Ladies and gentlemen, welcome to the annual meeting of unitholders of Slate Office REIT. Please note the meeting will be recorded. I would like to introduce Mr. Monty Baker, a trustee of Slate Office REIT. Mr. Baker, the floor is yours.
Good morning, welcome to the annual meeting of unitholders of Slate Office REIT. My name is Monty Baker, I am a trustee of Slate Office REIT. I have on the line Mr. Steve Hodgson, Chief Executive Officer of the REIT, Mr. Charles Peach, Chief Financial Officer of the REIT, and Ms. Lindsay Stiles, Chief Operating Officer of the REIT. For those of you who are unitholders, thank you for joining us today. We also welcome all other guests in attendance. In order to address the public health concerns related to the global COVID-19 pandemic and to mitigate the health risks of our communities, unitholders, employees, and other stakeholders, we are again holding the meeting this year in a virtual-only format. Our main objective is to ensure that all unitholders have the same opportunities to participate and vote regardless of their geographic location and that everyone stays safe.
Other members of our current board of trustees, Lori-Ann Beausoleil , Nora Duke , Meredith MacCheyne, Blair Welch, and Brady Welch, are attending this meeting electronically. Michael Fitzgerald, a trustee nominee, is also in virtual attendance. Welcome, trustees, and thank you for joining us. Since the meeting is being held virtually, we want to outline a few logistical items regarding the conduct of the meeting. First, questions can be submitted by registered unitholders and duly appointed proxyholders using the instant messaging service of the virtual interface. For each question we answer, we will summarize the question to the extent necessary. Second, we will attempt to address all questions during the question period at the end of the meeting, provided that some questions may be addressed during the formal part of the meeting, including questions regarding procedural matters or directly related to the motions before the meeting.
Third, for the purposes of the meeting today, voting on all matters will be conducted by electronic ballot. Registered unitholders and duly appointed proxyholders will be able to vote on each business item during and shortly after the presentation of all business items. Fourth, when the voting polls are open, registered unitholders and duly appointed proxyholders may click on the voting button on the left side of your screen and submit your votes accordingly. If you have already submitted your vote by proxy and do not wish to change your vote, you do not need to vote again. With your permission, I would like to begin with the formal part of the meeting. To expedite the formal part of the meeting, I will move and second all motions.
I will act as the chair of the meeting. With the permission of the meeting, I appoint Ramsey Ali, the General Counsel and Corporate Secretary of the REIT, who is also joining virtually to act as Secretary of the meeting. As well, I have appointed TSX Trust Company, acting through its representative, Christopher de Lima, as scrutineer. The meeting will now come to order. Notice of the time and place of the meeting has been provided to each unitholder entitled to vote and to each trustee and to the REIT's auditors. The notice calling this meeting requires that unitholder intending to vote by proxy must have deposited their proxies with TSX Trust Company prior to Tuesday, May tenth, twenty twenty-two, at 12:00 P.M. The proxies so deposited are now in the custody of the scrutineer.
For the meeting, a quorum of unitholders is present if there are at least two unitholders present in person or represented by proxy, holding or representing by proxy in aggregate at least 25% of the total number of outstanding units entitled to be cast at the meeting. I have received the preliminary report on attendance from the scrutineer and have determined that quorum is present. I got this report. As notice of the meeting has been given as required, I declare this meeting to be regularly called and properly constituted for the transaction of business. The scrutineer's report will be kept with records of this meeting. On behalf of the board, I thank those unitholders who have chosen to attend the meeting virtually today. I also thank those who submitted their proxies in advance.
There are 2 matters set out in the notice of meeting to be voted on by unitholders. They are the election of trustees and reappointment of the auditors. Voting today will be conducted by electronic ballot. The balloting will be open to registered holders and appointed proxyholders who have properly logged in with their control numbers during and until shortly after the presentation of all business items. I will now take a moment to ask that the balloting be open to registered holders and appointed proxyholders. The polls are now open. At this point, all registered holders and proxyholders who have properly logged in with their control numbers and wish to vote will be able to click on the voting button to the left of your screen in order to view the voting resolutions being brought forth at this meeting.
The voting will remain open while we address the items of business to be voted on. You will receive a 15-second warning in advance of the closing of the polls. Once the electronic balloting closes, the voting page will disappear, and your votes will automatically be submitted. uncertain will confirm for us when the polls have closed. Please register your votes by clicking on the voting button to the left of your screen and selecting the for or withhold buttons next to the name of each proposed trustee and next to the resolution with respect to the reappointment of KPMG LLP as the REIT's auditors.
The votes of all unitholders who have deposited proxies with management representatives will be cast for the instructions of unitholders by the persons they designated on the proxies, or where no choice is specified, for the resolutions to be dealt with at today's meeting. The first item of business concerns the 2021 consolidated financial statements. The management information circular for this meeting, dated March 23rd, 2022, contains instructions to request a copy of the consolidated financial statements in accordance with applicable securities laws. Copies of these materials are available on the REIT's website and on SEDAR. On behalf of the REIT, I now place before the meeting the consolidated financial statements and a report of the auditors thereon for the year ended December 31st, 2021.
