Philippe Lapointe Appointed President of
the REIT
$21.06 NAV
per Unit(1)
19.1% Same Property NOI (Cash Basis)
Growth(2)
5.8% Distribution
Increase
TORONTO, May 12, 2022
/CNW/ - H&R Real Estate Investment Trust ("H&R" or
"the REIT") (TSX: HR.UN) today is pleased to announce strong first
quarter financial results and senior leadership and Board of
Trustees changes.
"Our strong first quarter financial results mark a pivotal
moment in the continuation of our transformation and the surfacing
of the embedded value within our portfolio," said Tom Hofstedter, CEO. "Following the successful
spin out of our enclosed shopping centre division and the sale of
the Bow and Bell office campus, our portfolio today is
significantly more concentrated on higher growth asset classes
within strong urban markets. Today's results are a testament to the
quality of our properties, platform and strategic plan."
Tom Hofstedter further added, "As
we execute on our repositioning plan, I am very pleased to announce
that Philippe Lapointe has accepted
the role as President of the REIT. His broad and proven real estate
track record, combined with close to 15 years of experience in
development, finance, operations and strategic planning, has been
and will continue to be invaluable to the REIT. Philippe will
continue to oversee our residential platform, as well as have more
influential involvement in investment strategy, capital
redeployment and investor relations for the REIT."
SENIOR LEADERSHIP CHANGES
The REIT is pleased to announce the following changes
effective immediately:
- Philippe Lapointe, currently
President of the REIT's residential division, is appointed
President of H&R REIT.
- Tom Hofstedter is appointed
Executive Chairman and will continue in his role as Chief Executive
Officer.
- Ronald Rutman, currently the
Chair of the Board of Trustees, is appointed Vice-Chair and
independent Lead Trustee.
Ronald Rutman, Vice-Chair and
Lead Trustee said, "The Board of Trustees is very pleased that
Philippe Lapointe has accepted the
role as President of the REIT. His leadership capabilities and
achievements in the creation and development of the residential
platform, make him exceptionally well-qualified to further
contribute during our exciting phase of transition and growth."
"I am honoured to serve as the REIT's next President," said
Philippe Lapointe. "Since 2014, I
have had the privilege of working closely with Tom, the executive
team and the Board of Trustees to build a strong foundation for the
REIT, which will serve as a catalyst for our future growth. I am
committed to this expanded leadership role to advance our strategic
repositioning plan, and deliver on our commitment to close the
significant discount to NAV at which our Units trade. I look
forward to spending more time with investors discussing our
progress and direction."
(1)
This is a non-GAAP ratio. Refer to the "Non-GAAP
Measures" section of this news release.
|
(2)
This is a non-GAAP measure. Refer to the "Non-GAAP
Measures" section of this news release.
|
QUARTERLY FINANCIAL HIGHLIGHTS
- $1.0 billion in favourable fair
value adjustments driven by capitalization rate compression and
rental growth;
- $19.88 unitholders' equity per
Unit, an increase of $3.33 from
December 31, 2021;
- $21.06 Net Asset Value ("NAV")
per Unit(2), an increase of $3.36 from December 31,
2021;
- 34.4% Debt to total assets per the REIT's financial
statements;
- 43.1% Debt to total assets at the REIT's proportionate
share(2);
- 96.0% Occupancy representing H&R's high-quality property
portfolio;
- Sold 33.3% non‐managing interest in The Pearl, in Austin, Texas for approximately U.S.
$45.8 million, generating a gain of
$20.7 million over construction cost,
and a return on equity invested of approximately 221.5%;
- 13,715,500 Units repurchased year to date, at a weighted
average price of $12.97 per Unit, for
a total cost of $177.8 million as at
May 10, 2022;
- $931.5 million in liquidity
comprised of $103.0 million in cash
and $828.5 million available to be
drawn under the REIT's credit facilities;
- $4.5 billion unencumbered
property pool;
- 30.9% decrease in net operating income as compared to Q1 2021
primarily due to the spin-off of Primaris REIT and property
dispositions throughout 2021; and
- 19.1% Same-Property net operating income (cash
basis)(1) growth driven by strong residential and office
rental growth together with industrial and retail property
lease-ups.
