Tag: SOT

Slate Office REIT’s nearly cooked

It’s not looking good for Slate Office REIT, now rebranded as Ravelin Properties (TSX: RPR.UN):

Toronto, Ontario–(Newsfile Corp. – February 20, 2026) – Ravelin Properties REIT (TSX: RPR.UN) (“Ravelin” or the “REIT”), an internally managed global owner and operator of well-located commercial real estate, announced today that it does not expect to make principal or interest payments on the upcoming maturity date of its 9.00% convertible unsecured subordinated debentures (the “9% Debentures”).

The maturity date of the 9% Debentures is February 28, 2026. In connection with the upcoming maturity date, the 9% Debentures, which currently trade on the Toronto Stock Exchange under “RPR.DB”, will be halted at the market open and delisted at the close of trading on the business day following the maturity date, being March 2, 2026.

The REIT has been in default of its obligations to pay interest on the 9% Debentures since March 1, 2024. The repayment price due on maturity is $1,180 per $1,000 principal amount of 9% Debentures, representing aggregate principal amount of $28,750,000, and $5,175,000 for accrued and unpaid interest thereon to, but excluding, the maturity date.

The big question I have in my mind is – how will George Armoyan, who went through a huge effort to take over the REIT, be able to salvage this situation? It is incredibly unlikely anybody from the public will be able to make lemonade from the lemons (the units and debentures are well subordinated), but Armoyan’s corp, G2S2, has lent Slate/Ravelin a ton of money and maybe this was the plan all along when they will get to eat away at the entrails of this soon to be extinct REIT.

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.

Slate Office REIT – The next episode of boardroom drama

Continuing on from my April 19, 2024 post about the board room and proxy drama occurring at Slate Office REIT, we have the following developments:

April 20, 2024 – an incumbent trustee decides to not run again, and in replacement Armoyan’s nominee is put forward (Scott Dorsey).

Following receipt of the Notice, Lori-Ann Beausoleil advised the Board that she is declining to stand for re-election to the Board and tendered her resignation as a trustee of the REIT effective May 2, 2024 and, thus, will not be standing for re-election at the Meeting. Following unsuccessful attempts by the REIT to come to a cooperative outcome with Mr. Armoyan, and in light of the resignation of one of the Board’s nominees for election at the Meeting, on the recommendation of the Governance Committee, the Board resolved to nominate Scott Dorsey in place of Ms. Beausoleil and to add Mr. Dorsey to the REIT’s slate of management nominees to be considered for election as trustees at the Meeting. Mr. Dorsey is also one of the individuals put forward by Armco.

April 24, 2024 – another incumbent trustee, Jean-Charles Angers, decides to not run again (obviously knowing that the writing is on the wall and he would not win a seat).

May 2, 2024 – Slate reports their quarterly result, a rather tepid quarter. FFO and AFFO is roughly $4 million. Loan-to-value still hovering around 68% and interest expenses creeping higher. They are basically continuing their slow fire-sale of properties to try to deleverage.

May 3, 2024 – AGM day! Voting results:

Brian Luborsky and Scott Dorsey and Sam Altman were endorsed by Armoyan.

And finally, after the vote…

May 8, 2024 –

Slate Office REIT (TSX: SOT.UN) (the “REIT”), an owner and operator of high-quality workplace real estate, announced today that Scott Dorsey has informed the REIT that, for personal reasons, he is unable to serve as a trustee on the REIT’s board of trustees.

What??? Who strong-armed him into leaving Slate with a five-trustee board?

Practically speaking, it appears the George Armoyan takeover of Slate Office REIT is nearly complete. The question at this point is what he can salvage from the entrails of this debt-laden entity before it will have to go through some inevitable recapitalization.

Slate Office REIT – attention to details

It looks like things are getting heated in the board backroom of Slate Office REIT (TSX: SOT.un). 17 days before the scheduled Annual General Meeting, George Armoyan decided to let loose a proxy solicitation to install two additional directors out of six. If he won, including himself, that would constitute a board of six directors – George himself, two controlled by him, two directors (the co-founders, who are brothers) and an independent.

To take action this late in the game suggests that there was some sort of board decision that pissed him off.

Armoyan controls 17.7% of the units, or 15.1 million units of Slate, which gives him huge sway considering that only 36 million units voted on the resolution to increase the gross book value to debt ratio of 65% earlier this year. When adding the 1,123,880 units that one of the director nominees owns, it’s a near majority. 32 million units voted in the 2023 annual general meeting. It’s quite likely that Armoyan will find at least a million or so disgruntled Slate Office holders to vote in his direction to put him over the top.

Part of the previous vote was a consent to decrease the board size from 8 to 6 trustees, which means there are less people for him to take out. If he is successful, he will effectively have at least a veto on every decision from the board, which is close enough to having control of the entire operation.

I do note, however, when reading the proxy solicitation statement, that it must have been hastily constructed. Witness the following from their proxy solicitation:

On the bottom, “PROTECT YOUR IVESTMENT IN SLATE OFFICE REIT”. Not the greatest look for the professionalism of Morrow Sodali, the firm being engaged to solicit the proxies.

Perhaps they all just need to hold on until after June 25 before going into CCAA – at least when everybody disposes their units for zero, they get 2/3rds and not 1/2 inclusion on the capital loss. To be clear, this was a joke and not a prediction although the last financial statement released by the trust is not looking that good!

Looking at the Slate Office REIT train wreck

Today’s victim is Slate Office REIT (TSX: SOT.UN). I’ve written about them in the past.

I actually managed to find something using SEDAR “Plus” (let’s save my analysis of this for another post) and fetched out their declaration of trust. Via their Annual Information Form, here is the following snippet:

the REIT shall not incur or assume any indebtedness if, after giving effect to the incurrence or assumption of such indebtedness, the total indebtedness of the REIT would be more than 65% of GBV (including convertible debentures);

(FYI – GBV = Gross Book Value)

Let’s do some math.

In June 30, 2023 their assets were 1.826 billion. Their total debt was $1.166 billion. That’s about 64%.

So they’re hitting up against a debt wall.

This gross book value will surely decline as all REITs mark their books as a function of the government treasury bond rate – as the risk-free rate rises (and has it ever!) your asset values will decline.

Very shortly, Slate is going to be debt-locked unless if they take efforts to reduce their GBV. This can only come in the form of an equity offering (not going to happen when your units are trading at $1.52 a pop and a total market cap of $120 million), an extremely dilutive preferred share offering (George Armoyan to the rescue), or selling real estate assets.

The problem with selling your real estate assets is that you’re only likely to be able to sell in short notice the assets that are actually worth something, compared to the rest of the sub-par garbage you have in your (pun intended) asset slate. Not only that, but selling such assets might trigger the need to value your other assets accordingly (i.e. the cap ratio you were assuming on your books isn’t what you’re getting when you sell the asset!) which would then cause the GBV to debt ratio to increase even further.

In other words, CCAA could be in the cards here. I’m glad I walked away from this one. Twice!