TORONTO, May 12, 2023
/CNW/ - H&R Real Estate Investment Trust ("H&R" or "the
REIT") (TSX: HR.UN) is pleased to announce its financial results
for the three months ended March 31,
2023.
"Our portfolio transformational plan is producing strong
financial results across all property classes," said Tom Hofstedter, Executive Chair and Chief
Executive Officer. "Subsequent to the end of the first quarter, we
completed an important property disposition with the sale of 160
Elgin, continued to unlock value through the rezoning of select
office properties, and enhanced our balance sheet with reduced
leverage and increased liquidity, moving H&R closer to
achieving our portfolio simplification strategy goals. We will
continue to act on our transformational strategic repositioning
plan, as we have been doing since its announcement on October 27, 2021, with discipline, transacting
when we can to surface value for our unitholders. Given the line of
sight we have into our current disposition pipeline, and the demand
we are seeing for our properties, we expect to sell an additional
$300 million of non-core assets
during the balance of 2023 including the retail sale we are
announcing today."
Mr. Hofstedter added, "As we approach our annual general meeting
in June, on behalf of H&R Unitholders, I'd like to thank
Ronald Rutman for his years of
service as a Trustee on H&R's Board, including eight years as
Chair, and most recently as Vice-Chair and Lead Independent
Trustee. We are delighted to have welcomed Donald Clow, Lead Independent Trustee, to the
Board where his expertise and guidance will be invaluable as we
seek to accelerate the REIT's transformation strategy. We have also
nominated two experienced Trustees, who are standing for election
at the AGM, Lindsay Brand and
Leonard Abramsky. Upon their
appointments, the Board will be comprised of 40% women. With the
unwavering support of this distinguished Board, the H&R team
continues to have clear direction as we execute our repositioning
strategy."
HIGHLIGHTS:
- Net operating income increased by 5.3% for the three months
ended March 31, 2023 compared to the
respective 2022 period.
- Same-Property net operating income (cash basis)(1)
increased by 10.5% for the three months ended March 31, 2023 compared to the respective period
in 2022 driven by healthy gains across our operating segments:
|
•
Residential
|
|
|
|
+21.3 %
|
|
Driven by strong rent
growth and the strengthening of the U.S. dollar
|
|
•
Industrial
|
|
|
|
+10.2 %
|
|
Driven by strong rent
growth and higher occupancy
|
|
•
Retail
|
|
|
|
+6.2 %
|
|
Driven by the
strengthening of the U.S. dollar
|
|
•
Office
|
|
|
|
+5.4 %
|
|
Driven by the
strengthening of the U.S. dollar and lease terminations
|
- Funds From Operations ("FFO")(1) per Unit grew 11.1%
to $0.31 per Unit for the three
months ended March 31, 2023 compared
to $0.279 per Unit for the respective
period in 2022. The REIT distributed 48.4%(2) of FFO to
Unitholders for the three months ended March
31, 2023;
- Cash distributions per unit increased by 15.0% for the three
months ended March 31, 2023 compared
to the respective 2022 period;
- Unitholders' equity per Unit was $20.72 and Net Asset Value ("NAV") per
Unit(2) was $21.95 at
March 31, 2023. The following
weighted average capitalization rates were used to value the REIT's
investment properties:
|
•
Residential
|
|
|
|
4.31 %
|
|
|
•
Office (general)
|
|
|
|
6.99 %
|
|
•
Industrial
|
|
|
|
5.20 %
|
|
|
•
Office (rezoning)
|
|
|
|
4.52 %
|
|
•
Retail
|
|
|
|
6.40 %
|
|
|
|
|
|
|
|
|
|
(1)
|
These are non-generally
accepted accounting principles ("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
|
|
2023
|
2022
|
Total assets (in
thousands)
|
$11,449,189
|
$11,412,603
|
Debt to total assets
per the REIT's Financial Statements(1)
|
34.4 %
|
34.4 %
|
Debt to total assets at
the REIT's proportionate share(1)(2)
|
43.9 %
|
44.0 %
|
Unitholders' equity (in
