This week, Toronto-based Ravelin Properties REIT (TSX: RPR.UN) — formerly known as Slate Office REIT — published its Q1 2025 results, at the end of which the REIT issued a going concern warning.
"The REIT is in discussions with G2S2 Capital and other lenders regarding the terms of an acceptable potential Recapitalization Plan," said the REIT. "As of the date hereof, no agreement has been reached with any of the REIT's stakeholders with respect to a potential Recapitalization Plan, and there can be no assurance that the REIT will be successful in negotiating a potential Recapitalization Plan, or in raising the additional funding needed for the REIT to continue as a going concern. If the REIT is unsuccessful in negotiating a potential Recapitalization Plan, the REIT will be unable to continue as a going concern, and, in that case, the market price of the units and the convertible debentures would be materially adversely affected or extinguished."
When companies are unable to continue as a "going concern," it means there is doubt as to how long the company can continue operating, though, in this case, nothing has been confirmed.
In November 2023, the REIT announced a Portfolio Realignment Plan and began making a series of dispositions. In June 2024, the REIT then disclosed that it had received notices of default from its senior lenders. In October, it and its external manager, Slate Asset Management, began the process of ending their management agreement and internalizing the management of the REIT.
The end of the management agreement was set to occur on March 31, but was accelerated and moved up to December 31, after which Slate Office REIT rebranded as Ravelin Properties REIT. In January, the REIT then welcomed in a new leadership team under CEO Shant Poladian.
More recently, Ravelin Properties REIT restructured and consolidated over $528,519,232 of debt in March.
Senior secured lenders of a November 2023 credit agreement sold and assigned $233,047,602.23 of debt to G2S2 Capital Inc., the privately-held investment company of George Armoyan, who is the Chair of Ravelin's Board of Trustees. Additionally, RBC also sold and assigned $295,471,630.31 of debt to G2S2 Capital. As part of that debt consolidation, Ravelin secured a six-month forbearance agreement with G2S2 so it could advance the aforementioned recapitalization plan.
In its Q1 2025 press release, Ravelin said it remains in default under several agreements.
"As at March 31, 2025, and as previously reported, the REIT remains in breach of the financial leverage and debt service coverage covenants on its revolving credit facility and certain other mortgages, resulting in other mortgages being in breach due to cross-default clauses. The REIT's convertible debentures are also in default due to restrictions imposed by default of the debt from senior lenders. The REIT is in active discussions with its lenders to resolve current defaults and to amend, renew or consider alternate arrangements on its debt with the objective of reaching terms that are acceptable to the REIT."
During the quarter, Ravelin Properties REIT signed new leases or lease renewals pertaining to 264,626 sq. ft of space, completed at a weighted average net rental rate that was 4.6% higher than the prior rental rate. Occupancy across its portfolio ended the quarter at 76.7%, after being at 76.8% following Q4 2024.
As of March 31, 2025, the REIT's liquidity was at $22.6 million, comprised of $14 million in unrestricted cash and and $8.6 million of property-level restricted cash.
Subsequent to the quarter, Ravelin Properties REIT disposed of the office property at 1189 Colonel Sam Drive in Oshawa for $16.5 million, which was fully used to service debt. It also notified the external property manager for its Chicago properties that it was terminating the management agreement and internalizing management.
According to the REIT, it saved $3.0 million in Q1 as a result of the internalizing management in Canada and is expected to save a total of $10 million this year.
