at every asset class, nothing's been more polarizing, I guess, than the impact of value and negative sentiment around non-core markets and in particular, B&C class office markets, which make up a large majority, the overall inventory in North America, but also Toronto. I said, you know, essentially none of us are immune to these headlines and hot takes, but a dream office, you know, our team continues to work really hard and keep our buildings full with tenants that are generating good income, strong covenants, and long waltz.

Jay Jiang: Approximately four cents per unit of lease termination income this quarter and also four cents per unit of short term straight line rent for two larger tenants that took possession of their space a few months early.

Jay Jiang: That income will be fully reflected in our passionate operating income over the second half of 2024. Although compared to properties, NOI increased by 1.2% compared to the same quarter last year, comprised of a 2.6% increase in downtown Toronto, offset by a decrease of 2.7% in other markets. Arna as a value per unit was $64.82, down $1.1, 10 cents, or 1.7% from Q1 out of 6592. The decrease includes 25 million attributed to fair value adjustments on investment properties. As part of our valuation process is quarter, we externally appraise for assets, totaling $333 million or 14% of our portfolio.

Jay Jiang: That income will be fully reflected in our cash net operating income over the second half of 2024. Total comparative properties NOI increased by 1.2% compared to the same quarter last year, comprised of a 2.6% increase in downtown Toronto offset by a decrease of 2.7% in other markets. Our net asset value per unit was $64.82, down $1.10 or 1.7% from Q1 NAV of $65.92. The decrease includes $25 million attributed to fair value adjustments on investment properties.

Jay Jiang: Net income will be fully reflected in our passionate operating income over the second half of 2024.

Jay Jiang: Total comparative properties NOI increased by one 2% compared to the same quarter last year comprised of two 6% increase in downtown Toronto offset by a decrease of two 7% in other markets.

Jay Jiang: Our net asset value per unit was $64 82 sets down 1.1 dollars 10, or one 7% from Q1 of 65 92.

Jay Jiang: The decrease includes $25 million attributed to fair value adjustments on investment properties as part of our valuation process. This quarter, we externally appraised four assets totaling $333 million or 14% of our portfolio.

Jay Jiang: As part of our valuation process this quarter, we externally appraised four assets totaling $333 million, or 14% of our portfolio. In February, we provided our annual guidance of $2.80 to $2.90 per unit of FFO post-unit consolidation and flat to low single-digit comparable property NOI. Based on the information and results since February, we are still targeting the midpoint range of our guidance for both FFO and CPNOI. The key variability to our forecast will be the maturity of the 206,000 square feet leased with the federal government at 74 Victoria on October 31st, 2024.

Jay Jiang: As part of our valuation process this quarter, we externally appraised four assets totaling $333 million, or 14% of our portfolio. In February, we provided our annual guidance of $2.80 to $2.90 per unit of FFO post-unit consolidation and flat to low single-digit comparable property NOI. Based on the information and results since February, we are still targeting the midpoint range of our guidance for both FFO and CPNOI. The key variability to our forecast will be the maturity of the 206,000 square feet lease with the federal government at 74 Victoria on October 31st, 2024.

Gordon Wadley: I'm pleased to say that already for this year, we're on pace with already 60 deals for approximately 360,000 square feet. This has been a real key catalyst in dream maintaining a market leading current and committed occupancy versus our peers. We continue to be cautiously optimistic for the remainder of this year with another 14 high probability deals for an additional 270,000 feet that are either conditional or in advanced stages of negotiation, and we still have two quarters to go.

Jay Jiang: In February, we provided our annual guidance of $2.80, the $2.90 per unit of FFO post unit consolidation, and flat to low single-digit comparable properties NOI. Based on the information in results since February, we are still targeting the midpoint range of our guidance for both FFO and CPNOI. The key variability to our forecast will be the maturity of the $200,600,000 square feet leased with the federal government at 74 Victoria and October 31st, 2024. As Gordon mentioned, we have received a renewal for $64,000 square feet with the existing federal government, and we are currently in active discussions to lease another $50,000 square feet.

Jay Jiang: In February we provided our annual guidance of $2 80 to $2 90 per unit of Hustle post unit consolidation and flat to low single digit comparable property NOI base.

Jay Jiang: Based on the information as a result since February we are still targeting the midpoint range of our guidance for both <unk> and <unk>.

Cord: The key variable variability to our forecast will be the majority of the 206000 square feet leased with the federal government is 74, Victoria on October 31, 2024 as cord mentioned, we have received a renewal for 64000 square feet with the existing federal government and we are currently in active discussions to lease them.

Gordon Wadley: On a gross leasing perspective, we've been outpacing our annual average deal volume and absorption year over year, and I want to say this is a testament to a slowly improving climate and a hard work and dedication of our team as a whole. Our reputation and ability to manage a couple 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, very competitive sub-market.

Jay Jiang: As Gordon mentioned, we have received a renewal for 64,000 square feet with the existing federal government, and we are currently in active discussions to lease another 50,000 square feet. With only the 64,000 square feet renewal and no other leasing, the in-place occupancy of the building will be approximately 55%. The temporary reduction in occupancy until we lease up the building will result in an annualized NOI impact of approximately $8 million, or about 40 cents.

Cord: Other 50000 square feet.

Jay Jiang: With only the 64,000 square feet renewal and no other leasing, the in-place occupancy of the building will be approximately 55%. The temporary reduction in occupancy until we lease up the building will resolve an annualized NOI impact of approximately $8 million for about 40 cents. We are actively working on leasing strategies to mitigate this impact and look forward to reporting our progress next quarter. In addition, we have approximately 500 basis points of committed occupancy that will commence rent payments towards the end of this year. In aggregate, these leases will contribute approximately $7 million of higher comparative properties NOI in 2025 versus 2024, which covers much of the shortfall from the federal government's lease expiry at 74 Victoria.

Speaker Change: With only the 64000 square feet renewal and no other leasing in place occupancy of the building will be approximately 55%.

Jay Jiang: The temporary reduction in occupancy until we lease up the building will result in an annualized NOI impact of approximately $8 million, or about 40 cents per diluted share. We are actively working on leasing strategies to mitigate this impact and look forward to reporting our progress next quarter. In addition, we have approximately 500 basis points of committed occupancy that will commence rent payments towards the end of this year. In aggregate, these leases will contribute approximately $7 million of higher comparative property NOI in 2025 versus 2024, which covers much of the shortfall from the federal government's lease expiry at 74 Victoria. There are approximately 90,000 square feet of maturities, excluding 74 Victoria, across our portfolio for the remainder of this year relative to $271,000.

Speaker Change: A temporary reduction in occupancy until we lease up the building will result in annualized NOI impact of approximately $8 million or about 40 cents.

Gordon Wadley: We've been able to secure our largest tenants for renewals right across the portfolio, including Ayo, BFL, DBRS, and State Street Bank. We've highlighted our largest expiry at 74 Victoria in previous calls. And that transpires a cue for this year. We assumed the building would be coming back essentially vacant as of November 1st of this year. That would result in an NOI hit of about 11 million per annum. Our team is very pleased to say that we've conditionally secured over a third of this expiry in revenue, well in advance of the termination date, and moreover, we're in very active conversations to add another 40 to 50,000 square feet in that building by the end of the year.

Jay Jiang: We are actively working on leasing strategies to mitigate this impact and look forward to reporting our progress next quarter. In addition, we have approximately 500 basis points of committed occupancy that will commence rent payments towards the end of this year. In aggregate, these leases will contribute approximately $7 million of higher comparative property NOI in 2025 versus 2024, which covers much of the shortfall from the federal government's lease expiry at 74 Victoria.

Speaker Change: We are actively working on leasing strategies to mitigate this impact and look forward to reporting our progress next quarter and.

Speaker Change: In addition, we have approximately 500 basis points of community occupancy that will commence rent payments towards the end of this year.

Speaker Change: Aggregate these leases will contribute approximately $7 million of higher comparative properties NOI in 2025 versus 2024, which covers much of the shortfall from the federal government lease expiry of Sony for Victoria.

Jay Jiang: There is approximately 90,000 square feet of maturities excluding 74 Victoria across our portfolio for the remainder of this year relative to the 271,000 square feet of leasing pipeline that Gore noted, and we have five months this year to complete more leasing. Our expectation is to make reasonable progress on our leasing pipeline, and we think that 2025 total comparative properties NOI could be at or above 2024.

Jay Jiang: There are approximately 90,000 square feet of maturities, excluding 74 Victoria across our portfolio for the remainder of this year relative to the $271,000. Square Feet of Leasing Pipeline that Gore noted, and we have five months this year to complete more leasing.

Speaker Change: There was approximately 90000 square feet maturities, excluding 74, Victoria across our portfolio.

Gordon Wadley: This is all, please keep in mind, this is all much earlier than we have forecasted for 74 Victoria. From an income perspective, we're seeing very healthy trends. Year to date on the 360,000 square feet of leasing signed, we saw net rents carrying a healthy spread of 14% higher than expiry. With an average weighted average lease term of about 5.5 years, this is much higher than the market average. As mentioned over previous quarters, not much has changed in terms of net effective rents.

For the remainder of this year relative to the 271000 square feet of lethal pipeline that GOR noted and we have five months of this year to complete more leasing.

Jay Jiang: Square Feet of Leasing Pipeline that Gore noted, and we have five months this year to complete more leasing. Our expectation is to make reasonable progress on our leasing pipeline, and we think that 2025 total comparative properties NOI could be at or above 2024. Consistent with prior years, we will provide full financial guidance for 2025 on our Q4 conference call next February. We have made substantial progress on our mortgage refinancings this year. Out of the $73 million of mortgage maturities in 2024, we have closed on $56 million, and we are in discussions to address the remaining $17 million.

Jay Jiang: Our expectation is to make reasonable progress on our leasing pipeline, and we think that 2025 total comparative property NOI could be at or above 2024. Consistent with prior years, we will provide full financial guidance for 2025 on our Q4 conference call next February. We have made substantial progress on our mortgage refinancing this year. Out of the $73 million of mortgage maturities in 2024, we have closed on $56 million and are in discussions to address the remaining $17 million.

Speaker Change: Our expectation is to make reasonable progress on our leasing pipeline and we think that 2025 total comparative properties NOI could be at or above 2024.

Jay Jiang: Consistent with prior years, we will provide full financial guidance for 2025 on our Q4 conference call next February. We have made substantial progress on our mortgage refinancing this year. Out of the 73 million of mortgage maturities in 2024, we have closed on 56 million in our end discussions to address the remaining 17 million. We are also making good progress on our mortgage maturities in 2025, most notably the 225 million dollar mortgage at Adelaide Place. We believe we are close to receiving credit approval from the lenders and will look to complete the closing before the end of this year.

Speaker Change: Since then with prior years, we will provide full financial guidance for 2025 on our Q4 conference call next February.

Gordon Wadley: Any errors continue to be compressed, given the challenges with inflation, rising broker fees, increased costs of materials and labor to build suites. Ultimately, net rents though have been quite resilient and I feel good about the trajectory of our in place NOI. I feel that 2022 was the peak of the construction and supply impact costs. They had grown by almost 20% year over year. I remember Jay and I sitting down to talk about ways to mitigate the costs of construction, stay competitive and tendering, but also get competitive advantage on our peers and generates an important fee revenue.

Speaker Change: We have made substantial progress on our mortgage refinancings this year.

Speaker Change: Out of the $73 million of mortgage maturities in 2024, we have closed on $56 million and are in discussions to address the remaining $17 million.

Jay Jiang: We are also making good progress on our mortgage maturities in 2025, most notably the $225 million mortgage at Adelaide. We believe we are close to receiving credit approval from the lenders and will look to complete the closing before the end of this year. With this mortgage addressed, we will have $141 million of mortgages remaining for next year, of which we have already received credit approval for $44 million. Our $375 million revolving credit facility also matures in September 2025, and we will look to start the renewal process this fall.

Speaker Change: We are also making good progress on our mortgage maturities in 2005, most notably the $225 million mortgage Adelaide place.

Speaker Change: We believe we are close to receiving credit approval from the lenders and we will look to complete the closing before the end of this year.

Jay Jiang: With this mortgage address, we will have 141 million of mortgages remaining for next year, of which we have already received credit approval for 44 million.

Speaker Change: With this mortgage addressed we will have $141 million of mortgages remaining for next year of which we have already received credit approval for $44 million.

Gordon Wadley: We started an in-house construction management and materials procurement team as a way to mitigate GC charges, self-performed fit-ups and of equal importance to be a trusted provider for our clients that's accountable and on demand to deliver the space that they come As a result, last year we generated approximately 2.4 million in construction fees, and we continue that trend in 2024, all while performing work in creating beautiful environments for some of the most sophisticated clients in banking, government, and professional services. Just for some quick context, our construction team has been actively working on marquee projects with our amount of films, their national head office, we also completed this quarter, the new ICI bank headquarters on Bay, and have turned over the space for the very highly anticipated restaurant Nilos to put their finishing touches on what will be a spectacular opening later this year.

Jay Jiang: Our $375 million revolving credit facility also maturized in September 2005, and we will look to start the renewal process starting this fall. Currently, we are seeing five-year mortgage rates at GOC plus 250 basis points, or an all-in rate of approximately 5.5%. Overall, the lenders have been supportive of Dream Office, and we have benefited from Dream's overall relationship with the financial institutions. We will continue to take a cautious approach to refinancing our loans, and so that we have better visibility on our liquidity over the next few years. Our current leverage is 51%, and debt to EBITDA is 11.8 times.

Speaker Change: $375 million revolving credit facility also matures in September 2025, and we will look to start the renewal process starting this fall.

Jay Jiang: Currently, we are seeing five-year mortgage rates at GOC plus 250 basis points, or an all-in rate of approximately 5.5%. Overall, the lenders have been supportive of Dream Office, and we have benefited from Dream's overall relationship with the financial institutions.

Jay Jiang: Currently, we are seeing 5-year mortgage rates at GOC plus 250 basis points, or an all-in rate of approximately 5.5%. Overall, the lenders have been supportive of Dream Office, and we have benefited from Dream's overall relationship with the financial institutions.

Speaker Change: Currently we are seeing five year mortgage rates at G. O C plus 250 basis points or all in rate of approximately five 5%.

Speaker Change: Overall, the lenders have been supportive of Creme office and we have benefited from dreams overall relationship with the financial institutions. We will continue to take a cautious approach to refinancing our loads and so that we have better visibility on our liquidity over the next few years.

Jay Jiang: We will continue to take a cautious approach to refinancing our loans so that we have better visibility on our liquidity over the next few years. Our current leverage is 51%, and debt to EBITDA is 11.8 times. We would like to reduce our leverage and continue to de-risk our business in 2025. In July, we completed the sale of a small asset in Saskatchewan for $8.6 million. The cap rate for the asset was approximately 2.8%, as the committed occupancy was only 53%.

Our current leverage is 51% and debt to EBITDA is 11 eight times, we would like to reduce our leverage and continue to derisk our business in 2025 in.

Jay Jiang: We would like to reduce our leverage and continue to de-risk our business in 2025. In July, we completed a sale of a small asset in Saskatchewan for $8.6 million. A cap rate for the asset was approximately 2.8%, as the committed occupancy was only 53%. The proceeds were used to pay down our credit facility in Q3. We do not rely on dispositions in our forecast or guidance, but we will use the proceeds to repay mortgages in our credit facility. We estimate that for every $50 million of assets we sell, we expect leverage to decline 100 basis points and debt to EBITDA by 0.1 times.

Speaker Change: In July we completed a sale of a small asset in Saskatchewan for $8 $6 million the cap rate for the asset was approximately two 8% as a committed occupancy was only 53%. The proceeds were used to pay down our credit facility in Q3.

Gordon Wadley: Although we at Dream Office continue to see tempered improvements from an overall performance perspective, the Canadian office market, as Michael's mentioned in the past, can still be described as erratic. For example, while one performance metric sees improvements for an indication of stability, such as overall vacancy rates or absorption, and then you see in term a bit of a leveling of cap rates, some improving interest rates, and some renewed interest in buyers, you'll see another metric like the amount of new vacant space arriving sublet space and pressure on any iris take effect.

Jay Jiang: The proceeds were used to pay down our credit facility in Q3. We do not rely on dispositions in our forecast or guidance, but we will use the proceeds to repay mortgages on our credit facility. We estimate that for every $50 million of assets we sell, we expect leverage to decline 100 basis points and debt to EBITDA to decline 0.1 times.

Jay Jiang: The proceeds were used to pay down our credit facility in Q3. We do not rely on dispositions in our forecast or guidance, but we will use the proceeds to repay mortgages and our credit facility. We estimate that for every $50 million of assets we sell, we expect leverage to decline 100 basis points and debt to EBITDA to decline 0.1 times. And I'll turn the call back to Michael.

Speaker Change: We do not rely on dispositions in our forecast or guidance, but we will use the proceeds to repay mortgages and our credit facility. We estimate that for every $50 million of assets. We sell we expect leverage to decline 100 basis points and debt to EBITDA by 0.1 times I will now turn the call back to Michael.

Michael Cooper: And I'll turn the call back to Michael. Thanks, Jay. Thanks, Gordon. I mean, fundamentally, what we're saying is...

Michael Cooper: I'll turn the call back to Michael. Thanks, Jay. Thanks, Gord.

Michael Cooper: Thanks Jay, thanks Gordon. Fundamentally, what we're saying is that in 2016, we had 172 assets. We decided to really focus on our best assets. We're down to 31 assets now. Those assets we took really good care of. We began upgrading them well before COVID.

Michael Cooper: Thanks, Jay. Thanks, Gordon. Fundamentally, what we're saying is, in 2016, we had 172 assets. We decided to really focus on our best assets. We're down to 31 assets now. Those assets we took really good care of. We began upgrading them well before COVID.

Michael Cooper: Thanks, Jay Thanks, Corey I mean fundamentally what we're saying is.

Michael Cooper: I mean, fundamentally what we're saying is, in 2016 and on 172 assets, we decided to really focus on our best assets. We're down to 31 assets now. Those assets, we took really good care of. We began upgrading them well before COVID, and most of the CapEx is the building's proven to be popular with our tenants. And for the most part, we're very pleased with our progress leasing. Our team has done a great job in a demanding field. And I think we're getting through this quite well, and we're getting through with great buildings quite well.

Gordon Wadley: You often hear sublet space is being absorbed, but then the same week you'll hear about another large tenant adding sublet space to the supply. It honestly feels like a game of snakes and ladders, but our team remains laser focused on doing a good job with the assets we own and the variables in our control around policing and property management, and I would say our results as quarter illustrate those efforts right up until the end.

Michael Cooper: In 2016, we had 172 assets, we decided to really focus on our best assets were down to 31 assets now those assets. We took really good care of we began upgrading that well before COVID-19 and most of the Capex is done the buildings proven to be popular with our tenants and for the most part we're very pleased.

Michael Cooper: And most of the CapEx is done. The building's proven to be popular with our tenants, and for the most part, we're very pleased with our progress leasing. Our team has done a great job in a demanding field.

Michael Cooper: Pleased with our progress leasing our team has done a great job.

Gordon Wadley: Overall, they can see this quarter stabilized across all classes and downtown Toronto at around 18%. This is a number not seen since the early 90s. It's buoyed largely by a very low vacancy rate in the class A assets. Although the vacancy rates themselves did not see much movement quarter over quarter, our managed and re-property saw some positive absorption, and in doing about 580 basis points better than the market with a current and committed occupancy of almost 88% in our downtown assets.

Michael Cooper: Demanding.