thousands)
|
5,511,036
|
5,487,287
|
Units outstanding (in
thousands)
|
266,015
|
265,885
|
Exchangeable units
outstanding (in thousands)
|
17,974
|
17,974
|
Unitholders' equity per
Unit
|
$20.72
|
$20.64
|
NAV per
Unit(2)
|
$21.95
|
$21.80
|
|
Three months
ended March 31
|
|
2023
|
2022
|
Rentals from investment
properties (in millions)
|
$218.3
|
$201.7
|
Net operating
income (in millions)
|
$97.3
|
$92.4
|
Same-Property net
operating income (cash basis) (in
millions)(3)
|
$133.3
|
$120.6
|
Net income from equity
accounted investments (in
millions)
|
$9.9
|
$44.9
|
Fair value adjustment
on real estate assets (in millions)
|
$85.0
|
$1,022.5
|
Net income
(in millions)
|
$94.8
|
$970.0
|
Funds from operations
("FFO") (in millions)(3)
|
$87.9
|
$84.4
|
Adjusted funds from
operations ("AFFO") (in millions)(3)
|
$73.7
|
$77.1
|
Weighted average number
of Units and exchangeable units for FFO (in
thousands)
|
283,892
|
302,453
|
FFO per basic
Unit(2)
|
$0.310
|
$0.279
|
AFFO per basic
Unit(2)
|
$0.260
|
$0.255
|
Cash Distributions per
Unit
|
$0.150
|
$0.130
|
Payout ratio as a % of
FFO(2)
|
48.4 %
|
46.6 %
|
Payout ratio as a % of
AFFO(2)
|
57.7 %
|
51.0 %
|
|
|
(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 in
this news release.
|
(3)
|
These are non-GAAP
measures. Refer to the "Non-GAAP Measures" section in
this news release.
|
Senior Leadership Changes
As previously announced on May 10,
2023, Philippe Lapointe
stepped down as President of H&R and as an officer of H&R's
subsidiary, Lantower Residential. Effective immediately,
Emily Watson, Lantower's Chief
Operating Officer, has assumed leadership and the strategic
direction of Lantower Residential.
SUMMARY OF SIGNIFICANT Q1 2023 ACTIVITY
2023 Net Operating Income Highlights:
|
Three months
ended March 31
|
(in thousands of
Canadian dollars)
|
2023
|
2022
|
% Change
|
Operating
Segment:
|
|
|
|
Same-Property net
operating income (cash basis) -
Residential(1)
|
$40,161
|
$33,112
|
21.3 %
|
Same-Property net
operating income (cash basis) - Industrial(1)
|
16,532
|
14,999
|
10.2 %
|
Same-Property net
operating income (cash basis) - Office(1)
|
52,271
|
49,612
|
5.4 %
|
Same-Property net
operating income (cash basis) - Retail(1)
|
24,316
|
22,903
|
6.2 %
|
Same-Property net
operating income (cash basis)(1)
|
133,280
|
120,626
|
10.5 %
|
Net operating income
(cash basis) from Transactions at the REIT's proportionate
share(1)
|
29,999
|
32,139
|
(6.7) %
|
Realty taxes in
accordance with IFRIC 21 at the REIT's proportionate
share(1)(2)
|
(45,798)
|
(40,902)
|
(12.0) %
|
Straight-lining of
contractual rent at the REIT's proportionate
share(1)
|
3,758
|
154
|
2340.3 %
|
Net operating income
from equity accounted investments(1)
|
(23,939)
|
(19,594)
|
(22.2) %
|
Net operating
income per the REIT's Financial
Statements
|
$97,300
|
$92,423
|
5.3 %
|
|
|
(1)
|
These are non-GAAP
measures. Refer to the "Non-GAAP Measures" section of
this news release.
|
(2)
|
IFRIC 21 is defined in
the "Non-GAAP Measures" section of this news
release.
|
Subsequent Property Dispositions
In April 2023, H&R sold 160
Elgin Street, a 973,661 square foot office property in Ottawa, ON for $277.0
million, which was classified as held for sale as at
March 31, 2023. H&R provided two
vendor take-back mortgages to the purchaser upon closing: (i)
$180.0 million secured by a first
mortgage on the property, bearing interest at 6.5% per annum for 90
days, maturing July 20, 2023 and (ii)
$30.0 million which will be
subordinate to the first mortgage on the property, bearing interest
at 4.5% per annum for a five-year term, maturing April 20, 2028. The remaining proceeds of
$67.0 million were primarily used to
repay debt and fund closing costs. Approximately $33.0 million of the $67.0
million will be used to repurchase Units, under the REIT's
normal course issuer bid, which are currently trading at a
significant discount to the REIT's NAV per Unit.