I would be pleased to receive any questions you may have regarding the financial statements during the question period later in this meeting. We will dispense with the reading of the financial statements and the auditor's report thereon.... The next item of business is the election of trustees. The trustees have set the size of the board at present to seven. Each trustee is to be elected to hold office for a term of one year, commencing at the close of this meeting of unitholders and ending at the close of the next annual meeting of unitholders, or until their successors are duly elected or appointed. Details about the individual being nominated for trustee are found in the management information circular, dated March 23, 2022. In the proxy forms and voting instruction forms, unitholders were asked to vote individually for each of the nominees.
As described in the management information circular made available to unitholders in connection with this meeting, there are seven nominee trustees for election as trustees. The nominees are Lori-Ann Beausoleil, Meredith MacCheyne , Michael Fitzgerald, Monty Baker, Thomas Farley, Blair Welch, and Brady Welch. Nora Duke will be retiring from the board and will not be standing for re-election. The board and management would like to thank Mrs. Duke for her guidance and valued contributions to the REIT during her tenure. I declare the meeting open for nominations for the ensuing year or until their successors are elected or appointed. I will now nominate the trustees and second the nominations.
I nominate each of the persons whose name appears in the management information circular under the heading, Election of Trustees, to be a trustee of Slate Office REIT until the close of the next annual meeting of unitholders or until their successors are appointed, and I also second the nominations. The REIT's declaration of trust requires that nominations of trustees by unitholders be received at least 30 days in advance of the meeting in order to be valid. As no nominations were received from unitholders prior to the deadline, the nominations are closed.
I note that, as described more fully in the management information circular, the board has adopted a majority voting policy pursuant to which any nominee who receives a greater number of votes withheld than votes for cast with respect to his or her election by the unitholders, will offer his or her resignation from the board promptly following such meeting. The resignation will be effective if accepted by the board. I should advise the meeting that by virtue of votes already received by proxy, it is clear that all trustees will receive more than enough votes to be elected today. The next item of business is the appointment of auditors and the authorization of the trustees to set their remuneration. I will now move and second a resolution appointing the auditors for the current year and authorizing the trustees to fix the remuneration.
I move that KPMG LLP be, and they are hereby appointed auditors of the REIT to hold office until the close of the next annual meeting of unitholders, and the board of trustees be, and it is hereby authorized to fix the remuneration. I also second the motion. Unless there are any questions, I will move on to closing out the voting process. The polls will remain open for 15 more seconds. As a reminder, if you have not done so already, please register your votes by accessing the voting page and selecting the for or withhold buttons next to the name of each proposed trustee and next to the resolution with respect to the reappointment of KPMG LLP as the REIT's auditors.
The polls are now closed.
I have been advised by the scrutineer that the ballots and proxies deposited for the meeting have now been voted, and that each of the resolutions has been carried with the effect that each of the seven nominees has been elected as a trustee of the REIT until the next annual meeting of unitholders, until the successors are elected or appointed. The appointment of KPMG LLP as the auditors of the REIT has been approved, and the board of trustees has been authorized to fix their remuneration. We will file a report sending out the voting results on the SEDAR website. The formal items of business, as set out in the notice of the meeting, have now been dealt with. As there is no further business to come before the meeting, I declare the formal part of the meeting to be concluded.
I move that the meeting be terminated. I second the motion. I declare the resolution carried and the meeting terminated. The formal agenda for this meeting is now completed. The formal business of the meeting is now over. I will now turn the meeting over to Steve Hodgson, Charles Peach, and Lindsay Stiles to proceed with the review of the business of the REIT. I ask that all registered unitholders and duly appointed proxyholders who would like to ask a question, use the instant messaging feature of the virtual interface to do so. For each question we answer, we will summarize the question to the extent necessary. We will endeavor to answer questions once we have finished providing an update on the REIT's business. I will now open the floor for any questions.
Oh, sure, I think...
Sure.
Thank you, Monty. I'll provide an overview of our business and strategy. Lindsay will give an update on operations. Charles will conclude with why Slate Office is a compelling investment opportunity. Over the last year, we continued to demonstrate the durability of our income and validity of our net asset value. We were able to grow into a new market, Ireland, and increase our exposure to high-quality real estate with strong covenant tenants in growing life science and technology sectors. The same transaction was additive to many of our metrics, including building age, occupancy, weighted average lease term, and credit quality. Today, Slate Office has 55 properties, 7.7 million sq ft, and CAD 2 billion of asset value.
We're currently trading at an approximate 40% discount to net asset value and paying an attractive 8% distribution yield, which is well covered by an 84% payout ratio. Our investment strategy continues to be simple and effective. We focus on cost basis and buying assets well below replacement costs. This gives us competitive advantage on leasing as we can be flexible. We can provide a value solution to tenants, or we can reinvest in our assets and provide a like-new product for a lower economic rent than new supply. After acquiring an asset, we leverage our best-in-class management platform to create value. We have a track record of delivering high double-digit returns, which speaks to our strong operating capabilities. Once we've created value, we refinance or sell and redeploy equity to new accretive opportunities.