Michael Cooper: Field.

Michael Cooper: And I think we're getting through this quite well. And we're getting through great buildings quite well, on the investment side, you know. H&R sold their Corus building to George Brown College. We sold 720 Bay to a health group, so I think you're seeing building sales when there's a motivated buyer who probably has a different use. What I've been pleased with is that more and more large allocators of capital have been speaking to us about their interest in office.

Michael Cooper: And I think we're getting through this quite well. And we're getting through great buildings quite well, on the investment side. You know, H&R sold their Chorus building to George Brown College.

Speaker Change: And I think we're getting through this quite well and we're getting through it with great buildings quite well.

Michael Cooper: On the investment side, you know, age in our sold, their course building to George Brown College, we sold 720 Bay to a health group. So I think you're seeing buildings selling when there's a motivated buyer who probably has a different use. What I've been pleased with is more and more of large allocators of capital have been speaking to us about their interest in office. It's very preliminary, but I think that when investors are looking at where the different sectors are, office looks like it's been beaten up pretty bad, and there should be opportunities there. So I think we're starting to get more people interested in office, but not necessarily pulling the trigger.

Speaker Change: On the investment side.

Speaker Change: H&R sold of course building to George Brown College, we sold 720 Bay to a health group so.

Michael Cooper: We sold 720 Bay to a health group, so I think you're seeing buildings selling when there's a motivated buyer who probably has a different use. What I've been pleased with is that more and more large allocators of capital have been speaking to us about their interest in office. It's very preliminary, but I think that when investors are looking at where the different sectors are, office looks like it's been beaten up pretty bad, and there should be opportunities there.

Speaker Change: So I think youre seeing building selling when theres, a motivated buyer, who probably has a different use.

Speaker Change: What I've been pleased with this more and more of large allocators of capital have been speaking to us about their interest in office, it's very preliminary but I think that when investors are looking at.

Michael Cooper: It's very preliminary, but I think that when investors are looking at where the different sectors are, office looks like it's been beaten up pretty bad, and there should be opportunities there. So I think we're starting to get more people interested in office space, but not necessarily pulling the trigger. We've been working on a couple of things. We sold the parkade we had in Saskatoon. We're working on one other significant building. It's a slow process.

Speaker Change: Where the different sectors, our office looks like it's been beaten up pretty bad and there should be opportunities. There. So I think we're starting to get more people interested in office, but not necessarily pulling the trigger.

Michael Cooper: So I think we're starting to get more people interested in office space, but not necessarily pulling the trigger. We've been working on a couple of things. We sold the arcade we had in Saskatoon. We're working on one other significant building. It's a slow process.

Michael Cooper: We've been working on a couple of things. We sold the arcade we had in Saskatoon, where we're working on another significant building. It's a slow process. We hope to be there by the end of the year. And we'll see if there's other assets that make sense for us to sell. But things have been going as good as we could have hoped for.

Speaker Change: We've been working on a couple of things we sold the arcade we had in Saskatoon, we're working on one other significant building. It's a slow process, we hope to be there by the end of the year.

Michael Cooper: We hope to be there by the end of the year, and we'll see if there are other assets that make sense for us to sell. But things have been going as well as we could have hoped for.

Michael Cooper: We hope to be there by the end of the year. We'll see if there are other assets that make sense for us to sell, but things have been going as well as we could have hoped for. We made a list of what we thought were the risks to the company at the end of 2023. That's something that's been a real focus for us, and one by one, we've been knocking those risks off. There are a few new ones, but not much. And the company's in better shape now than it was before. At this point, we'd be happy to answer any of your questions.

Gordon Wadley: No one in the real estate market today is immune to the impact of rising interest rates, and it's become a more challenging lending environment today than three years ago. We work very well with our banking partners and are in lockstep with leasing strategy operations and are executing this such. Since the historical low of 40 basis points in the mid-2020s, the 10-year GOC bond yield and cost of debt has risen by over 270 basis points.

Speaker Change: And we'll see if there's other assets that makes sense for us to sell but.

Michael Cooper: We made a list of what we thought were the risks to the company at the end of 2023. That's something that's been a real focus for us. And one by one, we've been knocking those risks off. There have been a few new ones, but not many.

Speaker Change: Things have been going as good as we could have hoped for it we made a list of what we thought were the risk to the company at the end of 2023.

Michael Cooper: We made a list of what we thought were the risks to the company at the end of 2023. There's something that a real focus for us. And one by one, we've been knocking off of those risks. There's been a few new ones, but not much. And the companies in better shape now than it was before.

Speaker Change: That's something been a real focus for us and one by one we've been knocking off of those risks.

Speaker Change: A few new ones, but not much and the company is in better shape now than it was before.

Michael Cooper: And the company's in better shape now than it was before. At this point, we'd be happy to answer any of your questions, operator. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone.

Operator: At this point, we'd be happy to answer any of your questions. Operator?

Speaker Change: At this point, we'd be happy to answer any of your questions.

Gordon Wadley: The last quarter, we've seen an easing and rate pressure, however lenders are actively reviewing their office loan exposure and are becoming more selective based on properties location, quality, and addition to the covenant of the borrowers. They are evaluating tenant profiles with laser focus and leases carefully. Loans are size more conservatively, which Jay can speak about a little bit more. Tendons too are much more sophisticated in their demands and are acutely aware of their own balance sheets and liquidity position, hence many are trying to push traditional costs to the landlords on transactions to induce their tenancy, which is having a real impact in a high interest environment.

Operator.

Speaker Change: Yeah.

Operator: We will now begin the question in the intercession to ask a question. You may press star, then one on your couch tone phone.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. At any time after your question has been answered and you would like to withdraw your question, please press star and then two. Our first question comes from Mark Rothschild with Canaccord Genuity. Please go ahead.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Operator: If you're using a speaker phone, please pick up your hands up before pressing the keys.

Operator: If you're using a speakerphone, please pick up your handset before pressing the keys. At any time after your question has been answered and you would like to withdraw your question, please press star and then two. Our first question comes from Mark Rothschild with Canaccord Genuity. Please go ahead. Thanks, thanks. Good morning, everyone.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star and then two our first question comes from Mark Rothschild with Canaccord Genuity. Please go ahead.

Operator: At any time your question has been addressed and you would like to withdraw your question, please press star and then two.

Mark Rothschild: Our first question comes from Mark Rothschild with Canaccord Genuity. Please go ahead. Thanks, thanks. Good morning, everyone.

Mark Rothschild: Thanks, thanks. Good morning, everyone.

Speaker Change: Thanks.

Speaker Change: Everyone.

Mark Rothschild: Michael, strategically, it sounds like the asset sales that you're pursuing are ongoing, but maybe not with the sense of urgency, or maybe just taking time. Can you just comment a little bit on strategically, if anything has changed, and how you're viewing the asset sales and maybe connected with that? Is there anything else that you're considering, or feel the need to increase liquidity in regards to maybe the dream industrial investment? Is that still something that you intend to own for an extended period of time?

Michael Cooper: Maybe Michael, strategically, it sounds like the asset sales that you're pursuing are ongoing, but maybe not with a sense of urgency, or maybe just taking time. Can you just comment a little bit on strategically, if anything has changed, and how you're viewing the asset sales, and maybe connected with that? Is there anything else that you're considering, or feel the need to increase liquidity in regards to maybe the dream industrial investment? Is that still something that you intend to own for an extended period of time? That's great!

Mark Rothschild: Maybe Michael strategically it sounds like the asset sales that youre pursuing ongoing but maybe not with the sensor partners here, maybe just take time could you just comment a little bit on strategically.

Michael Cooper: Michael, strategically it sounds like the asset sales that you're pursuing are ongoing but maybe not with the sense of urgency or maybe just take time. Could you just comment a little bit on strategically if anything has changed and how you're viewing the asset sales and maybe connected with that. Is there anything else that you're considering or feel the need to increase liquidity in regards to maybe the dream industrial investment? Is that still something that you intend to own for an extended period of time in the office?

Gordon Wadley: In light of these challenges, as Jay will further mention, we have proactively addressed nearly all of our near term dematurities, including our biggest at Adelaide Place. In the same vein, it's also very important to note that we completed all of our biggest capital, maintenance, and base building projects, and are forecasting much less capital required for maintenance and catbacks in the next 24 months, thus in turn helping our annual cash flows, producing our risk and protecting our balance sheet. It's always top of mind and we continue to improve and leverage our strong lender relationships to ensure the balance sheet is well protected through what we believe as a trough in the office lending market.

Speaker Change: Anything is changed in how you're viewing the asset sales in there.

Speaker Change: Maybe connected with that is there anything else that you are considering or feel the need to increase liquidity in regards to maybe the dream industrial investment is that still something that you.

Speaker Change: Do you intend to own for an extended period of time at the office REIT.

Gordon Wadley: Well, I think our liquidity level is pretty good right now, and we've been prepared for things to be more difficult, so we're pleased with that. I think the sale of one or two buildings might be appropriate, and with the dream industrial units, they've been a great investment for us. They're obviously not office, so that they're not in our core strategy. If we need them or if we decide opportunistically to sell them, that's something that we could consider, but we're not really considering that now, nor do we feel we need to.

Speaker Change: Thanks.

Michael Cooper: Well, I think our liquidity level is pretty good right now. And we've been, you know, prepared for things to be more difficult. So we're pleased with that.

Michael Cooper: Well, I think our liquidity level is pretty good right now, and we've been, you know, prepared for things to be more difficult. So we're pleased with that. I think the sale of one or two buildings might be appropriate. And with the Dream Industrial Units, they've been a great investment for us. They're obviously not offices, so they're not our core strategy. If we need them, or if we decide opportunistically to sell them, that's something we could consider. But we're not really considering that now, nor do we feel we need to. Okay, great. Thanks.

Speaker Change: Well I think our liquidity levels are pretty good right now and we've been prepared for things to be more difficult. So we're pleased with that.

Speaker Change: I think the sale of one or two buildings might be appropriate and was a dream industrial units they've been a great investment for us. They are obviously not office. So that they are not our core strategy.

Michael Cooper: I get asked all the time about 357 Bay. What I'll tell everybody on the call is we work's been a tenant in very good standing, they communicate very well with us, they've never missed a red payment, and have brought in some great clients to our premier asset at 357 Bay. Coupled with all the beautiful renovations done in the building, we have a great deal of confidence and optimism. We work very closely with them during their bankruptcy proceedings, and came up with a fair solution that supports a good tenant, doesn't significantly impact our NOI long term, and ultimately protects the terminal value of one of our best and most in demand assets.

Speaker Change: We need them or if we decide opportunistically to sell them, that's something that we could consider but we're not really considering now nor do we feel we need to.

Gordon Wadley: Okay, great, thanks. And maybe for Gord, it sounds like there's a lot going on with the leasing, and the face rates appear to be good. Just comment a little bit on the trends you're seeing on the net effective rent. If that's improving at all, if it's still really expensive just to get leasing done, and how you see that evolving over the next year. Yeah, a good question, Mark. It's still really expensive to get leasing done. I think right across the board, you know, we're competing with a lot of different spaces that are fully improved. So for us, if we have base building space, it's table stakes to put in $70 of foot to $100 of foot to get in in a reasonably leasable condition to match our competitive set.

Speaker Change: Okay, great. Thanks, and then maybe for Gordon it sounds like Theres, a lot going on with the leasing and the face rates appear to be good you just comment a little bit on the trends youre seeing on the net effective brand if that's improving at all or if it's still really expensive just to get leasing done and how you see that evolving over the next year.

Michael Cooper: I think the sale of one or two buildings might be appropriate. And with the Dream Industrial Units, they've been a great investment for us. They're obviously not offices, so they're not our core strategy. If we need them, or if we decide opportunistically to sell them, that's something we could consider. But we're not really considering that now, nor do we feel we need to.

Gordon Wadley: And maybe for Gord, it sounds like there's a lot going on with the leasing, and the face rates appear to be good. Can you just comment a little bit on the trend you're seeing on the net effective rents, if that's improving at all or if it's still really expensive just to get leasing done, and how you see that evolving over the next year? Yeah, good question, Mark.

Gordon Wadley: Okay, great. Thanks. And maybe for Gord, it sounds like there's a lot going on with the leasing, and the face rates appear to be good. Can you just comment a little bit on the trend you're seeing under the net effective rent, if that's improving at all or if it's still really expensive just to get leasing done, and how you see that evolving over the next year?

Gordon Wadley: It's still really expensive to get leasing done, I think right across the board. You know, we're competing with a lot of different spaces that are fully improved. So for us, if we have base building space, it's table stakes to put in $70 a foot to $100 a foot to get it in a reasonably leaseable condition to match our competitive set. So yeah, I see NERs being relatively challenged for the next 18 to 24 months. But overall, I'm happy with how net rents are performing, and I'm happy with the pickup of tours and the velocity of people that are coming through our building. So that's positive.

Gordon Wadley: Yeah, good question, Mark. It's still really expensive to get leasing done. I think right across the board. You know, we're competing with a lot of different spaces that are fully improved. So for us, if we have base building space, it's table stakes to put in $70 a foot to $100 a foot to get it in a reasonably leaseable condition to match our competitive set. So yeah, I see NERs being relatively challenged for the next 18 to 24 months.

Margaret: Yes, good question Margaret.

Michael Cooper: Despite some of the macro challenges in the sector, I really couldn't be more pleased with how the whole team's navigated through some evolving challenges to the industry. Their effort and dedication to not only our company but to our clients is what I'm most proud of. At the end of the day, everyone and what I'd say, it's a combination of having near-replaceable assets, coupled with very high quality, high character team of people, we have operated in releasing those buildings that gives me the greatest confidence closing out of 2024. We're doing a lot of innovative deals that are making our assets better and will be in great shape as demand picks up and on future renewal cycles.

Speaker Change: Still really expensive to get leasing done I think right across the board.

Gordon Wadley: We're competing.

Speaker Change: With a lot of different spaces that are fully improved so for us. If we have a base building space. It's table stakes to put in $70 a foot to $100 a foot to get it in a reasonably at least reasonable condition.

Speaker Change: To match, our competitive set so yeah, I see any errors.

Gordon Wadley: So, yeah, I see any hours, at least for the next 18 to 24 months, being relatively challenged. But overall, I'm happy with how net rents are performing, and I'm happy with the pickup of the tours and the velocity of people that are coming to our building. So that's positive.

At least for the next 18 to 24 months been relatively challenged.

Gordon Wadley: But overall, I'm happy with how net rents are performing, and I'm happy with the pickup of tours and the velocity of people that are coming through our buildings. So that's positive. Yeah, I do wanna point that out.

Speaker Change: But overall I'm happy with how net rents are performing.

Michael Cooper: As always, I always like to throw this out there, but if in any time you'd like to tour or see firsthand the work that we've done or the work that we're doing, please reach out to me directly. I'm always really proud to showcase it, and it would be a great excuse to pop into one of our many great restaurants.

Speaker Change: And I'm happy with the pick up of tours and the velocity of people that are coming through our building. So thats positive I do want to point out that since September six last year. When we presented our our model for Creme office. We had said at the time that we believe that in 2020 for 2025 and 2026.

Gordon Wadley: I do want to point out that since September 6th, last year, when we presented our model for dream office, we had said at the time that we believe that in 2024, 2025, and 2026, things would be pretty much the same as in 2023. So we're now seven months into that plan, and things are basically the same as before. So, you know, it is basically what we expected. We actually expect another 20, 30 months of this. So I'm glad it hasn't gotten worse. I think we've made improvements to our buildings. Been pleased with our relationship with lenders and things we've been able to achieve.

Michael Cooper: Yeah, I do want to point out that since September 6 last year, when we presented our model for Dream Office, we had said at the time that we believe that in 2024, 2025, and 2026, things would be pretty much the same as in 2023. So we're now seven months into that plan, and things are basically the same as before.

Michael Cooper: Yeah, I do wanna point out that since September 6th, last year, when we presented our model for Dream Office, we had said at the time that we believed that in 2024, 2025, and 2026, things would be pretty much the same as in 2023. So we're now seven months into that plan, and things are basically the same as before. So, you know, it is basically what we expected.

Jay Jiang: Thanks so much everyone, and I'll pass you over to my friend, Jake. Thank you, Lord. Good morning.

Jay Jiang: I will provide a review of our financial results and also update on how we are internally forecasting our business for the second half of 2024. We reported diluted funds from operations of $0.76 per unit of 8.7% from $0.70 per unit in the second quarter of 2023 after adjusting for the 2.1 consolidation of units and Q1 of this year. We add approximately $0.04 per unit of these termination income this quarter and also $0.04 per unit of short-term straight line rent for two larger tenants that took possession of their space a few months early.

Speaker Change: Things will be pretty much the same as in 2023. So we're now seven months into that plan and things are basically the same as before so.

Michael Cooper: You know, it is basically what we expected. We actually expect another 20, 30 months of this. So I'm glad it hasn't gotten worse. I think we've made improvements to our buildings, been pleased with our relationship with lenders, and things we were able to achieve. So, I think we're doing pretty good compared to where we said we'd be.

Gordon Wadley: We actually expect another 20, 30 months of this, so I'm glad it hasn't gotten worse. I think we've made improvements to our buildings, and been pleased with our relationship with lenders and the things we've been able to achieve. So, I think we're doing pretty good compared to where we said we'd be. Yeah, the only quick observation I'd make for you, Mark, as well, is that we're seeing finishing trades. We're seeing a lot more come in to bid on jobs.

It is basically what we expected we actually expect another.

Speaker Change: 20, a 30 months of it so.

Speaker Change: I'm glad it hasn't gotten worse I think we've made improvements to our buildings been pleased with our relationship with lenders and things we were able to achieve so I.

Gordon Wadley: So I think we're doing pretty good compared to where we said we'd be.

Speaker Change: I think we're doing pretty good compared to where we said we'd be the only one quick observation I'd make for you Mark as well too as we're seeing finishing trades.

Gordon Wadley: The only quick observation I'd make for you, Mark, as well, is that we're seeing finishing trades, we're seeing a lot more come to bid on jobs, and I think that's a result of there being a bit of a down cycle in development, not just residentially, but commercially, obviously, as well. So a lot of the finishing trades, we're seeing instead of one or two come to bid on a job, we're usually seeing about three to five. So that's been a positive sign for us.

Gordon Wadley: Yeah, the only one quick observation I'd make for you, Mark, as well too, is we're seeing finishing trades. We're seeing a lot more come to bid on jobs, and I think that's a result of there being a bit of a down cycle in development. Not just residential, but commercially, obviously, as well. So a lot of the finishing trades, we're seeing, instead of one or two, come to bid on a job, we're seeing usually about three to five. So that's been a positive sign. for us.

Jay Jiang: That income will be fully reflected in our passionate operating income over the second half of 2024. Although compared to properties NOI increased by 1.2%, compared to the same quarter last year, comprised of 2.6% increase in downtown Toronto, offset by a decrease of 2.7% in other markets. Arna as a value per unit was $64.82, down $1.1, 10 cents, or 1.7% from Q1 out of 6592. The decrease includes 25 million attributed to fair value adjustments on investment properties.

Speaker Change: We're seeing a lot more come to bid on jobs and I think Thats a result of.

Gordon Wadley: And I think that's a result of there being a bit of a down cycle in development, not just residentially but commercially, obviously, as well. So a lot of the finishing trades, we're seeing, instead of one or two coming to bid on a job, we're usually seeing usually about three to five. So that's been a positive sign. Okay, great. Thanks. I'll send it back to you. And the next question comes from Sam Damiani with TD and Cowen. Please go ahead. Thank you, and good morning.

