H&R REIT Increases Distributable Cash 8% in Second Quarter 2008

    TORONTO, Aug. 7 /CNW/ - H&R Real Estate Investment Trust (TSX: HR.UN)
announced today that its distributable cash increased by 8% (1% on a per-unit
basis, basic) in the three months ended June 30, 2008 compared to the second
quarter last year, primarily due to H&R's property acquisitions and
contractual rent escalations. H&R's cash distributions increased 12% (5% per
unit) in the second quarter compared to the same period a year ago.

    Financial Highlights

    H&R management considers distributable cash to be an indicative measure
in evaluating the Trust's performance. The following table includes non-GAAP
(Generally Accepted Accounting Principles) information that should not be
construed as an alternative to net earnings or cash flows from operations and
may not be comparable to similar measures presented by other issuers as there
is no standardized meaning of distributable cash under GAAP.

                              ----------------------- -----------------------
                              3 months ended June 30  6 months ended June 30
                              ----------------------- -----------------------
                                    2008        2007        2008        2007
    Distributable cash
     (millions)(*)                 $55.4       $51.4      $110.5       $99.8
    Distributable cash per
     unit (basic)                 $0.400      $0.395      $0.806      $0.783
    Cash distributions
     (millions)                    $50.1       $44.9       $98.9       $87.6
    Cash distributions per
     unit                         $0.360      $0.343      $0.720      $0.685

    The following table includes results reported in accordance with Canadian

                              ----------------------- -----------------------
                              3 months ended June 30  6 months ended June 30
                              ----------------------- -----------------------
                                    2008        2007        2008        2007
    Rentals from income
     properties (millions)        $151.3      $142.5      $298.3      $286.6
    Net earnings
     (millions)(*)                 $32.9     ($102.8)      $72.7      ($74.7)
    Net earnings per unit
     (basic)                       $0.25      ($0.83)      $0.56      ($0.62)
    Cash provided by
     operations (millions)(*)      $50.4       $28.6      $121.7       $98.1
    (*) Reconciliations of distributable cash to net earnings and to cash
        provided by operations are included in H&R's MD&A.

    The increases in rentals from income properties of 6% in the second
quarter and 4% year to date were relatively modest for H&R, due to the
unusually low number of property acquisitions completed over the past 12
months. Net earnings, excluding provisions for future income taxes, increased
15% in the second quarter (31% to date), primarily as a result of gains on
sales of income properties.
    H&R's unaudited Consolidated Financial Statements and Management's
Discussion and Analysis for the second quarter 2008 are available on the
Trust's website (www.hr-reit.com) and have been concurrently filed on SEDAR

    Operating Strategy Highlights

    H&R's operating strategy is to take a disciplined approach to investing
in quality commercial properties that produce sustainable and growing
distributable cash and attractive returns on equity for unitholders. H&R has a
strong track record of leasing its properties long term to creditworthy
tenants and matching those leases with primarily long-term, fixed-rate
financing. As a result, the REIT reported average terms to maturity of 12
years for its leases and 10 years for its mortgages, and leases representing
only 9% of total rentable area will expire by the end of 2012.

    Property Development Highlights

    During the three months ended June 30, 2008:

    -   H&R invested $56 million in its landmark development project in
        Calgary ($300 million year to date). With a budgeted cost of
        $1.4 billion, The Bow is a two million sq.ft, office and retail
        complex. The 59-storey office tower is pre-leased to EnCana
        Corporation for 25 years. The REIT has entered into fixed-price
        contracts for more than 75% of the project's $850 million in budgeted
        hard costs. H&R is expecting to spend approximately $285 million over
        the next 12 months, which will be funded from cash on hand and from
        its available operating credit (which together amounted to over
        $360 million as at June 30, 2008) and net proceeds from additional
        sales, if any, of non-strategic assets.

