My name is Michael Cooper. I'm the chair of the Board of Dream Office REIT. It's 12:00 P.M. We'll start the meeting. I will act as chair. Rob Hughes will act as Secretary. With the consent of the meeting, we appoint Daniela Muniz and Arlene of Computershare to act as Scrutineers. We'll first proceed with the formal business. To that end, Rob Hughes will continuously make the motions. Shannon McRae will continually second them.
After we finish the meeting, management will make a presentation. The Scrutineers have advised that we have a quorum, and the meeting is declared to be properly constituted. The first item of business is the presentation of the REIT's 2024 annual report, which contains the REIT's audited financial statements. It has been placed in front of the meeting by the Secretary. The next item of business is the election of trustees. As stated in our circular, seven trustees are to be elected at the meeting, and seven nominees are named. They are Amar Balya, Donald Charter, Jane Gavan, Dr. Kellie Leitch, Karine MacIndoe, Qi Tang, and myself. Rob, will you propose the nominees for election?.
I nominate the individuals listed in the management information circular for election as trustees of the REIT to hold office for the upcoming term.
I second the motion.
Are there any other nominations? As there are none, we declare the nominations closed. Are there any questions on this motion? Seeing none, based on the process, they have passed. I mentioned that all of the nominees have had a majority of votes cast in their favor. I do not think we need a formal vote. We confirm that they have been appointed. Appointment of the auditors. The next item of business is the appointment of the auditors. The audit committee and the board have recommended PwC, Can I have a motion?
I move that PricewaterhouseCoopers LLP be appointed as auditors for the REIT and its subsidiaries for the ensuing year, and the board of trustees be authorized to fix their remuneration.
I second the motion.
Are there any questions on this motion? , Seeing none, we'll take a vote by hand. I would ask registered voters and duly appointed proxy holders who are in favor of the motion to raise your hand. PwC must be relieved. Any votes withheld?, The motion is carried. The next item of business is to vote on a resolution to amend the REIT's deferred unit incentive plan and to increase the number of deferred units that may be granted to 500,000. Can I have a motion?.
I move to approve the resolution amending the deferred unit incentive plan as set out starting on page 23 of the REIT's management information circular.
I second the motion.
I've been advised by the scrutineers that a majority of proxies received by management prior to the meeting have been voted, and that more than 50% of the proxies received by management prior to the meeting voted for this motion. I would ask those registered unit holders and duly appointed proxy holders who are in favor of the motion to please raise your hand. A little bit more support than PWC. Any against? The motion is carried. With that, the business meeting is over. I would ask Gord to make a short presentation, and Gord, Jay, and I'll be available to answer questions afterwards. Gord.
That's great. Thanks a lot, Michael. Good afternoon, everyone. As always, it's really great to be with you here. I'm looking forward to sharing how we managed in 2024 and give a year-to-date operations update for the REIT in 2025. I wanted to start by saying at the core of everything, we remain as a team very committed to leasing up and improving the quality of our assets despite operating in a challenging environment for the sector.
Over the course of 2024, we made really good strides across all key metrics, and that momentum has really paid off to start 2025. We recently had our best quarter in years. To kick it off, we wanted to remind everybody and show this slide as context to illustrate that our core portfolio is concentrated primarily in downtown Toronto. It ultimately represents almost 85% of the total portfolio IPP value.
As we'll show later in the presentation, we had some solid leasing over the past year in the downtown core, with the committed occupancy now standing at over 84% and trending upwards. Since we last met, there were some very large tenants that have committed to do long-term extensions, and we're happy to report that weighted average lease terms for downtown Toronto is now just over six years, up from 5.1 years we reported at last year's AGM and almost 1.5 years better than the market standard across all classes in Toronto.