(1)
|
These are non-GAAP
measures. Refer to the "Non-GAAP Measures" section of this news
release.
|
(2)
|
These are non-GAAP
ratios. Refer to the "Non-GAAP Measures" section of this news
release.
|
FINANCIAL HIGHLIGHTS
|
March
31,
|
December 31,
|
|
2022
|
2021
|
Total assets (in
thousands)
|
$11,366,851
|
$10,501,141
|
Unitholders' equity (in
thousands)
|
5,548,083
|
4,773,833
|
Units outstanding (in
thousands)
|
279,062
|
288,440
|
Exchangeable units
outstanding (in thousands)
|
18,280
|
13,344
|
Unitholders' equity per
Unit
|
$19.88
|
$16.55
|
NAV per
Unit(2)
|
$21.06
|
$17.70
|
|
Three months ended
March 31
|
|
2022
|
2021
|
Rentals from investment
properties (millions)
|
$201.7
|
$266.5
|
Net operating income
(millions)
|
$92.4
|
$133.7
|
Same-Property net
operating income (cash basis) (millions)(3)
|
$124.7
|
$104.7
|
Net income from equity
accounted investments (millions)
|
$44.9
|
$7.2
|
Fair value adjustment
on real estate assets (millions)
|
$1,022.5
|
$64.7
|
Net income
(millions)
|
$970.0
|
$159.5
|
Funds from operations
("FFO") (millions)(3)
|
$84.4
|
$119.7
|
Adjusted funds from
operations ("AFFO") (millions)(3)
|
$77.1
|
$97.1
|
Weighted average number
of Units and exchangeable units for FFO (in thousands)
|
302,453
|
301,758
|
FFO per basic
Unit(2)
|
$0.28
|
$0.40
|
AFFO per basic
Unit(2)
|
$0.26
|
$0.32
|
Cash Distributions per
Unit(4)
|
$0.13
|
$0.17
|
Payout ratio as a % of
FFO(2)
|
46.4%
|
42.5%
|
Payout ratio as a % of
AFFO(2)
|
50.0%
|
53.1%
|
|
|
(1)
|
Debt includes mortgages
payable, debentures payable, unsecured term loans and lines of
credit.
|
(2)
|
These are non-GAAP
ratios. Refer to the "Non-GAAP Measures" section in this news
release.
|
(3)
|
These are non-GAAP
measures. Refer to the "Non-GAAP Measures" section of this
news release.
|
(4)
|
H&R's Q1 2022
monthly distribution was $0.0433 per Unit. Following the spinoff of
Primaris REIT to H&R's unitholders, Primaris REIT announced a
monthly distribution of $0.067 per Primaris REIT unit, reflecting
$0.80 per Primaris REIT unit on an annualized basis (equivalent to
$0.20 per H&R Unit annually prior to the spin-off of Primaris
REIT and 4:1 consolidation of Primaris REIT units). The Primaris
REIT distribution together with H&R's increased annual
distribution of $0.55 per Unit on an annualized basis equates to a
combined distribution of $0.75 per Unit on an annualized basis
which is a 8.7% increase over the $0.69 per Unit on an annualized
basis paid by H&R in 2021.
|
Rentals from investment properties and net operating income for the
three months ended March 31, 2022
compared to the respective 2021 period have decreased primarily due
to the spin-off of Primaris REIT and property dispositions
throughout 2021.