Speaker Change: They're being a bit of a down cycle in development.

Speaker Change: Not just residential but commercially obviously as well so a lot of the finishing trades, we're seeing instead of one or two come to bid on a job. We're seeing usually about three to five so that's been a positive sign for us.

Mark Rothschild: Okay, great. Thanks. I'll send it back.

Mark Rothschild: Okay, great, thanks.

Speaker Change: Okay, great. Thanks, I'll turn it back.

Operator: I'll turn it back.

Sam Damiani: And the next question comes from Sam Damiani with TD and Cowan. Please go ahead. Thank you and good morning. I guess first question, just on dispositions, you talked about a bit and had a question from Mark there, but I mean, there were a couple buildings listed for sale earlier this year.

Operator: And the next question comes from Sam Damiani with TD and Cowen. Please go ahead.

Speaker Change: And the next question comes from Sam Damiani with TD and Cowen. Please go ahead.

Jay Jiang: As part of our valuation process is quarter, we externally appraise for assets, totaling $333 million or 14% of our portfolio. In February, we provided our annual guidance of $2.80, the $2.90 per unit of FFO post unit consolidation, and flat to low single-digit comparable properties NOI. Based on the information in results since February, we are still targeting the midpoint range of our guidance for both FFO and CPNOI. The key variability to our forecast will be the maturity of the $2006,000 square feet leased with the federal government at 74 Victoria and October 31st, 2024.

Sam Damiani: Thank you and good morning. I guess my first question is just on dispositions. You talked about that a bit and had a question for Mark there. But I mean, there were a couple buildings listed for sale earlier this year. Just wondering if you could provide an update on those specifically, if those are still intended to proceed or how that's going.

Sam Damiani: I guess the first question is just on dispositions, you talked about it a bit and had a question from Mark there, but I mean, there were a couple buildings that were listed for sale earlier this year. Just wondering if you could provide an update on those specifically, if those are still intended to proceed or how that's going. I know you think that's an easy question, but the answer is hard. As I mentioned, we definitely have been making great progress on one, but it's a slow process.

Speaker Change: Thank you and good morning.

Sam Damiani: I guess first question just on dispositions you talked about it a bit and I had a question for Mark there, but I mean, there was a couple of buildings listed for sale earlier. This year. Just wondering if you could provide an update on those specifically if those are still.

Michael Cooper: Just wanted to know if you could provide an update on those specifically, if those are still intended to proceed or how that's going. I know you think that's an easy question, but the answer is hard. As I mentioned, we definitely have been making great progress in one, but it's a slow process.

Sam Damiani: Intended to to proceed or how that's going.

Michael Cooper: I know you think that's an easy question, but the answer is hard. As I mentioned, we definitely have been making great progress on one, but it's a slow process. On the other one, we actually don't have an update. One thing that hasn't been mentioned is that I think another source of capital for us is we have some buildings whose loads mature, and while everybody expects that, there's gonna be paydowns on loans, we have a few that are under leveraged, and they'll be a great source of capital for the company. So that's another choice that we have to look at. But our liquidity is in pretty good shape right now, at least as good as we'd expect.

Mark Rothschild: I know you think Thats, an easy question, but the answer is hard.

Mark Rothschild: As I mentioned, we definitely have been making great progress in one, but it's a slow process on the other one we actually don't have an update.

Sam Damiani: On the other one, we actually don't have an update. One thing that hasn't been mentioned is that I think another source of capital for us is we have some buildings whose loads mature, and while everybody expects that, there's gonna be paydowns on loans, we have a few that are under leveraged, and they'll be a great source of capital for the company. So that's another choice that we have to look at. But our liquidity is in pretty good shape right now, at least as good as we'd expect. Okay, thank you.

Michael Cooper: On the other one, we actually don't have an update. One thing that has been mentioned is, I think, that another source of capital for us is we have some buildings whose loads mature. And while everybody expects that, there's going to be paydowns on loads. We have a few that are under leveraged, and they'll be a great source of capital for the company. So that's another choice that we have to look at, but our liquidity is in pretty good shape right now. At least as good as we had expected.

Speaker Change: One thing that has been mentioned it and I think that.

Speaker Change: Another source of capital for us to have some buildings as loans mature and well everybody expects that.

Jay Jiang: As Gordon mentioned, we have received a renewal for $64,000 square feet with the existing federal government, and we are currently in active discussions to lease another $50,000 square feet. With only the 64,000 square feet renewal and no other leasing, the in-place occupancy of the building will be approximately 55%. The temporary reduction in occupancy until we lease up the building will resolve an annualized NOI impact of approximately $8 million for about 40 cents.

Speaker Change: Theres going be Paydowns on loans, we have a few that are under leveraged and there'll be a great source of capital for the company. So that's another choice that we have to look at but our liquidity is in pretty good shape right now at least as good as we had expected.

Gordon Wadley: And just on the leasing... The occupancy was kind of flat for the quarter on an in-place basis, but there were some decreases in a few of the Bay Street-type properties. I'm just wondering if there are trends specific to the Bay Street properties that are, if they're at all different from the overall trends Gordon talked about. Yeah, I think one of the biggest mitigating factors for the Bay Street properties, and I'll be honest with you first, it's just been the construction at the corner of Adelaide and Bay and on Richmond. It's been very difficult to get groups there to tour. And it's been very punitive for brokers to bring them along.

Sam Damiani: Okay, thank you. And just on the leasing... The Arkansas Museum is kind of flat on an in place basis, but there were some decreases in a few of the base street type properties. I'm just wondering if there are any trends specific to the Bay Street properties that are any if they're at all different than the overall trends. Gordon, you talked about

Sam Damiani: Okay, thank you. And just on the leasing, you know, the Arkansas was kind of flat on the quarter on an in place basis, but you know, there was some decreases in a few of the Bay Street type properties.

Speaker Change: Okay. Thank you and just on the on the leasing.

Speaker Change: The occupancy was kind of kind of flat in the quarter on an in place basis, but you know there was some decreases in a few of the the Bay Street type properties I'm just wondering if there is.

Jay Jiang: We are actively working on leasing strategies to mitigate this impact and look forward to reporting our progress next quarter. In addition, we have approximately 500 basis points of committed occupancy that will commence rent payments towards the end of this year. In aggregate, these leases will contribute approximately $7 million of higher comparative properties NOI in 2025 versus 2024, which covers much of the shortfall from the federal government's lease expiry at 74 Victoria.

Michael Cooper: I'm just wondering if there's a trend specific to the Bay Street properties that are any, if they're at all different than the overall trends, Gordon talked about. Yeah, I think one of the biggest mitigating factors for the Bay Street properties, and I'll be honest with you first, it's just in the construction at the corner of Adelaide Bay. And on Richmond, it's been very difficult to get groups there to tour, and it's been very punitive for brokers to bring them along. But that being said, we've seen it clean up a little bit over the course the last six weeks, right at the intersection of Adelaide, right in front of First Canadian Place, Adelaide Bay.

Speaker Change: Trends specific to the Bay Street properties that are.

Gordon Wadley: If they're at all different than the overall trends Gordon you talked about.

Gordon Wadley: Yeah, I think one of the biggest mitigating factors for the Bay Street properties, and I'll be honest with you first, has just been the construction at the corner of Adelaide and Bay and on Richmond. It's been very difficult to get groups there to tour, and it's been very punitive for brokers to bring them along.

Gordon Wadley: Yes, I think one of the biggest mitigating factors for the base Street properties and ill be honest with you first has just been the construction at the corner of Adelaide Bay.

Speaker Change: In Richmond, its been very difficult to get groups there to tour and it's been very punitive for brokers to bring them, along but that being said, we've seen a clean up a little bit over the course of the last six weeks right at the intersection of Adelaide Brighton front at first Canadian place at late in May and we've started to see more tours, we had a good pick.

Gordon Wadley: But that being said, we've seen it clean up a little bit over the course of the last six weeks, right at the intersection of Adelaide and First Canadian Place, Adelaide Bay. And we've started to see more tours. We had a good pickup of tours at 330 and 80 Richmond, especially.

Gordon Wadley: But that being said, we've seen a little bit of a cleanup over the course of the last six weeks, right at the intersection of Adelaide, right in front of First Canadian Place, Adelaide and Bay. And we've started to see more tours. We had a good pickup of tours at 330 and 80 Richmond, especially.

Michael Cooper: And we've started to see more tours. We had a good pick up the tours at 330 and 80 Richmond especially. That's good to hear.

Gordon Wadley: Cup of tours.

At $3, 38, and 80 Richmond, especially.

Gordon Wadley: That's good to hear. Last one for me, I mean, do you have an actual sort of CapEx budget for this year and next year that you'd be able to share? Yes, sure. We'll talk through the pieces.

Gordon Wadley: That's good to hear. Last one for me, I mean, do you have an actual sort of CapEx budget for this year and next year that you'd be able to share?

Speaker Change: That's good to hear last one for me I mean do you ever do you have an actual capex budget for this year and next year that you'd be able to share.

Sam Damiani: Last one for me.

Gordon Wadley: I mean, do you have an actual sort of CapEx budget for this year and next year that you'd be able to share? Yeah, to share. We'll talk through the pieces. So, with leasing costs, I think consistent with the guidance in February and what Gordon talked about in his commentaries within that effective rent, it really depends on the duration of the lease. So typically, we're budgeting about $10 per square foot per year. And it's a bit less if you do a 10-year lease, so you could just go about $7.50. For maintenance capital, we've been really smart and only focusing on life safety and putting value in buildings where we can get a reasonable payback or lending value.

Gordon Wadley: So with leasing costs, I think, consistent with the guidance in February and what Gordon talked about in his commentary, within that effective rent, it really depends on the duration of the lease. So typically, we're budgeting about $10 per square foot per year. And it's a bit less if you do a 10 year lease, so you get to go about $7.50. For maintenance capital, we've been really smart and only focusing on life safety and putting value in buildings where we can get a reasonable payback or lending value.

Gordon Wadley: Yes, sure. We'll talk through the pieces.

Speaker Change: Yeah sure will talk through the pieces so.

Speaker Change: Leasing costs I think consistent with the guidance in February and what was talked about in his commentary, but the net effective rent it really depend on the duration of the lease. So typically we're budgeting about $10 per square feet per year.

Gordon Wadley: So with leasing costs, I think consistent with the guidance in February and what was talked about in his commentary is within that effective rent. It really depends on the duration of the lease. So typically, we're budgeting about $10 per square foot per year, and it's a bit less if you do a 10-year lease. So you get to go about $7.50. For maintenance capital, we've been really smart and only focusing on life safety and putting value in buildings where we can get a reasonable payback or lending value.

Marie: And it's a bit less if you do a 10 year lease so you get to about $7.50 for maintenance capital, we've been really smart and only focusing in a life safety and putting value in building, its where we can't get a reasonable payback or lending value, but that's because we've already improved the buildings and that's what's leftover yes, so on <unk> Marie <unk>.

Jay Jiang: We believe we are close to receiving credit approval from the lenders and will look to complete the closing before the end of this year. With this mortgage address, we will have 141 million of mortgages remaining for next year, of which we have already received credit approval for 44 million.

Gordon Wadley: But that's because we've already improved the buildings and that's what's left over. Yeah, so on page three, it will be very light, because we plan the $50 million already. Otherwise, with respect to the reserves, it's about $1 to $2 per year, or $.25 per square foot.

Gordon Wadley: But that's because we've already improved the building, and that's what's left over. Yeah. So on page three, it will be very light because we plan for the $50 million already. Otherwise, with respect to the reserves, it's about $1 to $2 per year.

Sam Damiani: But that's because we've already improved the building, and that's what's left over. Yep, so on pace, it will be very light because we've put in the $50 million already. Otherwise, with that, respect to the reserves, is about a dollar to $2 per year per square foot. Square foot. Okay. Is that sufficient? Yeah, that is. Very helpful. Thank you so much.

Speaker Change: Very light because we play on the $50 million already.

Jay Jiang: Our $375 million revolving credit facility also maturized in September 2005, and we will look to start the renewal process starting this fall. Currently we are seeing five year mortgage rates at GOC plus 250 basis points, or all in rate of approximately 5.5%. Overall, the lenders have been supportive of Dream Office, and we have benefited from dreams overall relationship with the financial institutions. We will continue to take a cautious approach to refinancing our loans, and so that we have better visibility on our liquidity over the next few years. Our current leverage is 51%, and debt to EBITDA is 11.8 times.

Marie: Otherwise.

Marie: With.

Marie: With respect to the reserves is about a $1 to $2 per.

Marie: Per year.

Marie: Square foot per square foot.

Sam Damiani: Is that sufficient, Sam? Yeah, that is. Very helpful. I do want to pick up on Gord's point, which

Sam Damiani: Is that sufficient, Sam? Yeah, that is. Very helpful. I do want to pick up on Gord's point, which I hear from everybody I speak to, which is that it's hard for employees to get to work, that the traffic is a real problem, all the bike lanes that minimize cars are a problem, and I think that's something we've got to work on as a community to help people get around. Any other questions? And the next question comes from Sairam Srinivas with Cormark Securities. Please go ahead. Thank you, Alveda.

Speaker Change: Okay, that's the fisheries that yes.

Speaker Change: That is very helpful. Thank you so much.

Michael Cooper: I do want to pick up on Gordon's point, which I hear from everybody I speak to, which is it's hard for employees to get to work. that the traffic is a real problem. All the bike lanes that minimize cars is a problem. And I think that's something we've got to work on as a community to help people get around.

Gordon Wadley: I do want to pick up on Gord's point, which I hear from everybody I speak to, which is that it's hard for employees to get to work, that the traffic is a real problem, all the bike lanes that minimize cars are a problem, and I think that's something we've got to work on as a community to help people get around.

Speaker Change: I do want to pick up on Gordon's point, which I hear from everybody I speak too, which is it's hard for employees to get to work.

Gordon Wadley: That the traffic is a real problem all the bike lanes that minimized cars the problem.

Speaker Change: And I think that's something we got to work on is the community.

Speaker Change: Help people get around.

Jay Jiang: We would like to reduce our leverage and continue to de-risk our business in 2025. In July, we completed a sale of a small asset and Saskatchewan for $8.6 million. A cap rate for the asset was approximately 2.8%, as the committed occupancy was only 53%. The proceeds were used to pay down our credit facility in Q3. We do not rely on dispositions in our forecast or guidance, but we will use the proceeds to repay mortgages in our credit facility. We estimate that for every $50 million of assets we sell, we expect leverage to decline 100 basis points and debt to EBITDA by 0.1 times.

Sairam Srinivas: Any other questions? And the next question comes from Sairam Srinivas with Kornmark Securities. Please go ahead. Thank you very much. Good morning, guys. God is really going to give you.

Speaker Change: Any other questions.

Operator: And the next question comes from Sairam Srinivas with Cormark Securities. Please go ahead.

Speaker Change: And the next question comes from their Gera, three invest with core Mark Securities. Please go ahead.

Sairam Srinivas: Good morning, guys. God, maybe a year ago, we were talking about, you know, the number of tours going up, but then essentially taking some time to actually find those pieces. When you look at the situation today, how does that compare and contrast to a year ago? Are tenants more willing to come to the table and actually negotiate, or is it more of the same? We're starting, good question, so we're starting to see more of these deals get executed. But they're taking longer.

Sairam Srinivas: Thank you, Alveda. Good morning, guys. God, maybe a year ago, we were talking about, you know, the number of tours going up, but then essentially taking some time to actually sign those leases. When you look at the situation today, how does that compare and contrast to a year ago? Are tenants more willing to come to the table and actually negotiate, or is it more of the same?

Thank you operator, good morning, guys.

Speaker Change: God. This is probably a question for you.

Gordon Wadley: Maybe a year ago we were talking about, you know, the number of tours going up, but 10th essentially digging some time to actually sign those pieces. When you look at the situation today, how does that compare in contrast to a year ago? Are tenants being more willing to come to the table and actually execute, or is it more the same? We're starting to see more of these deals get executed. They're taking longer. You know, we mentioned today that we've got at least 10 deals for about 270,000 square feet in the pipeline. These deals we've been working on for, you know, the better part of six to eight months on some of them.

Speaker Change: A year ago, we were talking about you know the number of tours going up but tenants essentially deal some time to actually sign goes thesis.

Speaker Change: When you look at the situation today how.

Speaker Change: How does that compare and contrast, what you Gotta go often and as being more willing to come to the table are actually at the acute or is it more of a theme.

Gordon Wadley: We're starting, good question, so we're starting to see more of these deals get executed. But they're taking longer.

Speaker Change: We're good.

Michael Cooper: I'll turn the call back to Michael. Thanks, Jay. Thanks, Gord.

Speaker Change: Good question. So we're starting to see more of these deals get executed theyre taking longer.

Gordon Wadley: You know, we mentioned today that we've got at least 10 deals for about 270,000 square feet in the pipeline. These deals we've been working on for, you know, the better part of six to eight months on some of them. I think everybody's just being prudent on what the responsibilities are going to be in terms of construction and costs. But yeah, to your point, a lot of the deals that we've seen come to fruition this year were deals that we started last year. I wouldn't say they're getting any faster to do in a competitive environment.

Gordon Wadley: You know, we mentioned today that we've got at least 10 deals for about 270,000 square feet in the pipeline. These deals we've been working on for, you know, the better part of six to eight months on some of them. I think everybody's just being prudent on what the responsibilities are going to be in terms of construction and costs. But yeah, to your point, a lot of the deals that we've seen come to fruition this year, or deals that we started last year, I wouldn't say they're getting any faster to do in a competitive environment.

Speaker Change: You know we mentioned today that we've got at least 10 deals for about 270000 square feet in the pipeline. These deals we've been working on for the.

Speaker Change: The better part of six to eight months on some of them.

Gordon Wadley: I think everybody's just being prudent on what the responsibilities are going to be in terms of construction and costs. But yeah, to your point, a lot of the deals that we've seen come to fruition this year were deals that we started last year. I wouldn't say they're getting any faster to do in a competitive environment. There's a lot of leverage being set up by brokers and other landlords. So we just have to be patient and navigate through them, and every time we have a window to close, just do everything we can to try and get these things done.

Speaker Change: I think everybody's just being prudent on on what the responsibilities are going to be in terms of construction and costs.

Speaker Change: But yet to your point a lot of the deals that we've seen come to fruition. This year were deals that we started last year.

Speaker Change: I wouldn't say, they're getting any faster to do in a competitive environment. There's a lot of leverage being set up by brokers and other landlords. So we just have to be patient and navigate through them and every time, we have a window to close just do everything we can to try and get these things done.

Gordon Wadley: There's a lot of leverage being set up by brokers and other landlords, so we just have to be patient, navigate through them, and every time we have a window to close, just do everything we can to try and get these things done. But I don't foresee deals getting any quicker in the near term. We just have to keep battling through each one as they come.

Gordon Wadley: There's a lot of leverage being set up by brokers and other landlords, so we just have to be patient and navigate through them. And every time we have a window to close, just do everything we can to try and get these things done. But I don't foresee deals getting any quicker in the near term. We just have to keep battling through each one as they come.

Michael Cooper: On the investment side, you know, age in our sold, their course building to George Brown College, we sold 720 Bay to a health group. So I think you're seeing buildings selling when there's a motivated buyer who probably has a different use. What I've been pleased with is more and more of large allocators of capital have been speaking to us about their interest in office. It's very preliminary, but I think that when investors are looking at where the different sectors are office looks like it's been beaten up pretty bad, and there should be opportunities there.

