H&R REIT increases distributable income per unit by 5% in third quarter 2007

    TORONTO, Nov. 9 /CNW/ - H&R Real Estate Investment Trust (TSX: HR.UN)
announced today that it increased distributable income (DI) by 20% in the
third quarter 2007 (19% year to date) compared to the same periods last year,
and that DI per unit rose 5% both in the quarter and year to date. These
increases were primarily attributable to the REIT's continuing property
acquisitions, and to contractual rent escalations. The cash distributions paid
by H&R for the nine months ended September 30, 2007 increased by 3% over the
same period last year.

    Financial Highlights

    H&R management considers distributable income to be an indicative measure
in evaluating the Trust's performance. The following table, however, 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 income as
prescribed by GAAP.

                                     3 months ended          9 months ended
                                        Sept. 30                Sept. 30
                                    2007        2006        2007        2006
    Distributable income
     (millions)(*)                 $52.2       $43.5      $152.1      $127.5
    Distributable income
     per unit (basic)             $0.388      $0.370      $1.171      $1.113
    Total distributions paid
     (millions)                    $46.1       $39.2      $133.7      $114.6
    Total distributions
     paid per unit                $0.343      $0.334      $1.028      $1.001

    The following table includes results reported in accordance with Canadian

                                     3 months ended          9 months ended
                                        Sept. 30                Sept. 30
                                    2007        2006        2007        2006
    Rentals from income
     properties (millions)        $152.1      $140.3      $456.6      $404.1
    Net earnings/(loss)
     (millions)(*)                 $23.9       $24.8      ($50.9)      $65.9
    Net earnings/(loss)
     per unit (basic)              $0.19       $0.22      ($0.42)      $0.61
    Cash provided by operations
     (millions)(*)                 $35.1       $34.6      $133.2      $121.3
    (*) Reconciliations of DI to net earnings and to cash provided by
        operations are included in H&R's MD&A.

    The net loss year to date was the result of recording a future income tax
expense of $136.2 million as a non-cash charge to its consolidated earnings in
the 9-month period ended September 30, 2007 ($2.2 million for the 3 months
ended September 30, 2007), and a future income tax liability of the same
amount on its balance sheet. The Federal Budget Implementation Act 2007 ("Bill
C-52") includes new provisions for income taxation of a specified investment
flow-through trust such as H&R. Bill C-52 will not apply to a REIT if it meets
prescribed conditions relating to the nature of its income and investments.
Although H&R currently complies with all foreign income and property
limitations for its US portfolio, it does not meet certain other technical
requirements for the REIT exemption. H&R does intend to qualify for the REIT
exemption before 2011, however, GAAP nevertheless requires H&R to include this
future income tax expense. This charge has no impact on H&R's cash flows or
distributions, and will be reversed should the technical rules of the Bill be
amended or, if not amended, when H&R restructures certain investments, in both
cases to enable H&R to qualify for the REIT exemption.
    H&R President and CEO Tom Hofstedter said, "We continued to maintain
stable but growing earnings with an overall average occupancy rate of our
portfolio at nearly 100% and a weighted average 2% growth in rent per square
foot in the third quarter, and $267 million of accretive acquisitions in the
first nine months of the year. This allowed us to increase distributable
income per unit in the quarter by 5%. Excavation is currently under way on our
$1.1-billion landmark development of The Bow in Calgary, and we continue to
pursue additional acquisitions and development opportunities."
    H&R's Consolidated Financial Statements and Management's Discussion and
Analysis for the period ended September 30, 2007 will be available on the
Trust's website (www.hr-reit.com) and 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 income 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 a high portfolio occupancy rate at
the end of the third quarter of 99.7%, average terms to maturity of 12.2 years
for its leases and 10.4 years for its mortgages, and leases representing only
12.8% of total rentable area will expire by the end of 2012.

    Capital Transaction Highlights

    During the third quarter 2007, H&R:
    -   sold a 79,000 square foot industrial building located in Markham, ON
        for gross proceeds of $7.1 million,
    -   acquired a 53,000 square foot retail property in Metairie, Louisiana
        for cash consideration of $12.6 million,
    -   disposed of two retail properties in the south-east US (total
        28,000 sq.ft.; gross proceeds of $8.4 million),
    -   purchased a 1.7 million sq.ft. portfolio of 12 refrigerated
        distribution facilities in six provinces for a cash consideration of
        $215 million, and
    -   exercised its purchase option and commenced construction for the
        348,000 sq.ft. Phase III expansion of Bell Canada's state-of-the-art
        office complex in Mississauga, ON. The project has an estimated
        construction cost of $125 million and is expected to be completed by
        July 2009.

    As at September 30, 2007, H&R reported financial ratios of 60% for total
debt to gross book value (61% at year end 2006), and 51.1% for non-recourse
debt to total debt (55.3% at year end 2006).

    Monthly Distribution Declared

    H&R also announced a cash distribution of $0.1142 per unit (representing
$1.3704 on an annualized basis), to be paid on December 28 to Unitholders on
record as of December 17, 2007.

    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, 125 industrial and 142 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.

    This news release contains forward-looking statements with the meaning of
applicable securities laws, including statements relating to the Trust's
objectives, and strategies to achieve those objectives, and similar statements
concerning anticipated future events, results, circumstances, performance or
expectations that are not historical facts. 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: price of the units; real property ownership; availability of cash
flow; competition for real property investments; government regulation;
interest rates and financing; environmental matters; redemption of the units;
unitholder liability; co-ownership interest in properties; reliance on one
corporation for management of a significant number of the Trust's properties;
dependence on key personnel; potential conflicts of interest; changes in
legislation; investment eligibility; construction risks; currency risk; tax
treatment of income trusts; dilution; ability to access capital markets; cash
distributions; indebtedness of the Trust; and statutory remedies. 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; acquisition
capitalization rates are stable; competition for acquisitions of high quality
office, industrial and retail properties remains strong; 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.
The forward-looking statements are made only as of the date of this news
release and the Trust, 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, (416)
635-7520, or e-mail info@hr-reit.com

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