There are 3 investment highlights for Slate Office REIT that we will touch on for the balance of this presentation. The first is our durable cash flows, which have never been more apparent than during the pandemic. We attribute this to 67% of our tenant base being government or high-quality credit tenants. The second is our current discount to net asset value compared to both private market transactions and external appraisals. This provides a very compelling entry point for investors. Finally, we have a scalable platform for growth. We believe in the office sector long term. We know there'll be exciting opportunities to grow accretively and align our portfolio with tenant demand. I'm going to pass it over to Lindsay to go through operations.
Thanks, Steve. We're focused on aligning ourselves with bigger utilizers of office space, who value the importance of workplace to foster in-person connection, corporate culture, collaboration, and innovation. As markets reopen, we are seeing continued demand for office space, with leasing volume increasing 26% and building utilization rates increasing 12% quarter-over-quarter. The recent acquisition of a portfolio in Ireland was additive to portfolio metrics across the board. Occupancy has increased from 84%-85%, WALT has increased from 5.2-5.6 years, and the percentage of strong credit quality tenants has increased from 61%-67%. We completed over 770,000 sq ft of leasing last year, the most volume we've seen since the onset of the pandemic.
As the markets we operate in continue to reopen, we are seeing increased activity and a shift to long-term lease commitments of 5-10 years, as compared to short-term renewals that were more common at the onset of the pandemic. Leasing spreads were 6.5% overall last year. As we continue to adjust our in-place rents, we are currently sitting at a 7.8% discount to current market rents. We will realize organic earnings growth. The durability of our cash flow is directly related to our top tenants, who come from a diverse industry mix, including companies such as CIBC, Bell Canada, and government. ESG has always been top of mind in everything we do.
Subsequent to quarter end, Slate Asset Management released an updated version of its corporate ESG policy, which embeds ESG strategies and practices into the REIT's operations to mitigate ESG risk. I'll now hand it over to Charles.
Thank you, Lindsay. Slate Office REIT trades at a 40% discount to our net asset value. Our valuations have been supported by comparable transactions, supporting our property values, and CAD 1.6 billion of our properties have been externally appraised in the last 24 months, mostly for financing purposes. We have taken advantage of opportunities to lock in sales above this NAV. Our capital recycling plan since June 2019, has sold properties at or above net asset value, delivering a 22% internal rate of return and providing capital for further opportunities. The units trade as a discount to NAV, which is supported, as mentioned just now. First, we look at our distribution capacity, and our AFFO payout ratio was 84% for quarter 1, showing our distributions continue to be well covered.
We trade at an AFFO multiple of 10x, a favorable comparison with office peers. That distribution of CAD 0.10 in the first quarter translates to a 7.9% distribution yield, again, favorable against those peers. The units of their current price show a discount to our NAV and a favorably comparable distribution that is well covered. I earlier mentioned a 22% internal rate of return on recent sales. This shows not only that our proactive management has been able to improve our asset value and contribute to net asset value growth, but also that the valuations used have been supported by market transactions. Where do we go from here? Growth is important for Slate Office, as it provides scale and diversification, access to and a lower cost of capital, and it increases trading volume and corporate visibility to attract both retail and institutional investors.
We can demonstrate progress in each of these areas over the past quarter. The acquisition of Yew Grove has increased our scale, both in assets, revenue, and net operating income. It has further diversified our portfolio into markets that are supportive for our strategy. Having onboarded the Yew Grove team, we have a further significant pipeline of local assets to continue these strands. The company has diversified its sources of financing from North American providers to our European providers. The increasing WALT from the acquisition of the Irish portfolio is supportive of our future financing plans. The units in issue have been increased following the conversion of subscription receipts in the first quarter. Our investor outreach includes Europe. We will continue to grow through selective transformative acquisitions and use creative transaction structures while focusing on growth markets.
We will also continue to focus on core plus real estate, which means assets that are stable, but have upside for our management platform to continue to create value. We will target metropolitan areas with high barriers to entry, where Slate has a presence, and most importantly, we can buy at an attractive entry point relative to investment comparables and replacement cost. We will focus on tenants that are growing and consistent users of office space. Slate Office continues to be a compelling investment with an attractive and well-covered distribution, trading upside to net asset value, and a scalable platform for growth.
I will now open the floor for any questions. I ask that all registered unit holders and duly appointed proxy holders who would like to ask a question, use the instant messaging feature of the virtual interface to do so. We will answer as many questions as time permits. We will now give registered unit holders and duly appointed proxy holders a moment to type in their questions. For each question we answer, we will summarize the question to the extent necessary. Questions which were already answered or that are redundant or repetitive will not be answered. In that there's no questions, I would like to close by acknowledging the efforts and accomplishments of the REIT team during these extraordinary times.
We look forward to continuing to deliver on our objectives of generating solid returns to our unit holders, enhancing the value of our assets, and growing our platform of properties. Thank you, and have a great day.
Ladies and gentlemen, as the meeting is now concluded, you may now disconnect.