Gordon Wadley: But I don't foresee deal getting any quicker in the near term. We just got to keep battling to reach one as they come.

Speaker Change: But I don't foresee deals getting any quicker.

Speaker Change: In the near term, we just got to keep battling through each one as they come.

Gordon Wadley: And maybe they're looking at the deals that are being executed. Let's say it's 24 Victoria when you look at the deal there. One sign, you know, in one 10, 10, 10, 10 takes an occupancy there. How long does it take before that shows up in the NOIs? Is it still like six to 12 months over there? That's actually a good question. So, you know, one thing that we've been looking at instead of, you know, always putting capital in the deals is doing free rent out of term fixed range. So that, in that kind of case, will delay the occupancy date, but give the tenant the access to the space in advance of the occupancy date.

Sairam Srinivas: And maybe they're looking at these deals that are being executed, like, let's say, 74 Victoria. When you look at the deal there, once signed, you know, and once the tenant takes occupancy there, how long does it take before that shows up in the NOI? Is it still like 6 to 12 months over there? That's right.

Gordon Wadley: And maybe they're looking at these deals that are being executed, like, let's say, 74 Victoria. When you look at the deal there, once signed, you know, and once the tenant takes occupancy there, how long does it take before that shows up in the NOI? Is it still like 6 to 12 months over that? That's actually a good question.

Speaker Change: And maybe just looking at the deals that are being executed is there any part of Victoria and when you look at it.

Speaker Change: Dan.

<unk> signed and done deal.

Speaker Change: But then it peaks in occupancy that how long does it take before that shows up in their NOI is it does it still make six to 12 months.

Michael Cooper: So I think we're starting to get more people interested in office, but not necessarily pulling the trigger. We've been working on a couple of things. We sold the arcade we had in Saskatoon, where we're working on another significant building. It's a slow process. We hope to be there by the end of the year. And we'll see if there's other assets that make sense for us to sell. But things have been going as good as we could have hoped for.

Gordon Wadley: That's actually a good question. So, you know, one thing that we've been looking at instead of, you know, always putting capital in the deals is doing free rent out of term fixturing. So in that kind of case, we'll delay the occupancy date but give the tenant access to the space in advance of the occupancy date, so they have out of term free rent, but we start the term. Say, for example, we do a five-year deal.

Gordon Wadley: So, you know, one thing that we've been looking at instead of, you know, always putting capital in the deals is doing free rent, out of term fixturing. So that in that kind of case will delay the occupancy date but give the tenant access to the space in advance of the occupancy date, so they have out of term free rent, but we start the term, say, for example, we do a five-year deal.

Speaker Change: That's actually a good question. So you know one thing that we've been looking at instead of always putting capital in the deals is doing free rent out of term fixed dream.

Speaker Change: So that in that kind of case will delay the occupancy date, but give.

Gordon Wadley: Maybe we'll give them five months of fixing period takes us a month to do the space that you effectively get four months of term free rent, and then their commencement date starts on the fifth year. So on bigger deals, you will see a bit of a lag from when the deal is signed to when the actual rent commencement date is. But a lot of the time, that is out of term free fixturing, and we make sure to get a full term to amortize the cost that we put in.

Gordon Wadley: Maybe we'll give them five months of fixing period, which takes us a month to do, the space that you get effectively get four months out of term free rent, and then their commencement date starts on the fifth year. So on bigger deals. You will see a bit of a lag from when the deal is signed to when the actual rent commencement date is, but a lot of the time that is out of term free fixtures, and we make sure to get a full term to amortize the cost that we put in. To answer your question, yeah, yeah, no, that definitely does.

Speaker Change: The tenant the access to the space in advance of the occupancy date. So they about a term free rent, but we start the term say for example, we do a five year deal, maybe we'll give them five months of fixed stream period.

Gordon Wadley: So they have out a term free rent, but we start the term, say for example, we do a five year deal. Maybe we'll give them five months of fixed range period; takes us a month to do the space that you get effectively get four months out of term free rent. And then their commencement date starts on the fifth year. So on bigger deals, you will see a bit of a leg from when the deals signed to when the actual rent commencement date is. But a lot of the time that is out of term free-fixering, and we make sure to get a full term to amortize the cost that we put in.

Speaker Change: It takes us a month to do the space. They can effectively get four months out of term of free rent and then their commencement date starts on the 50 or so on bigger deals.

Speaker Change: You will see a bit of a lag from when the deal is signed to when the actual rent commencement date is but a lot of the time that is out of term free fixed stream and we make sure to get a full term to amortize the costs that we put in.

Operator: At this point, we'd be happy to answer any of your questions. Operator? We will now begin the question in the intercession to ask a question you may press star than one on your couch tone phone.

Speaker Change: Yeah.

Sairam Srinivas: That's your question. Yeah, yes, no, that definitely does.

Sairam Srinivas: Maybe just switching to absorption in the market, you know, apart from obviously the subleases, another factor weighing on Toronto was the amount of supply that came into downtown. When you look at the absorption of new supply today, like, do you see most of the spaces being actually absorbed? Or are they still in the market competing, which you know, they're still in.

Speaker Change: The answer to your question Yeah.

Sairam Srinivas: Yeah, yeah, no, definitely, guys. Maybe just switching to absorption in the market. You know, apart from obviously the subleases, another factor weighing on Toronto was the amount of supply that came into downtown. When you look at the absorption of new supply today, do you see most of your spaces being actually absorbed, or are they still in the market competing with you guys?

Speaker Change: Got it.

Gordon Wadley: Maybe just switching to absorption in the market, you know, apart from obviously the subleases, another factor weighing on Toronto was the amount of supply that came into downtown. When you look at the absorption of the new supply today, like do you see most of the spaces being actually absorbed, or are they still in the market competing with you? There's still very much in the market competing with us. A lot of the buildings have a tremendous amount of free leasing, but the amount that isn't is a competitor. What's the absorption been for the quarter of the year of that and stuff?

Speaker Change: Maybe just switching to absorption in the market.

Operator: If you're using a speaker phone, please pick up your hands up before pressing the keys. At any time your question has been addressed and you would like to withdraw your question, please press star and then two.

Speaker Change: Apart from obviously, the sub leases and the fact of the England channel was the amount of supply that came into downtown.

Speaker Change: When you look at the absorption of the new supply today do you see most of those pieces being actually absorbed or are they still in the market competing with you guys.

Mark Rothschild: Our first question comes from Mark Rothschild with Can Accord Genuity.

Michael Cooper: Please go ahead. Thanks, thanks. Good morning everyone. Michael, strategically it sounds like the asset sales that you're pursuing are ongoing but maybe not with the sense of urgency or maybe just take time. Could you just comment a little bit on strategically if anything has changed and how you're viewing the asset sales and maybe connected with that. Is there anything else that you're considering or feel the need to increase liquidity in regards to maybe the dream industrial investment?

Gordon Wadley: They're still in them. They're still very much in the market, competing with us. A lot of the time

Gordon Wadley: They're still very much in the market competing with us. A lot of the buildings have a tremendous amount of free leasing, but the amount that isn't is a competitor. What's the absorption been for the quarter of the year, that kind of stuff? How are we doing?

Speaker Change: They are still in them they are still very much in the market competing with us.

Gordon Wadley: A lot of the buildings have a tremendous amount of free leasing, but the amount that isn't is a competitor. What's the absorption been for the quarter of the year, that kind of stuff? How are we doing?

Speaker Change: A lot of the buildings have tremendous amount of pre leasing, but the amount that isn't as a competitor.

Speaker Change: Let's see absorption for the quarter of the year and stuff.

Gordon Wadley: Are we doing it? So the market? So it's actually the vacancy rate's been growing in the core, and one thing to look at, and there's a lot of great publications, and I don't want to name specifically, but there has been some buildings, commercial buildings built on spec that unfortunately haven't had any absorption. So I think that's a real challenge, and that's what we compete against on a daily basis is some of the new space. A lot of it's periphery to the core, but there are still situations where there's vacancy on new space.

Speaker Change: Doing it.

Gordon Wadley: to the market so it's actually the vacancy rate's been growing uh in the core and and one thing to look at and there's a lot of great publications and i don't want to name specifically but um but there has been some buildings commercial buildings built on spec that unfortunately haven't had any absorption um so i i think that's a real challenge and that's what we compete against on a daily basis is some of the new space a lot of it's periphery to the core um but there are still situations where there's a vacancy on new space

Gordon Wadley: the market. So actually, vacancy rates have been growing in the core. And, and one thing to look at, and there are a lot of great publications, and I don't want to name specifically, but there have been some buildings, commercial buildings built on spec, that unfortunately haven't had any absorption. So I think that's a real challenge.

So the market. So it's actually the vacancy rate has been growing.

Speaker Change: In the core and and one thing to look at and there's a lot of great publications and I don't want to name specifically, but.

Michael Cooper: Is that still something that you intend to own for an extended period of time in the office? Well, I think our liquidity level is pretty good right now and we've been prepared for things to be more difficult, so we're pleased with that. I think the sale of one or two buildings might be appropriate and with the dream industrial units, they've been a great investment for us. They're obviously not office so that they're not in our core strategy. If we need them or if we decide opportunistically to sell them, that's something that we could consider but we're not really considering that now nor do we feel we need to.

Speaker Change: But there has been some buildings commercial buildings built on spec that unfortunately haven't had any absorption.

Mark Rothschild: Okay, great, thanks.

Speaker Change: So I think that's a real challenge and Thats, what we compete against on a daily basis with some of the new space a lot of its periphery to the core.

Gordon Wadley: And that's what we compete against on a daily basis for some of the new space, a lot of its periphery to the core. But there are still situations where there's vacancy in new space. Right. And for you, my last question before I turn it back, when you look at these spaces, and you know, all the competing spaces that have come in, are they concessed in terms of their net rents, which means that maybe in a couple of years, those concessions would roll off, and the average rent of the market would kind of go up? Would that be a situation we could see in the next couple of years?

Speaker Change: But there is still situations, where there's a vacancy on your space.

Sairam Srinivas: Right. And for you, my last question before I turn it back, when you look at these spaces and, you know, all the competing spaces that have come in, are they concessed in terms of their net rents, which means that maybe in a couple of years, those concessions would roll off, and the average rent of the market would kind of go up? Would that be a situation we could see in the next couple of years?

Gordon Wadley: For me, my last question before I turn it back: when you look at these spaces and all these other competing spaces that came in, are they consistent in terms of their net rents, which means they're maybe in a couple of years those concessions would roll off and the average rent of the market would kind of go up. Would that be a situation we could see in the next couple of years? Yeah, I think so. So some of the deals that you would have done now at lower any hours are marginally lower face rates. On the next renewal cycle, if it's three years, five years, seven years, or ten years, you should very much see a pickup on net rent, but more importantly, on the renewals you have to put, you know, you often put in less capital.

Speaker Change: And finally, my last question before I turn it back.

Speaker Change: When you look at these pieces and you know all this.

Speaker Change: Competing spaces that came in.

Speaker Change: Are they concerned in terms of the Netherlands, which means that maybe in a couple of years those concession for roll off and the average length of the market would kind of go up would that be a situation you will see in the next couple of years.

Gordon Wadley: And maybe for Gord, it sounds like there's a lot going on with the leasing and the face rates appear to be good. Just comment a little bit on the trends you're seeing on the net effective rent. If that's improving at all, if it's still really expensive just to get leasing done and how you see that evolving over the next year.

Gordon Wadley: Yeah, I think so. So some of the deals that you would have done now at lower NERs or marginally lower face rates on the next renewal cycle, if it's three years, five years, seven years, or 10 years, you should very much see a pick-up in net rent. But more importantly, on the renewals, you have to put, you know, you often put in less capital. So you see a benefit on both sides. So that's a good question. And I think in the next cycle, you'll see better deals, better net effectives, and better rent. Awesome. Thanks for the call, guys. I'll turn it back.

Speaker Change: Yes, I think so so some of the deals that you would've done now at lower any ours are marginally lower face rates on the next renewal cycle. If it's three years five years seven years or 10 years, you should very much see a pickup on net rent, but more importantly on the renewals GAAP you often put in less capital.

Gordon Wadley: Yeah, a good question, Mark. It's still really expensive to get leasing done. I think right across the board, you know, we're competing with a lot of different spaces that are fully improved. So for us, if we have base building space, it's table stakes to put in $70 of foot to $100 of foot to get in in a reasonably leasable condition to match our competitive set. So yeah, I see any hours at least for the next 18 to 24 months being relatively challenged. But overall, I'm happy with how net rents are performing and I'm happy with the pickup of the tours and the velocity of people that are coming to our building. So that's positive.

Sairam Srinivas: So you see a benefit on both sides. So that's a good question. And I think on the next cycle, you'll see better deals; better net effect is a better rents. Awesome.

Speaker Change: So you see a benefit on both sides. So that's a good question and I think on the next cycle Youll see better deals better net effective and better rents.

Sairam Srinivas: Awesome. Thanks for the call, guys. I'll turn it back.

Speaker Change: Awesome. Thanks for the color guys I'll turn it back.

Operator: Thanks to the guy that turned back. Welcome.

Speaker Change: Welcome.

Matt Kornak: And the next question comes from Matt Kornak with National Bank Financial. Please go ahead. Good morning, everyone. And just quickly, Jay, I wanted to walk through kind of the bridge between Q1 and Q2 on NOI. I think most of it is either in straight line rents or these termination income, but if you could give us a sense as to how that straight line rent, I think you mentioned that it will impact the second half of the year. But should we assume that the full kind of million dollars of straight line rent converts to cash rent and is that a run rate for the remainder of the year?

Matt Kornack: And the next question comes from Matt Kornack with National Bank Financial. Please go ahead. Good morning, everyone.

Operator: And the next question comes from Matt Kornack with National Bank Financial. Please go ahead.

Speaker Change: And the next question comes from Matt <unk> with National Bank Financial. Please go ahead.

Matt Kornack: Good morning, everyone. Just quickly, Jay, I wanted to walk you through kind of the bridge between Q1 and Q2 on NOI. I think most of it is either in straight-line rent or at least termination income, but if you could give us a sense as to how that straight-line rent – I think you mentioned that it will impact the second half of the year – but should we assume that the full amount of $1 million of straight-line rent converts to cash rent, is that a run rate for the remainder of the year? Sure.

Jay Jiang: And just quickly, Jay, I wanted to walk through kind of the bridge between Q1 and Q2 on NOI. I think most of it is either in straight line rents or these termination income. But if you could give us a sense as to how that straight line rent, I think you mentioned that it will impact the second half of the year. But should we assume that the full kind of million dollars straight line rent converts to cash rent? And is that a run rate for the remainder of the year? No problem.

Speaker Change: Good morning, everyone.

Matt: Just quickly Jay I wanted to walk through.

Matt: Kind of the bridge between Q1 and Q2 on an NOI I think most of it is either in straight line rent or lease termination income, but if you could give us some sense as to how that straight line rent I think you mentioned that it will impact the second half of the year.

Michael Cooper: I do want to point out that since September 6th, last year, when we presented our model for dream office, we had said at the time that we believe that in 2024, 2025 and 2026, things would be pretty much the same as in 2023. So we're now seven months into that plan and things are basically the same as before. So, you know, it is basically what we expected. We actually expect another 20, 30 months of this.

Speaker Change: But should we assume that the full kind of million straight line rent converts to cash rent and is that a run rate for the remainder of their sure no.

Jay Jiang: No problem. Answer the first part of your question from Q1 to Q2 in addition to the noted straight line rent and lease termination income. We were also a little bit higher, about 350K on comparile properties, NOI sequentially, and that's just due to free rent burning off for tenants that have taken occupancy. Our property management and construction income was also about higher by 150,000, and we did some work for tenants and were paid one time income for that. On straight line, we had two tenants in downtown Toronto that took occupancy a few months early this quarter over being Q2.

Jay Jiang: No problem. To answer the first part of your question, from Q1 to Q2, in addition to the noted straight-line rent and lease termination income, we were also a little bit higher, about $350K, on comparable properties' NOI sequentially, and that's just due to street rent burning off for tenants that have taken occupancy. Our property management and construction income was also higher, about $150,000, and we did some work for tenants, and we were paid a one-time income for that.

Jay Jiang: To answer the first part of your question, from Q1 to Q2, in addition to the noted straight-line rent and lease termination income, we were also a little bit higher, about $350K, on Comparado Properties' NOI sequentially, and that's just due to street rent burning off for tenants that have taken occupancy. Our property management and construction income was also higher, about $150,000, and we did some work for tenants and were paid a one-time income for that.

Speaker Change: Answered the first part of your question from Q1 to Q2. In addition to the noted our straight line rent and lease termination income.

Speaker Change: We were also a little bit higher about 350, K on comparable property NOI sequentially and Thats just use free rent burning off for tenants that have taken occupancy our property management and construction income was also higher by 150000, and we did some work for tenants and we're paid a one time income for that.

Michael Cooper: So I'm glad it hasn't gotten worse. I think we've made improvements to our buildings. Been pleased with our relationship with lenders and things we've been able to achieve. So I think we're doing pretty good compared to where we said we'd be.

Jay Jiang: On a straight line, we had two tenants in downtown Toronto that took occupancy a few months early this quarter, being Q2. They commenced rent payment, I think, one in July and one in September, so these are very quick free rent periods, and that income will be reflected in the cash NOI in Q3. However, before I mention ICICI Bank at 366 Bay, their lease is in November, but they actually finished the work early, and they have taken occupancy and begun operations this summer, which is great.

Speaker Change: <unk>.

Speaker Change: On a straight line, we had two tenants in downtown Toronto that took occupancy a few months early.

Gordon Wadley: Yeah, the only one quick observation I'd make for you, Mark, as well too, is we're seeing finishing trades. We're seeing a lot more come to bid on jobs and I think that's a result of there being a bit of a down cycle in development. Not just residential, but commercially obviously as well. So a lot of the finishing trades, we're seeing instead of one or two come to bid on a job, we're seeing usually about three to five. So that's been a positive sign, for us. Okay, great, thanks.

Speaker Change: Quarter being Q2 they.

Jay Jiang: They commenced rent payment; I think one in July, one in September, so these are very quick free rent periods, and that income will be reflected in the cash on NOI and Q3. However, the board mentioned ICI, CI Bank at 366 Bay. There are lease, I think, is in November, but they actually finished the work early, and they have taken occupancy and began operations this summer, which is great. We will see some straight line for that. The simple answer to your question is, our straight line will actually be around the same, I think for Q3 and Q4, but it puts in takes because we have two tenants burning off, and then it will be replaced by 366 Bay.

Speaker Change: They commence rent payment I think one in July one in September. So these are very quick free rent periods and that income will be reflected in the cash NOI in Q3. However.

Speaker Change: You had mentioned the ICI bank at $3 66 Bay.

Speaker Change: Their lease I think as of November but they actually finished the work early and they have taken occupancy and began operations. This summer which is great. We.

Operator: I'll turn it back.

Jay Jiang: We will see some straight line for that. So the simple answer to your question is, our straight line will actually be around the same, I think, for Q3 and Q4, but it's puts and takes because we have two tenants burning off, and then it'll be replaced by 366 Bay. Okay, so going into, I guess, Q3, the only variance would then be the lease termination, which was one-time in nature. So maybe NOI goes down a little bit sequentially.