Net Operating Income Highlights
|
Three months ended
March 31
|
(in thousands of
Canadian dollars)
|
2022
|
2021
|
% Change
|
Operating
Segment:
|
|
|
|
Same-Property net
operating income (cash basis) – Office(1)
|
$54,053
|
$43,496
|
24.3%
|
Same-Property net
operating income (cash basis) – Retail(1)
|
24,965
|
23,717
|
5.3%
|
Same-Property net
operating income (cash basis) – Industrial(1)
|
14,035
|
13,393
|
4.8%
|
Same-Property net
operating income (cash basis) –
Residential(1)
|
31,631
|
24,110
|
31.2%
|
Total Same-Property net
operating income (cash basis)(1)
|
124,684
|
104,716
|
19.1%
|
Net operating income
(cash basis) from Transactions at the REIT's proportionate
share(1)
|
28,081
|
67,315
|
(58.3%)
|
Realty taxes in
accordance with IFRIC 21 at the REIT's proportionate
share(1)
|
(40,902)
|
(35,410)
|
(15.5%)
|
Straight-lining of
contractual rent at the REIT's proportionate
share(1)
|
154
|
11,348
|
(98.6%)
|
Net operating income
from equity accounted investments(1)
|
(19,594)
|
(14,291)
|
(37.1%)
|
Net operating income
per the REIT's Financial Statements
|
$92,423
|
$133,678
|
(30.9%)
|
|
|
(1)
|
These are non-GAAP
measures. Refer to the "Non-GAAP Measures" section of this
news release.
|
Same Property Net Operating Income (Cash Basis)
Same‐Property net operating income (cash basis) from office
properties increased by 24.3% for the three months ended
March 31, 2022 compared to the
respective 2021 period, primarily due to Hess Corporation ("Hess")
having a rent-free period for its premises in Houston, TX until June
2021.
Same‐Property net operating income (cash basis) from retail
properties increased by 5.3% for the three months and year ended
March 31, 2022 compared to the
respective 2021 period, primarily due to the lease‐up of River
Landing.
Same‐Property net operating income (cash basis) from industrial
properties increased by 4.8% for the three months ended
March 31, 2022 compared to the
respective 2021 period, primarily due to an increase in occupancy
and contractual rental escalations.
Same‐Property net operating income (cash basis) from residential
properties in U.S. dollars increased by 31.2% for the three months
ended March 31, 2022 compared to the
respective 2021 period, primarily due to an increase in occupancy
at Jackson Park in New York.
Excluding Jackson Park, Same-Property net operating income (cash
basis) from residential properties in U.S. dollars increased by
11.1% for the three months ended March 31,
2022 compared to the respective 2021 period, primarily due
to strong rental rate growth.
Fair Value Adjustments on Real Estate Assets
Fair Value
Adjustment on Real Estate Assets
|
|
|
Three months ended
March 31
|
(in thousands of
Canadian dollars)
|
|
|
2022
|
2021
|
Change
|
Operating
Segment:
|
|
|
|
|
|
Office
|
|
|
$53,668
|
($60,180)
|
$113,848
|
Retail
|
|
|
6,154
|
95,475
|
(89,321)
|
Industrial
|
|
|
185,514
|
2,428
|
183,086
|
Residential
|
|
|
516,422
|
28,893
|
487,529
|
Land and Properties
under development
|
|
|
294,562
|
-
|
294,562
|
Fair value adjustment
on real estate assets per the REIT's proportionate
share(1)
|
1,056,320
|
66,616
|
989,704
|
Less: equity accounted
investments
|
|
|
(33,783)
|
(1,913)
|
(31,870)
|
Fair value adjustment
on real estate assets per the REIT's Financial Statements
|
$1,022,537
|
$64,703
|
$957,834
|
|
|
(1)
|
The REIT's
proportionate share is a non-GAAP measure. Refer to the
"Non-GAAP Measures" section in this news release.
|
During Q1 2022, the REIT had $1.0
billion in favourable fair value adjustments on real estate
assets driven by net operating income:
- Residential: U.S. sunbelt residential capitalization rate
compression as observed in the market via two very large
publicly-traded U.S. multifamily REIT privatizations, together with
an independent appraisal and continued robust growth.
- Industrial: Industrial capitalization rate compression and
continued market rent growth confirmed through 53 independent
appraisals received during the quarter.
- Lands and Properties under development: Primarily due to
industrial lands and properties under development in Long Beach, CA and Hercules, CA. H&R obtained an independent
appraisal for its lands in Caledon,
ON in Q1 2022 which reflected the values of comparable land
sales in the area as a result of changing economics in the area.