In May 2023, H&R entered into
an agreement to sell four Canadian retail properties for aggregate
gross proceeds of $68.0 million.
Closing of the sale remains subject to certain customary conditions
being satisfied and is expected to occur in July 2023.
2023 Distribution Increase
H&R increased its monthly distributions to $0.05 per Unit commencing January 2023. This amounts to $0.60 per Unit annually, an 11.1% increase from
the 2022 distribution of $0.54 per
Unit, excluding the 2022 special cash distribution.
The 2022 special distribution of $0.40 per Unit was comprised of $0.05 per Unit in cash and $0.35 per Unit in additional Units, which were
immediately consolidated such that there was no change in the
number of outstanding Units. As a result of the recently announced
property sales, H&R expects to make a special distribution in
2023. The amount and nature of such distribution will be determined
in Q4 2023.
For the three months ended March 31,
2023, H&R's payout ratio as a percentage of AFFO was
57.7%.
Major Leasing Transactions:
In Q1 2023, H&R completed a 5-year lease renewal on a
132,735 square foot industrial property in Mississauga, ON, at H&R's ownership
interest. The original lease expired in February 2023 and rent increased by 269%
commencing in March 2023 with annual
contractual rent escalations. The tenant had a free rent period for
March and April 2023.
In Q1 2023, H&R completed a 5-year lease renewal on a 37,600
square foot industrial property in Mississauga, ON, at H&R's ownership
interest. The original lease will expire in July 2023 and rent will increase by 232%
commencing in August 2023 with
contractual rent escalations. The tenant has a free rent period for
the months of August 2023,
August 2024 and August 2025.
In Q1 2023, H&R entered into a lease amendment with its
tenant at 6900 Maritz Drive in Mississauga, ON to terminate their lease in
December 2023. The terms of the
rental payments to December 2023 have
not changed. The previous lease term would have ended in
May 2031. H&R received a lease
termination fee of approximately $0.9
million in Q1 2023 and will receive an additional
$2.5 million in Q3 2023. IFRS 16,
Leases ("IFRS 16") requires revenue from leases to be
recognized on a straight-line basis over the contractual term of
the lease. As a result of this lease amendment, a non-cash
adjustment to straight-lining of contractual rent of nil was
recorded in Q1 2023 and $0.8 million,
($1.8) million, and $0.8 million will be recorded in Q2 2023, Q3 2023
and Q4 2023 respectively. H&R is preparing a Site Plan
application for submission to the City of
Mississauga for a new single story 122,400 square foot
industrial building, which would replace the existing 104,689
square foot office building. Site Plan approval is expected by Q4
2023.
Development Update
Canadian Properties under Development
The REIT currently has two industrial properties under
development located at 1965 Meadowvale Boulevard and 1925
Meadowvale Boulevard in Mississauga,
ON, totalling 336,800 square feet, which are expected to be
completed in Q4 2023 and Q1 2024, respectively. The total
development budget to complete these two properties is
approximately $40.2 million. In
October 2022, H&R entered into a
binding agreement with Armour Transport Inc. to fully lease 1965
Meadowvale Boulevard, totalling 187,290 square feet, for a term of
10 years at current market rents with annual contractual rental
escalations. The lease was completed in February 2023. In March
2023, H&R entered into a lease agreement with UAP Inc.
to fully lease 1925 Meadowvale Boulevard, totalling 149,510 square
feet, for a term of 12.5 years at current market rents with annual
contractual rental escalations.