Sam Damiani: And the next question comes from Sam Damiani with TD and Cowan. Please go ahead. Thank you and good morning. I guess first question, just on dispositions, you talked about a bit and had a question from Mark there, but I mean, there was a couple buildings listed for sale earlier this year. Just wanted if you could provide an update on those specifically, if those are still intended to proceed or how that's going.

Speaker Change: We will see some straight line for that so the simple answer to your question is our straight line will actually be around the same I think for Q3 and Q4.

Speaker Change: And takes because we had two tenants burning off and then it'll be replaced by a 366 day.

Jay Jiang: Okay, so the going into Q3, the only variance would then be the least termination, which was one time in nature. So maybe 10 to 10, why it goes down a little bit? Is there anything in the coverage? I also noticed that the margins were fairly high this quarter. I don't know if that may just be difficult to do that. That's a good catch.

Matt Kornack: Okay, so going into Q3, the only variance would then be the lease termination, which was one-time in nature. So maybe NOI goes down a little bit sequentially. Was there anything in recoveries? I also noticed that the margins were... fairly high this quarter. And that may just be typical seasonality.

Jay Jiang: Was there anything in recoveries? I also noticed that the margins were fairly high this quarter, but that may just be typical seasonality.

Speaker Change: Okay. So the going into Q3, the only variance would then be the lease termination income, which was onetime in nature. So maybe kind of why it goes down a little bit sequentially was there anything in recoveries I also noticed the margins were.

Sam Damiani: I know you think that's an easy question, but the answer is hard. As I mentioned, we definitely have been making great progress in one, but it's a slow process. On the other one, we actually don't have an update. One thing that has been mentioned is I think that another source of capital for us, we have some buildings whose loads mature. And while everybody expects that, there's going to be paydowns on loads.

Speaker Change: Hi.

Speaker Change: Right.

Speaker Change: Typical seasonality.

Speaker Change: That's a good cash we're actually since January they are working collaboratively with our property management and accounting group to look for efficiencies with regards to our Opex and that has created a gain in the NOI margin. So for example, we're looking at optimizing utilities cleaning.

Jay Jiang: That's a good catch. We've actually, since January, been working collaboratively with the Property Management Accounting Group to look for efficiencies with regard to our OPEX, and that has created a gain in the NOI margin. So, for example, we're looking at optimizing utilities and cleaning services that align with tenants' hybrid working schedules. So, for example, if they don't need to be in the space on Mondays or Fridays, we can actually save quite a bit of money by optimizing electricity and cleaning.

Sam Damiani: We have a few that are under leveraged and they'll be a great source of capital for the company. So that's another choice that we have to look at, but our liquidity is in pretty good shape right now. At least as good as we had expected.

Jay Jiang: We're actually, since January, been working collaboratively with the Property Management Accounting Group to look for efficiencies with regards to our OPEX. And that has created a gain in the NOI margins. So, for example, we're looking at optimizing utilities, cleaning services, that align with tenant hybrid working schedules. So, for example, if they don't need to be in the space on Mondays or Fridays, you can actually save quite a bit of money by optimizing electricity and cleaning. A couple other things we looked at suppliers for a lot of supplies, cleaning materials, and labor as well. So hopefully that actually can flow through and becomes a normalized run rate, but we're still sort of in the phase right now.

Speaker Change: Cleaning services.

Speaker Change: That.

Speaker Change: Align with tenants hybrid working schedules. So for example, if they don't need to be in this space are Mondays Fridays.

Michael Cooper: Okay, thank you. And just on the on the leasing, you know, the Arkansas was kind of flat on the quarter on an in place basis, but you know, there was some decreases in a few of the the Bay Street type properties. I'm just wondering if there's a trend specific to the Bay Street properties that are any, if they're at all different than the overall trends, Gordon talked about. Yeah, I think one of the biggest mitigating factors for the Bay Street properties, and I'll be honest with you first, it's just in the construction at the corner of Adelaide Bay.

Speaker Change: Save quite a bit of money by optimizing our electricity and cleaning.

Jay Jiang: A couple other things; we looked at suppliers for a lot of supplies, cleaning materials, and labor as well. So, hopefully, that can actually flow through and become the normalized run rate, but we're still sort of in the phase right now where we're trying to figure out if we can save a bit more money.

Jay Jiang: A couple other things, we looked at suppliers for a lot of supplies, cleaning materials, and labor as well. So, hopefully, that can actually flow through and become the normalized run rate, but we're still sort of in the phase right now where we're trying to figure out if we can save a bit more money. Okay, fair enough.

Speaker Change: A couple of other things, we looked at suppliers for a lot of supplies cleaning materials and labor as well, so hopefully that actually can flow through and becomes the normalized run rate, but we're still sort of in the phase right now where we're trying to figure out if it gets a little bit more money.

Jay Jiang: We're trying to figure out if we could save a bit more money.

Matt Kornack: Okay, fair enough. And then the last one for me on 74 Victoria, when you approach the leasing for that property, obviously, there's some long-term optionality to potentially densify the site. Are you taking that into account and for the remaining two-thirds of space? Gord, will those timelines that you provided in terms of the gap between signing and commencing cash rents be similar for the tenancy you're looking for in that space? And would you invest in that space at this point, given that the building may not exist in a decade?

Matt Kornak: Okay, turn up and then the last one for me on 74 Victoria when you approach the leasing for that property. Like obviously there's some some long journal optionality to potentially densifying the site. Are you taking that into account, and for the remaining two thirds of space? Gord, with those timelines that you provided in terms of the gap between signing and commencing cash rent to be similar for the tenant that you're looking for for that space. And would you invest in that space against CapEx at this point, given that the building may not exist in a decade.

Matt Kornack: And then the last one for me on 74 Victoria, when you approach the leasing for that property, like, obviously, there's some long-term optionality to potentially densify the site. Are you taking that into account, and for the remaining two-thirds of space Gord, with those timelines that you provided in terms of the gap between signing and commencing cash rents be similar for the tenants that you're looking for for that space? And would you invest in that space? CapEx at this point, given that the building may not exist in a decade? Or can you answer those seven questions?

Speaker Change: Okay Fair enough and then the last one for me on 74, Victoria when you approach the leasing for that property.

Speaker Change: Obviously theres some some long term optionality to potentially densify the site.

Michael Cooper: And on Richmond, it's been very difficult to get groups there to tour, and it's been very punitive for brokers to bring them along. But that being said, we've seen it clean up a little bit over the course the last six weeks right at the intersection of Adelaide right in front of First Canadian place, Adelaide Bay. And we've started to see more tours. We had a good pick up the tours at 330 and 80 Richmond especially. That's good to hear.

Speaker Change #100: Taking that into account and for the remaining two thirds of space.

Gordon Wadley: Last one for me.

Speaker Change #101: Gordon with those.

Speaker Change #102: Timelines that you provided in terms of the gap between.

Speaker Change #103: Signing and commencing cash rents be be similar for the tenants that youre looking forward for that space and would you invest in that space against Capex at this point given the building may not exist in a decade.

Gordon Wadley: I mean, do you have an actual sort of CapEx budget for this year and next year that you'd be able to share? Yeah, to share. We'll talk through the pieces. So with leasing costs, I think consistent with the guidance in February and what Gordon talked about in his commentaries within that effective rent, it really depends on the duration of the lease. So typically, we're budgeting about $10 per square feet per year.

Gordon Wadley: Or can you answer those seven questions?

Gordon Wadley: Gord, can you answer those seven questions? Yeah, no problem. They're all good questions.

Speaker Change #103: Or can you answer the seven questions Yeah, no problem, they're all good questions.

Gordon Wadley: Yeah, no problem. They're all good questions, by the way.

Gordon Wadley: By the way, so in terms of investing capital, we would for the right deal in that building. It's a great location. We've actually had quite a few tours of people going in because it is a large block of space. It's available. So, on a case-by-case, I think a lot of people have to appreciate in any single commercial lease. There's often a demo and relocation provision in these leases. So we try to structure our leases very much like the industry standard where, if down the road there's flexibility, you know, we work closely with the tenant to come up with optionality if we want to do something to the building.

Yes, so so in terms of investing capital.

Gordon Wadley: Yes, so in terms of investing capital, we work for the right deal on that building. It's a great location. We've actually had quite a few tours of people going in because it is a large block of space that's available. So, case by case, I think a lot of people have to appreciate that in any single commercial lease, there's often a demolition and relocation provision in these leases. So we try to structure our leases very much like the industry standard, where if down the road there's any flexibility, we work closely with the tenant to come up with an optionality if we want to do something to the building.

Gordon Wadley: Yeah, no problem. They're all good questions, by the way. Yes, so in terms of investing capital, we look for the right deal in that building. It's a great location. We've actually had quite a few tours of people going in because it is a large block of space that's available. So, case by case, I think a lot of people have to appreciate that in any single commercial lease, there's often a demolition and relocation provision in these leases.

Gordon Wadley: And it's a bit less if you do a 10-year lease, so you could just go about $7.50. For maintenance capital, we've been really smart and only focusing on life safety and putting value in buildings where we can get a reasonable payback or lending value. But that's because we've already improved the building, and that's what's left over. Yep, so on pace, it will be very light because we've put in the $50 million already. Otherwise, with that, respect to the reserves, is about a dollar to $2 per year per square foot. Square foot. Okay. Is that sufficient? Yeah, that is. Very helpful. Thank you so much.

Speaker Change #103: We would for the right deal in that in that building.

Speaker Change #103: It's a great location.

Speaker Change #104: We've actually had quite a few tours of people going in because it is a large block of space available. So on a case by case I think a lot of people have to appreciate in any single commercial east Theres, often a demo and relocation provision in these leases.

Gordon Wadley: So we try to structure our leases very much like the industry standard, where if down the road there's flexibility, we work closely with the tenant to come up with optionality if we want to do something to the building. And we'll look at, much like any space, we'll look at every deal on a case by case basis. If it requires capital, we'll do the due diligence to understand if it's something that's going to benefit us. If it doesn't require capital, maybe a low net rent and immediate occupancy, then we'll look at that on a case-by-case basis as well. We try to do everything.

Speaker Change #104: So we try to structure our leases very much like the industry standard where if down the road there's flexibility we work closely with the tenant.

Speaker Change #104: To come up with Optionality, if we want to do something to the building.

Gordon Wadley: You know, and we'll look at, much like any space, we'll look at every deal on a case by case basis. If it requires capital, we'll do the due diligence to understand if it's something that's going to benefit us. If it doesn't require capital, maybe a low net rent and immediate occupancy, then we'll look at that on a case-by-case basis as well. We try to do everything. We also have our CIB facility, which we've talked about in the past.

Gordon Wadley: And we'll look at much like any space. We'll look at every deal on a case-by-case basis. If it requires capital, we'll do the due diligence to understand if it's something that's going to benefit us. If it doesn't require capital, maybe a low net rent and immediate occupancy, then we'll look at that on a case-by-case basis as well. So we try to do everything.

Speaker Change #105: And we will look at you know much like any space will look at every deal on a case by case basis.

Speaker Change #105: It requires capital, we'll do the due diligence to understand if it's something that's going to benefit us if it doesn't require capital it may be a low net rent in the immediate occupancy then we'll look at that on a case by case as well so.

Gordon Wadley: It's about a $140 million Canadian infrastructure bank loan where we get a really low cost of capital to improve all of the basic buildings in that building. And 74 Victoria is a building that we've done the studies on. We know what we need to do there. And we've got this facility that we can lean on to do things cheaply and then also to advertise those improvements to the tenants.

Gordon Wadley: We also have our CIB facility, which we've talked about in the past. It's about a $140 million Canadian infrastructure bank loan where we get a really low cost of capital to improve all of the base buildings in that building. And 74 Victoria is a building that we've done the studies on. We know what we need to do to do there.

Speaker Change #105: We tried to we tried to do everything we also have our CIB facility.

Gordon Wadley: We also have our CIB facility, which we've talked about in the past. It's about $140 million Canadian Infrastructure Bank loan, where we get a really low cost to capital to improve all of the base building in that building. And 74 Victoria is a building where we've done the studies on. We know what we need to do to do there. And we've got this facility that we can lean on to do things cheap and then also to advertise those improvements to the tenants. I think that's the most important point, Matt, that we're prepared to put money into the space, but we wouldn't expect to recover it after the existing tenant is gone.

Michael Cooper: I do want to pick up on Gordon's point, which I hear from everybody I speak to, which is it's hard for employees to get to work, that the traffic is a real problem. All the bike lanes that minimize cars is a problem. And I think that's something we've got to work on as a community to help people get around.

Speaker Change #105: Which we've talked about in the past, it's about $140 million.

Canadian infrastructure Bank Bank loan, where we get a really low cost of capital too.

Operator: Any other questions?

Speaker Change #106: To improve all of the base building and that building and 74, Victoria is a building where we've done the studies on we know what we need to do to do there and we've got this facility that we can lean on.

Speaker Change #107: To do things cheap and then also to amortize those improvements to the tenants I think thats most important point Matt.

Sairam Srinivas: And the next question comes from Sairam Srinivas with Kornmark Securities. Please go ahead. Thank you very much. Good morning, guys. God is really going to give you. Maybe a year ago we were talking about, you know, the number of tours going up, but 10th essentially digging some time to actually sign those pieces. When you look at the situation today, how does that compare in contrast to a year ago? Are tenants being more willing to come to the table and actually execute or is it more the same?

Matt Kornack: I think that's the most important point, Matt, that we're prepared to put money into the space, but we wouldn't expect to recover it after the existing tenant is gone. And that goes towards the potential redevelopment. But for the right tenant, for the right lease, we're happy to keep it as an office building in the meantime.

Speaker Change #108: We're prepared to put money into the space, but we wouldn't expect to recover it after the existing tenant is gone and that goes to the potential redevelopment, but for the right tenant for the right lease we're happy to keep it as an office building in the meantime.

Gordon Wadley: And that goes to potentially redevelopment. But for the right tenant, for the right lease, we're happy to keep it as an office building in the meantime.

Gordon Wadley: Perfect. Thanks, guys. I'll turn it back on.

Matt Kornak: Perfect. Thanks, guys.

Gordon Wadley: And we've got this facility that we can lean on to do things cheap and then also to amortize those improvements to the tenants. I think that's the most important point, Matt, that we're prepared to put money into the space, but we wouldn't expect to recover it after the existing tenant is gone. And that goes to the potential redevelopment. But for the right tenant, for the right lease, we're happy to keep it as an office building in the meantime. Perfect. Thanks, guys. I'll turn it back. And the next question comes from Mario Saric with Scotiabank. Please go ahead. Hi, good morning.

Speaker Change #109: Perfect. Thanks, guys I'll turn it back.

Operator: I'll turn it back.

Mario Saric: And the next question comes from Mario Saric with Scotiabank. Please go ahead. Hi, good morning. Maybe a general question, Michael, on your comment that it still may take 12, 18 months for visibility to kind of stabilize on what tenants are doing with their space and so on and so forth. It's been over four years since the start of the pandemic. So is the comment? Is it more so tenants having made decisions and now reconsidering those decisions in terms of how to optimize a space, or is it simply more tenants, most tenants still haven't figured out what to do?

Operator: And the next question comes from Mario Saric with Scotiabank. Please go ahead.

Speaker Change #110: And the next question comes from Mario <unk> with Scotiabank. Please go ahead.

Mario Saric: Hi, good morning. Maybe a general question, Michael, on your comment that it still may take 12 to 18 months for visibility to kind of stabilize on what tenants are doing with their space and so on and so forth. You know, it's been over four years since the start of the pandemic, so is the comment about the tenant being more so tenants having made decisions and now reconsidering those decisions in terms of how to optimize the space, or is it simply that more tenants, like most tenants, still haven't figured out what to do?

Mario Saric: Maybe a general question, Michael, on your comment that it still may take 12 to 18 months for Visibility to kind of stabilize on what tenants are doing with their space and so on and so forth. It's been over four years since the start of the pandemic. So is the comment, is it more so tenants having made decisions and now reconsidering those decisions in terms of how to optimize the space? Or is it simply that more tenants, like most tenants still haven't figured out what they're doing? It's absolutely everything.

Hi, good morning.

Speaker Change #110: Maybe.

Sairam Srinivas: We're starting to see more of these deals get executed. They're taking longer. You know, we mentioned today that we've got at least 10 deals for about 270,000 square feet in the pipeline. These deals we've been working on for, you know, the better part of six to eight months on some of them. I think everybody's just being prudent on what the responsibilities are going to be in terms of construction and costs. But yeah, to your point, a lot of the deals that we've seen come to fruition this year were deals that we started last year.

Speaker Change #111: A general question Michael on your comment that.

Speaker Change #112: May take 12 to 18 months.

Speaker Change #113: <unk> ability to stabilize on what tenants are doing with their space and so on and so forth. So it's been it's been over four years since the start of the pandemic. So is the comment.

Speaker Change #114: Is it kind of is it more so tenants having made decision to now reconsidering.

Speaker Change #114: In terms of how do you optimize the space or is it simply more tenants like most of it still haven't figured out what they're doing.

Michael Cooper: It's absolutely everything. I'm not sure how your company is dealing with it, but everybody I know says their companies have had maybe 20 or 30 different policies in the last four years. So I think we are seeing people trying to figure out what the combination is that works best for them. I think what's been added a little bit recently is, you know, we've seen that some businesses are doing great and that may translate into more space, but you know, people are getting more concerned about a slow economy and instead of a thing in discussion about remote work or these big ideas, it feels like the old days where the CFO is trying to figure out how to save money on off the space.

Michael Cooper: It's absolutely everything. I'm not sure how your company is dealing with it. But everybody I know says their companies have had maybe 20 or 30 different policies in the last four years. So I think we are seeing people trying to figure out what the combination is that works best for them. I think what's been added a little bit recently is, you know, we've seen that some buildings are doing, some businesses are doing great.

Michael Cooper: I'm not sure how your company is dealing with it, but everybody I know says their companies have had maybe 20 or 30 different policies in the last four years. So I think we are seeing people trying to figure out what the combination is that works best for them. I think what's been added a little bit recently is, you know, we've seen that some buildings are doing, some businesses are doing great, and that may translate into more space.

Speaker Change #115: It's absolutely everything I don't I'm not sure how you're <unk>.

Sairam Srinivas: I wouldn't say they're getting any faster to do in a competitive environment. There's a lot of leverage being set up by brokers and other landlords. So we just have to be patient and navigate through them and every time we have a window to close, just do everything we can to try and get these things done. But I don't foresee deal getting any quicker in the near term. We just got to keep battling to reach one as they come.

Speaker Change #115: Company is dealing with it but everybody I noticed that the companies have had maybe 20 or 30 different policies in the last four years.

Speaker Change #116: So I think we are seeing people trying to figure out what the combination does that works best for them I think what's been added a little bit recently as we've seen at some buildings are doing some businesses are doing great.

Speaker Change #116: That may translate into more space.

Michael Cooper: And that may translate into more space. But, you know, people are getting more concerned about a slow economy. And instead of it being a discussion about remote work or these big ideas, it feels like the old days where the CFO is trying to figure out how to save money on office space. So when I say 12 to 18 months, I don't want to be held accountable. It could be longer; I doubt it would be shorter.

Michael Cooper: But, you know, people are getting more concerned about a slow economy. And instead of it being a discussion about remote work or these big ideas, it feels like the old days where the CFO was trying to figure out how to save money on office space. So when I say 12 to 18 months, I don't want to be held accountable. It could be longer; I doubt it would be shorter.