A couple of these factors with some of the most irreplaceable locations in the country. I honestly feel really good about the assets that we own. One metric we've been tracking internally, and arguably it's the most asked question of our investors, lenders, and tenants, is office utilization. We closely follow the Downtown Toronto Occupancy Index, which tracks the average weekly physical occupancy in the office as a percentage of pre-COVID levels. It's a great metric as it's been a direct correlation with occupancy and leasing velocity. To provide a bit of context, at this time last year, the physical office occupancy was around 65%. The year before that, the average occupancy was around 50%. As of today, the average physical office occupancy across all five days is now 78%, with peak days Wednesday being 89%.
This is a material improvement year over year and marks a notable recovery from the post-pandemic days. Many of our largest tenants, including the provincial government, banks, and professional services firms, have seen marked improvement in their physical occupancy and in-person work. I like this slide because it really shows the bifurcation of assets remaining a key trend in the office sector.
We're continuing to witness very material differences in rents and occupancy across Class A, B, and C assets. As you can see from this slide, the occupancy gap between Class A and B assets has widened by about 11 percentage points. This is from five percentage points only three years ago. We're happy to report that downtown Toronto committed occupancy is continuing to trend in line with downtown Toronto Class A assets, and our portfolio is not going the other way with the lower-class assets. We were able to invest, as you know, a lot of capital in our Bay Street collection in 2022 and 2023, which created this beautiful portfolio of boutique assets, which we're all really proud of. We're targeting tenants that are in the market for very high-quality space located in arguably Canada's top submarket.
Our largest asset, I wanted to just let everybody know about this, but our largest asset at Adelaide Place has seen the most activity where we've done six deals totaling over 130,000 sq ft and Krinz teams in advanced discussions on four more deals totaling another 85,000 ft, where 70,000 ft is net new absorption and the balance is expansions. As some perspective, this is the most leasing we've done in this building in the last three years combined. In a competitive submarket, quality, management, and amenities have never been more prominent and important. As a company, we're really fortunate to have focused on great buildings in unparalleled locations with curated retail and amenity experiences that sophisticated tenants covet, and that's what's helping us continue to win ultra-competitive deals in a very competitive market.
Much like the utility index, one of the things we monitor closely is the amount of new office supply that is coming onto the market, as that directly impacts our competitive vacancy and ultimately absorption. It has been very well publicized that there is no new supply in the pipeline and is declining to almost zero. As shown in this slide, office under construction peaked in 2020 at about 9 million sq ft, trending downward significantly since the pandemic.
Over the next four years, which is important, new deliveries are expected to be close to zero. Additionally, office conversions continue to see buildings removed from the existing competitive inventory as owners look for ways to reposition their assets, be it through substantial renovations or residential conversions. Our downtown assets are so well located in Canada's most coveted submarket, and these conditions further strengthen our position to attract office tenants amid shrinking availability.
Next slide, please. That's great. Okay, I love this slide because it's a bit of humble bragging for the team. But we're seeing a trend with existing tenants signing renewals with long lease terms, with some expanding on their existing footprint. As of Q1, as I mentioned before, our weighted average lease term went from five years to just over six years. A big catalyst is all of these deals we've done in the last 12 months. These are only eight of the over 120 deals we've done in the last 12 months. These eight deals total about 315,000 sq ft in an ultra-competitive environment. We're really happy to get these deals done and strengthen our portfolio.
I was just talking to Tony about this, but sophisticated tenants are still really focused, though, just to preface, they're still really focused on their own liquidity and their own balance sheet. There is evolving economic uncertainty at the macro level. Longer terms usually allow for more amortization for the tenants. While the improved WALTs are great, we're still seeing lower NERs as a result, and NERs for people are net effective rents.
It is the effective rent after you take out the cost of doing the deal. Renewals have improved, and we feel like as an industry, we're through the trough of the NER cycle, and we're really optimistic that this will slowly rebound in line with absorption and the lack of new supply. These are eight of our tenants, just showing you some deals that are net new.
