Dream Office Real Estate Investment Trust

Good morning, ladies and gentlemen. Welcome to the Dream Office Read second quarter 2025 conference call for Friday, August 8th, 2025. During this call, management of Dream Office Read 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 Read's control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Additional information about these assumptions and risks and uncertainties is contained in Dream Office REITs filings with securities regulators, including its latest annual information form and MDNA. These filings are also available on Dream Office REITs 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 then 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.

Thank you, Operator, and good morning to everybody. Today, we're doing our second quarter conference call for Dream Office. I'm going to make a few comments and then turn it over to Gord Wadley, the Chief Operating Officer, and then turn it over to Jane for the financial update, and then we'd be happy to answer questions. I would say that what we're seeing now is a lot more companies calling people back to work and a lot better sentiment about office than there has been in years. And we know that of four of the five major banks in Canada, they're looking for between an extra 200,000 to 500,000 square feet each in order to house the people they're calling back to work. And we're seeing that the best buildings are quite full. We're looking forward to more and more tenants doing the same thing as the banks. And we're seeing interest. We've had a lot of progress, but it does feel as if finally we're starting to see a lot more commitment to having employees in offices and companies expanding. So we hope that that will turn into occupancy numbers over the next six to 12 months that are meaningful. And on September 6, 2023, we presented a model at our Investors Day where we showed that for 2024, 2025, and 2026, we modeled similar rents, occupancy, and leasing costs as we had at that time. And then we started to improve over 2027 and 2028, where we got to maybe halfway in between the occupancy we had at the peak before COVID and the low during COVID and since. And same thing with costs of leasing. And the company looked pretty good as we started to lease back. So it feels as if we actually may be ahead of what we proposed in the fall of 2023, but we're looking to have more concrete evidence rather than just anecdotes. The anecdotes are meaningful. I'd also say that we're seeing some anecdotes of new buyers of office showing up. I know with individuals, some institutions, it's still very early, but I think there's lots of signs that the future looks better than the last 24 to 36 months, so that's quite encouraging. Gord, do you want to address this?