U.S. Properties under Development
The REIT commenced construction on two U.S. residential
development properties in 2022. The total development budget to
complete these two properties is approximately U.S. $150.5 million. The REIT expects its construction
costs for these two properties under development to be
approximately U.S. $101.2 million for
the remainder of 2023 and U.S. $49.2
million in 2024.
Future Intensification
On February 27, 2023, H&R
attended a settlement hearing with the Ontario Land Tribunal
("OLT") for 53 & 55 Yonge Street in Toronto, ON where H&R received a
settlement decision from the OLT for a 66-storey mixed use tower
representing approximately 550,000 square feet, including
approximately 510 residential units with approximately 170,000
square feet of replacement office area and approximately 10,000
square feet of retail area. H&R is now working on a
re-submission to reflect minor tweaks negotiated with the
City of Toronto and H&R's
neighbours as a part of the settlement, and is targeting finalized
re-zoning in Q2 2023.
On March 10, 2023, H&R reached
a verbal agreement with the City of
Toronto for 310 Front Street in Toronto, ON, for a 65-storey mixed use tower
representing approximately 550,000 square feet, including
approximately 575 residential units with approximately 117,000
square feet of replacement office area and approximately 2,000
square feet of retail area. H&R has made a re-submission
reflecting minor tweaks negotiated with the City of Toronto, and a positive Staff Report
is slated to head to Council in Q2 2023.
Debt & Liquidity Highlights
In January 2023, H&R redeemed
all of its $250.0 million Series O
Senior Debentures, which bore interest at 3.416% per annum.
In March 2023, H&R and its
co-owner obtained a new $275.0
million non-revolving secured credit facility, at H&R's
ownership interest, secured by 42 industrial properties. Upon
closing, the REIT and its co-owner repaid $12.5 million outstanding on its secured
revolving $25.0 million line of
credit facility which matured as a part of closing this new
facility, each at H&R's ownership interest.
During the three months ended March 31,
2023, H&R repaid two mortgages totalling $13.3 million at a weighted average interest rate
of 4.7%.
As at March 31, 2023, debt to
total assets per the REIT's Financial Statements was 34.4%
unchanged from 34.4% as at December 31,
2022. As at March 31, 2023,
debt to total assets at the REIT's proportionate share (a non-GAAP
ratio) was 43.9% compared to 44.0% as at December 31, 2022. The weighted average interest
rate of H&R's debt as at March 31,
2023 was 4.0% with an average term to maturity of 3.1 years.
The weighted average interest rate of H&R's debt as at
December 31, 2022 was 3.8% with an
average term to maturity of 3.2 years.
As at March 31, 2023, H&R had
cash and cash equivalents of $68.4
million, $879.7 million
available under its unused lines of credit and an unencumbered
property pool of approximately $4.5
billion.
ESG UPDATE
On March 13, 2023, H&R REIT
announced the appointment of Donald
Clow to the REIT's Board of Trustees. Mr. Clow fills the
vacancy left by Ronald Rutman, who
resigned from the Board following a successful term as Vice-Chair
and Independent Lead Trustee. Subsequent to his appointment, the
Trustees appointed Mr. Clow as Independent Lead Trustee of the
REIT's Board of Trustees.
On April 25, 2023, H&R
announced the nominations of two Trustees to the Board,
Lindsay Brand and Leonard Abramsky. Upon their appointments, the
H&R Board of Trustees will be comprised of 40% women.
MONTHLY DISTRIBUTIONS DECLARED
H&R today declared distributions for the months of May and
June scheduled as follows:
|
Distribution/Unit
|
Annualized
|
Record date
|
Distribution
date
|
May 2023
|
$0.05
|
$0.60
|
May 31, 2023
|
June 15,
2023
|
June 2023
|
$0.05
|
$0.60
|
June 30,
2023
|
July 14,
2023
|
CONFERENCE CALL AND WEBCAST
Management will host a conference call to discuss the financial
results of the REIT on Friday, May 12,
2023 at 3.00 p.m. Eastern
Time. Participants can join the call by dialing
1-888-886-7786 or 1-416-764-8658. 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
1-416-764-8692 or 1-877-674-7070 and enter the passcode 779694
followed by the "#" key. The telephone replay will be available
until Friday, May 19, 2023 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.
