TORONTO, May 14, 2014 /CNW/ - H&R Real Estate
Investment Trust ("H&R REIT" or the "REIT") and H&R Finance
Trust (collectively, "H&R") (TSX: HR.UN; HR.DB.D; HR.DB.E and
HR.DB.H) today announced its financial results for the three months
ended March 31, 2014.
SUMMARY OF SIGNIFICANT Q1 2014 ACTIVITY
Assets Held for Sale
The REIT entered into an agreement to sell a 50% non-managing
interest in three enclosed shopping centres within the Primaris
portfolio: Regent Mall in Fredericton,
New Brunswick; McAllister
Place in Saint John, New
Brunswick; and Grant Park in
Winnipeg, Manitoba for a total
price of $219.0 million, at a
capitalization rate of 5.6% before property management fee
income. The purchaser will be assuming 50% of the existing
mortgages. Net proceeds are expected to be approximately
$113.0 million before customary
adjustments. This transaction, as well as the sale of a 50%
non-managing interest in Place d'Orleans in 2013, further leverages the
Primaris management platform to act as both owners and third party
managers of regional shopping centres.
The REIT also entered into a conditional agreement to sell a 50%
non-managing interest in 3777 Kingsway St. in Burnaby, B.C., a 686,697 square foot office
property, for $86.9 million, at a
capitalization rate of 6.2% before property management fee
income. The purchaser will be assuming 50% of the existing
mortgage. Net proceeds are expected to be approximately
$31.0 million before customary
adjustments.
Development of Airport Road Project
The development of the 740,000 square foot state-of-the-art,
built-to-suit distribution centre on the Airport Road lands in
Mississauga, Ontario, is on
schedule, and is expected to be completed by the end of 2014.
Unilever Canada Inc. has agreed to lease the property for 10 years
providing the REIT with an anticipated 7% return on capital
invested before financing.
Acquisitions
The REIT acquired a 65,941 square foot grocery anchored retail
plaza in Florida for U.S.
$13.8 million, at a capitalization
rate of 6.6% with Publix Supermarkets Inc. as the anchor
tenant.
The REIT also acquired a 4.2 acre parcel of land adjacent to its
head office in Toronto, Ontario
for $14.3 million.
Sale of 1618 Station
In March 2014, the REIT sold 1618
Station St., a 73,197 square foot office building in Vancouver, B.C. for $30.5 million. The REIT purchased this property
in November 2004 for $20.1 million. As part of the sale, the
REIT was obligated to repay the $11.8
million existing mortgage on the property.
Mortgage Refinancing
In March 2014, the REIT refinanced
six existing mortgages which had an aggregate outstanding balance
of U.S. $39.7 million. These
mortgages had a weighted average interest rate of 5.48% per annum
and average remaining term of 8.9 years. These six mortgages, along
with three new mortgages on properties that were previously
unencumbered, were refinanced for U.S. $72.9
million at 4.24% per annum for an 8-year term.
Normal Course Issuer Bid ("NCIB")
In February 2014, H&R
announced its intention to launch a NCIB through the facilities of
the TSX to repurchase up to 25 million Stapled Units on the open
market. In April 2014, H&R
received final acceptance from the TSX to commence the NCIB.
To date, H&R has not purchased any Stapled Units.
Operating Highlights
H&R REIT's average remaining term to maturity as at
March 31, 2014 was 10.1 years for
leases and 6.8 years for outstanding mortgages. Occupancy at
March 31, 2014 was 97.9%, down
slightly from 98.1% at December 31,
2013. Leases representing only 2.8% of total rentable area
will expire during the remainder of 2014. As at March 31, 2014, the ratio of H&R's debt to
total assets was 48.9% compared to 49.2% as at December 31, 2013.
Financial Highlights
The following table includes non-Generally Accepted Accounting
Principles ("GAAP") information that should not be construed as an
alternative to comprehensive income (loss) or cash provided by
operations and may not be comparable to similar measures presented
by other issuers as there is no standardized meaning of Funds from
Operations ("FFO") under GAAP. Management believes that these
are meaningful measures of operating performance. Readers are
encouraged to refer to H&R's combined MD&A for further
discussion of non-GAAP information presented.
|
3 months ended March
31
|
2014
|
2013
|
Rentals from
investment properties (millions)
|
$311.9
|
$222.6
|
Property operating
income
|
$181.6
|
$130.9
|
Net income
(millions)
|
$113.1
|
$132.1
|
FFO
(millions)(1)
|
$135.2
|
$90.0
|
FFO per Stapled Unit
(basic)
|
$0.47
|
$0.45
|
FFO per Stapled Unit
(diluted)
|
$0.47
|
$0.44
|
Cash provided by
operations (millions)
|
$189.7
|
$137.1
|
Distributions
(millions) (2)
|
$70.1
|
$49.2
|
Distributions per
Stapled Unit
|
$0.34
|
$0.34
|
Payout ratio per
Stapled Unit (as a % of FFO)
|
72.3%
|
75.6%
|
|
|
(1)
|
H&R's combined
MD&A includes a reconciliation of property operating income to
FFO. Readers are encouraged to review the reconciliation in
the combined MD&A.
|
(2)
|
Distributions exclude
distributions reinvested in units pursuant to H&R's unitholder
distribution reinvestment plan as well as distributions on
exchangeable units.
|
The REIT's adoption of IFRIC 21, Levies, has resulted in
the property taxes for the REIT's U.S. properties all being
recorded in Q1 for the related year. The impact of the adoption of
this policy is a reduction in property operating income of
$21.6 million and $20.1 million for the three months ended
March 31, 2014 and March 31, 2013 respectively. There was no impact
to net income as a result of adopting this accounting standard.
Monthly Distribution Declared
H&R's declared distribution for the month of June is
scheduled as follows:
|
Distribution/Stapled
Unit
|
Annualized
|
Record
date
|
Distribution
date
|
June 2014
|
$0.11250
|
$1.35
|
June 16,
2014
|
June 30,
2014
|
2014 Annual Unitholders' Meeting
H&R will host its annual and special Unitholders' meeting
this year on Thursday, June 19 at
1:00 pm at the TSX Gallery, 130 King
Street West, Toronto, Ontario.
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 41 office, 112 industrial
and 168 retail properties comprising over 53 million square feet
and 2 development projects, with a fair value of approximately
$13 billion. In addition,
H&R REIT owns a 33.6% interest in ECHO Realty LP which owns 178
properties, excluding properties under development and vacant land,
comprising over 7.4 million square feet. 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 leases its properties for long terms to
creditworthy tenants and strives 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 a U.S. corporation which
is a subsidiary of H&R REIT. As at March 31, 2014, the note receivable balance is
U.S. $219.8 million. 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.
Forward-looking Statements
Certain statements in this news release contain 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, 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, the amount of distributions to unitholders.
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 risks 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; real property ownership; availability of cash for
distributions; 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; joint
arrangements risk; currency risk; unitholder liability;
co-ownership interest in properties; competition for real property
investments; environmental matters and 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 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.
SOURCE H&R Real Estate Investment Trust