I will. Thanks very much, Michael. Well, good morning, everybody. It's real nice to get a chance to connect with everybody today and share some of the work our team's been doing year to date. Also look forward to sharing some insights, some key milestones regarding our asset strategies, leasing performance, and just generalized property operations. You know, I'd say to Michael's point, none of us in the industry are immune to the headlines and hot takes we kind of see in the media almost every day. Traditionally, over the last few years, nothing's been more polarizing than the impact of value, slower than anticipated return, and negative sentiment around office space. However, I just wanted to reiterate, I feel like this narrative has changed dramatically over the last few quarters, with new government mandates, large bank requirements, and large cap companies all over Canada calling their staff back and publicly disclosing their return to work plans. There's good reason to finally be optimistic in our sector. Our numbers and deal velocity support this sentiment, and Jay and I are pleased to share these key metrics with you today. I'm really pleased and quite proud with how the whole team's been performing. To date, we've leased about 507,000 square feet, which is well on track to exceed our best full year of gross leasing, which was in 2023, we did 695,000 feet. Another important metric is the sheer deal velocity year to date, where we're already up to 82 transactions, which puts us on pace to far surpass our best volume year, which was 2024, where we did 104 deals. There's another approximate 328,000 square feet of deals that the team's in various stages of negotiations on, and we still have almost five months to go. On a gross leasing perspective, we've been outpacing all key metrics in every category going back almost five years. 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 done this year in a very competitive submarket. We're pleased to announce that we've been able to secure HDI Girling for a large blend and extend, expanded DBRS Morningstar, who happens to be our largest client at Adelaide Place, did a net new lease for over 40,000 square feet with Streamland at 30 Adelaide, and a number of large blend and extends throughout the portfolio, including one with IFDS at 30 Adelaide. All this coupled with improved deal traction on our Bay Street assets, and I'm also happy to confirm that we completed two net new, I wanted to kind of reiterate that, two net new full floor deals at Adelaide Place with Embarc and the Insurance Institute of Canada, and we also leased vacant floors for about 45,000 square feet at 74 Victoria. I feel like this is a really good segue to highlight two assets where we've made some pretty strong progress, the first being 74 Victoria. As a quick reminder, we had PSP inform us just over a year ago that they were leaving the building in full, giving us approximately 200,000 square feet of vacancy. Since then, we secured 70,000 square feet direct with another department at PSPC, completed another 44,000 square feet, and have an active prospect in negotiations for another 45,000 square feet. That would take us to over 160,000 square feet secured on the approximate 220,000 square feet of vacancy. We're actively marketing our common area upgrades to lobbies and bathrooms. They've been really well received, and we've seen a large uptick in tours for the asset. It puts us in a much better position than originally anticipated. The biggest improvement I want to talk about today comes in our most valuable and highest grossing asset from an NOI perspective, Adelaide Place. We will see our NOI go from $15.8 million in 2024 to $17.8 million by year-end in 2025. For greater context, this time a year ago, we were looking to renew our financing on the property. It was sitting at about 80% occupancy. The whole team worked really hard formulating the strategy. We executed on our asset plan, brought in some incredible restaurants, filled all the retail, and proceeded with our model suite program. The results have been astounding. We've leased almost 220,000 square feet in the complex in just under 18 months, effectively raising our committed occupancy by almost 15% in a brief period. We're really appreciative and would like to thank our lending partners, LBBW and TD. They saw the vision, believed in our plan for the asset, worked very closely with us, and now as a collective team, we've delivered with very high committed occupancy at 95% approximately and top of market rents for that sub-market, all in the high 30s. It's been a major success for the REIT and we're grateful to our partners. The last five years, the Canadian office market can best be described as disjointed. Just as some context, while some performance metrics like vacancy rates or absorption may show improvement or stability, Other indicators such as new vacant space on the market, NERs, and income often fluctuate due to costs, rising interest rates, and softening cap rates. This combination has created some sector challenges we haven't seen since the financial crisis. I do want to say that I honestly feel like we're past this and we're starting to hit an inflection point. We've seen this trend shift the better part of the last three quarters. NERs have steadily been improving on smaller mid-sized deals. I would say larger deals still are ultra-competitive, and that's what drives down NERs generally for the whole market. But once all those large pockets are off the competitive inventory, couple that with no new supply, NERs are going to inevitably tighten again. But as a team, we're seeing construction prices and procurement costs level out, and this gives us optimism that we're through the NER trough cycle. It's well behind us. We still feel very strongly that we'll hit our current and committed occupancy guidance by year-end, as Michael mentioned, and NOI will continue to improve in 2026 and beyond. It's important to note in-place occupancy was down marginally by about 80 basis points from 80% to 79.2%, but this was due only to the fact that we had to proactively take back space from existing obligations short-term to do construction, fixturing periods, and make way for much longer term commitments that actually backfill the vacancy. As such, it's important to note that while the committed occupancy is down, while the construction is being completed, our future committed occupancy actually improved. Quarter over quarter, our committed occupancy improved 110 basis points from 84.2 to 85.3%. One key component that helps drive our occupancy is retail. I'm proud to say we've leased every single ground floor retail unit in our Bay Street collection and all of the retail we have at Adelaide Place. Milos and Daphne have been performing well as expected, and they've been a real catalyst to help drive leasing tours. Other great restaurants like Aloe, Sushi Yujin, and CHOP at Adelaide Place have also been great amenities and helped the renewed success of our most valuable complex. We just welcomed Florian Trattoria at 80 Richmond, and the feedback's been tremendous. And we have a brand new Starbucks on our last unit on Bay Street, which helps fuel our clients and drives the experience. All of these great brands are key components in bringing an elevated experience of boutique luxury to the core, positioning us well for tenants' flight to quality, and really helping us drive value in these curated offerings. They honestly appeal to Canada's top covenants and most discerning tenants who covet quality much more so than face rate. Our downtown committed occupancy continues to be very resilient Our pipeline remains strong, which will continue to support healthy cash flows at our buildings. Covenant-wise, we have large commitments with the federal, provincial, and municipal governments, as well as Crown Corps. Coupled with our premium locations, asset quality, and leasing prospects, I feel really good about our portfolio. Despite some of the macro challenges in the sector over the last few years, I couldn't be more pleased with how the whole team's navigated through some of these evolving challenges in the industry. Their efforts and dedication to not only our company, but to our clients, is what I'm most proud of. At the end of the day, it's this combination of having irreplaceable assets, coupled with the quality, high-character team of people we have operating and leasing those buildings, that candidly gives me the greatest confidence closing out 2025. Thanks, everybody. I'll turn it over to my good friend, Jay.