
H&R REIT Reports First Quarter 2025 Results
Tom Hofstedter, Executive Chair and Chief Executive Officer said "During 2024, we sold $429.0 million of real estate assets and sold a further $59.9 million during the first quarter of 2025. While we would like to see more transaction volume, we are very pleased with our first quarter's operating results for 2025. Overall occupancy was at 95.6%, total Same-Property net operating income (cash basis) grew by 4.4% and FFO was $0.30 per unit."
FINANCIAL HIGHLIGHTS
March 31
December 31
December 31
2025
2024
2023
Total assets (in thousands)
$10,460,327
$10,620,487
$10,777,643
Debt to total assets per the REIT's Financial Statements (1)
33.8 %
33.4 %
34.2 %
Debt to total assets at the REIT's proportionate share (1)(2)
44.1 %
43.7 %
44.0 %
Debt to Adjusted EBITDA at the REIT's proportionate share (1)(2)(3)
9.3x
9.4x
8.5x
Unitholders' equity (in thousands)
$5,192,448
$5,278,743
$5,192,375
Units outstanding (in thousands)
262,566
262,016
261,868
Exchangeable units outstanding (in thousands)
17,424
17,974
17,974
Unitholders' equity per Unit
$19.78
$20.15
$19.83
Net Asset Value ("NAV") per Unit (2)(4)
$20.62
$20.92
$20.75
Three months ended March 31
(in thousands except for per Unit amounts)
2025
2024
Rentals from investment properties
$205,639
$209,521
Net operating income
$82,963
$94,187
Same-Property net operating income (cash basis) (5)
$126,469
$121,183
Net income (loss) from equity accounted investments
($10,082)
$12,550
Fair value adjustment on real estate assets
($52,698)
($44,167)
Net income (loss)
($52,018)
$31,792
Funds from Operations ("FFO") (5)
$83,098
$83,066
Adjusted Funds from Operations ("AFFO") (5)
$68,013
$68,787
Weighted average number of Units and exchangeable units
279,990
279,847
FFO per basic and diluted Unit (2)
$0.297
$0.297
AFFO per basic and diluted Unit (2)
$0.243
$0.246
Cash distributions per Unit
$0.150
$0.150
Payout ratio as a % of FFO (2)
50.5 %
50.5 %
Payout ratio as a % of AFFO (2)
61.7 %
61.0 %
(1)
Debt includes mortgages payable, debentures payable, unsecured term loans, lines of credit and liabilities classified as held for sale.
(2)
These are non-GAAP ratios. Refer to the "Non-GAAP Measures" section of this news release.
(3)
Adjusted EBITDA is based on the trailing 12 months and is defined in the " Debt" section of this news release.
(4)
See page 9 of this news release for a detailed calculation of NAV per Unit.
(5)
These are non-GAAP measures. Refer to the "Non-GAAP Measures" section of this news release.
SUMMARY OF SIGNIFICANT Q1 2025 ACTIVITY
2025 Net Operating Income Highlights
Three months ended March 31
(in thousands of Canadian dollars)
2025
2024
% Change
Operating Segment:
Same-Property net operating income (cash basis) - Residential (1)
$44,483
$42,340
5.1 %
Same-Property net operating income (cash basis) - Industrial (1)
17,181
16,435
4.5 %
Same-Property net operating income (cash basis) - Office (1)
39,358
38,883
1.2 %
Same-Property net operating income (cash basis) - Retail (1)
25,447
23,525
8.2 %
Same-Property net operating income (cash basis) (1)
126,469
121,183
4.4 %
Net operating income (cash basis) from Transactions at the REIT's proportionate share (1)(2)
28,874
36,645
(21.2) %
Realty taxes in accordance with IFRIC 21 at the REIT's proportionate share (1)(3)
(49,194)
(43,821)
12.3 %
Straight-lining of contractual rent at the REIT's proportionate share (1)
3,658
4,976
(26.5) %
Net operating income from equity accounted investments (1)
(26,844)
(24,796)
8.3 %
Net operating income per the REIT's Financial Statements
$82,963
$94,187
(11.9) %
(1)
These are non-generally accepted accounting principles ("GAAP") measures. Refer to the "Non-GAAP Measures" section of this news release.
(2)
Transactions includes acquisitions, dispositions, and transfers of investment properties to or from properties under development during the 15-month period ended March 31, 2025.
(3)
Realty taxes in accordance with IFRS Interpretations Committee Interpretation 21, Levies ("IFRIC 21") relates to the timing of the liability recognition for U.S. realty taxes. By excluding the impact of IFRIC 21, U.S. realty tax expenses are evenly matched with realty tax recoveries received from tenants throughout the period.