LEASING UPDATES
Subsequent to March 31, 2022, the
REIT entered into a 10-year lease commencing in September 2022 for the vacant 314,000 square foot
industrial property at 2121 Cornwall, Oakville, ON, in which the REIT has a 50%
ownership interest.
Subsequent to March 31, 2022, the
REIT also entered into a letter of intent to lease its vacant
office building located at 649 North Service Road, Burlington, ON for a 10-year term.
DISPOSITION
In March 2022, H&R sold its
33.3% non‐managing interest in The Pearl, a 383 residential rental
unit development in Austin, TX for
approximately U.S. $45.8 million.
H&R's total cost to build this property was approximately U.S.
$25.1 million, at the REIT's
ownership interest. As a result, $20.7
million in value was crystalized, with a return on equity
invested amounting to approximately 221.5%.
DEVELOPMENT
Canadian Properties under Development
The REIT currently has two Canadian properties under development
at its industrial business park in Caledon, ON which are expected to be completed
in Q2 2022 and Q3 2022, respectively. As at March 31, 2022, the total development budget for
both properties is approximately $31.3
million, with $20.8 million in
costs incurred to date and $10.5
million in costs remaining to complete. 34 Speirs Giffen in
Caledon, ON has been leased for a
10-year term and the REIT has entered into a letter of intent to
lease 140 Speirs Giffen, Caledon,
ON, for a 10-year term.
The REIT expects to commence construction later this year on two
industrial projects in Mississauga,
ON which will add 586,069 square feet to the REIT's
industrial portfolio at H&R's ownership interest. The total
development budget for these two properties under development is
approximately $154.5 million at
H&R's ownership interest.
U.S. Properties under Development
The REIT currently has two U.S. residential properties under
development which are expected to be completed in Q2 2022. As at
March 31, 2022, the total development
budget is approximately U.S. $101.1
million, with U.S. $98.5
million of costs incurred to date and U.S. $2.6 million in costs remaining to complete.
The REIT has five residential developments which are expected to
commence construction in 2022. The total development budget is
approximately U.S. $464.5 million.
The REIT expects its construction costs to be approximately U.S.
$73.9 million in 2022 and U.S.
$240.0 million in 2023 for these five
properties under development.
Completion of River Landing Development
River Landing is a mixed-use urban site in Miami, FL which was completed in Q2 2021.
River Landing includes approximately 341,000 square feet of retail
space, approximately 149,000 square feet of office space and 528
residential rental units. It is adjacent to the Health District
with approximately 1,000 feet of waterfront on the Miami River, two
miles from downtown Miami.
As at March 31, 2022, residential
occupancy was 94.3% and as of May 6,
2022, the committed retail occupancy was 90.4%.
In March 2022, the REIT signed a
new office lease with the Public Health Trust of Miami Dade County to occupy an additional
19,656 square feet for a total of 63,007 square feet at River
Landing. As at March 31, 2022,
committed office leases was 76.7% with 98.2% of tenants having an
investment grade rating. The REIT is continuing negotiations with
multiple parties on the remaining office space.
NORMAL COURSE ISSUER BID ("NCIB")
On December 13, 2021, the REIT
received approval from the TSX for the renewal of its NCIB allowing
the REIT to purchase for cancellation up to a maximum of 14.0
million Units. On April 19, 2022, the
TSX approved the increase in the maximum number of Units allowed to
be repurchased on the open market to 28,269,228 Units. The NCIB
will expire on the earlier of December 15,
2022 or the date on which the REIT purchases the maximum
number of Units permitted under the NCIB.
During the three months ended March 31,
2022, the REIT purchased and cancelled 9,390,500 Units at a
weighted average price of $12.99 per
Unit, for a total cost of $122.0
million. From April 1, 2022 to
May 6, 2022, the REIT purchased and
cancelled 4,325,000 additional Units at a weighted average price of
$12.91 per Unit, for a total cost of
$55.9 million.