Streamland is a net new deal that we've done. We've brought Vanderbrand over to Adelaide Place. Just to give you some context, IFDS was an ultra-competitive deal. They chose to stay in a Dream building. We did a long-term extension with them. One of our greatest partners is the federal government, and they also made a commitment to stay with us for three years. I'm really happy with the partnerships that we have and grateful for our clients working with us. As previously mentioned, Q1 2025 was one of our most active quarters of leasing since the end of 2019. We executed, just in one quarter alone, 36 deals spanning over 255,000 sq ft. In downtown Toronto alone, we completed just over 33 deals over 240,000 sq ft.
If this continues, we're well on pace to have our best year in terms of volume of deals and gross square footage leased. Last year was our best year in volume of deals. We did about 105 deals. 2023 was our best year for gross leasing, and we did just over 700,000 sq ft. We're on pace to beat both those. I'm really proud of the efforts of the team. We've consistently shown that Dream has done a great job securing renewals and expansions with long-term leases. There's good reason for optimism as we feel good about our current pipeline with over 31 new leases and renewal prospects currently in various stages of negotiation for over another 258,000 sq ft. We're targeting continued growth in committed occupancy and are hoping to be around 86% by the end of 2025.
Despite the headwinds and hot takes we all read regarding the office environment, I like this slide because we've been really pleased with how our rents have held up versus our budget and versus market. This slide's great as it shows we've seen steady growth in downtown Toronto in in-place rents, which have increased from 2,668 to 3,261 over the past three years alone. This represents a very healthy compounded annual growth rate of nearly 7%. In addition to healthy rent growth, we've been ultra-focused on enhancing our suite offerings to improve occupancy. CBRE Research notes that since the beginning of 2024, there's been around 800 office deals done in Toronto. Of this, 615 of the deals, making up nearly 80% of those total deals, were on spaces that were under 10,000 sq ft.
This compares really favorably to Dream's downtown portfolio, where our average size is about 10,000 sq ft. The elevated demand for small to mid-size floor plates positions us really well and helps drive continued absorption for our core portfolio. This specific segment of the submarket, as you can see, has by far the most absorption, and our team has seen very steady growth by about 15% in tours. We've been investing capital prudently in these smaller vacant units, which I'm going to show on a subsequent slide, to improve tours and accelerate lease-up. Beyond our investment to our Bay Street collection, tenants can have their own floors, their own security, enjoy world-class retail, and get a Bay Street address. All coupled together, it's been a real catalyst for our overall activity and deal flow.
We've seen that many tenants opt to only tour finished suites or sublets, especially for suites under 10,000 sq ft, which matches much of our vacancy in Bay Street. Keeping this in mind, we worked really hard to convert these vacancies into finished suites that had better potential to generate more tours and lease-up sooner than if otherwise in their original conditions. In mid-2024, we brought a business plan to Michael and sought approval.
We invested CAD 2 million into our modified suites program to refresh some of our spaces to help accelerate leasing and tour activity. This represented about 20 suites that look like this on the top to this on the bottom after. So 20 suites. We've leased about 16 of those units in less than a year at rates in the mid to high 30s with low capital deals. We spec the capital before.
We put it in condition where we think tenants would appreciate it, and then we've been able to capitalize and get some really good rents on these suites. One other thing I'd say too is our model suite program has shown some pretty good success right across. One building in particular, 67 Richmond. It's where Daphne is. It's a building where Daphne's on the ground floor.
We've gone through that building floor by floor. Every time we've brought a floor on, we've been able to lease it. We're working right now on doing the balance. We've got negotiations on those floors. As we're improving spaces, we're finding the velocity and the absorptions there. We're really proud of the team on that. Next slide, please, Kim. One main driver of our Bay Street leasing velocity was the addition of our premier restaurant partners.