2023 Annual Unitholders' Meeting
H&R will host its annual Unitholders' meeting on
Thursday, June 15, 2023 at
10.30 a.m. Eastern Time (by virtual
meeting only via live audio webcast at
https://central.virtualshareholdermeeting.com/vsm/web?pvskey=HRREIT2023).
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, 2023. 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'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, Montreal, Vancouver, 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 made or implied under the
heading "Summary of Significant Q1 2023 Activity" 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 ability to take
advantage of value-creating opportunities, H&R's
transformational strategic repositioning plan and its strategy to
grow its exposure to residential assets in U.S. sunbelt and gateway
cities, leasing of the REIT's investment properties, including
expected lease expiration dates, H&R's expectation regarding
the sale of non-core assets, H&R's expectations with respect to
the activities of its development properties, including the
building of new properties, the use of such properties, the timing
of construction and completion, expected construction plans and
costs, anticipated square footage, expected approvals and the
timing thereof, capitalization rates and cash flow models used to
estimate fair values, expectations regarding future operating
fundamentals, future growth in Same-Property net operating income
(cash basis), H&R's intention to repurchase Units in the open
market, H&R's beliefs regarding the benefits of persons who
hold Units, 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 effects of increased
inflation; debt markets continue to provide access to capital at a
reasonable cost, notwithstanding rising interest rates; and
assumptions concerning currency exchange and interest rates
including, for the purposes of expected Same-Property net operating
income (cash basis) growth, that there won't be any change in the
currency exchange rate. Additional risks and uncertainties include,
among other things, risks related to: 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; capital expenditures
risk; currency risk; liquidity risk; risks associated with disease
outbreaks; cyber security risk; financing credit risk; ESG and
climate change risk; 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; Unit
price risk; potential conflicts of interest; availability of cash
for distributions; credit ratings; ability to access capital
markets; dilution; unitholder liability; redemption right risk;
risks relating to debentures; tax risk; additional tax risks
applicable to unitholders; investment eligibility; 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 contained in this news
release are qualified by these cautionary statements. These
forward-looking statements are made as of May 12, 2023 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, 2023 (the "REIT's Financial
Statements") were prepared in accordance with International
Accounting Standard 34, Interim Financial Reporting.
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's discussion and analysis as at
and for the three months ended March 31,
2023, 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,
2023
|
December 31,
2022
|
(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
|
$8,787,019
|
$2,106,630
|
$10,893,649
|
$8,799,317
|
$2,128,306
|
$10,927,623
|
Properties under
development
|
956,642
|
94,368
|
1,051,010
|
880,778
|
89,912
|
970,690
|
|
9,743,661
|
2,200,998
|
11,944,659
|
9,680,095
|
2,218,218
|
11,898,313
|
Equity accounted
investments
|
1,052,722
|
(1,052,722)
|
—
|
1,060,268
|
(1,060,268)
|
—
|
Assets classified as
held for sale
|
275,000
|
—
|
275,000
|
294,028
|
—
|
294,028
|
Other assets
|
309,386
|
20,363
|
329,749
|
301,325
|
21,892
|
323,217
|
Cash and cash
equivalents
|
68,420
|
38,546
|
106,966
|
76,887
|
38,443
|
115,330
|
|
$11,449,189
|
$1,207,185
|
$12,656,374
|
$11,412,603
|
$1,218,285
|
$12,630,888
|
Liabilities and
Unitholders' Equity
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Debt
|
$3,943,414
|
$1,126,076
|
$5,069,490
|
$3,922,529
|
$1,137,210
|
$5,059,739
|
Exchangeable
units
|
226,475
|
—
|
226,475
|
217,668
|
—
|
217,668
|
Deferred
Revenue
|
976,879
|
—
|
976,879
|
986,243
|
—
|
986,243
|
Deferred tax
liability
|
494,874
|
—
|
494,874
|
483,048
|
—
|
483,048
|
Accounts payable and
accrued liabilities
|
296,511
|
58,914
|
355,425
|
309,505
|
58,502
|
368,007
|
Liabilities classified
as held for sale
|
—
|
—
|
—
|
6,323
|
—
|
6,323
|
Non-controlling
interest
|
—
|
22,195
|
22,195
|
—
|
22,573
|
22,573
|
|
5,938,153
|
1,207,185
|
7,145,338
|
5,925,316
|
1,218,285
|
7,143,601
|
Unitholders'
equity
|
5,511,036
|
—
|
5,511,036
|
5,487,287
|
—
|
5,487,287
|
|
$11,449,189
|
$1,207,185
|
$12,656,374
|
$11,412,603
|
$1,218,285
|
$12,630,888
|
|
|
(1)
|
The REIT's
proportionate share is a non-GAAP measure defined in the "Non-GAAP
Measures" section of this news release.
