TORONTO, May 14, 2018 /CNW/ - H&R Real Estate
Investment Trust ("H&R REIT") (TSX: HR.UN) has entered into an
agreement to sell 63 U.S. retail properties (the "Portfolio") for
approximately U.S. $633 million,
subject to customary closing conditions. The sale includes all of
H&R REIT's retail properties in the
United States, other than 16 gas stations and convenience
stores.
Thomas Hofstedter, H&R REIT's
President and CEO, said: "This transaction follows through on our
strategy of narrowing and streamlining our focus, while enhancing
the quality and growth profile of our portfolio. A significant
share of the net proceeds will be used to further grow our Lantower
Residential division which, since its inception a little over 3
years ago, has grown to approximately 15% of our real estate assets
today."
The sale price equates to a 7.3% capitalization rate on 2018
forecasted property operating income and is in line with IFRS fair
values before mortgage prepayment and other closing costs.
Management does not expect to incur any material income tax expense
resulting from the sale as substantially all of the taxable gains
will be deferred through Internal Revenue Code Section 1031
exchanges. Closing is expected to occur in June 2018.
Part of the proceeds from the sale will be used to repay U.S.
$205.9 million of mortgage debt on
the Portfolio (weighted average interest rate of 4.8%). The
balance of the proceeds are expected to fund Lantower Residential
acquisitions and to repurchase units under H&R REIT's normal
course issuer bid. As a result of the sale, H&R REIT expects
stronger long-term funds from operations ("FFO") growth and net
asset value growth. FFO is a non-GAAP measure. See "Non-GAAP
Financial Measures" in this press release.
The table below highlights the pro forma fair value of
investment properties and properties under development by segment
following the sale of the Portfolio:
Segment
|
Fair Value -
Pro forma(1)
|
Fair Value -
Pro forma %
|
Office
|
$6,601
|
47.1%
|
Primaris
|
2,850
|
20.3%
|
Lantower
Residential
|
2,080
|
14.8%
|
Industrial
|
1,094
|
7.8%
|
Echo
|
821
|
5.9%
|
H&R
Retail
|
580
|
4.1%
|
Total
|
$14,026
|
100.0%
|
|
|
(1)
|
Using $1.29 Canadian
dollars for every $1.00 U.S. dollar (the exchange rate as at March
31, 2018).
|
About H&R REIT
H&R REIT is one
of Canada's largest real estate
investment trusts with total assets of approximately $14.5 billion at March 31,
2018. H&R REIT has ownership interests in a North
American portfolio of high quality office, retail, industrial and
residential properties comprising over 45 million square feet.
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). These forward-looking statements include, but are not
limited to H&R REIT's plans, objectives, expectations and
intentions, including the ability to repay existing mortgage debt
secured by the Portfolio on or before the expected closing date and
the expected use of net proceeds from the sale of the Portfolio;
the ability to satisfy the closing conditions and expected closing
date for the sale of the Portfolio; management's expectation that
it does not expect to incur any material income tax expense
resulting from the sale and management's expectation of stronger
FFO growth and net asset value growth as a result of this
disposition. Such forward-looking statements reflect H&R
REIT'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 REIT's estimates and
assumptions that are subject to risks and uncertainties, including
those to be set forth in H&R REIT's materials filed with the
Canadian securities regulatory authorities from time to time, which
could cause the actual results and performance of H&R REIT to
differ materially from the forward-looking statements contained in
this news release. Although the forward-looking statements
contained in this news release are based upon what H&R REIT
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 REIT, 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.
Non-GAAP Financial Measures
H&R REIT's management uses a number of measures which do not
have a meaning recognized or standardized under IFRS or Canadian
Generally Accepted Accounting Principles ("GAAP"). The non-GAAP
measure FFO should not be construed as an alternative to financial
measures calculated in accordance with GAAP. Further, H&R
REIT's method of calculating FFO may differ from the methods of
other real estate investment trusts or other issuers, and
accordingly may not be comparable. H&R REIT uses FFO to better
assess H&R REIT's underlying performance and provides this
additional measure so that investors may do the same. FFO is more
fully defined and discussed in H&R REIT's combined MD&A for
the three months ended March 31,
2018, available at www.hr-reit.com and on www.sedar.com.
Additional information regarding H&R REIT is available at
http://www.hr-reit.com and on www.sedar.com.
SOURCE H&R Real Estate Investment Trust