TORONTO, Feb. 27, 2014 /CNW/ - H&R Real Estate Investment Trust ("H&R
REIT" or the "REIT") and H&R Finance Trust (collectively, "H&R") (TSX:
HR.UN; HR.DB.D; HR.DB.E and HR.DB.H) today announced their financial
results for the year ended December 31, 2013 and further announced
that, subject to the approval of the Toronto Stock Exchange (the
"TSX"), H&R intends to launch a normal course issuer bid through the
facilities of the TSX to repurchase up to 25,000,000 Stapled Units on
the open market. As at February 26, 2014, H&R had 270,303,206
outstanding Stapled Units and the maximum number of Stapled Units to be
purchased under the bid represents approximately 9.4% of the public
float (determined in accordance with the applicable rules of the TSX)
of 265,574,442 Stapled Units. H&R will file a notice of intention with
the TSX in this regard and may commence purchases for a period of a
year after the TSX has accepted the notice of intention.
Purchases of Stapled Units under the normal course issuer bid will be
made primarily through the facilities of the TSX in accordance with TSX
by-laws, rules and policies. The Stapled Units so purchased will be
cancelled. The price paid for any repurchased units will be the market
price of such Stapled Units at the time of acquisition.
"Management believes the repurchase of Stapled Units is an appropriate
use of H&R's general funds in order to increase unitholder value," said
Thomas Hofstedter, President and CEO of H&R. "We are currently
exploring the sale and joint venturing of certain assets the proceeds
of which may be added to H&R's general funds for use to repurchase
Stapled Units under this bid. The normal course issuer bid is a
reflection of the confidence we have in the company and the commitment
we have to using our balance sheet strength to sustain growth and
generate economic value."
2013 Highlights include:
Internalization of property management.
Acquisition of a 1/3rd interest in ECHO Realty LP ("ECHO").
Acquisition of Primaris Retail Real Estate Investment Trust
Completion of the Bow and commencement of the 25-year lease with Encana.
Issuance of the final tranche of Bond Financing on the Bow.
Construction launch of a 740,000 square foot distribution centre, fully
pre-leased to Unilever Canada Inc. ("Unilever").
8% increase in funds from operations ("FFO") per stapled Unit (excluding
2012's $10.2 million gain on extinguishment of debt).
14% increase in distributions per Stapled Unit.
Reduction in debt to total assets from 50.3% in 2012 to 49.2%.
Increase in total assets from $9.9 Billion in 2012 to $13.6 Billion.
Increase in unencumbered asset pool to $1.3 billion.
Capital Transaction Highlights
In September 2013, the REIT completed its agreement with H&R Property
Management Ltd. ("HRPM") to internalize the REIT's property management
function effective July 1, 2013. On closing, a wholly owned subsidiary
of the REIT, H&R REIT Management Services LP ("HRRMSLP"), acquired
HRPM's REIT-related property management business in return for 9.5
million limited partnership units of HRRMSLP, which are exchangeable on
a one-for-one basis for Stapled Units. HRPM has agreed to hold the
exchangeable units (or Stapled Units upon exchange) for five years,
subject to limited exceptions. As a result of the internalization, the
REIT saved $11.9 million in management and incentive fees which would
otherwise have been payable to HRPM and incurred only an additional
$2.2 million in property operating costs for the six months ended
December 31, 2013.
In August 2013, the REIT acquired a one-third interest in ECHO, owner
and developer of a core portfolio of grocery anchored shopping centres
in the United States. ECHO's retail portfolio is primarily tenanted by
Giant Eagle, Inc., the leading grocer in the western Pennsylvania and
eastern Ohio regions, with an average remaining lease term of 12.9
years. ECHO's portfolio consists of 173 investment properties
(excluding properties under development and vacant land) totaling
approximately 7.3 million square feet and is expected to generate, once
its existing development projects are completed, in excess of U.S.
