Slate Office REIT’s (SOT-UN-T) financial troubles are continuing, as the trust has announced this morning it has received notices of default for its revolving credit facility, and expects to also go into default on upcoming interest payments for three debentures.
The Toronto-based trust has been selling assets and preserving cash in recent months in an effort to pay down its debt, which has been impacted by a combination of declining property values, higher vacancy rates, and a continued period of higher interest rates.
Today’s announcement is a result of its senior lenders providing notices of default in respect of its revolving credit facility. Slate has been negotiating with its lenders “to determine a mutually acceptable path forward in respect of its obligations to such senior lenders” the announcement states, but the move by its lenders will also impact a series of upcoming scheduled payments.
The announcement states Slate does not expect to make its interest payments on:
- its 7.5 per cent convertible unsecured subordinated debentures and 5.5 per cent convertible unsecured subordinated debentures which are due June 30;
- nor for its outstanding nine per cent convertible unsecured subordinated debentures due August 31.
Slate states that failure to make its payments within 15 days of those dates will place it into default on these debentures.
Slate’s efforts to deal with financial troubles
Slate announced a major realignment plan in the fall of 2023 to deal with its financial concerns, including asking its investors for the right to raise its maximum allowable debt beyond the previous limit of 65 per cent of gross book value. That was approved early this year, but one of its major investors – G2S2 Capital – successfully demanded that exemption have a time limit of Dec. 31, 2025.
In its Q1 financials, Slate Office REIT reported a net loss of $22.5 million (comprehensive loss of $19.5 million).
The trust reported a total of $1.7 billion in assets at the end of Q1, versus debt of $1.16 billion, for a debt ratio of 67.8 per cent.
One of Slate Office’s largest concerns has been the timing of its need to reorganize the portfolio. It is attempting to divest properties into a transaction market which has slowed considerably, particularly with respect to the office sector which is still struggling to rebound from the COVID pandemic and expanded work-from-home arrangements.
In the fall, Slate had announced the successful refinancings of mortgage loans related to two of its Greater Toronto Area assets, totalling approximately $140 million.
It refinanced a $45.3 million mortgage on a joint venture office property at the Woodbine and Steeles Corporate Centre in Markham with a two-year, $50-million mortgage; and a $95.9-million mortgage on the West Metro Corporate Centre in Toronto with a $90-million, one-year mortgage with one-year extension option. It also acquired the remaining stake in the West Metro centre which it did not already own, as part of the refinancing.
