H&R REIT Increases Distributable Income per unit by 6% in Fourth Quarter, 5% in 2007

    TORONTO, Feb. 29 /CNW/ - H&R Real Estate Investment Trust (TSX: HR.UN)
announced today that its distributable income (DI) increased by 18% in the
fourth quarter 2007 compared to the fourth quarter 2006 (19% in 2007 compared
to 2006) and that DI per unit rose 6% in the fourth quarter and 5% in the year
when compared with corresponding periods in 2006. These increases were
primarily attributable to the REIT's continuing property acquisitions and to
contractual rent escalations. H&R's cash distributions increased in 2007 by
16% in total, and by 3% per unit when compared to 2006.

    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     12 months ended
                                            Dec. 31             Dec. 31
                                         2007      2006      2007      2006
    Distributable income (millions)(*)   $54.1     $46.0    $206.2    $173.8
    Distributable income per
     unit (basic)                       $0.401    $0.378    $1.572    $1.494
    Total distributions paid (millions)  $46.3     $40.8    $180.0    $155.4
    Total distributions paid per unit   $0.343    $0.334    $1.370    $1.334
    (*) Reconciliations of DI to net earnings and to cash provided by
        operations are included in H&R's MD&A.

    The following table includes results reported in accordance with Canadian
                                         3 months ended     12 months ended
                                            Dec. 31             Dec. 31
                                         2007      2006      2007      2006
    Rentals from income properties
     (millions)                         $149.5    $142.9    $579.5    $527.5
    Net earnings/(loss) (millions)(*)    $48.7     $20.6     ($2.2)    $86.4
    Net earnings/(loss) per unit (basic) $0.38     $0.18    ($0.02)    $0.79
    Cash provided by operations
     (millions)(*)                       $63.4     $48.0    $196.6    $169.2

    The net loss for the year 2007 was the result of recording a future
income tax expense of $115.6 million as a non-cash charge to its consolidated
earnings in 2007. For the 3 months ended December 31, 2007 there was a
reversal of future income taxes which resulted in an increase to net earnings
of $20.5m. 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 if the technical rules of Bill C-52 are 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's Consolidated Financial Statements and Management's Discussion and
Analysis for the year ended December 31, 2007 will be available on the Trust's
website (www.hr-reit.com) and concurrently filed on SEDAR (www.sedar.com).
    H&R President and CEO Tom Hofstedter said, "Distributable income per unit
increased 5% from last year mainly due to $261 million of property
acquisitions, and contractual rent escalations. Our diversified portfolio of
commercial properties, leased long-term to creditworthy tenants, was 99.7%
occupied in 2007".

    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 average terms to maturity of 12.1
years for its leases and 10.2 years for its mortgages, and leases representing
11% of total rentable area will expire by the end of 2012.

    Capital Transactions Highlights

    During the fourth quarter 2007, H&R purchased a 910,000 square foot
distribution facility currently under construction in the Greater Toronto
Area. H&R acquired the project from a national, investment grade company with
a current market capitalization in excess of $5 billion, and will lease the
building to this company for a term of 20 years. The project has been financed
by a vendor take-back mortgage for two years and a separate construction loan
that will be replaced by long-term financing when the tenant takes occupancy.
The building is estimated to cost $140 million at completion, which is
expected to be in May 2008.
    H&R renewed its short-term, operating credit facility, which has been
provided by the same major Canadian bank since the REIT's inception. The
facility has been increased from $200 million to $300 million subject to
providing further properties as security and can be drawn in either Canadian
or US dollars.
    By year end, H&R had invested $190 million in its $1.4-billion landmark
development in Calgary called The Bow - a two million square foot, office and
retail complex, where the REIT has completed excavation and begun pouring
foundations for EnCana Corporation's future 59-storey head office tower.
    As at December 31, 2007, H&R reported financial ratios of 60.9% for total
debt to gross book value (61.0% at year end 2006), and 49.5% for non-recourse
debt to total debt (55.3% at year end 2006).

    Monthly Distribution Declared

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

                  Record date    Distribution date
    March 2008      March 18          March 31
    April 2008      April 21          April 30
    May 2008          May 20            May 30

    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 141 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 within 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 including those risks
relating to the Bow development; 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, H&R REIT,
(416) 635-7520, or e-mail info@hr-reit.com.

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