$84.0 million in net operating income annually. The total ECHO
portfolio was valued at U.S. $1.2 billion which equated to a weighted
average capitalization rate of 7.3%. The REIT acquired ECHO limited
partnership units issued from treasury for a total purchase price of
approximately U.S. $296.4 million before closing costs. One-third of
this purchase price was paid in cash on closing, with a further one
third due 18 months from closing and the final one third due 30 months
from closing. However, should ECHO require funds for qualified asset
acquisitions, a portion of the full outstanding deferred payment would
be payable on accelerated demand at ECHO's option. The proceeds
received from the REIT will be used by ECHO to further expand its
retail portfolio by acquiring additional retail properties in the
eastern United States. As part of the transaction, the REIT has
appointed two directors to the ECHO board. ECHO is accounted for as an
equity investment and will be reporting its financial information to
the REIT one month in arrears. ECHO's results for August, September,
October and November 2013 have been reported in H&R's year end combined
financial statements and the management discussion and analysis
During the second quarter of 2013, the REIT acquired 100% of Primaris
which consisted of 26 properties valued at $3.2 billion, and a highly
skilled professional management platform. The acquisition was funded
through the issuance of 62.5 million Stapled Units with a value of $1.4
billion, the assumption of Primaris' outstanding mortgages, convertible
debentures and bank indebtedness totalling $1.6 billion and other
working capital. In addition, holders of 2.1 million exchangeable
units of certain subsidiaries of Primaris received the same number of
exchangeable units of subsidiaries of the REIT, each of which is
exchangeable for 1.166 Stapled Units. The increased market
capitalization resulting from the acquisition of Primaris has enhanced
liquidity for unitholders. Through this transaction, the REIT has also
achieved broader diversification by geographic region and has taken a
dominant position in the enclosed shopping centre asset class at a
pivotal time when significant U.S. and international retailers are
actively expanding into Canada. In July 2013, the REIT, through
Primaris, acquired Peter Pond Mall, the leading enclosed shopping
centre in Fort McMurray, Alberta for $168.5 million, at a
capitalization rate of 6.3% (before property management fee income).
In addition, the REIT sold a 50% non-managing interest in Place
d'Orleans, an enclosed shopping centre in the Ottawa region for $110.6
million, at a capitalization rate of 5.5%, (before property management
fee income). This transaction leverages the Primaris management
platform to act as both owners and third party managers of regional
shopping centres. The REIT has been pleased with its successful
integration of the Primaris portfolio and management platform.
The REIT has now completed the construction of the Bow, a two million
square foot office building in Calgary, Alberta, which is fully leased
to Encana Corporation for a 25-year term. On March 15, 2013, the final
floors were delivered to Encana Corporation and the 25-year lease term
commenced, which will continue until May 14, 2038. Office rent
escalates at 0.75% per annum and parking income escalates at 1.5% per
annum throughout the full 25-year term. Consistent with the REIT's
strategy to secure long-term fixed rate financing, on June 20, 2013,
the REIT issued the final $300.0 million tranche of Series C bonds at
an annual rate of 3.797% due June 13, 2023. These bonds rank pari
passu to the $250.0 million, 3.690% Series A bonds due June 14, 2021
and the $250.0 million, 3.693% Series B bonds due June 14, 2022, which
were both issued on June 14, 2012.
The REIT has commenced construction of a state-of-the-art 740,000 square
foot distribution centre on the REIT's Airport Road lands in
Mississauga, Ontario. Unilever has leased the entire facility for a 10
year term providing the REIT with an anticipated 7% return on capital
invested before financing. It is expected that the development will be
completed by the end of 2014.
H&R REIT's average remaining term to maturity as at December 31, 2013
was 10.3 years for leases and 7.0 years for outstanding mortgages.
Occupancy at December 31, 2013 was 98.1%, down slightly from 98.7% at
December 31, 2012. Leases representing only 3.5% of total rentable
area will expire during 2014. As at December 31, 2013, the ratio of
H&R's debt to total assets was 49.2% compared to 50.3% as at December
The following table includes non-Generally Accepted Accounting
Principles ("GAAP") information that should not be construed as an
alternative to comprehensive income (loss) or cash provided by
operations and may not be comparable to similar measures presented by
other issuers as there is no standardized meaning of FFO under GAAP.
Management believes that these are meaningful measures of operating
performance. Readers are encouraged to refer to H&R's combined MD&A
for further discussion of non-GAAP information presented.
3 months ended December 31
Year ended December 31
Rentals from investment properties (millions)
Property operating income
Net income (millions)
FFO per Stapled Unit (basic)(2)
FFO per Stapled Unit (diluted)(2)
Cash provided by operations (millions)
Cash distributions (millions) (3)
Distributions per Stapled Unit
Payout ratio per Stapled Unit (as a % of FFO)
H&R's combined MD&A includes a reconciliation of net income to FFO.
Readers are encouraged to review the reconciliation in the combined
See below for significant and non-recurring items included in FFO per
Cash distributions exclude distributions reinvested in units pursuant to
H&R's unitholder distribution reinvestment plan.
Net income for the year ended December 31, 2013 has been reduced by
$204.8 million due to transaction costs relating to the Primaris
acquisition and the property management internalization which were
expensed during the year.
During the year ended December 31, 2012, there was a gain on
extinguishment of debt of $10.2 million. Excluding this gain, FFO
would have been $318.8 million and $1.69 per Stapled Unit (basic).
This equates to an increase in FFO per Stapled Unit of 8% in 2013.