Management and the Board of Trustees believe that H&R's
Units continue to trade at a significant discount to the REIT's NAV
and using excess cash and lines of credit to repurchase Units is an
optimal use of capital which will ultimately provide strong returns
to unitholders.
DISTRIBUTION INCREASE
H&R is pleased to announce a 5.8% increase in distributions,
on an annualized basis, from $0.52
per Unit annually to $0.55 per
Unit.
H&R today declared distributions for the months of May and
June scheduled as follows:
|
Distribution/Unit
|
Annualized
|
Record date
|
Distribution
date
|
May 2022
|
$0.0458
|
$0.55
|
May 31, 2022
|
June 15,
2022
|
June 2022
|
$0.0458
|
$0.55
|
June 30,
2022
|
July 15,
2022
|
CONFERENCE CALL AND WEBCAST
Management will host a conference call to discuss the financial
results for H&R REIT on Friday, May 13,
2022 at 9.30 a.m. Eastern
Time. Participants can join the call by dialing
1-888-510-2507 or 1-289-514-5065. 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
1-647-362-9199 or 1-800-770-2030 and enter the passcode 3504623
followed by the "#" key. The telephone replay will be available
until Friday, May 20, 2022 at
midnight.
A live audio webcast will be available through
https://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
https://www.hr-reit.com/investor-relations/#investor-presentation
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
March 31, 2022. H&R REIT has
ownership interests in a North American portfolio comprised of
high-quality office, industrial, residential and retail properties
comprising over 29.5 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 made or implied 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 the
statements made under the headings "Senior Leadership Changes",
"Financial Highlights", "Leasing Updates", "Dispositions",
"Development" and "Normal Course Issuer Bid" including with respect
to H&R's future plans and targets, including the REIT's
strategic repositioning, the expected benefits from the REIT's
strategic repositioning, the REIT's funding of its strategic
repositioning, the REIT's commitment to close the discount of the
trading price of the Units relative to NAV, Lantower Residential
serving as a catalyst for the REIT's future growth, capitalization
rates and cash flow models used to estimate fair values, the REIT's
leasing activities, the disposition of certain of the REIT's
assets, including seven service station anchored retail properties,
significant development projects, H&R's expectation with
respect to the future developments, including the timing of
construction, the timing of completion and the expected
construction costs, the benefit of the REIT's NCIB and use of
capital, the potential for positive returns to Unitholders,
management's expectations regarding future distributions by the
REIT, management's belief that H&R has sufficient funds and
liquidity for future commitments, 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 described below under "Risks and Uncertainties" and
those 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 that the general economy is
gradually recovering as a result of the COVID-19 pandemic, the
extent and duration of which is unknown; debt markets continue to
provide access to capital at a reasonable cost, notwithstanding the
ongoing economic downturn; assumptions concerning currency exchange
and interest rates; and the assumptions made in connection with the
anticipated benefits of the strategic repositioning plan.
Additional risks and uncertainties include, among other things,
risks related to: disease outbreaks and COVID-19; real property
ownership; the current economic environment; credit risk and tenant
concentration; lease rollover risk; interest rate and other
debt-related risk; development risks; residential rental risk;
currency risk; capital expenditures risk; liquidity risk; cyber
security risk; financing credit risk; environmental and climate
change risk; general uninsured losses; co-ownership interest in
properties; joint arrangement and investment risks; dependence on
key personnel; 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; Unit price
risk; availability of cash for distributions; credit ratings;
ability to access capital markets; tax risk and additional tax
risks applicable to unitholders; dilution; unitholder liability;
redemption right risk; investment eligibility; risks relating to
debentures and the inability of the REIT to purchase senior
debentures on a change of control; 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 May 12, 2022 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 REIT's financial statements are 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, payout ratio as a % of FFO, payout ratio as a % of
AFFO and debt to total assets 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 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 discussion and analysis as at and
for the three months ended March 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.