Transaction Highlights
Property Dispositions
In January 2025, H&R sold its ownership interests in three Canadian retail properties and its 50% interest in four Canadian retail properties, which were classified as held for sale as at December 31, 2024, totalling 336,695 square feet for gross proceeds of $49.8 million.
In March 2025, H&R sold one automotive-tenanted retail property in Puyallup, WA, which was classified as held for sale as at December 31, 2024, totalling 10,102 square feet for approximately $10.1 million (U.S. $7.0 million).
Leasing Update
On March 7, 2025, Hudson's Bay Company ("HBC") applied for protection from their creditors under the Companies' Creditors Arrangement Act (Canada). HBC is only a tenant at one REIT property, being 100 Metropolitan Rd., an industrial property in Toronto, ON, where HBC currently occupies 369,051 square feet at H&R's 50% ownership interest. HBC's base rent is currently $5.25 per square foot and market rent is approximately $14 per square foot.
Development Update
Canadian Properties under Development
In January 2024, H&R received approval from the City of Mississauga to replace the existing 104,689 square foot office building at 6900 Maritz Drive in Mississauga, ON with a new 122,367 square foot industrial building. Construction commenced in 2024 and practical completion is expected in Q2 2025. The property will include sustainability elements such as EV charging stations and solar panel readiness and is targeted to achieve LEED Gold certification. As at March 31, 2025, the total development budget for this property was approximately $43.6 million with costs remaining to complete the new building of approximately $5.5 million.
Equity Accounted Investments
H&R has a 50% managing ownership interest in 560 & 600 Slate Drive, a 26.6 acre land site in Mississauga, ON, located next to Toronto Pearson International Airport and in close proximity to access points on the 410, 401 and 407 Highways. In 2024, construction commenced on two single storey industrial buildings totalling 309,727 square feet and 160,485 square feet, respectively at the 100% level. Both buildings have been designed with flexibility such that they can accommodate either single or multiple tenants. Both will include sustainability elements such as EV charging stations and solar panel readiness and are targeted to achieve LEED Gold certification. As at March 31, 2025, the total budget for 560 & 600 Slate Drive was approximately $66.3 million with costs remaining to complete of $20.7 million, all at H&R's ownership interest. The yield on cost for the overall project is expected to be approximately 6.6% with completion expected in Q3 2025. In February 2025, the partnership owning the site obtained a $32.5 million construction financing facility, at H&R's ownership interest. As at March 31, 2025, the available balance was approximately $26.5 million, at H&R's ownership interest.
In February 2024, the REIT created Lantower Residential Real Estate Development Trust (No. 1) (the "REDT") which completed an initial public offering in April 2024. The REDT raised U.S. $52.0 million of equity capital from investors to acquire an interest in and fund the development of two residential development projects (the "REDT Projects") in Florida totalling 601 residential rental units. The REIT contributed the land to Lantower Residential REDT (No.1) JV LP ("REDT JV LP"), in exchange for a 29.1% ownership interest in the REDT JV LP. The REIT is accounting for its ownership interest in the REDT Projects as an equity accounted investment. H&R is earning a development fee of 4% of the total hard and soft costs of the REDT Projects (excluding land and financing costs) and is expecting to earn a 1% asset management fee on gross proceeds raised by the REDT. H&R will also be entitled to 20% of the distribution proceeds over and above its pro-rata share of the equity after investors receive an 8% internal rate of return and 30% after investors receive a 15% internal rate of return. As at March 31, 2025, H&R's share of the total budget for the REDT Projects was approximately $87.8 million (U.S. $61.0 million) with costs remaining to complete of $57.4 million (U.S. $39.8 million), all at H&R's ownership interest. The REDT Projects are expected to be completed in mid-2026.
Debt & Liquidity Highlights
Liquidity
As at March 31, 2025, H&R had cash and cash equivalents of $69.9 million, $803.3 million available under its unused lines of credit and an unencumbered property pool of approximately $4.5 billion.
As at March 31, 2025, debt to total assets per the REIT's Financial Statements was 33.8% compared to 33.4% as at December 31, 2024. As at March 31, 2025, debt to total assets at the REIT's proportionate share (a non-GAAP ratio, refer to the "Non-GAAP Measures" section of this news release) was 44.1% compared to 43.7% as at December 31, 2024.