Sairam Srinivas: And maybe they're looking at the deal that are being executed. Let's say it's 24 Victoria when you look at the deal there. One sign, you know, in one 10, 10, 10, 10 takes an occupancy there. How long does it take before that shows up in the NOIs? Is it still like six to 12 months over there? That's actually good question. So, you know, one thing that we've been looking at instead of, you know, always putting capital in the deals is doing free rent out of term fixed range.

Speaker Change #117: People are getting more concerned about a slow economy and instead of it being a discussion about remote work or these big ideas. It feels like the old days, where the CFO is trying to figure out how to save money on office space. So when I say 12 to 18 months.

Michael Cooper: So when I say 12 to 18 months, I don't want to be held accountable. It could be longer. I doubt it would be shorter, but I do think that businesses are trying to figure out how they're going to use space. But overall, the economy is growing. Overall, I think demand for space is picking up, and I think there is pent-up demand. So, as things set aside, which is why I said 12 to 18 months, I think we'll have better insight. But your point about it's been since 2020, and is that people have made decisions or have made decisions and reconsidering.

Speaker Change #117: I don't want to be held accountable it could be.

Michael Cooper: But I do think that businesses are trying to figure out how they're going to use space. But overall, the economy is growing overall, I think the demand for space is picking up, and I think there is pent-up demand. So as things settle out, which is why I said 12 to 18 months, I think we'll have better insight. But, your point about it's been since 2020. And is it that people haven't made decisions and made decisions and reconsidered? This is really an unusual situation. I don't think this was an issue in retail five years ago. I mean, this is like nothing I've seen.

Michael Cooper: But I do think that businesses are trying to figure out how they're going to use space. But overall, the economy is growing overall, I think demand for space is picking up, and I think there is pent-up demand. So as things settle out, which is why I said 12 to 18 months, I think we'll have better insight. But your point about it's been since 2020. And is it that people haven't made decisions and made decisions and reconsidered? This is really an unusual situation. I don't think this was an issue in retail five years ago. I mean, this is like nothing I've seen.

Speaker Change #118: Longer I doubt it will be shorter, but I do think that businesses are trying to figure out how they're going to use space.

Sairam Srinivas: So that in that kind of case will delay the occupancy date, but give the tenant the access to the space in advance of the occupancy date. So they have out a term free rent, but we start the term, say for example, we do a five year deal. Maybe we'll give them five months of fixed range period takes us a month to do the space that you get effectively get four months out of term free rent.

Speaker Change #118: But overall the economy is growing overall I think the demand for space is.

Speaker Change #118: Picking up and I think there is pent up demand.

Speaker Change #118: As things settle out which is why I said 12 to 18 months I think we'll have better insight but.

Speaker Change #118: Your point about it's been since 2020.

Speaker Change #119: Is it that people haven't made decisions with maintenance things that reconsidering. This is really an unusual situation I don't think this was the issue of retail five years ago. I mean, this is like nothing I've seen but what I would say what's amazing about it is things are holding together pretty well and there's been some.

Michael Cooper: This is really an unusual situation. I don't think this was the issue in retail five years ago. I mean, this is like nothing I've seen. But what I would say is, what's amazing about it is, things are holding together pretty well. And there's been some big hits to the sector, let's say, in the stock market. And there's been some loss of occupancy. But there's a lot of activity going on in all the buildings. We're starting to see some buildings getting converted, especially in Calvary, but we're seeing more and more of it in Toronto.

Sairam Srinivas: And then their commencement date starts on the fifth year. So on bigger deals, you will see a bit of a leg from when the deals signed to when the actual rent commencement date is. But a lot of the time that is out of term free-fixering and we make sure to get a full term to amortize the cost that we put in. That's your question. Yeah, yes, no that definitely does. Maybe just switching to absorption in the market, you know, apart from obviously the sub leases, another factor weighing on Toronto was the amount of supply that came into downtown.

Michael Cooper: But what I would say is amazing about it is that things are holding together pretty well. And there's been some, you know, big hits to the sector, let's say in the stock market, and there's been some loss of occupancy. But, you know, there's a lot of activity going on in all the buildings. We're starting to see some buildings getting converted, especially in Calgary, but we're seeing more and more of it in Toronto, and it will fix itself. But until then, I'm pretty pleased with how it's holding together.

Speaker Change #119: Big hits to the sector, let's say in the stock market and there had been some loss of occupancy but.

Speaker Change #120: There's a lot of activity going on in all the buildings, we're starting to see some buildings getting converted especially in Calgary, but we're seeing more and more of it in Toronto and it will fix itself but.

Michael Cooper: And it will fix itself, but until then, I'm pretty pleased with how it's holding together.

Sairam Srinivas: When you look at the absorption of the new supply today, like do you see most of the spaces being actually absorbed or are they still in the market competing with you? There's still very much in the market competing with us. A lot of the buildings have tremendous amount of free leasing but the amount that isn't is a competitor. What's the absorption been for the quarter of the year of that and stuff?

Speaker Change #120: Till then I'm pretty pleased with how it's holding together.

Michael Cooper: Okay, and just on the building conversions, what's your sense in terms of the applicable inventory in Toronto that could be suitable for conversion? So when people think about conversion, they're usually thinking about office to residential, but it can be office to institutional and office to a whole bunch of other things. We are seeing that. We're seeing that with 720 Bay, it becomes a healthcare building with George Brown College taking over Chorus building. As time goes by, that will become a school building. So don't underestimate the significance in terms of the conversion to non-office uses that are still commercial.

Speaker Change #120: Okay. Okay.

Michael Cooper: And just on building conversions, what's your sense of the applicable inventory in Toronto that could be suitable for conversion? Um, so when people think of a conversion, they're usually thinking about office to residential, but it can be office to institutional and office to a whole bunch of other things. We are seeing that, like with 720 Bay, it will become a healthcare building with George Brown College taking over Chorus Building. As time goes by, that will become a school building.

Mario Saric: Okay, and just on the building conversions, what's your sense in terms of the applicable inventory in Toronto that could be suitable for conversion?

Speaker Change #120: Just on the building conversions whats your sense in terms of the applicable inventory in Toronto that could be suitable for conversion.

Speaker Change #121: So when people think about conversion, they're usually thinking about office to residential but it can be office to institutional and office to a whole bunch of other things. We are seeing that we're seeing that like with 720 Bay It becomes a health care building with.

Michael Cooper: So when people think of a conversion, they're usually thinking about office to residential, but it can be office to institutional and office to a whole bunch of other things. We are seeing that like with 720 Bay, it will become a healthcare building with George Brown College taking over the Chorus Building as time goes by. That will become a school building.

George Brown College, taking over quarters building as time goes by that will become a school building. So don't underestimate the significance in terms of the conversion to non office uses that are still commercial.

Sairam Srinivas: Are we doing it? So the market? So it's actually the vacancy rate's been growing in the core and one thing to look at and there's a lot of great publications and I don't want to name specifically but but there has been some buildings, commercial buildings built on spec that unfortunately haven't had any absorption. So I think that's a real challenge and that's what we compete against on a daily basis is some of the new space.

Michael Cooper: So don't underestimate the significance in terms of the conversion to non-office uses that are still commercial. On the residential conversion, the term is used loosely. Sometimes when people say conversion, it means like changing the use, which might include tearing down the building and building a new building. We're seeing that the City of Toronto, on an ad hoc basis, is reducing the requirement to replace offices in some cases entirely.

Michael Cooper: So don't underestimate the significance in terms of the conversion to non-office uses that are still commercial. On the residential conversion, it's used loosely. Sometimes when people say conversion, it means like conversion of the use, which might include tearing down the building and building a new building. We're seeing that the City of Toronto, on an ad hoc basis, is reducing the requirement to replace offices in some cases entirely. What we've seen is they're also prepared to say, well, why don't you have the office over on one side so you can build a residential building, and the density has to be held for the office, but you don't have to build it.

Michael Cooper: On the residential conversion, it's uselessly sometimes when people say conversion. I mean, it's like conversion of the use, which might include tearing down the building and building a new building. We're seeing that the city of Toronto, on an ad hoc basis, is reducing the requirement to replace office in some cases entirely. What we've seen is, they're also prepared to say, well, why don't you have the office over on one side so you can build a residential and the density has to be held for office, but you don't have to build it. So it's starting to pick up steam.

Speaker Change #121: On the residential conversion.

Speaker Change #122: It's used loosely sometimes when people say conversion to meet the conversion of the US which might include tearing down the building and building a new building, we're seeing that the city of Toronto on an AD hoc basis is reducing the requirement to replace office in some cases entirely.

Sairam Srinivas: A lot of it's periphery to the core but there is still situations where there's vacancy on new space. For me my last question before I turn it back, when you look at these spaces and all these other competing spaces that came in, are they consistent in terms of their net rents which means they're maybe in a couple of years those concessions would roll off and the average rent of the market would kind of go up.

Speaker Change #123: What we've seen is it also fair to say well why don't you have the office over on one side. So you can build a residential and the density has to be held for office, but you don't have to build it. So it's starting to pick up steam I think last year. There was a 1 million square feet that was converted I could see that going to 5 billion relatively easily across the country and.

Michael Cooper: What we've seen is they're also prepared to say, well, why don't you have the office over on one side so you can build a residential and the density has to be held for office, but you don't have to build it. So it's starting to pick up steam. I think last year there was a million square feet that were converted. I could see that going to 5 million relatively easily across the country.

Michael Cooper: So it's starting to pick up steam. I think last year there were a million square feet that were converted. I could see that going to five million relatively easily across the country. And, as I've said before, I suspect that we'll be looking at not the net addition to supply but the net subtraction from supply over the next few years. So I think that'll be a significant factor as we go forward.

Michael Cooper: I think last year, there was a million square feet that was converted. I could see that going to 5 million relatively easily across the country. And I think I've said this before; I suspect that we'll be looking at not the net addition to supply, but the net subtraction to supply over the next few years. So I think that'll be a significant factor as we go forward.

Sairam Srinivas: Would that be a situation we could see in the next couple of years? Yeah, I think so. So some of the deals that you would have done now at lower any hours are marginally lower face rates. On the next renewal cycle if it's three years, five years, seven years or ten years, you should very much see a pickup on net rent but more importantly on the renewals you have to put you know you often put in less capital.

I think I've said this before I suspect that we'll be looking at.

Michael Cooper: And I think I've said this before, I suspect that we'll be looking at not the net addition to supply but the net subtraction to supply over the next few years. So I think that'll be a significant factor as we go forward. Got it. Okay, switching gears for my second question, just maybe for Jay, I think you mentioned that 14% of the portfolio was externally appraised during the quarter. In terms of the fair value change during the quarter, is it fair to say that it doesn't just apply to the 14% of the portfolio that was appraised but that it was extrapolated throughout the entire portfolio? Yeah, you're right.

Speaker Change #124: The net addition to supply, but the net subtraction to supply over the next few years. So I think that'll be a significant factor as we go forward.

Mario Saric: Got it. Okay, switching gears for my second question, just maybe for Jay, I think you mentioned that 14% of the portfolio was externally appraised during the quarter. In terms of the fair value change during the quarter, is it fair to say that it doesn't just apply to the 14% of the portfolio that was appraised but rather it was extrapolated throughout the entire portfolio?

Speaker Change #125: Got it okay.

Mario Saric: Okay.

Jay Jiang: Switching gears from my second question, maybe for Jay, I think you mentioned that 14% of the portfolio was externally praised during the quarter. In terms of the fair value change during the quarter, the fair to say that it doesn't just apply to the 14% of the portfolio that was appraised but rather it was extrapolated throughout the entire portfolio. Yeah, you're right. We follow the external appraisal methodologies pretty closely. We also look for external data points. So all the brokerage research firms that released their cap rates, they were pretty flat this quarter. We make sure everything reconciled because, over the course of the year, we probably externally appraised 25% to a third of the properties historically.

Speaker Change #126: So switching gears for my second question just.

Sairam Srinivas: So you see a benefit on both sides. So that's a good question. And I think on the next cycle, you'll see better deals, better net effect is a better rents. Awesome. Thanks for the guy that turned back.

Speaker Change #127: Maybe for Jay I think you mentioned, 14% of the portfolio was externally praised.

Gordon Wadley: Welcome.

Speaker Change #127: During the quarter in terms of the.

Speaker Change #128: Fair value change during the quarter is it fair to say that it doesn't just.

Speaker Change #129: <unk> to the 14% of the portfolio was appraised, but rather it was extrapolated throughout the entire portfolio.

Matt Kornak: And the next question comes from Matt Kornak with National Bank Financial. Please go ahead. Good morning, everyone.

Jay Jiang: We follow the external appraisal methodologies pretty closely. We also look for external data points. So all the brokerage research firms that released their cap rates this quarter were pretty flat. We make sure everything reconciles because, over the course of the year, we probably externally appraise 25% to a third of the properties we normally do. And then we want to make sure that the methodologies are consistent.

Jay Jiang: Yeah, you're right. We follow the external appraisal methodologies pretty closely. We also look for external data points. So all the brokerage research firms that released their cap rates, they were pretty flat this quarter.

Speaker Change #130: Yeah Youre right.

Speaker Change #131: We follow the external appraisal methodologies pretty closely we also look for external data points sold at a brokerage research firms that are released are cap rates. They were pretty flat. This quarter, we make sure everything reconciles because over the course of the year, we probably externally appraised a 25% to a third of the property's historically and.

Jay Jiang: And just quickly, Jay, I wanted to walk through kind of the bridge between Q1 and Q2 on on NOI. I think most of it is either in straight line rents or these termination income, but if you could give us a sense as to how that straight line rent, I think you mentioned that it will impact the second half of the year. But should we assume that the full kind of million dollars of straight line rent converts to cash rent and is that a run rate for the remainder of the year?

Jay Jiang: We make sure everything reconciles because, over the course of the year, we probably externally appraise 25% to a third of the properties historically. And then we want to make sure that the methodologies are consistent. Of course, each quarter, the auditors review the methodologies, and at year end, there's a more thorough process. But you're right; it's typically the methodologies are extra.

Jay Jiang: And then we want to make sure that the methodologies are consistent. Of course, each quarter of the auditors review the methodologies and your end. There's a more full sum process, but you're right. It's typically the methodologies are extrapolated.

Speaker Change #132: Then we want to make sure that the methodologies are consistent and of course each quarter. The auditors review the methodologies at year end or is that more fulsome process, but.

Jay Jiang: And of course, each quarter, the auditors review the methodologies, and at year end, there's a more thorough process. But you're right, it's typically the methodologies are extrapolated. Okay, and then just one quick follow-on, Jay, like you mentioned that the sensitivity to TATIBA DAW is 6.1 for every $50 million of sales. You're at 11.8.

Speaker Change #133: You are right. It's typically the methodologies are extrapolated.

Jay Jiang: Okay, and then just one quick follow-up, Jay, like you mentioned that the sensitivity that you have to point one for every $50 million of sales here at 11.8. Probably not this question before on prior calls in terms of what your target at the job. That's a lot of asset sales to get down to kind of sub 10. If we want to grow the EBITDA. So that's on the numerator side, but if we can grow the EBITDA, get the leasing gun, it's a lot more meaningful on the denominator. Is there a target EBITDA that you think you can get to by X date?

Mario Saric: Okay, and then just one quick follow-on Jay, like you mentioned that the sensitivity that Diva Da has.1 for every $50 million of sales, you're at 11.8. I've been asked this question before on prior calls in terms of what your target EBITDA is, but that's a lot of asset sales to get down to kind of the sub-10 ish type that we want to grow EBITDA.

Speaker Change #134: Okay, and then just one quick follow on Jay I.

Thank you mentioned that.

Speaker Change #134: Sensitivity to the EBITDA.

Speaker Change #135: One for $50 million of sales you are at 11 eight.

Jay Jiang: I've been asked this question before on prior calls in terms of what your target for EBITDA is, but that's a lot of asset sales to get down to kind of a sub-10 ish type. We want to grow EBITDA. So that's on the numerator side, but if we can grow the EBITDA, and get the leasing done, it's a lot more meaningful on the denominator. I know that makes sense.

Speaker Change #136: I've been asked this question before on prior calls in terms of what your target that EBITDA, but that's a lot of asset sales to get down to sub 10 ish, but we wanted to grow EBIT.

Speaker Change #136: Want to grow the EBITDA.

Jay Jiang: On straight line, we had two tenants in downtown Toronto that took occupancy a few months early this quarter over being Q2. They commenced rent payment, I think one in July, one in September, so these are very quick free rent periods, and that income will be reflected in the cash on NOI and Q3. However, the board mentioned ICI, CI bank at 366 Bay. There are lease, I think is in November, but they actually finished the work early, and they have taken occupancy and began operations this summer, which is great.

Jay Jiang: So that's on the numerator side. But if we can grow the EBITDA, get the leasing done, it's a lot more meaningful on the denominator side.

Speaker Change #136: So that's on the numerator side, but if we can grow the EBITDA get the leasing done.

Speaker Change #136: A lot more meaningful on a denominator.

Jay Jiang: So is there a target EBITDA that you think you can get to by X date? It's really hard to give a number, but we're really focused on this metric, and we can get it down closer to 11 times within 12 to 18 months. I think that's a good start. Perfect. Okay, that's good. And the next question comes from Lorne Kalmar with Desjardins. Please go ahead. Thank you. Good morning.

Jay Jiang: I know that makes sense. So is there a target EBITDA that you think you can get to by X date?

Speaker Change #137: So that makes it so is there a target EBITDA, but if we can get to by X date.

Jay Jiang: Yes. It's really hard to give a no purpose, but we're really focused on this metric, and we can get it down closer to 11 times within 12 to 18 months.

Jay Jiang: It's really hard to give a number, but we're really focused on this metric, and we can get it down closer to 11 times within 12 to 18 months. I think that's a start.

Speaker Change #138: It's really hard to give it now, but we're really focused on this metric and we can get it down closer to 11 times.

Speaker Change #138: Within 12 to 18 months I think that's a start.

Jay Jiang: I think that's the start. Okay, that's good.

Mario Saric: Okay. That's good.

Speaker Change #138: Okay.

Lorna Kalmar: And the next question comes from Lorna Calmar with a discharge this. Please go ahead. Thank you. Good morning. Just on this 74 Victoria, not to be the dead horse or anything. I think you mentioned there's 64,000 that's been renewed, correct? Yes, we're yes, we're an advanced negotiations for. And I guess so. Assuming this moves forward, there would be no downtime there. You maybe give us an idea of what sort of spread you're kind of looking at on that. We don't want to disclose that respect for the tenant right now. We're working through and say some market deal.

Operator: And the next question comes from Lorne Kalmar with Desjardins. Please go ahead. Thank you.

Speaker Change #139: And the next question comes from Lauren a calmart with.

Jay Jiang: We will see some straight line for that. The simple answer to your question is, our straight line will actually be around the same, I think for Q3 and Q4, but it puts in takes because we have two tenants burning off, and then it will be replaced by 366 Bay. Okay, so the going into Q3, the only variance would then be the least termination, which was one time in nature. So maybe 10 to 10, why it goes down a little bit?

Speaker Change #139: This Jordan. This please go ahead.

Lorne Kalmar: Just on the 74 Victoria, not to beat a dead horse or anything. I think you mentioned there are 64,000 that've been renewed, correct? Yes, we're, we're in advanced negotiations for, and I guess, assuming this moves forward, there would be no downtime there. Can you maybe give us an idea of what sort of spread you're kind of looking at on that? We don't want to disclose the details out of respect for the tenant right now, but we're working through it. I'd say it's a market deal. Okay, it's not done yet.