Monthly Distribution Declared
H&R's declared distribution for the month of March is scheduled as
March 17, 2014
March 31, 2014
H&R REIT is pleased to announce the following new appointments:
(a) Cheryl Fried has been appointed Executive Vice President,
(b) Blair Kundell has been appointed Vice President, Operations; and
(c) Jason Birken has been appointed Vice President, Finance.
Cheryl previously served as H&R REIT's VP-Accounting. In her new role,
she will oversee corporate finance, accounting and public reporting
responsibilities for H&R REIT. Cheryl earned a Bachelor of Arts at The
City University of New York and holds a Chartered Accountant
Blair previously served as H&R REIT's General Manager, Operations. In
his new role, he will be responsible for building operations, tenant
services and joint health and safety. Blair holds a degree in
Economics from the University of Western Ontario.
Jason previously served as H&R REIT's Controller. In his new role, he
will be responsible for financial reporting, finance and compliance
functions of the Trust, cash and treasury management and investor
relations. Jason earned a Bachelor of Business Administration at
Wilfrid Laurier University and holds a Chartered Accountant
2014 Annual Unitholders' Meeting
H&R will host their Annual Unitholders' meeting this year on Thursday,
June 19 at 1:00 pm at the TSX Gallery, 130 King Street West, Toronto,
About H&R REIT and H&R Finance Trust
H&R REIT is an open-ended real estate investment trust, which owns a
North American portfolio of 42 office, 112 industrial and 167 retail
properties comprising over 53 million square feet and 2 development
projects, with a fair value of approximately $13 billion. In addition,
H&R REIT owns a 33.7% interest in ECHO Realty LP which owns 173
properties, excluding properties under development and vacant land,
totalling 7.3 million square feet. The foundation of H&R REIT's
success since inception in 1996 has been a disciplined strategy that
leads to consistent and profitable growth. H&R REIT leases its
properties for long terms to creditworthy tenants and strives to match
those leases with primarily long-term, fixed-rate financing.
H&R Finance Trust is an unincorporated investment trust, which primarily
invests in notes issued by a U.S. corporation which is a subsidiary of
H&R REIT. As at December 31, 2013, the note receivable balance is U.S.
$219.8 million. In 2008, H&R REIT completed an internal reorganization
which resulted in each issued and outstanding H&R REIT unit trading
together with a unit of H&R Finance Trust as a "Stapled Unit" on the
Toronto Stock Exchange.
Certain statements in this news release contain forward-looking
information within the meaning of applicable securities laws (also
known as forward-looking statements) including, among others,
statements relating to the objectives of H&R REIT and H&R Finance
Trust, strategies to achieve those objectives, H&R's beliefs, plans,
estimates, and intentions, and similar statements concerning
anticipated future events, results, circumstances, performance or
expectations that are not historical facts including, the amount of
distributions to unitholders. Forward-looking statements generally can
be identified by words such as "outlook", "objective", "may", "will",
"expect", "intend", "estimate", "anticipate", "believe", "should",
"plans", "project", "budget" or "continue" or similar expressions
suggesting future outcomes or events. Such forward-looking statements
reflect H&R's current beliefs and are based on information currently
available to management. These statements are not guarantees of future
performance and are based on H&R's estimates and assumptions that are
subject to risks and uncertainties, including those discussed in H&R's
materials filed with the Canadian securities regulatory authorities
from time to time, which could cause the actual results and performance
of H&R to differ materially from the forward-looking statements
contained in this news release. Those risks and uncertainties include,
among other things, risks related to: prices and market value of
securities of H&R; real property ownership; availability of cash for
distributions; restrictions pursuant to the terms of indebtedness;
liquidity; credit risk and tenant concentration; interest rate and
other debt related risk; tax risk; ability to access capital markets;
dilution; lease rollover risk; construction risks; joint arrangements
risk; currency risk; unitholder liability; co-ownership interest in
properties; competition for real property investments; environmental
matters and changes in legislation and indebtedness of H&R. Material
factors or assumptions that were applied in drawing a conclusion or
making an estimate set out in the forward-looking statements include
that the general economy is stable; local real estate conditions are
stable; interest rates are relatively stable; and equity and debt
markets continue to provide access to capital. H&R cautions that this
list of factors is not exhaustive. Although the forward-looking
statements contained in this news release are based upon what H&R
believes are reasonable assumptions, there can be no assurance that
actual results will be consistent with these forward-looking
statements. All forward-looking statements in this news release are
qualified by these cautionary statements. These forward-looking
statements are made as of today, and H&R, except as required by
applicable law, assumes no obligation to update or revise them to
reflect new information or the occurrence of future events or
SOURCE: H&R Real Estate Investment Trust
For further information:
Additional information regarding H&R REIT and H&R Finance Trust is available at www.hr-reit.com and on www.sedar.com. For more information, please contact Larry Froom, Chief Financial Officer, H&R REIT, 416-635-7520, or e-mail email@example.com.