MONTHLY DISTRIBUTION DECLARED
H&R today declared a distribution for the month of May scheduled as follows:
Distribution per Unit
Annualized
Record date
Distribution date
May 2025
$0.05
$0.60
May 30, 2025
June 13, 2025
CONFERENCE CALL AND WEBCAST
Management will host a conference call to discuss the financial results of the REIT on Thursday, May 15, 2025 at 9.30 a.m. Eastern Time. Participants can join the call by dialing 1‐800‐717‐1738 or 1‐289‐514‐5100. For those unable to participate in the conference call at the scheduled time, a replay will be available approximately one hour following completion of the call. To access the archived conference call by telephone, dial 1‐289‐819‐1325 or 1‐888‐660‐6264 and enter the passcode 05267 followed by the "#" key. The telephone replay will be available until Thursday, May 22, 2025 at midnight.
A live audio webcast will be available through www.hr-reit.com/investor-relations/#investor-events. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived on H&R's website following the call date.
The investor presentation is available on H&R's website at www.hr-reit.com/investor-relations/#investor-presentation.
2025 ANNUAL UNITHOLDERS' MEETING
H&R will host its annual Unitholders' meeting on Friday, June 27, 2025 at 10.30 a.m. Eastern Time (by virtual meeting only via live audio webcast at http://www.virtualshareholdermeeting.com/HRREIT2025).
About H&R REIT
H&R REIT is one of Canada's largest real estate investment trusts with total assets of approximately $10.5 billion as at March 31, 2025. H&R REIT has ownership interests in a Canadian and U.S. portfolio comprised of high-quality residential, industrial, office and retail properties comprising over 25.6 million square feet. H&R's strategy is to create a simplified, growth-oriented business focused on residential and industrial properties in order to create sustainable long-term value for unitholders. H&R plans to sell its office and retail properties as market conditions permit. H&R's target is to be a leading owner, operator and developer of residential and industrial properties, creating value through redevelopment and greenfield development in prime locations within Toronto and high growth U.S. sunbelt and gateway cities.
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 future plans and targets, the REIT's strategic repositioning plan to create sustainable long-term value for unitholders, H&R's strategy to grow its exposure to residential assets in U.S. sunbelt and gateway cities, H&R's expectations with respect to the activities of its development properties, including the building of new properties and the redevelopment of existing properties, the use of such properties, the timing of construction and completion, expected construction plans and costs, yield on cost, anticipated square footage, future intensification opportunities, expectations with respect to the REDT and the REDT Projects, management's expectations regarding future distributions by the REIT, and management's expectation to be able to meet all of the REIT's ongoing obligations. 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 continuing effects of inflation; debt markets continue to provide access to capital at a reasonable cost; and assumptions concerning currency exchange and interest rates. Additional risks and uncertainties include, among other things, risks related to: real property ownership; the current economic environment, including the impact of any tariffs and retaliatory tariffs on the economy; strategic transformational repositioning plan; credit risk and tenant concentration; lease rollover risk; interest rate and other debt-related risks; inflation risk; development risks; residential rental risk; capital expenditure risk; currency risk; liquidity risk; cyber security risk; financing credit risk; ESG and climate change risk; risks associated with disease outbreaks; co-ownership interest in properties; general uninsured losses; joint arrangement and investment risks; 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; potential conflicts of interest; litigation and regulatory risk; Unit prices; availability of cash for distributions; credit ratings; ability to access capital; dilution; unitholder liability; redemption right; investment eligibility; debentures; statutory remedies; tax risk; and additional tax risks applicable to the REIT and to unitholders. 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 contained in this news release are qualified by these cautionary statements. These forward‐looking statements are made as of May 14, 2025 and the REIT, 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 unaudited condensed consolidated financial statements of the REIT and related notes for the three months ended March 31, 2025 (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, FFO, AFFO, FFO and AFFO per basic and diluted Unit, payout ratio as a % of FFO, payout ratio as a % of AFFO, debt to total assets at the REIT's proportionate share, debt to Adjusted EBITDA at the REIT's proportionate share, Same‐Property net operating income (cash basis) and the REIT's proportionate share, which do not have meanings recognized or standardized under IFRS or 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 ended March 31, 2025 available at www.hr‐reit.com and on the REIT's profile on SEDAR at www.sedarplus.com, which is incorporated by reference into this news release.
Financial Position
The following table reconciles the REIT's Statement of Financial Position from the REIT's Financial Statements to the REIT's proportionate share (a non-GAAP measure):
Debt to Adjusted EBITDA at the REIT's Proportionate Share
The following table provides a reconciliation of Debt to Adjusted EBITDA at the REIT's proportionate share (a non-GAAP ratio):
(1)
Debt includes mortgages payable, debentures payable, unsecured term loans, lines of credit and liabilities classified as held for sale.