|
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, 2023
|
Three months ended
March 31, 2022
|
(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
|
$218,295
|
$37,594
|
$255,889
|
$201,702
|
$30,854
|
$232,556
|
Property operating
costs
|
(120,995)
|
(13,655)
|
(134,650)
|
(109,279)
|
(11,260)
|
(120,539)
|
Net operating
income
|
97,300
|
23,939
|
121,239
|
92,423
|
19,594
|
112,017
|
Net income from equity
accounted investments
|
9,896
|
(9,851)
|
45
|
44,853
|
(44,834)
|
19
|
Finance costs -
operations
|
(54,971)
|
(11,895)
|
(66,866)
|
(55,286)
|
(8,799)
|
(64,085)
|
Finance
income
|
1,757
|
60
|
1,817
|
2,546
|
3
|
2,549
|
Trust
expenses
|
(8,091)
|
(754)
|
(8,845)
|
(7,249)
|
(776)
|
(8,025)
|
Fair value adjustment
on financial instruments
|
(19,877)
|
300
|
(19,577)
|
(591)
|
676
|
85
|
Fair value adjustment
on real estate assets
|
84,991
|
13
|
85,004
|
1,022,537
|
33,783
|
1,056,320
|
Gain (loss) on sale of
real estate assets, net of related costs
|
(497)
|
(1,629)
|
(2,126)
|
(28)
|
733
|
705
|
Net income before
income taxes and non-controlling
interest
|
110,508
|
183
|
110,691
|
1,099,205
|
380
|
1,099,585
|
Income tax
expense
|
(15,706)
|
(12)
|
(15,718)
|
(129,214)
|
(80)
|
(129,294)
|
Net income before
non-controlling interest
|
94,802
|
171
|
94,973
|
969,991
|
300
|
970,291
|
Non-controlling
interest
|
—
|
(171)
|
(171)
|
—
|
(300)
|
(300)
|
Net income
|
94,802
|
—
|
94,802
|
969,991
|
—
|
969,991
|
Other comprehensive
loss:
|
|
|
|
|
|
|
Items that are or may
be reclassified subsequently to net
income
|
(32,872)
|
—
|
(32,872)
|
(37,102)
|
—
|
(37,102)
|
Total comprehensive
income attributable to unitholders
|
$61,930
|
$—
|
$61,930
|
$932,889
|
$—
|
$932,889
|
|
|
(1)
|
The REIT's
proportionate share is a non-GAAP measure defined in the "Non-GAAP
Measures" section of this news release.
|
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)
|
2023
|
2022
|
Change
|
Rentals from investment
properties
|
$218,295
|
$201,702
|
$16,593
|
Property operating
costs
|
(120,995)
|
(109,279)
|
(11,716)
|
Net operating
income per the REIT's Financial
Statements
|
97,300
|
92,423
|
4,877
|
Adjusted
for:
|
|
|
|
Net operating income
from equity accounted investments(1)
|
23,939
|
19,594
|
4,345
|
Straight-lining of
contractual rent at the REIT's proportionate
share(1)
|
(3,758)
|
(154)
|
(3,604)
|
Realty taxes in
accordance with IFRIC 21 at the REIT's proportionate
share(1)
|
45,798
|
40,902
|
4,896
|
Net operating income
(cash basis) from Transactions at the REIT's proportionate
share(1)
|
(29,999)
|
(32,139)
|
2,140
|
Same-Property net
operating income (cash basis)(1)
|
$133,280
|
$120,626
|
$12,654
|
|
|
(1)
|
These are non-GAAP
measures as defined in the "Non-GAAP Measures" section of this news
release.
