H&R REIT increases distributable income per unit by 6% in second quarter 2007

    TORONTO, Aug. 9 /CNW/ - H&R Real Estate Investment Trust (TSX: HR.UN)
announced today a 20% increase in distributable income (DI) in the second
quarter 2007 (19% year to date) compared to the same periods last year, with
DI per unit having increased by 6% (5% year to date). These increases were
primarily attributable to the REIT's continuing property acquisitions, and to
contractual rent escalations. H&R also paid 3% more distributions per unit to
unitholders in the second quarter than it did 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      6 months ended
                                             June 30             June 30
                                          2007      2006      2007      2006
    Distributable income (millions)(*)   $51.4     $42.9     $99.8     $84.1
    Distributable income per unit
     (basic)                            $0.395    $0.371    $0.783    $0.743
    Total distributions paid
     (millions)                          $44.9     $38.5     $87.6     $75.4
    Total distributions paid per unit   $0.343    $0.334    $0.685    $0.667

    The following table includes results reported in accordance with Canadian

                                          3 months ended      6 months ended
                                             June 30             June 30
                                          2007      2006      2007      2006
    Rentals from income properties
     (millions)                         $151.4    $135.3    $304.7    $264.0
    Net earnings (millions)(*)         ($102.8)    $20.7    ($74.7)    $41.1
    Net earnings per unit (basic)       ($0.83)    $0.19    ($0.62)    $0.39
    Cash provided by operations
     (millions)(*)                       $28.6     $37.0     $98.1     $90.5
    (*) The reconciliations of distributable income to net earnings, and to
    cash provided by operations, are included in H&R's MD&A.

    In June 2007, the Federal Budget Implementation Act 2007 ("Bill C-52")
received Royal Assent, including 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 a future income tax expense of $134 million as a
non-cash charge to its consolidated earnings for the 3- and 6-month periods
ended June 30, 2007, and a future income tax liability of the same amount on
its balance sheet. 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 are pleased to report a
portfolio average occupancy rate of nearly 100%, a 3% increase in overall rent
per square foot, and a 6% increase in distributable income per unit in the
second quarter. We have also begun construction of our $1.1-billion landmark
development of The Bow in Calgary."
    H&R's Consolidated Financial Statements and Management's Discussion and
Analysis for the period ended June 30, 2007 will be available on the Trust's
website (www.hr-reit.com) and concurrently filed on SEDAR (www.sedar.com).

    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 second quarter of 99.7%, average terms to maturity of
12.2 years for its leases and 10.6 years for its mortgages, and leases
representing only 11.5% of total rentable area will expire by the end of 2011.

    Capital Transaction Highlights

    The REIT closed a public offering of 8,860,000 Trust units at a price of
$25.30/unit to raise gross proceeds of $224.2 million in May 2007. The net
proceeds are being used to fund the acquisition of additional properties and
future development commitments, and for general corporate purposes.
    As at June 30, 2007, H&R reported financial ratios of 58.3% for total
debt to gross book value (61.0% at year end 2006), and 56.2% for non-recourse
debt to total debt (55.3% at year end 2006).

    Subsequent Events

    On July 4, 2007, the Trust disposed of a 79,000 square foot industrial
building located in Markham, Ontario for gross proceeds of $7.1 million, and
on July 10, 2007, the Trust purchased a 53,000 square foot retail property in
Metairie, Louisiana for cash consideration of $12.6 million.

    Monthly Distributions Declared

    H&R also announced cash distributions of $0.1142 per unit (representing
$1.3704 on an annualized basis), which will be scheduled as follows.

                        Record date     Distribution date
    September 2007     September 19          September 28
    October 2007         October 22            October 31
    November 2007       November 21           November 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, 114 industrial and 144 retail
properties comprising 41 million square feet, with a net book value of
$4.4 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: please call Larry Froom, Chief Financial
Officer, (416) 635-7520, or e-mail info@hr-reit.com.

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