Slate Ending Management Agreement With Slate Office REIT, Welchs Leave Board

In an announcement on Wednesday evening just past 9:00 pm EST, Slate Office REIT (TSX: SOT.UN) said that it had received a Notice of Termination that will see its external management agreement come to an end and the REIT shift to internal management.

Slate Office REIT is currently managed by Slate Asset Management, which was co-founded by brothers Blair Welch and Brady Welch in 2005. Both were serving on Slate Office REIT's Board of Trustees and have resigned from the Board, effective immediately. Brady Welch is also currently serving as the Chief Executive Officer of Slate Office REIT.

The management agreement with Slate Asset Management will not end for another 180 days. In accordance with their management agreement, Slate was obligated to provide the REIT with 180 days notice.

During this period, Slate "will cooperate and work diligently with the REIT to prepare a transition plan and effect the transition of the management services to the REIT in an orderly manner as soon as reasonably practicable," the REIT said.

"We are working collaboratively with Slate to internalize management of the REIT," added Samuel Altman, the independent Chair of the Board of Trustees. "The Trustees believe that internalized management will achieve strong alignment with unitholders and lower costs for the REIT."

With Blair and Brady Welch resigning, Slate Office REIT's six-member Board of Trustees is now down to four: Altman, George Armoyan, Brian Luborksy, and Charles Pellerin. Pellerin joined the Board on June 25, after the REIT announced on May 8 that Trustee Scott Dorsey was leaving the Board.

The shift to internal management comes after the Globe and Mailreported in July that a behind-the-scenes boardroom battle was brewing between the Welches and Armoyan, who owns 20% of the REIT and told the Globe that Slate Asset Management has collected $132 million in management fees while overseeing "the destruction of over $700 million in unitholder value" to the point that the REIT's unit price is now approaching zero.

According to Slate Office REIT's most-recent Management Information Circular, Slate Asset Management collects a base management fee of 0.3% of the gross book value of the REIT's assets, a property management fee equal to 3.0% of the gross revenues collected and remitted from the REIT's assets, as well as fees pertaining to acquisitions, financing, leasing, and construction management. Between January 1, 2023 and December 31, 2023, Slate Asset Management was paid $13.7 million.

Wednesday's announcement also comes after Slate Office REIT announced in late-June that it had received notices of default from its senior lenders. The REIT is also amidst a Portfolio Relignment Plan announced in November 2023. In its Q2 2024 results report, the REIT said it had completed nearly $50 million in dispositions as of July 31, with more dispositions under contract or in advanced negotiations.