Lorne Kalmar: Thank you, good morning. Just on the 74 Victoria, not to beat a dead horse or anything, I think you mentioned there are 64,000 that have been renewed, correct?

Speaker Change #140: Thank you and good morning.

Speaker Change #141: Just start with 74, Victoria, Ed not to beat a dead horse or anything.

Speaker Change #142: I think you mentioned there are 64000, that's been renewed correct.

Gordon Wadley: Yes, we're in advanced negotiations for it, and I.

Yes, we're yes, we're in advanced negotiations for <unk>.

Gordon Wadley: And I guess, assuming this moves forward, there would be no downtime there. Can you maybe give us an idea of what sort of spread you're kind of looking at?

Speaker Change #143: And I guess, so assuming this moves forward there would be no downtime there could you maybe give us an idea of what sort of spend you're kind of looking at on that.

Jay Jiang: Is there anything in the coverage I also noticed that the margins were fairly high this quarter, I don't know if that may just be difficult to do that. That's a good catch. We're actually since January, been working collaboratively with the Property Management Accounting Group to look for efficiencies with regards to our OPEX. And that has created a gain in the NOI margins. So for example, we're looking at optimizing utilities, cleaning services, that align with tenant hybrid working schedules.

Speaker Change #143: Okay.

Gordon Wadley: We don't want to disclose out of respect for the tenant right now. We're working through I'd say it's a market deal. Okay, it's not done yet. And we want to provide you guys with as much transparency as possible, but we got to take care of the business too. Fair enough.

Speaker Change #144: We don't want to disclose out of respect for the tenant right now we're working through I'd say its a market deal.

Jay Jiang: Okay. It's not done yet. And we want to provide you guys as much transparency as possible, but we've got to take care of the business too. Fair enough.

Gordon Wadley: And we want to provide you guys with as much transparency as possible, but we have got to take care of the business, too. Fair enough. Okay. And on that note, are there any other kind of material non renewals that you guys are starting to work through now? So net new deals. Sorry, non-renewals, any non-renewals that, you know, you're looking to address in the not too distant future, maybe, you know, looking at 2025. Okay, so non-renewals we usually classify as new deals on vacant space. We've got a pipeline in the pipeline of about 270,000 feet that we're working through now.

Speaker Change #143: Okay.

Speaker Change #143: It's not done yet and.

Speaker Change #145: We want to provide you guys with as much transparency as possible, but we got to take care of the business too.

Jay Jiang: So, for example, if they don't need to be in the space on Mondays or Fridays, you can actually save quite a bit of money by optimizing electricity and cleaning. A couple other things we looked at suppliers for a lot of supplies, cleaning materials, and labor as well. So hopefully that actually can flow through and becomes a normalized run rate, but we're still sort of in the phase right now. We're trying to figure out if we could save a bit more money.

Speaker Change #143: Okay fair enough.

Lorne Kalmar: Fair enough. Okay, and on that, are there any other kind of material non-renewals that you guys are starting to work through now? So net new deals, sorry, non-renewals, any non-renewals that, you know, you're looking to address in the not too distant future, maybe, you know, looking at 2025.

Okay.

Speaker Change #143: On are there any other kind of material non renewals that you guys are starting to work through now.

Jay Jiang: Are there any other kind of material non-renewals that you guys are starting to work through now? So net new deals. Sorry, non-renewals that any non-renewals that you know, you're looking to address in the not to this in future, maybe you know, looking at 2025. Okay, so non-renewals we usually classify as new deals on fake and space. We've got a pipeline in the pipeline of about 270,000 feet that we're working through now. I'd say close to about 90,000 of that is net new. And towards the end of next year, we want to pick up probably about another 114,000 square feet net new as well.

Speaker Change #143: So net new deals.

Speaker Change #143: Sorry non renewals.

Speaker Change #143: On renewals.

Speaker Change #143: You're looking to address in the not too distant future maybe looking at 2025.

Gordon Wadley: Okay, so non renewals, we usually classify as new deals on vacant space. We've got a pipeline in the pipeline of about 270,000 feet that we're working through now.

Speaker Change #146: Okay. So non renewals, we usually classify as new deals on vacant space.

Speaker Change #146: <unk> got a pipeline and the pipeline of about 270000 feet that we're working through now.

Gordon Wadley: I'd say close to about 90,000 of that is net new. And towards the end of next year, we want to pick up probably about another 114,000 square feet of net new as well. And then Jay can give you a quick update on some larger expiries. Yeah, I think Lorne, you mean expiries are uncommitted in our MD&A disclosures. So actually, over the past two years, we had a lot of expiries. But over the course of next year, if you look at the disclosures, that number has come down quite a bit.

Gordon Wadley: Okay, turn up and then the last one for me on 74 Victoria when you approach the leasing for that property. Like obviously there's some some long journal optionality to potentially densifying the site. Are you taking that into account and for the remaining two thirds of space? Gord with those timelines that you provided in terms of the gap between signing and commencing cash rent to be similar for the tenant that you're looking for for that space.

Speaker Change #146: Say.

Speaker Change #146: Close to about 90000 of that is net new.

Speaker Change #146: And towards the end of next year.

Jay: We want to pick up probably about another 114000 square feet that new as well and then Jay can give you a quick update on some larger expiry, yeah. I think Laura you mean expiries are uncommitted in our MD&A disclosures, so actually over the past two years, we had a lot of expiries, but over the course of next year.

Jay Jiang: And then Jay can give you a quick update on some larger expirations. Yeah, I think Lauren, you mean expirations are uncommitted in our MDNA disclosures. So actually, over the past two years, we had a lot of expirations. But over the course of next year, if you look at the disclosures, that numbers come down quite a bit. The next largest expirations actually the end of 2025, that's our asset in Kansas City and we're currently in discussions with them right now. So other than that, we already pre-least I-O-F-438 University. So that was a large one, and we don't have any larger exposures beyond that.

Speaker Change #148: If you look at the disclosures that numbers come down quite a bit. The next largest expiry is actually at the end of 2025, that's our asset and Kansas City and we're currently in discussions with them right now so other than that.

Gordon Wadley: And would you invest in that space against CapEx at this point given that the building may not exist in a decade. Gord, can you answer those seven questions? Yeah, no problem. They're all good questions. By the way, so in terms of investing capital, we would for the right deal in that in that building. It's a great location. We've actually had quite a few tours of people going in because it is a large block of space.

Jay Jiang: And we're currently in discussions with them right now. So other than that, we already pre-leased IO at 438 University. So that was a large one, and we don't have any larger exposures beyond that.

Gordon Wadley: The next largest expiry is actually the end of 2025. That's our asset in Kansas City, and we're currently in discussions with them right now. So other than that, we already released IO at 438 University. So that was a large one, and we don't have any larger exposures beyond that.

We already pre leased.

Speaker Change #149: <unk> University, so that was a large one and we don't have any larger exposures beyond that.

Lorne Kalmar: Perfect. And then, Gordon, I think you gave, in your allusion, your remarks, you might have done a little bit of a rework of the WeWork deal. Could you maybe give us a little bit of color on what you guys had to do to get that done?

Lorne Kalmar: Perfect. And then Gord, I think you gave your allusion, your remarks, you might have done a little bit of a rework of the WeWork deal. Could you maybe give us a little bit of color on what you guys had to do to get that done? I mean, they were great to deal with and they were quite, quite forthcoming and transparent throughout.

Jay Jiang: Perfect.

Speaker Change #150: Okay, Perfect and then GOR I think he gave.

Gordon Wadley: And then, Gordon, I think you gave a really junior program. You might have done a little bit of a rework of the WeWork deal. Could you maybe give us a little bit of color on what you guys had to do to get that done? I mean, they were great to deal with, and they were quite forthcoming and transparent throughout. So we provided a small or reasonable market adjustment to their net rent for a fixed period of time. And you know, the future rents and the future steps were preserved. And we also worked directly with them just to see what the pipeline was.

Gordon Wadley: It's available. So on a case by case, I think a lot of people have to appreciate in any single commercial lease. There's often a demo and relocation provision in these leases. So we try to structure our leases very much like the industry standard where if down the road there's flexibility, you know, we work closely with the tenant to come up with optionality if we want to do something to the building. And we'll look at much like any space.

Speaker Change #151: You alluded in your prepared remarks, you might have done a little bit of a rework of.

Speaker Change #151: We work deal.

Could you maybe give us a little bit of color on what you guys have to do to get that done.

Gordon Wadley: I mean, they were great to deal with and they were quite quite forthcoming and transparent throughout. So we provided a small or reasonable market adjustment to their net rent for a fixed period of time. And, you know, the future rents and the future steps were preserved. And we also worked directly with them just to see what the pipeline was for occupancy for them and everything. And they've got a great plan for the building, and they put in some great tenants. So we just did kind of, I'd say, a relatively near-term adjustment to protect our long-term value.

Speaker Change #152: I mean, they were great to deal with and they were quite.

Gordon Wadley: So we provided a small or reasonable market adjustment to their net rent for a fixed period of time. And, you know, future rents and future steps were preserved. And we also worked directly with them just to see what the pipeline was for occupancy for them and everything. And they've got a great plan for the building, and they put in some great tenants. So we just did kind of, I'd say, a relatively near-term adjustment to protect our long-term values. Okay, thank you very much for the color.

Speaker Change #153: Quite forthcoming and and transparent throat. So we provided a small.

Speaker Change #153: Or reasonable.

Market adjustment to their net rent for a fixed period of time and.

Gordon Wadley: We'll look at every deal on a case by case basis. If it requires capital, we'll do the due diligence to understand if it's something that's going to benefit us. If it doesn't require capital, maybe a low net rent and immediate occupancy, then we'll look at that on a case by case as well. So we try to do everything. We also have our CIB facility, which we've talked about in the past. It's about $140 million Canadian infrastructure bank loan, where we get a really low cost to capital to improve all of the base building in that building.

Speaker Change #154: The future rents in the future steps were preserved and we also work directly with them just to see what the pipeline was on occupancy for them and everything and they've got a great plan for the building and they put in some great tenants.

Gordon Wadley: On occupancy for them and everything. And they've got a great plan for the building, and they put in some great tenants. So we just did kind of, I'd say, a relatively near-term adjustment, protecting our long-term value. Okay, thank you very much for the color.

Speaker Change #154: So we just didnt kind of I'd say, a relatively near term adjustment.

Speaker Change #154: Protecting our long term value.

Lorne Kalmar: Okay, thank you very much for the color.

Speaker Change #155: Okay. Thank you very much for the color that's it for me.

Pam Ebert: Let's hear from me. Thank you.

Operator: And the next question comes from Pammi Bir, with RBC Capital Markets. Please go ahead.

Pam <unk>: Thank you and the next and the next question comes from Pam <unk> with RBC capital markets. Please go ahead.

Lorne Kalmar: And the next question comes from Pammi Bir, with RBC Capital Markets. Please go ahead. Thanks. Good morning.

Pam Ebert: And the next question comes from Pam Ebert with RBC Capital Markets.

Gordon Wadley: And 74 Victoria is a building where we've done the studies on. We know what we need to do to do there. And we've got this facility that we can lean on to do things cheap and then also to advertise those improvements to the tenants. I think that's most important point, Matt, that we're prepared to put money into the space, but we wouldn't expect to recover it after the existing tenant is gone. And that goes to potentially redevelopment. But for the right tenant, for the right lease, we're happy to keep it as an office building in the meantime.

Pam Ebert: Please go ahead. Thanks, good morning. At some before Victoria, I think you mentioned the 40 to 50,000 square feet of discussions with prospective tenants that's in the works. Can you maybe just expand on that? I'm just curious what types of tenants that you're talking to, and any color would be helpful there. Thank you. Yeah, so there's a few different groups. So we've got a couple not-for-profits that are looking at various opportunities in this space. We've got a, we've got a professional services firm that's looking at space. And also, too, we own 30 Adelaide, which is right next door.

Pammi Bir: Thanks, good morning. At 74 Victoria, I think you mentioned the 40-50,000 square feet of discussions with prospective tenants that's in the works. Can you maybe just expand on that? I'm just curious what types of tenants that you're talking to, and any caller would be helpful there. Thank you.

Pammi Bir: At 74 Victoria, I think you mentioned the 40 to 50,000 square feet of discussions with prospective tenants that's in the works. Can you maybe just expand on that? I'm just curious what types of tenants that you're talking to, and any caller would be helpful there. Thank you. Yeah, so there are a few different groups.

Pam <unk>: Thanks, Good morning.

At 74, Victoria I think you mentioned, the 40 to 50000 square feet.

Speaker Change #157: Discussions with prospective tenants that's in the works can you maybe just expand on that I'm, just curious what types of tenants that you're talking to and.

Any color would be helpful. There. Thank you.

Gordon Wadley: Yeah, so there are a few different groups. So we've got a couple not-for-profits that are looking at various opportunities in the space. We've got a professional services firm that's looking for space. And also, too, we own 30 Adelaide, which is right next door. We have a lot of people asking us about availability in this space.

Gordon Wadley: So we've got a couple not for profits that are looking at various opportunities in the space. We've got a professional services firm that's looking for space. And also, we own 30 Adelaide, which is right next door, so we have a lot of people asking us about availability in this space. This is a great, well-coveted building. So there's a lot of flexibility in kind of moving pieces throughout the portfolio and taking buildings where we have some vacancy and reallocating tenants from one building to another. And that's a real competitive advantage for us that not a lot of our peers have.

Speaker Change #158: Yeah. So there's a few different groups. So we've got a couple of not for profits that are looking at various opportunities in this space. We've got a we've got a professional services firm that's looking at space.

Michael Cooper: Perfect. Thanks, guys. I'll turn it back.

Mario Saric: And the next question comes from Mario Saric with Scotiabank. Please go ahead. Hi, good morning.

Speaker Change #158: And also too we own 30, Adelaide, which is right next door, we have a lot of people asking us about availability in this space. This is a great well covenant building. So theres a lot of flexibility on kind of moving pieces throughout the portfolio and taking buildings, where we have some vacancy and reallocating tenants from one building to another and.

Gordon Wadley: We have a lot of people asking us about availability in this space. This is a great, well-covered building. So there's a lot of flexibility on kind of moving pieces throughout the portfolio and taking buildings where we have some vacancy and reallocating tenants from one building to another. And that's a real competitive advantage for us that not a lot of our peers have. And it really, it's a testament to the value of our portfolio. Having all these buildings so close together, I think it really helps us just plan our stacks and make sure we're forecasting the right way.

Gordon Wadley: This is a great, well-coveted building. So there's a lot of flexibility in kind of moving pieces throughout the portfolio and taking buildings where we have some vacancy and reallocating tenants from one building to another. And that's a real competitive advantage for us that not a lot of our peers have, and it really is a testament to the value of our portfolio. Having all these buildings so close together, I think it really helps us just plan our stacks and make sure we're forecasting the right way. So, you know, in closing, we've had about four groups take a pretty hard look at 74 Victoria, and they range from not-for-profits right through to professional services.

Michael Cooper: Maybe a general question, Michael, on your comment that it still may take 12, 18 months for visibility to kind of stabilize on what tenants are doing with their space and so on and so forth. It's been over four years since the start of the pandemic. So is the comment? Is it more so tenants having made decisions and now reconsidering those decisions in terms of how to optimize a space or is it simply more tenants, most tenants still haven't figured out what to do?

Gordon Wadley: And it really adds to the value of our portfolio. Having all these buildings so close together, I think it really helps us just plan our stacks and make sure we're forecasting the right way. So, you know, in closing, we've had about four groups take a pretty hard look at 74 Victoria, and they range from not for profits right through to professional services. And these would, if these deals are successful, I mean, this is, you know, hopefully for some point in 2025, fair to say. The back end of 2020 plus. That's correct. The back end.

Speaker Change #158: That's a real competitive advantage for us that not a lot of our peers have.

Speaker Change #158: And it really is a testament to the value of our portfolio, having all these buildings so close together.

Speaker Change #159: I think it really helps us just plan, our stacks and and make sure we're forecasting the right way so.

Gordon Wadley: So, you know, in closing, we've had about four groups take a pretty hard look at 74 Victoria, and they range from not-for-profits right through to professional services. And these would, if these deals are successful, I mean, this is, you know, hopefully for some point, 2025 economic occupancy, fair to say. The back end of 2025. That's correct.

Speaker Change #160: We've had about four groups.

Speaker Change #161: Take a pretty hard look at 74 Victoria.

Speaker Change #161: And they range from not for profit right through to professional services.

Pammi Bir: And these would, if these deals are successful, I mean, this is, you know, hopefully for some point in 2025 economic occupancy, fair to say?

Speaker Change #161: And these weird if these deals are successful I mean this is.

Speaker Change #161: Hopefully for at some point 2025 economic.

Speaker Change #161: Kopinski fair to say.

Gordon Wadley: The back end of 2020 plus.

Speaker Change #161: The back end of 2020.

Pammi Bir: Okay. And just coming back to the comments earlier on the loan to value and some assets, and maybe there are some that perhaps have lower ratios on the refinancing talks that Adelaide put in, can you maybe share sort of what range of loan to value that maybe sits at? And are you anticipating any pay down on that property? The simple answer is no, no pay down on the asset.

Pammi Bir: That's correct. Back end. Okay. And just coming back to the comments earlier on the loan-to-value on some assets, and some are perhaps having lower ratios, on the refinancing talks that Adelaide put in, can you maybe share sort of what range of loan-to-value that maybe sits at, and are you anticipating any pay down on that property?

Speaker Change #162: That's correct backend okay.

Pam Ebert: Back end, okay. And just coming back to the comments earlier on the loan to value and some assets that's in there, some are perhaps, have moral ratios.

Speaker Change #162: And just coming back to the comments earlier on.

Speaker Change #162: The loan to value on some assets in May there are some are perhaps.

Speaker Change #163: Have a lower loss ratio on the refinancing talks at Adelaide place can you maybe share sort of what range of loan to value that maybe sits that and are you anticipating any pay down on that property.

Jay Jiang: On the refinancing talks at Adelaide Place, can you maybe share sort of what range of loan to value that maybe sits at? And are you anticipating any paydown on that property? Simple answer is no, no paydown on the asset. We're refinancing for approximately the same amount of maturity. The LTVs are dictated by the lenders and the engaged in external praesal process for it. We're just in the final process for that. And we expect the LTVs to be in the 50s. Sorry, Jay, did you say 50s? 5.0? Yeah. Okay. And what's going to be the 50% depending on the appraisal, which they keep?

Michael Cooper: So when I say 12 to 18 months, I don't want to be held accountable. It could be longer. I doubt it would be shorter, but I do think that businesses are trying to figure out how they're going to use space. But overall, the economy is growing. Overall, I think demand for space is picking up and I think there is pent-up demand. So as things set aside, which is why I said 12 to 18 months, I think we'll have better insight.

Jay Jiang: Simple answer is no, no pay down on that asset. We're refinancing for approximately the same amount of maturity. The LTVs are dictated by the lenders, and they engage in an external appraisal process for it. We're just in the final process for that, and we expect the LTVs to be

Speaker Change #163:

Speaker Change #164: <unk> answer is no no pay down on our asset where refinancing for approximately the same in our maturity. The ltvs are dictated by the lenders and the engaged an external appraisal process for it. We're just in the final process for that and we expect to ltvs to be a in the fifties.

Jay Jiang: We're refinancing for approximately the same amount of maturity. The LTVs are dictated by the lenders, and they engage in an external appraisal process for it. We're just in the final process for that, and we expect the LTVs to be in the 50s. Sorry Jay, did you say 50s?