Milos at 330 Bay, the award-winning Sushi Yugen and Chop at Adelaide Place, all opened to much success late last year and joined our portfolio of high-quality restaurants, which already included top destinations like Daphne, John & Sons, Cocktail, Goa, and Alob ar. With the launch of these restaurants, approximately 95% of our retail space downtown is leased. I'm pretty proud to share with you all today that the last two vacancies we had downtown are also both now leased. I can't say who it is. One is a global coffee provider, and the other one is another major Canadian hospitality firm that's doing a beautiful concept at 80 Richmond. We are really proud about what we've got going there. We are positioning our Bay Street assets as signature assets in Canada's financial core, anchored by premium retail offerings.
I always welcome say this every year, i always welcome any of our investors, analysts, or partners to reach out if you ever want to see them firsthand. Just going off script for a sec, Jay and I were talking about this last week. I actually had about eight people reach out to me since the last AGM to go out. A couple of them are in the room.
I am hoping more people will want to come and see the space because we are really proud to show it off, and it helps our restaurant partners. Thank you very much. Next slide, please, Kim. This slide I am really proud of. It illustrates an almost 400 basis point increase in Bay Street occupancy over the past few years. Couple this with our model and modified suite program and our new retail on Bay Street.
We honestly feel like we're really well positioned to make 2025 our best for total leasing velocity. As mentioned earlier, we're already on pace to do more total deals and have more square footage leased than we have since 2019. What gives me the greatest confidence as we look into the second half of 2025 and beyond is the combination of our high-quality and well-located assets and the great team that operates, manages, and leases them. It's our collective passion for providing exceptional property management and the great culture and teamwork to be creative at Dream that's been absolutely integral in our ability to get deals done and steadily fill our buildings in an ultra-competitive market. It's my commitment, and we remain totally accountable to improving our portfolio quality, our operating performance, and our overall client experience.
Our team's going to con1tinue to work relentlessly to drive occupancy, grow income, and be very prudent with our capital in spite of any market conditions or any macro challenges we might see. If at any time again, if anybody wants to connect, has any questions, or would like to go see what we're doing, please reach out to me directly, and I'd be happy to take you through. With that, I'm going to turn it over to my good friend and CFO, Jay Jiang.
Thank you, Gord. That was great. Hello, everyone. As Gord has said, we really appreciate everyone taking the time to be with us this afternoon. Over the next couple of minutes, we'll go over our financial strategy that supports our vision of managing Dream Office as safely as we can.
We are in the midst of a period that has already experienced five years of significant uncertainty for the commercial real estate sector. Now, since 2020, we've managed our building and our balance sheet as conservative as we can, more conservative than in a normalized market, and we have done so by proactively selling assets, refinancing our debt early, and increasing our liquidity wherever possible and reducing our operating expenses each year. To start, these are the four pillars that represent our key financial focus until the office market reaches a stronger equilibrium. Our key financial metrics prioritize safety and the preservation of our capital. As we just mentioned, we intend to continue to bolster liquidity, proactively refinance all of our debt in advance, sell assets to pay down our debt further.
We also want to continue to be very prudent in utilizing our capital and supporting leasing strategies to improve both occupancy and the value in our buildings so that our portfolio remains attractive to both lenders and investors. The purpose of this slide is to show that with careful management of our capital and expenses, the REIT has delivered stable financial and operating metrics year over year as the office market continues to gradually recover. On our 2023 fourth quarter conference call, we provided FFO guidance in the range of CAD 2.80-CAD 2.90 per unit and same property NOI guidance of low single digits. In 2024, we were able to beat our FFO guidance and meet our SP NOI target.
We do not have a crystal ball on the future of the office market, but we have been very transparent and conservative in our commentary since March of 2020. This includes all of our conference calls, AGMs, and investor days. We believe having a more conservative dialogue and also approach in managing our business have helped us deliver stable financial results over the past five years, and we continue to believe that this approach will continue to serve us well until we have more information, certainty, and clarity. In 2024, we were able to deliver same property NOI growth of 2.1%, marking the second consecutive year of SP NOI growth since the pandemic. Our guidance for 2025 is flat to low-digit growth as well.