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:
|
March 31,
2022
|
December 31,
2021
|
(in thousands of
Canadian dollars)
|
REIT's
Financial
Statements
|
Equity
accounted
investments
|
REIT's
proportionate
share(1)
|
REIT's
Financial
Statements
|
Equity
accounted
investments
|
REIT's
proportionate
share(1)
|
Assets
|
|
|
|
|
|
|
Real estate
assets
|
|
|
|
|
|
|
Investment properties
|
$9,260,087
|
$1,817,538
|
$11,077,625
|
$8,581,100
|
$1,824,609
|
$10,405,709
|
Properties under development
|
747,492
|
196,256
|
943,748
|
481,432
|
165,187
|
646,619
|
|
10,007,579
|
2,013,794
|
12,021,373
|
9,062,532
|
1,989,796
|
11,052,328
|
Equity accounted
investments
|
985,063
|
(985,063)
|
-
|
992,679
|
(992,679)
|
-
|
Assets classified as
held for sale
|
-
|
-
|
-
|
-
|
57,309
|
57,309
|
Other assets
|
271,223
|
15,409
|
286,632
|
321,789
|
13,557
|
335,346
|
Cash and cash
equivalents
|
102,986
|
39,951
|
142,937
|
124,141
|
40,499
|
164,640
|
|
$11,366,851
|
$1,084,091
|
$12,450,942
|
$10,501,141
|
$1,108,482
|
$11,609,623
|
Liabilities and
Unitholders' Equity
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Debt
|
$3,909,592
|
$1,010,514
|
$4,920,106
|
$3,894,906
|
$1,026,836
|
$4,921,742
|
Exchangeable units
|
238,548
|
-
|
238,548
|
216,841
|
-
|
216,841
|
Bow
deferred revenue
|
891,936
|
-
|
891,936
|
896,801
|
-
|
896,801
|
Deferred tax liability
|
474,541
|
-
|
474,541
|
350,501
|
-
|
350,501
|
Accounts payable and accrued liabilities
|
304,151
|
51,424
|
355,575
|
368,259
|
59,130
|
427,389
|
Non-controlling interest
|
-
|
22,153
|
22,153
|
-
|
22,516
|
22,516
|
|
5,818,768
|
1,084,091
|
6,902,859
|
5,727,308
|
1,108,482
|
6,835,790
|
Unitholders'
equity
|
5,548,083
|
-
|
5,548,083
|
4,773,833
|
-
|
4,773,833
|
|
$11,366,851
|
$1,084,091
|
$12,450,942
|
$10,501,141
|
$1,108,482
|
$11,609,623
|
|
|
(1)
|
The REIT's
proportionate share is a non-GAAP measure.
|
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:
|
Three months ended
March 31, 2022
|
Three months ended
March 31, 2021
|
(in thousands of
Canadian dollars)
|
REIT's
Financial
Statements
|
Equity
accounted
investments
|
REIT's
proportionate
share(1)
|
REIT's
Financial
Statements
|
Equity
accounted
investments
|
REIT's
proportionate
share(1)
|
Rentals from investment
properties
|
$201,702
|
$30,854
|
$232,556
|
$266,467
|
$25,756
|
$292,223
|
Property operating
costs
|
(109,279)
|
(11,260)
|
(120,539)
|
(132,789)
|
(11,465)
|
(144,254)
|
Net operating
income
|
92,423
|
19,594
|
112,017
|
133,678
|
14,291
|
147,969
|
Net income (loss) from
equity accounted investments
|
44,853
|
(44,834)
|
19
|
7,191
|
(7,115)
|
76
|
Finance costs -
operations
|
(55,286)
|
(8,799)
|
(64,085)
|
(59,491)
|
(9,221)
|
(68,712)
|
Finance
income
|
2,546
|
3
|
2,549
|
5,874
|
52
|
5,926
|
Trust
expenses
|
(7,249)
|
(776)
|
(8,025)
|
(5,319)
|
(673)
|
(5,992)
|
Fair value adjustment
on financial instruments
|
(591)
|
676
|
85
|
13,126
|
999
|
14,125
|
Fair value adjustment
on real estate assets
|
1,022,537
|
33,783
|
1,056,320
|
64,703
|
1,913
|
66,616
|
Gain (loss) on sale of
real estate assets, net of related costs
|
(28)
|
733
|
705
|
(3,917)
|
3
|
(3,914)
|
Net income before
income taxes
|
1,099,205
|
380
|
1,099,585
|
155,845
|
249
|
156,094
|
Income tax (expense)
recovery
|
(129,214)
|
(80)
|
(129,294)
|
3,694
|
(13)
|
3,681
|
Net income before
non-controlling interest
|
969,991
|
300
|
970,291
|
159,539
|
236
|
159,775
|
Non-controlling
interest
|
-
|
(300)
|
(300)
|
-
|
(236)
|
(236)
|
Net income
|
969,991
|
-
|
969,991
|
159,539
|
-
|
159,539
|
Other comprehensive
loss:
|
|
|
|
|
|
|
Items that are or may be reclassified subsequently to net
income
|
(37,102)
|
-
|
(37,102)
|
(25,913)
|
-
|
(25,913)
|
Total comprehensive
income attributable to unitholders
|
$932,889
|
$
-
|
$932,889
|
$133,626
|
$
-
|
$133,626
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The REIT's
proportionate share is a non-GAAP measure.
