H&R REIT TO ACQUIRE ATRIUM ON BAY IN DOWNTOWN TORONTO; PROVIDES IFRS UPDATE ON VALUATION OF INVESTMENT PROPERTIES
January 04 2011 - 5:00PM
PR Newswire (Canada)
TORONTO, Jan. 4 /CNW/ -- TORONTO, Jan. 4 /CNW/ - H&R Real
Estate Investment Trust (TSX: HR.UN) ("H&R REIT") is pleased to
announce that it has entered into an agreement to purchase 595 Bay
Street, 20 & 40 Dundas Street West and 306 Yonge Street in
Toronto, which are collectively known as the "Atrium on Bay"
property for a total purchase price of $344.8 million. The year 1
capitalization rate is expected to be approximately 6.5% and it is
anticipated that the acquisition will close by April 2011. The
property comprises 915,378 sq.ft. of 'Class A' office space and
135,929 sq.ft. of prime retail premises. CIBC, Legal Aid Ontario,
Public Guardian & Trustee, Land Registry Office, Hydro One
Networks, Hunter Keity Muntz & Beatty, University Health
Network and other government tenants comprise approximately 75% of
the total rental area. The property is 98% occupied and has an
average lease term to expiry of 5 years. The property has one of
the largest floor plates in downtown Toronto, which can accommodate
office tenants requiring premises from 1,500 sq.ft. to 88,000
sq.ft. on a single floor. In addition to having direct underground
access to the subway and the PATH, the property is in close
proximity to City Hall, Queen's Park, the provincial court
buildings, the major downtown hospitals and Ryerson University. The
purchase price will be satisfied by the assumption of a
non-recourse, $190-million mortgage having a remaining term to
maturity of approximately 7 years, with the balance of the purchase
price currently expected to be paid in cash drawn from H&R
REIT's operating facility. H&R REIT President and CEO Tom
Hofstedter said, "Below market rents, excess density for expansion
of the office space, investment grade institutional tenants, and
increasing demand for efficient, well priced and strategically
located office and retail space are some of the primary reasons why
we feel confident that the Atrium on Bay will provide our
unitholders with reliable and increasing returns on their
investment and will be a prestigious addition to our portfolio of
high quality properties." IFRS Update ----------- International
Financial Reporting Standards ("IFRS") became effective on January
1, 2011. As a result, H&R REIT's 2011 financial statements will
include 2010 comparative figures under IFRS. H&R REIT's first
reporting period under IFRS will commence with the interim
financial statements for the three months ending March 31, 2011.
For the purpose of its transition to IFRS, H&R REIT will
disclose the fair value of its investment properties at January 1,
2010 and September 30, 2010 in the notes to its financial
statements as follows:
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January 1, 2010 September 30, 2010 (billions) (billions)
-------------------------------------------------------------------------
Net Book Value of income-producing properties as reported under
Canadian GAAP(1) $4.1 $4.1
-------------------------------------------------------------------------
IFRS note disclosure to be reported $5.1 $5.3
-------------------------------------------------------------------------
Increase in value of income-producing properties $1.0 $1.2
-------------------------------------------------------------------------
(1) These amounts include tenant inducements, deferred leasing
costs and intangible liabilities. The majority of H&R REIT's
portfolio (i.e. 268 properties) was appraised by a leading
independent national real estate appraisal firm as at January 1,
2010. The fair value of these properties was appraised at $4.9
billion. The 13 remaining properties were valued internally by
H&R REIT as at January 1, 2010. The September 30, 2010 fair
values were all internally valued. Based on the foregoing, the
total weighted average overall capitalization rate ("OCR") was
determined to be 7.71% on January 1, 2010 and 7.45% on September
30, 2010. More specifically, weighted average OCRs by geographic
segments were as follows: ---------------------------------------
January 1, 2010 September 30, 2010
-------------------------------------------------------------------------
Canadian - aggregated capitalization rate 7.48% 7.28%
-------------------------------------------------------------------------
United States - aggregated capitalization rate 8.60% 8.15%
-------------------------------------------------------------------------
H&R REIT will elect to use the cost model to value its
investment properties when preparing financial statements as part
of the first-time adoption of IFRS. However, as provided under
IFRS, H&R REIT will elect to use fair value as the deemed cost
for 13 of its properties. This election will result in a net
increase to investment properties on the balance sheet as at
January 1, 2010 of approximately $531 million, net of impairments.
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 35 office, 118 industrial and 130 retail
properties comprising over 39 million square feet, with a net book
value of $4.1 billion. 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 strives to lease
its properties long term to creditworthy tenants and 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 an H&R REIT subsidiary. 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. Additional information regarding
H&R REIT and H&R Finance Trust is available at
www.hr-reit.com and on www.sedar.com. Forward-looking Statements
Certain information in this news release contains 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 (together,"H&R"), 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, in particular, H&R REIT's
expectation regarding its acquisition of the "Atrium on Bay"
property and H&R's expectation concerning disclosure under and
transition to IFRS. 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 risk 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; availability of cash for
distributions; development and financing relating to The Bow
development; 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;
currency risk; unitholder liability; co-ownership interest in
properties; competition for real property investments;
environmental matters; reliance on one corporation for management
of substantially all H&R REIT's properties; 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 is 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. Larry Froom, Chief Financial Officer,
H&R REIT, 416-635-7520, or e-mail info@hr-reit.com
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