Despite a 6.8% drop in in-place occupancy since the end of 2020, we have been able to increase in-place rents from CAD 23 per sq ft to over CAD 27 per sq ft in the portfolio. Overall, it has been encouraging to see the trend in SP NOI improving. We have also reduced our operating expenses by managing our buildings more efficiently so that the additional rent savings can pass on to our tenants. It is cheaper to operate our buildings as well.
Our prospective tenants focus on their total gross rents so that if we can help them reduce their additional rents, they will be able to pay a higher net rent rate without having to pay more dollars. This means that over time, we will be able to realize higher net operating income. The debt market for office has been turbulent.
There has been a noticeable flight to quality from the lenders to higher quality buildings and stronger sponsorships. We believe we have demonstrated the ability to stand out by curating a portfolio of well-located and unique assets in downtown Toronto, mostly in the CBD district, and also maintaining strong and honest relationships and dialogues with all of our lenders. In this first slide, it shows our original 2025 debt maturities totaled about CAD 744 million, or over 56% of our total debt stack. This is a transformation.
In this slide, we show that we have already refinanced all of our maturities in 2025. This includes the CAD 225 million mortgage at Adelaide Place and our CAD 375 million corporate revolving credit facility. Both were refinanced in advance of the maturities with no paydowns. We have already started to work on our 2026 maturities.
Next year, for context, we have mortgages on three office buildings and three residential development sites totaling CAD 165 million. We are confident in our ability to refinance all of the debt next year. As an example, the weighted average loan-to-value of the mortgages expiring is approximately 36% based on the latest third-party appraisals. For our income properties, the debt service coverage ratio is about two and a half times.
For our development sites, the debt per density approved is under CAD 30 per sq ft. We think these metrics are rather conservative, and we can comfortably support the lending values when we refinance. Overall, we feel that the refinancing risk has been mitigated for at least two years. However, we will continue to explore strategies to make our balance sheet even safer. From 2016 to 2020, we sold 139 properties for about CAD 4 billion.
We returned about CAD 2 billion to our unit holders, and then we used CAD 2 billion to pay down our debt. The investment market since COVID has been more challenging, but each year we look for opportunities to sell assets at a fair price to pay down our debt and increase liquidity. In 2022, we sold an asset in Saskatoon for CAD 14 million. In 2023, we sold 720 Bay for CAD 135 million above our carrying value. In 2024, we sold another Saskatoon property for about CAD 8.6 million.
This year, we have already closed CAD 182 million of dispositions. In the first quarter, we completed the sale of 438 University. That generated CAD 105.6 million of proceeds, and we also received incremental benefits of about CAD 20 million by securing a third-party property management contract. We were allowed to move tenants from the building we sold over to another building we own and increased NOI.
Third, we were able to remove an encumbrance in one of our best development sites to advance the redevelopment. We also sold 5.9 million units of Dream Industrial REIT for CAD 62 million, as well as our interest in the vendor take-back mortgage in Calgary from a building that we sold in 2018 for CAD 15 million. All of the proceeds were used to prepay mortgages and our credit facility, and the transactions were done in a way to help facilitate a tax-efficient outcome for all of our unit holders.
Looking ahead, we are exploring other assets to sell at a fair price, which can improve our balance sheet. For example, we have one remaining asset in the U.S. in Kansas, and it was recently listed, and we will look to have it sold hopefully by the end of the year.
This is a really neat case study that we wanted to showcase. It's an office building that we have in Calgary at 606 4th Avenue. Canadian Western Bank was the anchor tenant in the building, and recently they were acquired by National Bank, so they will be moving out. The building is about 166,000 sq ft, and the debt on the property is due next year. Before that, for the last year and a half, our development team has been actively working with both the City of Calgary and the government to secure a development grant, which works out to be about CAD 75 per sq ft to help fund the redevelopment and the government financing that will help replace both the office mortgage and help fund a significant portion of the development.
