TORONTO,
Nov. 13, 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 and nine months ended September 30,
2014.
Summary of Significant Q3 2014 Activity
Primaris Portfolio Activity
In September 2014,
the REIT acquired a 50% managing interest in Kildonan Place, an
enclosed shopping centre in Winnipeg,
MB for $69.7 million, at a
capitalization rate of 6% including property management fee income.
Kildonan Place is the third largest enclosed shopping centre in
Winnipeg. The site has
approximately 7.5 acres of excess lands which after rezoning would
result in total excess density of approximately 100,000 square feet
for potential future development. This transaction, as well
as previously announced dispositions in Q2 2014 of a 50%
non-managing interest in Regent Mall in Fredericton, NB; McAllister Place in Saint John, NB; and Grant Park in Winnipeg, MB continues to leverage the
Primaris management platform as an owner and third party manager of
regional shopping centres.
H&R Portfolio Dispositions
In July 2014, the
REIT sold 50 Cambridge St., a 69,020 square foot retail property in
Worcester, MA for U.S.$16.0 million.
In September 2014,
the REIT sold 200 Chisholm Dr., a 91,828 square foot vacant
industrial building in Milton, ON
for approximately $7.3 million.
In September 2014,
the REIT sold a four property portfolio for approximately
U.S.$29.5 million. These four
properties total 163,766 square feet and are located in
Tennessee, Georgia and South
Carolina. As part of the sale, the REIT repaid the existing
mortgages on these properties for U.S.$13.7
million.
Development of Airport Road Project
The development of the 744,922 square foot
state-of-the-art, built-to-suit distribution centre on the Airport
Road lands in Mississauga, ON, was
completed ahead of schedule and, as a result, the property is now
classified in H&R's Financial Statements as an investment
property. Unilever Canada Inc.'s lease for 10 years commenced
October 1, 2014 and the REIT is
expected to earn a 7% return on its cost.
Mortgage Financing and Unencumbered Pool
In August 2014,
the REIT repaid two mortgages totalling $92.7 million which were bearing interest at a
weighted average interest rate of 6.4%. As at September 30, 2014, excluding H&R's interests
in real estate assets included in equity accounted investments, the
REIT had 49 unencumbered properties with a fair value of
approximately $1.5 billion.
Also, due to the REIT's 18-year history and management's
conservative strategy of securing long-term financing on individual
properties, the REIT has numerous other properties with low loan to
value ratios. As at September 30,
2014, the REIT had 41 properties valued at approximately
$1.8 billion which are encumbered
with mortgages totaling $403.6
million. In this pool of assets, the average loan to value
is 22.9%, the maximum loan to value is 29.6% and the minimum loan
to value is 8.4%. In August
2014, DBRS Limited upgraded H&R's credit rating from BBB
with a Stable trend to BBB (high) with a Stable trend. The
REIT believes the rating upgrade is primarily due to the
stabilization of the Bow, the successful integration of Primaris
and recent high-quality property investments, which have resulted
in significant operating income and portfolio growth, lower debt
levels, a growing unencumbered asset pool, and an increase in
H&R's coverage ratios.
Operating Highlights
H&R REIT's average remaining term to
maturity as at September 30, 2014 was
9.8 years for leases and 6.4 years for outstanding mortgages.
As at September 30, 2014, the ratio
of H&R's debt to total assets was 47.8% 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 Management Discussion and Analysis ("MD&A") for
further discussion of non-GAAP information presented.
|
3
months ended September 30 |
9
months ended September 30 |
2014 |
2013 |
2014 |
2013 |
Rentals from
investment properties (millions) |
$302.4 |
$305.8 |
$919.2 |
$822.4 |
Property operating income
(millions) |
$204.8 |
$207.8 |
$595.0 |
$537.6 |
Net income (loss) (millions) |
$136.5 |
($111.1) |
$286.9 |
$209.9 |
FFO (millions)(1) |
$134.5 |
$129.1 |
$404.9 |
$338.5 |
FFO per Stapled Unit (basic) |
$0.46 |
$0.45 |
$1.40 |
$1.35 |
FFO per Stapled Unit (diluted) |
$0.46 |
$0.45 |
$1.39 |
$1.32 |
Cash provided by operations
(millions) |
$207.7 |
$220.0 |
$567.6 |
$413.8 |
Distributions per Stapled Unit |
$0.33 |
$0.33 |
$1.01 |
$1.01 |
Payout ratio per Stapled Unit (as a %
of FFO) |
71.7% |
73.3% |
72.1% |
74.8% |
(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.
Subsequent Events
In October 2014,
the REIT repaid two U.S. mortgages of approximately
U.S.$19.0 million, bearing interest
at a weighted average rate of 5.4%.
In October and November
2014, the REIT repaid 11 Canadian mortgages of approximately
$70.0 million bearing interest at a
weighted average rate of 5.8%.
Monthly Distribution Declared
H&R's declared distribution for the month of
December is scheduled as follows:
|
Distribution/Stapled Unit |
Annualized |
Record date |
Distribution date |
December 2014 |
$0.11250 |
$1.35 |
December 15, 2014 |
December 31, 2014 |
About H&R REIT and H&R Finance
Trust
H&R REIT is Canada's largest diversified real estate
investment trust with a total capitalization of approximately
$12.9 billion as at September 30, 2014. H&R REIT is a fully
internalized REIT and has ownership interests in a North American
portfolio of high quality office, retail and industrial properties
comprising over 55 million square feet.
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. The
current note receivable balance is U.S. $220.5 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, 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