|
NAV per Unit
The following table reconciles Unitholders' equity per Unit to
NAV per Unit(2):
Unitholders' Equity
per Unit and NAV per Unit
|
March
31
|
December 31
|
(in thousands except
for per Unit amounts)
|
2023
|
2022
|
Unitholders'
equity
|
$5,511,036
|
$5,487,287
|
Exchangeable
units
|
226,475
|
217,668
|
Deferred tax
liability
|
494,874
|
483,048
|
Total
|
$6,232,385
|
$6,188,003
|
|
|
|
Units
outstanding
|
266,015
|
265,885
|
Exchangeable units
outstanding
|
17,974
|
17,974
|
Total
|
283,989
|
283,859
|
Unitholders' equity per
Unit(1)
|
$20.72
|
$20.64
|
NAV per
Unit(2)
|
$21.95
|
$21.80
|
|
|
(1)
|
Unitholders' equity per
Unit is calculated by dividing unitholders' equity by Units
outstanding.
|
(2)
|
This is a Non-GAAP
ratio defined in the "Non-GAAP Measures" section of this news
release.
|
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)
|
2023
|
2022
|
Net
income per the REIT's Financial
Statements
|
$94,802
|
$969,991
|
Realty taxes in
accordance with IFRIC 21
|
42,181
|
37,548
|
FFO adjustments from
equity accounted investments
|
4,933
|
(31,328)
|
Exchangeable unit
distributions
|
2,696
|
2,375
|
Fair value adjustments
on financial instruments and real estate assets
|
(65,114)
|
(1,021,946)
|
Fair value adjustment
to unit-based compensation
|
1,296
|
3,134
|
Loss on sale of real
estate assets, net of related costs
|
497
|
28
|
Deferred income tax
expense applicable to U.S. Holdco
|
15,378
|
128,850
|
Incremental leasing
costs
|
587
|
617
|
The Bow and 100 Wynford
non-cash rental income and accretion adjustments
|
(9,364)
|
(4,865)
|
FFO(1)
|
$87,892
|
$84,404
|
Straight-lining of
contractual rent
|
(3,624)
|
(194)
|
Rent amortization of
tenant inducements
|
1,123
|
1,160
|
Capital
expenditures
|
(9,232)
|
(4,997)
|
Leasing expenses and
tenant inducements
|
(760)
|
(1,841)
|
Incremental leasing
costs
|
(587)
|
(617)
|
AFFO adjustments from
equity accounted investments
|
(1,140)
|
(805)
|
AFFO(1)
|
$73,672
|
$77,110
|
Weighted average number
of Units and exchangeable units (in thousands of
Units)(2)
|
283,892
|
302,453
|
Diluted weighted
average number of Units and exchangeable units (in thousands of
Units)(2)(3)
|
285,004
|
303,172
|
FFO per basic
Unit(4)
|
$0.310
|
$0.279
|
FFO per diluted
Unit(4)
|
$0.308
|
$0.278
|
AFFO per basic
Unit(4)
|
$0.260
|
$0.255
|
AFFO per diluted
Unit(4)
|
$0.258
|
$0.254
|
Cash Distributions per
Unit
|
$0.150
|
$0.130
|
Payout ratio as a % of
FFO(4)
|
48.4 %
|
46.6 %
|
Payout ratio as a % of
AFFO(4)
|
57.7 %
|
51.0 %
|
|
|
(1)
|
These are non-GAAP
measures defined in the "Non-GAAP Measures" section of this news
release.
|
(2)
|
For the three months
ended March 31, 2023 and 2022, included in the weighted average and
diluted weighted average number of Units are exchangeable units of
17,974,186 and 18,060,192, respectively.
|
(3)
|
For the three months
ended March 31, 2023 and 2022, included in the determination of
diluted FFO and AFFO with respect to H&R's Incentive Unit Plan
are 1,111,914 Units and 718,878 Units, respectively.
|
(4)
|
These are non-GAAP
ratios defined in the "Non-GAAP Measures" section of 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