We're in the process of hopefully bringing in a partner so that can continue to further de-risk both the construction of the project as well as reduce our equity. We think the construction will begin in the fourth quarter of this year, and it'll take about two years to complete. Once complete, this will transform the old office building into a new rental building. Currently, it will have about close to zero NOI.
Once completed, we think the apartment building will have about CAD 3.5 million of NOI. We also intend to relocate some of the office tenants at the existing building over next door, so our building at 444 7th will increase in both occupancy and cash flow. This is the last slide for my part of the presentation. Thank you for your interest. I'll turn it back to Michael for Q&A.
Thanks, Gord. Thanks, Jay. Happy to answer any questions if people have some. Attention in the room as Paul approaches the mic.
Okay. I could have made a mistake, but I did not see the Dream shareholder meetings listed in the Globe and Mail every Monday at the bottom of the page. They're looking out through. I did not see that. The only reason I know this meeting was happening is my notice. Did you skip the Globe and Mail?
I have not read the physical copy of the Globe and Mail since 1942. I do not know where the obituaries are either.
Okay. The other thing is in the management's discussion, you are referring to sedarplus.com, and that it is not sedarplus.com. It is sedarplus.ca, and that is what I have been working with for the last couple of years. Sedarplus.ca is what I have been punching in. That is all.
If Shannon wants to defend our company, I think. Shannon, do you have a point?.
Either website will get you to the same place.
Shannon's saying either address gets you there. Yep. Thanks, Paul. That's about right, yes. Those two points are connected, but go on. A third one? Oh. Yeah, we have about CAD 7.5 million DIR units left. The building in Calgary we sold in 2017, I think. We sold it without a mortgage. There was no debt on it, and we sold it to Hines. I can say that. And they never paid us the mortgage. When we looked at the different alternatives, they actually spent a lot of money on the building. It was about 50% leased.
It was breaking even, and we didn't want another building. We used to have 40 buildings in Alberta. We're down to two. You could see that one was being converted. There's another one that's going to be a residential site, but we decided we wanted to take the best bid we could get to sell the mortgage. That turned out we partnered with H&R, it turned out to be CAD 30 million, and that was less than the amount of money that we lent plus interest that had been accrued. Overall, I don't know, Jay, do you remember the total dollars per sq ft? I thought it was like CAD 120 per sq ft we got for selling that building all in.
What we're saying is when we sold it in 2019 with the cash we got then plus this, it's about CAD 110 a sq ft, and that might be 25-40% more than the building would be worth today. It didn't work out exactly the way we wanted, but it was the best option at the time. The other thing is that loss of CAD 29 million gave us the tax shelter to sell the DIR units that we sold in the first quarter, so we got back a portion of that. Now, REITs are flow-throughs, which means they don't show anything about tax, and REIT guys never talk about tax. There are holders of REITs, and they do have to pay tax. We're very focused on what the owner gets.
In that case, we were able to use up that plus the losses from old companies that we literally had to clear from GST issues to close them down. Between those two, that's how we had the shelter for the CAD 61 million, or as Jay said, almost CAD 62 million of proceeds from DIR. It came from those losses, and as a result, there's no tax paid on it. Those had a zero cost base. The DIR units had a zero cost base within Dream Office. Even though the stock price isn't great, it still would be a significant tax bill. I think the tax bill could be between 25% and 54%. It was really important that we had those losses. We got some of it back.
Yeah, it's a great question. We get appraisals on 30% or 40% of the buildings a year, sometimes more. We use our own inputs in between. Office certainly has had a lot of deterioration since 2019 or so. As we do that, we generally do have some impairment as we take some hits on it as we get new appraisals. I mean, I think what's the IFRS value? CAD 58.
[audio distortion]
Sorry, how much did the cap rate go up? 31 basis points? Yeah, not percent. Yeah.
[audio distortion]
Any employees have a question? Okay. Thanks, everybody. Oh, did you have anything else? We sell Dream Industrial and Dream Unlimited, so whoever wants to hang around, you're more than welcome. Thanks a lot.