Letter to Artis REIT Unitholders:

In light of the recent COVID-19 virus outbreak, I would like to provide our unitholders with an update on our business and the measures we are taking to protect our tenants, employees and the community during this tumultuous period. While the true impact of the virus is not known at this time, we would like to assure our unitholders that we are confident that we have a defensive business strategy and the means to protect the REIT against the recent market volatility and that we are doing our best to minimize the impact on our business.

First, I would like to highlight the quality and stability of our assets. Our portfolio of office, retail and industrial properties is 93% leased to quality tenants in Canada and the US, with a weighted-average remaining lease term of nearly 5 years. Our portfolio has been over 90% leased consistently since the REIT’s inception, even during the recession in 2008 and 2009. We expect that COVID-19 will have the most notable impact on our retail assets, which generate only 18% of our property NOI. These properties are 91% leased with a weighted-average remaining lease term of approximately 4 years. We are working with tenants to ensure that, wherever possible, they can continue to operate at this time. While we expect that this segment of our business will be impacted, we are confident that the high-quality nature of our retail properties, strong tenant base and our limited exposure to this asset class will mitigate the impact on our overall business.

From a liquidity perspective, we have ample cash on hand and availability on our unsecured credit facilities. At 52%, our adjusted funds from operations (AFFO) payout ratio is one of the most conservative payout ratios in the industry – and indeed, the most conservative of all commercial REITs in Canada! We fully expect that our liquidity and our conservative payout ratio will provide Artis with the means to continue to successfully operate and carry us through this challenging period. Furthermore, the recent market volatility has provided an excellent opportunity to buy back our units using our NCIB, which is highly accretive for the REIT. Interestingly, the strengthening US dollar and falling interest rates will also provide the REIT with an unforecasted boost in income.

In the meantime, we are taking appropriate measures to ensure that we are limiting the spread of COVID-19 and are working hard to maintain a safe environment for tenants, employees, customers and visitors of our properties. Our first priority is to keep our buildings safe and continuously open unless ordered closed by government authority. We have implemented appropriate contingency plans to ensure the strictest cleanliness standards at our properties and to maintain building supplies and necessary manpower for operations. Further information on the COVID-19 protocol for our properties and tenants can be found on our website at https://www.artisreit.com/covid-19/statement-on-covid-19/. We are closely monitoring this situation and will adjust our approach as recommended by public health agencies.

We are confident that Artis is well-positioned to handle this economic and market volatility with a strong diversified portfolio of properties and tenants, ample liquidity and a conservative payout ratio. Our stellar team of 220 employees is doing everything possible to ensure cleanliness and safety at all of our properties. I would like to reiterate that we are taking this situation very seriously and are committed to minimizing the impact on our business. This is a rapidly changing situation and we will do our best to provide timely updates on material developments as they occur.

Sincerely,

Armin Martens
President & CEO
March 23, 2020

Letter to Unitholders