|
Net operating income per the REIT's Financial Statements decreased
by $41.3 million for the three months
ended March 31, 2022 compared to the
respective 2021 period, primarily due to the spin-off of Primaris
REIT and property dispositions throughout 2021.
Net income (loss) before income taxes per the REIT's Financial
Statements increased by $943.4
million for the three months ended March 31, 2022 compared to the respective 2021
period primarily due to fair value increases to real estate assets
included in Q1 2022 totalling $1.0
billion. This was partially offset by the decrease in net
operating income noted above.
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):
|
|
Three months ended
March 31
|
(in thousands of
Canadian dollars)
|
|
2022
|
2021
|
Change
|
Rentals
|
|
$201,702
|
$266,467
|
($64,765)
|
Property operating
costs
|
|
(109,279)
|
(132,789)
|
23,510
|
Net operating
income
|
|
92,423
|
133,678
|
(41,255)
|
Adjusted
for:
|
|
|
|
|
Net
operating income from equity accounted
investments(1)
|
|
19,594
|
14,291
|
5,303
|
Straight-lining of contractual rent at the REIT's proportionate
share(1)
|
|
(154)
|
(11,348)
|
11,194
|
Realty
taxes in accordance with IFRIC 21 at the REIT's proportionate
share(1)
|
|
40,902
|
35,410
|
5,492
|
Net
operating income (cash basis) from Transactions at the REIT's
proportionate share(1)
|
|
(28,081)
|
(67,315)
|
39,234
|
Same-Property net
operating income (cash basis)(1)
|
|
$124,684
|
$104,716
|
$19,968
|
|
|
(1)
|
These are non-GAAP
measures.
|
NAV per Unit
The following table reconciles Unitholders' equity per Unit to
NAV per Unit:
|
March
31,
|
December 31,
|
Unitholders' Equity
per Unit and NAV per Unit
|
2022
|
2021
|
Unitholders' equity (in
thousands)
|
$5,548,083
|
$4,773,833
|
Exchangeable units (in
thousands)
|
238,548
|
216,841
|
Deferred tax liability
(in thousands)
|
474,541
|
350,501
|
Total
|
$6,261,172
|
$5,341,175
|
|
|
|
Units outstanding (in
thousands of Units)
|
279,062
|
288,440
|
Exchangeable units
outstanding (in thousands of Units)
|
18,280
|
13,344
|
Total (in thousands of
Units)
|
297,342
|
301,784
|
Unitholders' equity per
Unit(1)
|
$19.88
|
$16.55
|
NAV per
Unit(2)
|
$21.06
|
$17.70
|
|
|
(1)
|
Unitholders' equity per
Unit is calculated by dividing unitholders' equity by Units
outstanding.
|
(2)
|
This is a Non-GAAP
ratio.
