TORONTO, May 8, 2019 /CNW/ - H&R Real Estate
Investment Trust ("H&R") (TSX: HR.UN) is pleased to announce
that it has entered into an agreement to sell The Atrium for
$640 million, subject to customary
closing conditions. The purchase price equates to a
capitalization rate of 4.56%. Closing is expected to occur on
or about June 6, 2019.
The Atrium, comprising 595 Bay Street, 20 & 40 Dundas Street
West, and 306 Yonge Street, is a 1.1 million square foot office and
retail complex, effectively occupying a full city block in downtown
Toronto at one of the busiest
intersections in Canada.
The Atrium sale demonstrates H&R's commitment to its
industry-leading balance sheet and BBB+ credit rating, as well as
the capital discipline to prioritize investment opportunities and
recycle capital. At December 31,
2018, H&R had $1.6 billion
of properties under development, with multiple additional
high-return development, redevelopment and intensification
opportunities embedded in its portfolio.
H&R purchased The Atrium for $344.8
million in 2011 and since the acquisition, has increased
annual net operating income by $6.5
million, creating substantial value for unitholders.
The Atrium's IFRS value as at March
31, 2019 was $600 million, up
from $548 million as at December 31, 2018. Management expects to
record a gain of approximately $40
million, relative to its IFRS value, and a sale price
approximately $295 million higher
than its original purchase price.
The Atrium is currently unencumbered. H&R will provide the
purchaser with a vendor take-back (VTB) mortgage of $256 million, bearing interest at an annual rate
of 4.56% and maturing on January 2,
2020. Assuming the proceeds from the sale were used to repay
debt, H&R's debt to total asset ratio would improve to 42.1%
from 44.6% at December 31, 2018.
H&R's president and CEO Thomas
Hofstedter said: "Given the strong investor demand for
Toronto office properties and the
substantial capital this asset will require over the next several
years for redevelopment and intensification, we chose to take
advantage of strong market pricing, and reallocate capital to both
strengthen our balance sheet and to fund our value-creating
developments."
About H&R REIT
H&R REIT is one of Canada's
largest real estate investment trusts with total assets of
approximately $14.7 billion at
December 31, 2018. H&R REIT has
ownership interests in a North American portfolio of high quality
office, retail, industrial and residential properties comprising
over 42 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's plans,
objectives, expectations and intentions, including the expected
closing date of the sale of The Atrium, the use of proceeds from
the sale of The Atrium, H&R's high-return development,
redevelopment and intensification opportunities and H&R's pro
forma debt to total asset ratio. 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. 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.
Additional information regarding H&R REIT is available at
www.hr-reit.com and on www.sedar.com.
SOURCE H&R Real Estate Investment Trust