Slate Office REIT has received notices of default from senior lenders in respect of its revolving credit facility.

Toronto-based Slate said the notices restrict the REIT from making further accrued interest payments on outstanding debentures.

As a result, Slate does not expect to make cash interest payments due June 30 on its outstanding 7.5% and 5.5% convertible unsecured subordinated debentures.

The REIT also does not expect to make an August cash interest payment on a 9% convertible unsecured subordinated debentures.

Under the terms of the debentures, Slate will be placed in default 15 days after it fails to make the payments, the REIT said.

Slate has been negotiating with lenders in recent months to organize its debt. The REIT has been grappling with reduced office space demand due to the hybrid-work movement, effects of the COVID-19 pandemic, market conditions and other factors.

Slate said it continues to make progress on its previously announced portfolio realignment plan. At the end of the first quarter, Slate had total assets of $1.7 billion and total debt liabilities of $1.2 billion, but those figures have changed slightly due to divestments completed since then.

The notices of default come as Slate is engaged in a massive asset sell-off. In November 2023, Slate unveiled plans to divest 40% of its gross leasable area as part of the portfolio realignment plan.

In the latest quarterly report, Slate said it has agreed to sell 12.3% of its gross leasable area for $101.9 million. Slate said it made further progress on its portfolio realignment plan by completing $40.6 million of dispositions in Canada and Ireland as at May 2.

Slate previously said it expects the divestment process to continue into 2025. But the notices of default now raise questions about that time line.

Photo: Slate Office REIT