|
Funds from Operations and Adjusted Funds from Operations
The following table reconciles net income per the REIT's
financial statements to FFO and AFFO:
FFO AND
AFFO
|
|
|
Three Months ended
March 31
|
(in thousands of
Canadian dollars except per Unit amounts)
|
|
|
2022
|
2021
|
Net income per the
REIT's Financial Statements
|
|
|
$969,991
|
$159,539
|
Realty taxes in accordance with IFRIC 21
|
|
|
37,548
|
31,647
|
FFO
adjustments from equity accounted investments
|
|
|
(31,328)
|
1,711
|
Exchangeable unit distributions
|
|
|
2,375
|
2,567
|
Fair value adjustments on financial instruments and real
estate assets
|
|
|
(1,021,946)
|
(77,829)
|
Fair value adjustment to unit-based compensation
|
|
|
3,134
|
402
|
Loss on sale of real estate assets
|
|
|
28
|
3,917
|
Deferred income taxes expense (recoveries) applicable to U.S.
Holdco
|
|
|
128,850
|
(3,934)
|
Incremental leasing costs
|
|
|
617
|
1,670
|
The
Bow non-cash rental and accretion adjustment
|
|
|
(4,865)
|
-
|
FFO(1)
|
|
|
$84,404
|
$119,690
|
Straight-lining of contractual rent
|
|
|
(194)
|
(11,205)
|
Rent amortization of tenant inducements
|
|
|
1,160
|
1,139
|
Capital expenditures
|
|
|
(4,997)
|
(6,429)
|
Leasing expenses and tenant inducements
|
|
|
(1,841)
|
(3,502)
|
Incremental leasing costs
|
|
|
(617)
|
(1,670)
|
AFFO adjustments from equity accounted investments
|
|
|
(805)
|
(915)
|
AFFO(1)
|
|
|
$77,110
|
$97,108
|
Weighted average number
of Units and exchangeable units (in thousands of
Units)(2)
|
|
|
302,453
|
301,758
|
Diluted weighted
average number of Units and exchangeable units (in thousands of
Units)(2)(3)
|
|
|
303,172
|
302,154
|
FFO per basic Unit
(adjusted for conversion of exchangeable
units)(4)
|
|
|
$0.279
|
$0.397
|
FFO per diluted
Unit(4)
|
|
|
$0.278
|
$0.396
|
AFFO per basic Unit
(adjusted for conversion of exchangeable
units)(4)
|
|
|
$0.255
|
$0.322
|
AFFO per diluted
Unit(4)
|
|
|
$0.254
|
$0.321
|
Cash Distributions per
Unit(5)
|
|
|
$0.130
|
$0.173
|
Payout ratio as a % of
FFO(4)
|
|
|
46.4%
|
42.5%
|
Payout ratio as a % of
AFFO(4)
|
|
|
50.0%
|
53.1%
|
|
|
(1)
|
These are non-GAAP
measures.
|
(2)
|
For the three
months ended March 31, 2022 and 2021, included in the weighted
average and diluted weighted average number of Units are
exchangeable units of 18,060,192 and 14,883,065,
respectively.
|
(3)
|
For the three
months ended March 31, 2022 and 2021, included in the determination
of diluted FFO and AFFO with respect to H&R's Unit Option Plan
and Incentive Unit Plan are 718,878 Units and 396,354 Units,
respectively.
|
(4)
|
These are non-GAAP
ratios.
|
(5)
|
H&R's Q1 2022
monthly distribution is $0.13 per Unit. Following the spin-off of
Primaris REIT to H&R's unitholders, Primaris REIT announced a
monthly distribution of $0.067 per Primaris REIT unit, reflecting
$0.80 per Primaris REIT unit on an annualized basis (equivalent to
$0.20 per H&R Unit annually prior to the spin-off of Primaris
REIT and 4:1 consolidation of Primaris REIT units). The Primaris
REIT distribution together with H&R's increased annual
distribution of $0.55 per Unit on annualized basis equates to a
combined distribution of $0.75 per Unit on an annualized basis
which is an 8.7% increase over the $0.69 per Unit on an annualized
basis paid by H&R in 2021.
|
SOURCE H&R Real Estate Investment Trust