TORONTO, April 20,
2023 /CNW/ - H&R Real Estate Investment Trust
("H&R" or "the REIT") (TSX: HR.UN) is pleased to announce the
closing of the sale of 160 Elgin Street for $277.0 million, to Groupe Mach (the "Purchaser"),
a private Canadian real estate firm. 160 Elgin Street was H&R's
only Ottawa office property,
comprising 973,611 square feet in downtown Ottawa, Ontario. This sale is consistent with
the REIT's strategic repositioning plan to surface significant
value for unitholders, by transforming into a simplified,
growth-oriented company focused on residential and industrial
properties.
"Given the considerable headwinds in the public and private real
estate markets, we are very pleased to have executed this
transaction," said Tom Hofstedter,
Executive Chairman and CEO. "This office sale furthers our
strategic repositioning plan and moves H&R REIT closer to
achieving our portfolio simplification strategy goals. We continue
to execute our plan with discipline by transacting when we can
surface fair value for our unitholders."
Philippe Lapointe, President of
the REIT, added, "We are well on our way to creating a simplified,
growth-oriented business that will create sustainable value for our
unitholders. Initial proceeds of $67
million from this sale will be put to good use repaying debt
and repurchasing H&R units at a significant discount to the
REIT's net asset value ("NAV") per Unit1."
Highlights
- $67.0 million cash proceeds
received on closing.
- $180.0 million to be received
within 90 days of closing.
- Net proceeds from the sale to be used to repay debt and
repurchase H&R units under the REIT's normal course issuer
bid.
- On a square footage basis, 160 Elgin represents 19% of the
REIT's Canadian office portfolio.
- Reduces total current office exposure from 30% to 28% on a fair
value basis.
- The REIT's proforma office weighted average lease term remains
at 7.5 years.
- Improves the REIT's growth profile by increasing exposure to
higher growth residential and industrial sectors.
H&R has provided the Purchaser with a 90-day $180.0 million loan secured by a first mortgage
on the property, earning interest at 6.5% per annum. In addition,
H&R has provided the Purchaser with a second loan of
$30.0 million which will be
subordinate to the first mortgage on the property. The second
mortgage will bear interest at 4.5% per annum and will mature in
April 2028.
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|
1 This
is a non-GAAP ratio. Refer to the "Non-GAAP Measures" section of
this news release.
|
Proforma Office
Portfolio
H&R's proforma December
31st, 2022 office portfolio adjusted for the sale
of 160 Elgin, Ottawa and
2611-3rd Avenue, Calgary consists of the following
categories:
- Canadian office currently undergoing rezoning represents
approximately $755.0 million across
eight properties.
- H&R's remaining Canadian office properties represents
approximately $702.0 million across
10 properties with an average remaining lease term of 7.5 years as
at December 31, 2022. H&R will
continue to hold these properties for future dispositions.
- H&R's U.S. office portfolio consists of five properties
with a weighted average lease term of 8.7 years as at December 31, 2022.
Debt Update
On January 23, 2023, H&R
borrowed $250.0 million on its
unsecured credit facility to repay the Series O Senior Debentures
that matured on the same day. On March 14,
2023, H&R obtained a new $275.0
million non-revolving secured credit facility secured by 42
industrial properties. Upon closing, the REIT repaid $12.5 million outstanding on its secured
revolving $25.0 million line of
credit facility which matured as part of closing this new term
loan. The remaining proceeds were used to repay unsecured operating
lines of credit.
About H&R REIT
H&R REIT is one of Canada's
largest real estate investment trusts with total assets of
approximately $11.4 billion as at
December 31, 2022. H&R REIT has
ownership interests in a North American portfolio comprised of
high-quality residential, industrial, office and retail properties
comprising over 28.7 million square feet. H&R is currently
undergoing a five-year, strategic repositioning to transform into a
simplified, growth-oriented company focusing on residential and
industrial properties to surface significant value for
unitholders.
