The slate is being cleaned

Slate Office REIT (TSX: SOT.un) today announced an update on its “portfolio realignment plan”, also known as “We’re trying to dump this stuff as fast as we can but can’t find anybody willing to pay a price that will pay down the mortgages” plan:

Slate Office REIT (TSX: SOT.UN) (the “REIT”), an owner and operator of high-quality workplace real estate, announced today that it continues to make progress on its previously announced portfolio realignment plan, and in connection with the foregoing, continues to engage with its senior lenders to determine a mutually acceptable path forward in respect of its obligations to such senior lenders, including in respect of its revolving credit facility. The REIT also announced today that, notwithstanding those ongoing discussions, its senior lenders have provided notices of default, which currently restrict the REIT from making further payments of accrued interest in respect of its outstanding debentures (collectively, the “Debentures”), for so long as such defaults have not been cured or waived. The REIT has determined that based on the information currently available to it, there can be no assurance if or when a cure or waiver in respect of such defaults will be achieved, and as such, the REIT does not expect to make the cash interest payments due on June 30, 2024 in respect of its 7.50% convertible unsecured subordinated debentures and 5.50% convertible unsecured subordinated debentures, nor does it expect to make the cash interest payment due on August 31, 2024 in respect of its outstanding 9% convertible unsecured subordinated debentures. Pursuant to the trust indentures governing such Debentures, failure to pay interest on the Debentures for 15 days following such interest being due will give rise to an Event of Default under the terms of the Debentures.

Needless to say, it isn’t looking good for them. This could be inferred from previous public filings, in addition to them having to beg to shareholders to go above their prescribed asset to debt ratio.

My attempts at being a corporate raider (November 2022) was incredibly brief before I came to the conclusion that there’s no way to win.

My question is not necessarily for Slate (we will see how George Armoyan can try to salvage this situation) but rather whether there will be any ripple effects in the office REIT sector if Slate does decide to go into CCAA. In the sector include AP.un, D.un, SOT.un, TNT.un, and diversified REITs which contain significant office components including BPY/BPO (preferred shares), HR.un, AX.un, and to a lesser extent MRC/MRT.un.