Michael Cooper: But your point about it's been since 2020, and is that people have made decisions or have made decisions and reconsidering. This is really an unusual situation. I don't think this was the issue in retail five years ago. I mean, this is like nothing I've seen. But what I would say is what's amazing about it is, things are holding together pretty well. And there's been some big hits to the sector, let's say, in the stock market.

Pammi Bir: Sorry, Jay, did you say 50s? 5-0? Yeah. Okay.

Speaker Change #164: Sorry, Jay did you say 55, Oh, yes.

Speaker Change #164: Yes.

Jay Jiang: Yeah. Okay. And what sort of term would you be on?

Jay Jiang: And what sort of return would you be... 50% depending on the appraisal, which they keep, we don't know. But that's typically how they scale the loan. Okay, and the term ish would be five years this year. Yeah.

Speaker Change #165: Okay and what's the goal.

Jay Jiang: Depending on the appraisal, which they keep, we don't know. But that's typically how they scale the loan. Okay, and the term ish would be five years ish or, Yeah, we're looking at a five-year. Okay. And then just lastly, at 438 University, can you maybe just expand on maybe where that sale process sits? And I'm curious, on any dispositions that you're looking at in the portfolio, would you be considering any VT? I can answer the second part. I can't answer the first part. The discussions we're having are an all cash deal with no structuring.

Jay: First that depending on the upgrade, though which which they keep we don't know, but that's typically how they scale alone.

Jay Jiang: We don't know, but that's typically how they scale the loan. Okay.

Speaker Change #166: Okay and term ish would be five years issuer.

Jay Jiang: And term, this would be five years issue. Yeah, we're looking at five years.

Pammi Bir: Yeah, we're looking at a five-year plan.

Speaker Change #167: Yes, we're looking at a five year.

Jay Jiang: Okay.

Speaker Change #167: Okay.

Pam Ebert: And then just lastly, at 438 University, can you maybe just expand on maybe where that sale process sits?

Pammi Bir: And then just lastly, at 438 University, can you maybe just expand on maybe where that sale process sits? And I'm curious, on any dispositions that you're looking at in the portfolio, would you be considering any VT?

Speaker Change #167: Then just lastly for 30 of University can you, maybe just expand on maybe where that sale process sits in.

Michael Cooper: And there's been some loss of occupancy. But there's a lot of activity going on in all the buildings. We're starting to see some buildings getting converted, especially in Calvary, but we're seeing more and more of it in Toronto.

Michael Cooper: And I'm curious on any dispositions that you're looking at in the portfolio. Would you be considering any VTVs? I can answer the second part.

Speaker Change #168: I'm curious on any dispositions that you are looking at in the portfolio would you be considering any <unk>.

Michael Cooper: I can answer the second part. The discussions we're having are an all-cash deal with no structuring. It's, it's it would be uncomfortable for our counterparty to provide any more detail.

Speaker Change #169: I can answer the second part I can answer the first part.

Michael Cooper: And it will fix itself, but until then, I'm pretty pleased with how it's holding together.

Michael Cooper: I can't answer the first part. The discussions we're having are all cashed deal with no structuring. But it's, it's, it would be uncomfortable for our counter party to provide any more detail.

Speaker Change #170: The discussions we're having are all cash deal with no structuring.

Michael Cooper: Okay, and just on the building conversions, what's your sense in terms of the applicable inventory in Toronto, that could be suitable for conversion? So when people think about conversion, they're usually thinking about office to residential, but it can be office to institutional and office to a whole bunch of other things. We are seeing that. We're seeing that with 720 Bay, it becomes a healthcare building with George Brown College taking over chorus building.

Speaker Change #170: But.

Pammi Bir: It's, it's it would be uncomfortable for our counterparty to provide any more detail. All right, thanks very much. I'm going to turn it back. And the next question comes from Sumayya Saeed with CIBC. Please go ahead. Thanks. Good morning.

Speaker Change #171: It's it's it would be uncomfortable for our counterparty to provide any more detail.

Samaria Saeed: All right, thanks for my time to turn it back.

Pammi Bir: Alright, thanks very much. I'm going to turn it back on.

Speaker Change #171: Alright, thanks, very much I'm going to turn it back.

Michael Cooper: As time goes by, that will become a school building. So don't underestimate the significance in terms of the conversion to non-office uses that are still commercial. On the residential conversion, it's uselessly sometimes when people say conversion, I mean, it's like conversion of the use, which might include tearing down the building and building a new building. We're seeing that the city of Toronto on an ad hoc basis is reducing the requirement to replace office in some cases entirely.

Samaria Saeed: And the next question comes from Samaria Saeed with CIBC. Please go ahead. Thanks. Good morning.

Operator: And the next question comes from Samaria Saeed with CIBC. Please go ahead. Thanks.

Speaker Change #172: And the next question comes from somebody Yeah, Sayiid with CIBC. Please go ahead.

Samaria Saeed: Thanks. Good morning. First question on the leasing cost in the quarter, they're about $1,670 a foot ahead of your last few quarters. Anything or any lease in particular that would have pushed that higher for this quarter?

Sumayya Saeed: First question on the leasing cost in the quarter: they're about $1670 a foot ahead of your last few quarters. Anything or any lease in particular that would have pushed that higher for this quarter? No, not in particular.

Speaker Change #173: Thanks, Good morning.

Samaria Saeed: First question on the lease and cost in the quarter. There about 1670 foot ahead of your last few quarters. Anything or any lease in particular that would have pushed that higher for this quarter? No, not, not in particular. It's just kind of an aggregate of deals put together and leasing up some space that was in rock condition, which took a little bit more capital to move them through. The other thing I'd say, Samaria, which is interesting, is broker fees. Even year-over-year are up about 20%. So, you know, it's the price to pay and to play.

Speaker Change #174: First question on the leasing costs in the quarter thereabouts.

Speaker Change #175: <unk> 70, I thought I head off last few quarters anything or any lease in particular that would push that higher for this quarter.

Gordon Wadley: No, not in particular. It's just kind of an aggregate of deals put together and leasing up some space that was in raw condition, which took a little bit more capital to move them through. The other thing I'd say about Samaya, which is interesting, is that broker fees, even year over year, are up about 20%. So, you know, it's the price to pay and to play. So we're seeing some increases there, but nothing tied to anything in particular.

Gordon Wadley: It's just kind of an aggregate of deals put together and leasing up some space that was in raw condition, which took a little bit more capital to move them through. The other thing I'd say, Sumayya, which is interesting, is that broker fees, even year over year, are up about 20%. So, you know, it's the price to pay and to play.

Speaker Change #176: No not not in particular is just kind of an aggregate of <unk>.

Speaker Change #176: <unk> put together and leasing.

Speaker Change #177: Leasing up some space that was in raw condition, which took a little bit more capital to move them through the other thing I would say semi which is interesting as broker fees.

Speaker Change #177: Even year over year are up about 20%.

Speaker Change #177: So.

Michael Cooper: What we've seen is, they're also prepared to say, well, why don't you have the office over on one side so you can build a residential and the density has to be held for office, but you don't have to build it. So it's starting to pick up steam. I think last year, there was a million square feet that was converted. I could see that going to 5 million relatively easily across the country.

Speaker Change #177: It's the price to pay.

Speaker Change #177: And to play.

Jay Jiang: So we're, we're seeing some increases there but nothing, nothing tied to anything in particular. Okay. Thanks for that.

Speaker Change #177: So where we're seeing some increases there, but nothing nothing tied to anything in particular.

Speaker Change #177: Okay.

Samaria Saeed: Thanks for that. And then just on the refinancing side, you did the Calgary mortgage in the quarter at 665. Is that really reflective of what you're seeing for rates generally? I guess, Jane, your comments mentioned more along the range of 5.5%.

Gordon Wadley: So we're seeing some increases there, but nothing tied to anything in particular. Okay. Thanks for that. And then, just on the refinancing side, you did the Calgary mortgage in the quarter at 665. Is that really reflective of what you're seeing for rates generally? I guess, Jay, in your comments, you mentioned more along the range of 5.5 percent.

Speaker Change #177: Thanks for that and then just on the refinancing side you did the Calgary a mortgage in the quarter 665 right.

Jay Jiang: And then just on the refining thing, Saeed, you did the Calgary mortgage in the quarter 665 rate. Is that really reflective of what you're seeing for rates generally? I guess Jane, your comments you mentioned more along the range of five and a half percent? Yeah. We closed the Calgary mortgage a couple months ago, and the benchmark has been moving down a bit, and we're just quoting rates in downtown Toronto. If we were to do a mortgage today, I would say that downtown Toronto is also a different market than in Calgary. So it's a really long way; it's a bit unique, but most of the quotes that we've been getting are around a five. Okay, got it.

Michael Cooper: And I think I've said this before, I suspect that we'll be looking at not the net addition to supply, but the net subtraction to supply over the next few years. So I think that'll be a significant factor as we go forward.

Speaker Change #177: That fairly reflective of what you're seeing for rates generally I guess Jay in your comments you mentioned tomorrow.

Speaker Change #178: How long the range of five 5%.

Jay Jiang: Yeah, we closed the Calgary mortgage a couple months ago, and the benchmark has been moving down a bit. And we're just quoting rates in downtown Toronto if we were to do a mortgage today. I would say that downtown Toronto is also a different market than in Calgary, so it's a bit more competitive in the spread. Every loan is a bit unique, but most of the quotes that we've been getting are around the five-year mark. Okay, I got it.

Jay: Yeah, we closed the Calgary mortgage a couple months ago, and the benchmark has been moving down a bit and we're just quoting a rates in downtown Toronto if were to do a mortgage today.

Jay Jiang: Okay.

Speaker Change #179: I would say that downtown Toronto was also a different market than in Calgary. So it was a bit more competitive on the spreads.

Speaker Change #179: Every loan is a bit unique but.

Speaker Change #179: Most of the calls that we've been getting around the five year Mark.

Samaria Saeed: Okay, got it. And lastly, probably a question for Michael. You now have shareholder holders that own more than 20% of Dewey. Just wondering what the dialogue is like with them, and what you can share with us about their intentions.

Sumayya Saeed: Okay, got it. And lastly, probably a question for Michael, you now have shareholder holders that own more than 20% of Dewey. Just wondering what the dialogue is like with them and what you can share with us about their intentions. The 20% Holder runs Artist Reit, and they have... conference calls. I think you should ask them.

Speaker Change #179: Okay got it.

Michael Cooper: Okay, I got it. Thank you. I'll turn it back.

Michael Cooper: And lastly, probably a question for Michael. You now have shareholders that own more than 20% of the wheat, discerning what's the dialogue like with them and what you can share with us about their intentions? The 20% holder runs Artist-Reate and they have conference calls. I think you shat them. Okay, got it. Thank you.

Speaker Change #180: And lastly, probably a question for Michael you don't have shareholder hold or is that on more than 20% of the REIT.

Michael Cooper: Just wondering what's the dialogue like what they want and what you can share with us about their intentions.

Jay Jiang: So all the brokerage research firms that released their cap rates, they were pretty flat this quarter. We make sure everything reconciled because over the course of the year, we probably externally appraised 25% to a third of the properties historically. And then we want to make sure that the methodologies are consistent. Of course, each quarter of the auditors review the methodologies and your end. There's a more full sum process, but you're right.

Michael Cooper: The 20% Holder runs Artist Reit, and they have a conference call. I think you should ask them.

Speaker Change #181: The 20% holder runs artist suite and they have.

Michael Cooper: A conference call. So I think you should ask them.

Okay got it.

Samaria Saeed: Thank you. I'll turn it back. Again, if you have a question...

Speaker Change #182: Thank you I'll turn it back.

Operator: I'll turn it back. Again, if you have a question, please press star and then one. Thank you, operators.

Operator: Again, if you have a question, please press star and then 1. Thank you, operators. Thank you, everybody, for your interest in the company. We look forward to following up with any follow-ups, any tours or our next conference call. Thank you very much. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Again, if you have a question, please press star and then 1.

Speaker Change #182: Again, if you have a question. Please press star and then one.

Jay Jiang: It's typically the methodologies are extrapolated. Okay, and then just one quick follow one, Jay, like, like you mentioned that the sensitivity that you have to point one for every $50 million of sales here at 11.8. Probably not this question before on prior calls in terms of what your target at the job. That's a lot of asset sales to get down to kind of sub 10. If we want to grow the EBITDA.

Michael Cooper: Thank you, operators. Thank you, everybody, for your interest in the company. We look forward to following up with any follow-ups, any tours or our next conference call. Thank you very much.

Speaker Change #183: Thank you operator, thank you everybody for your interest in the company, we look forward to.

Michael Cooper: Thank forward to follow any follow-ups, any tours, or our next conference call. Thank you very much.

Speaker Change #184: Fall of any follow ups any tours or our next conference call. Thank you very much.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change #185: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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Jay Jiang: So that's on the numerator side, but if we can grow the EBITDA, get the leasing gun, it's a lot more meaningful on the denominator. Is there a target EBITDA that you think you can get to by X date? Yes. It's really hard to give a no purpose, but we're really focused on this metric and we can get it down closer to 11 times within 12 to 18 months. I think that's the start.

Jay Jiang: Okay, that's good.

Lorna Kalmar: And the next question comes from Lorna Calmar with a discharge this. Please go ahead. Thank you.

Gordon Wadley: Good morning. Just on this 74 Victoria not to be the dead horse or anything. I think you mentioned there's 64,000 that's been renewed correct. Yes, we're yes, we're an advanced negotiations for. And I guess so assuming this moves forward, there would be no downtime there. You maybe give us an idea of what sort of spread you're kind of looking at on that. We don't want to disclose that respect for the tenant right now.

Gordon Wadley: We're working through and say some market deal. Okay. It's not done yet. And we want to provide you guys as much transparency as possible, but we've got to take care of the business too. Fair enough. Are there any other kind of material non renewals that you guys are starting to work through now? So net new deals. Sorry, non renewals that any non renewals that you know, you're looking to address in the not to this in future, maybe you know, looking at 2025.

Gordon Wadley: Okay, so non-renewals we usually classify as new deals on fake and space. We've got a pipeline in the pipeline of about 270,000 feet that we're working through now. I'd say close to about 90,000 of that is net new. And towards the end of next year, we want to pick up probably about another 114,000 square feet net new as well. And then Jay can give you a quick update on some larger expirations.

Gordon Wadley: Yeah, I think Lauren, you mean expirations are uncommitted in our MDNA disclosures. So actually over the past two years, we had a lot of expirations. But over the course of next year, if you look at the disclosures that numbers come down quite a bit. The next largest expirations actually the end of 2025, that's our asset in Kansas City and we're currently in discussions with them right now. So other than that, we already pre-least I-O-F-438 University. So that was a large one and we don't have any larger exposures beyond that.

Gordon Wadley: Perfect. And then, Gordon, I think you gave a really junior program. You might have done a little bit of a rework of the we work deal. Could you maybe give us a little bit of color on what you guys had to do to get that done? I mean, they were great to deal with and they were quite forthcoming and transparent throughout. So we provided a small or reasonable market adjustment to their net rent for a fixed period of time.

Gordon Wadley: And you know, the future rents and the future steps were preserved. And we also worked directly with them just to see what the pipeline was. On occupancy for them and everything. And they've got a great plan for the building and they put in some great tenants. So we just did kind of, I'd say, a relatively near-term adjustment, protecting our long-term value. Okay, thank you very much for the color.

Operator: Let's hear from me.

Pam Ebert: Thank you. And the next question comes from Pam Ebert with RBC Capital Markets. Please go ahead.

Gordon Wadley: Thanks, good morning. At some before Victoria, I think you mentioned the 40 to 50,000 square feet of discussions with prospective tenants that's in the works. Can you maybe just expand on that? I'm just curious what types of tenants that you're talking to and any color would be helpful there. Thank you. Yeah, so there's a few different groups. So we've got a couple not for profits that are looking at various opportunities in this space.

Gordon Wadley: We've got a, we've got a professional services firm that's looking at space. And also, too, we own 30 Adelaide, which is right next door. We have a lot of people asking us about availability in this space. This is a great, well-covered building. So there's a lot of flexibility on kind of moving pieces throughout the portfolio and taking buildings where we have some vacancy and and reallocating tenants from one building to another.

Gordon Wadley: And that's a real competitive advantage for us that not a lot of our peers have. And it really, it's a testament to the value of our portfolio. Having all these buildings so close together, I think it really helps us just plan our stacks and and make sure we're forecasting the right way. So, you know, in closing, we've had about four groups take take a pretty hard look at 74 Victoria and they range from not for profits right through to professional services.

Gordon Wadley: And these would, if these deals are successful, I mean, this is, you know, hopefully for some point, 2025 economic occupancy, fair to say. The back end of 2025. That's correct. Back end, okay. And just coming back to the comments earlier on the loan to value and some assets that's in there, some are perhaps, have moral ratios. On the refinancing talks at Adelaide Place, can you maybe share sort of what range of loan to value that maybe sits at?

Gordon Wadley: And are you anticipating any paydown on that property? Simple answer is no, no paydown on the asset. We're refinancing for approximately the same amount of maturity. The LTVs are dictated by the lenders and the engaged in external praesal process for it. We're just in the final process for that. And we expect the LTVs to be in the 50s. Sorry, Jay, did you say 50s? 5.0? Yeah. Okay. And what's going to be the 50% depending on the appraisal which they keep? We don't know, but that's typically how they scale the loan. Okay. And term, this would be five years issue. Yeah, we're looking at five years. Okay.

Gordon Wadley: And then just lastly, at 438 University, can you maybe just expand on maybe where that sale process sits? And I'm curious on any dispositions that you're looking at in the portfolio would you be considering any VTVs? I can answer the second part. I can't answer the first part. The discussions we're having are all cashed deal with no structuring. But it's, it's, it would be uncomfortable for our counter party to provide any more detail. All right, thanks for my time to turn it back.

Samaria Saeed: And the next question comes from Samaria Saeed with CIBC. Please go ahead. Thanks.

Jay Jiang: Good morning. First question on the lease and cost in the quarter. There about 1670 foot ahead of your last few quarters. Anything or any lease in particular that would have pushed that higher for this quarter? No, not, not in particular. It's just kind of an aggregate of deals put together and leasing up some space that was in rock condition which took a little bit more capital to move them through. The other thing I'd say Samaria, which is interesting is broker fees. Even year-over-year are up about 20%. So, you know, it's, it's the price to pay and to play. So we're, we're seeing some increases there but nothing, nothing tied to anything in particular.

Jay Jiang: Okay. Thanks for that. And then just on the refining thing, Saeed, you did the Calgary mortgage in the quarter 665 rate. Is that really reflective of what you're seeing for rates generally? I guess Jane, your comments you mentioned more along the range of five and a half percent? Yeah. We closed the Calgary mortgage a couple months ago and the benchmark has been moving down a bit and we're just quoting rates in downtown Toronto.

Jay Jiang: If we were to do a mortgage today, I would say that downtown Toronto is also a different market than in Calgary. So it's a really long way, it's a bit unique but most of the quotes that we've been getting are around a five Okay, got it.

Michael Cooper: And lastly, probably a question for Michael. You now have shareholder holders that own more than 20% of the wheat, discerning what's the dialogue like with them and what you can share with us about their intentions? The 20% holder runs artist-reate and they have conference calls. I think you shat them. Okay, got it.

Samaria Saeed: Thank you. I'll turn it back. Again, if you have a question, please press star and then one. Thank you, operators.

Operator: Thank forward to follow any follow-ups, any tours, or our next conference call. Thank you very much.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.

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