RESULTS OF OPERATIONS
The following table reconciles the REIT's Results of Operations from the REIT's Financial Statements to the REIT's proportionate share (a non-GAAP measure):
Three months ended March 31, 2025
Three months ended March 31, 2024
(in thousands of Canadian dollars)
REIT's
Financial
Statements
Equity
accounted
investments
REIT's
proportionate
share
REIT's
Financial
Statements
Equity
accounted
investments
REIT's
proportionate
share
Rentals from investment properties
$205,639
$41,566
$247,205
$209,521
$37,975
$247,496
Property operating costs
(122,676)
(14,722)
(137,398)
(115,334)
(13,179)
(128,513)
Net operating income
82,963
26,844
109,807
94,187
24,796
118,983
Net income (loss) from equity accounted investments
(10,082)
10,136
54
12,550
(12,621)
(71)
Finance costs - operations
(52,009)
(12,388)
(64,397)
(53,514)
(12,320)
(65,834)
Finance income
3,190
222
3,412
2,346
115
2,461
Trust expenses
(7,237)
(2,045)
(9,282)
(6,414)
(1,831)
(8,245)
Fair value adjustment on financial instruments
(22,105)
(96)
(22,201)
18,890
(22)
18,868
Fair value adjustment on real estate assets
(52,698)
(23,885)
(76,583)
(44,167)
2,340
(41,827)
Gain (loss) on sale of real estate assets, net of related costs
(1,103)
1,592
489
866
10
876
Net income (loss) before income taxes and non-controlling interest
(59,081)
380
(58,701)
24,744
467
25,211
Income tax (expense) recovery
7,063
(19)
7,044
7,048
(103)
6,945
Net income (loss) before non-controlling interest
(52,018)
361
(51,657)
31,792
364
32,156
Non-controlling interest
—
(361)
(361)
—
(364)
(364)
Net income (loss)
(52,018)
—
(52,018)
31,792
—
31,792
Other comprehensive income (loss):
Items that are or may be reclassified subsequently to net income (loss)
(62)
—
(62)
98,578
—
98,578
Total comprehensive income (loss) attributable to unitholders
($52,080)
$—
($52,080)
$130,370
$—
$130,370
Same-Property net operating income (cash basis)
The following table reconciles net operating income per the REIT's Financial Statements to Same-Property net operating income (cash basis) (a non-GAAP measure):
NAV per Unit (a non-GAAP Ratio)
The following table reconciles Unitholders' equity per Unit to NAV per Unit:
(1)
Unitholders' equity per Unit is calculated by dividing unitholders' equity by Units outstanding.
Funds from Operations and Adjusted Funds from Operations
The following table reconciles net income (loss) per the REIT's Financial Statements to FFO and AFFO (non-GAAP measures):
FFO AND AFFO
Three months ended March 31
(in thousands of Canadian dollars except per Unit amounts)
2025
2024
Net income (loss) per the REIT's Financial Statements
($52,018)
$31,792
Realty taxes in accordance with IFRIC 21
45,354
40,221
FFO adjustments from equity accounted investments
27,110
1,272
Exchangeable unit distributions
2,614
2,696
Non-cash loss on mortgages receivable
268
—
Fair value adjustments on financial instruments and real estate assets
74,803
25,277
Fair value adjustment to unit-based compensation
1,514
(522)
(Gain) loss on sale of real estate assets, net of related costs
1,103
(866)
Deferred income tax recovery applicable to U.S. Holdco
(7,495)
(7,387)
Incremental leasing costs
589
615
The Bow and 100 Wynford non-cash rental income and accretion adjustments
(10,744)
(10,032)
FFO
$83,098
$83,066
Straight-lining of contractual rent
(3,612)
(4,829)
Rent amortization of tenant inducements
1,150
1,130
Capital expenditures
(10,357)
(8,583)
Leasing expenses and tenant inducements
(657)
(215)
Incremental leasing costs
(589)
(615)
AFFO adjustments from equity accounted investments
(1,020)
(1,167)
AFFO
$68,013
$68,787
Basic and diluted weighted average number of Units and exchangeable units (in thousands of Units) (1)
279,990
279,847
FFO per basic and diluted Unit
$0.297
$0.297
AFFO per basic and diluted Unit
$0.243
$0.246
Cash distributions per Unit
$0.150
$0.150
Payout ratio as a % of FFO
50.5 %
50.5 %
Payout ratio as a % of AFFO
61.7 %
61.0 %
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