    -   H&R incurred expenditures of $23 million ($73 million year to date)
        for its 348,000 sq.ft. Phase III expansion of Bell Canada's
        $135-million, state-of-the-art office complex in Mississauga,
        Ontario. The project is expected to be completed in January 2009.

    -   The REIT also completed construction of its 910,000 sq.ft., cold-
        storage warehouse and distribution facility in Ajax, Ontario, on
        schedule, at a final all-in cost of $140 million. The tenant took
        occupancy and the 20-year lease commenced on May 1, 2008. H&R secured
        a 10-year, $95-million mortgage on the property with a contractual
        interest rate of 5.5%, in addition to a vendor take-back mortgage of
        $35 million at 6% interest rate.

    Capital Transactions Highlights

    In the second quarter this year:

    -   In May, H&R sold a 175,800 sq.ft. retail property in Deptford, New
        Jersey, generating gross proceeds of $13.8 million.

    -   In June, the REIT completed the sale of 11 retail properties
        comprising approximately 1.1 million sq.ft. for gross proceeds of
        approximately $156 million and net proceeds of $72 million.

    As at June 30, 2008, H&R reported financial ratios of 54.8% for debt to
gross book value (calculated in accordance with the declaration of trust)
versus 58.8% as at December 31, 2007, and 50% for non-recourse debt to total
debt (49.5% at year end 2007).

    Monthly Distribution Declared

    H&R also announced a cash distribution of $0.12 per unit (representing
$1.44 on an annualized basis), which will be scheduled as follows.

                             Record date       Distribution date
    September 2008          September 19            September 30
    October  2008             October 22              October 31
    November 2008            November 19             November 28

    About H&R REIT

    H&R REIT is a TSX-listed, open-ended real estate investment trust, which
owns a North American portfolio of 35 office, 124 industrial and 129 retail
properties comprising 43 million square feet, with a net book value of
$4.5 billion. The foundation of H&R's success since inception in 1996 has been
a disciplined strategy that leads to consistent and profitable growth.
Additional information regarding H&R REIT is available at www.hr-reit.com and
on www.sedar.com.

    Certain information in this news release contains forward-looking
statements within the meaning of applicable securities laws including, among
others, statements relating to the Trust's objectives, strategies to achieve
those objectives, the Trust's beliefs, plans, estimates, and intentions, and
similar statements concerning anticipated future events, results,
circumstances, performance or expectations that are not historical facts.
Forward-looking statements generally can be identified by words such as
"outlook", "objective", "may", "will", "expect", "intend", "estimate",
"anticipate", "believe", "should", "plans" or "continue" or similar
expressions suggesting future outcomes or events. Such forward-looking
statements reflect the Trust's current beliefs and are based on information
currently available to management. These statements are not guarantees of
future performance and are based on the Trust's estimates and assumptions that
are subject to risk and uncertainties, including those discussed in the
Trust's materials filed with the Canadian securities regulatory authorities
from time to time, which could cause the actual results and performance of the
Trust to differ materially from the forward-looking statements contained in
this news release. Those risks and uncertainties include, among other things,
risks related to: Unit prices; availability of cash for distributions;
development and financing relating to the Bow development; 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; real property; currency risk; government regulation; investment
eligibility; unitholder liability; co-ownership interest in properties;
dependence on key personnel; mezzanine financing credit risk; competition for
real property investments influence of H&R Property Management over the REIT;
potential conflicts of interest; redemption right; statutory remedies,
environmental matters; reliance on one corporation for management of a
significant number of the Trust's properties; changes in legislation and
indebtedness of the Trust. 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 remains stable; interest rates are
relatively stable; and equity and debt markets continue to provide access to
capital. The Trust cautions that this list of factors is not exhaustive.
Although the forward-looking statements contained in this news release are
based upon what the Trust 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 circumstances.

For further information:

For further information: Larry Froom, Chief Financial Officer, H&R REIT,
(416) 635-7520, or e-mail info@hr-reit.com

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