Forward-Looking Disclaimer
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 H&R's
objectives, beliefs, plans, estimates, targets, projections and
intentions and similar statements concerning anticipated future
events, results, circumstances, performance or expectations that
are not historical facts including, with respect to H&R's
strategic repositioning plan, the ability to surface value for
unitholders, the REIT's growth profile, the intended sales and
rezoning of office properties, portfolio exposure, and the use of
proceeds from the sale of 160 Elgin, and. 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.
Forward-looking statements are provided for the purpose of
presenting information about management's current expectations and
plans relating to the future and readers are cautioned that such
statements may not be appropriate for other purposes. These
statements are not guarantees of future performance and are based
on H&R's estimates and assumptions that are subject to risks,
uncertainties and other factors including those risks and
uncertainties discussed in H&R's materials filed with the
Canadian securities regulatory authorities from time to time, which
could cause the actual results, performance or achievements of
H&R to differ materially from the forward-looking statements
contained in this news release. Material factors or assumptions
that were applied in drawing a conclusion or making an estimate set
out in the forward-looking statements include assumptions relating
to the general economy, including the effects of increased
inflation; the debt markets continuing to provide access to capital
at a reasonable cost, notwithstanding rising interest rates; and
assumptions concerning currency exchange and interest rates.
Additional risks and uncertainties include, among other things,
risks related to: real property ownership; current economic
environment; credit risk and tenant concentration; lease rollover
risk; interest rates and other debt-related risks; development
risks; residential rental risk; capital expenditure risk; currency
risk; liquidity risk; risks associated with disease outbreaks;
cyber security risk; financing credit risk; ESG and climate change
risk; coownership interest in properties; general uninsured losses;
joint arrangements and investment risk; dependence on key personnel
and succession planning; potential acquisition, investment and
disposition opportunities and joint venture arrangements; potential
undisclosed liabilities associated with acquisitions; competition
for real property investments; and potential conflicts of interest;
unit-price risk; availability of cash for distributions; credit
ratings; ability to access capital markets; tax risk; additional
tax risks applicable to unitholders; dilution; unitholder
liability; redemption right risk; investment eligibility; risks
relating to debentures; and statutory remedies. H&R cautions
that these lists of factors, risks and uncertainties are 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.
Readers are also urged to examine H&R's materials filed with
the Canadian securities regulatory authorities from time to time as
they may contain discussions on risks and uncertainties which could
cause the actual results and performance of H&R to differ
materially from the forward-looking statements contained in this
news release. 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 Canadian law, assumes no obligation to update or revise
them to reflect new information or the occurrence of future events
or circumstances.
Non–GAAP Measures
The audited consolidated financial statements of the REIT and
related notes for the year ended December
31, 2022 (the "REIT's Financial Statements") were prepared
in accordance with International Financial Reporting Standards
("IFRS"). However, H&R's management uses a number of measures,
including NAV per Unit, which do not have meanings recognized or
standardized under IFRS or Canadian Generally Accepted Accounting
Principles ("GAAP"). These non-GAAP measures and non-GAAP ratios
should not be construed as alternatives to financial measures
calculated in accordance with GAAP. Further, H&R's method of
calculating these supplemental non-GAAP measures and ratios may
differ from the methods of other real estate investment trusts or
other issuers, and accordingly may not be comparable. H&R uses
these measures to better assess H&R's underlying performance
and provides these additional measures so that investors may do the
same. For information on the most directly comparable GAAP
measures, composition of the measures, a description of how the
REIT uses these measures and an explanation of how these measures
provide useful information to investors, refer to the "Non-GAAP
Measures" section of the REIT's management's discussion and
analysis as at and for the three months and year ended December 31, 2022, available at www.hr-reit.com
and on the REIT's profile on SEDAR at www.sedar.com, which is
incorporated by reference into this news release.
Additional information regarding H&R is available at
www.hr-reit.com and on www.sedar.com.
SOURCE H&R Real Estate Investment Trust