H&R Reports Solid Q3 Results and Increases Distributions by 8%

TORONTO, Nov. 14, 2012 /CNW/ - H&R Real Estate Investment Trust ("H&R REIT") 
and H&R Finance Trust (collectively, "H&R") (TSX: HR.UN; HR.DB.C; HR.DB.D; 
HR.DB.E) announced their financial results for the third quarter ended 
September 30, 2012. 
Operating Highlights 
H&R REIT's operating strategy is to stabilize annual earnings and minimize 
market risk by leasing and financing its properties on a long-term basis. As a 
result, the average remaining term to maturity as at September 30, 2012 was 
11.4 years for leases and 7.9 years for outstanding mortgages. Occupancy at 
September 30, 2012 was 98.5%, down slightly from 98.9% at September 30, 
2011. Leases representing only 4.4% of total rentable area will expire 
during the remainder of 2012 and 2013. As at September 30, 2012, the ratio 
of H&R's debt to fair market value was 53.1% compared to 53.6% as at December 
31, 2011. H&R's debt excluding convertible debentures to fair market value 
ratio was 49.7% compared to 47.0% as at December 31, 2011. 
Capital Transaction Highlights 
During the third quarter of 2012, H&R REIT: 


    --  redeemed all of its remaining outstanding 6.65% 2013
        Convertible Debentures for a total cash payment of $29.8
        million;
    --  redeemed all of its remaining outstanding 6.75% 2014
        Convertible Debentures for a total cash payment of $1.3
        million;
    --  sold two industrial properties, one in Ontario and one in the
        United States for gross proceeds of $65.5 million;
    --  incurred a $1.3 million prepayment penalty to refinance a
        $129.6 million mortgage bearing interest at a rate of 6.93%,
        with a new $200.0 million mortgage bearing interest at a rate
        of 4.0% for a 10-year term; and
    --  purchased 6 grocery anchored retail properties totaling 416,782
        square feet in Florida for an aggregate purchase price of U.S.
        $71.5 million at an average capitalization rate of 6.8% and
        subsequently closed a U.S. $46.5 million mortgage for these
        properties at an interest rate of 3.35% for a 7-year term. 
        This resulted in a 13.2% levered return on this portfolio which
        consists of the following properties:

 ____________________________________________________________________
|Property Address          |Anchor          |Square Feet|   Occupancy|
|__________________________|________________|___________|____________|
|840 A1A North, Ponte Vedra|The Fresh Market|     52,959|       89.5%|
|Beach, FL                 |                |           |            |
|__________________________|________________|___________|____________|
|11406 San Jose Boulevard, |Publix          |     56,700|       97.2%|
|Jacksonville, FL          |                |           |            |
|__________________________|________________|___________|____________|
|125 Merritt Island        |Publix          |     88,316|       91.0%|
|Causeway, Merritt Island, |                |           |            |
|FL                        |                |           |            |
|__________________________|________________|___________|____________|
|1850 Ridgewood Avenue,    |Publix          |     57,870|       97.8%|
|Holly Hill, FL            |                |           |            |
|__________________________|________________|___________|____________|
|17445 U.S. Highway 192,   |Publix          |     77,770|       93.8%|
|Clermont, FL              |                |           |            |
|__________________________|________________|___________|____________|
|8145 & 8195 Vineland Ave.,|Publix          |     83,167|       95.0%|
|Orlando, FL               |                |           |            |
|__________________________|________________|___________|____________|
|Total                     |                |    416,782|            |
|__________________________|________________|___________|____________|
    Development Highlights

H&R REIT is currently developing the Bow in Calgary, AB. The Bow is a 
2-million square foot head office complex, pre-leased on a triple net basis, 
to Encana Corporation for a term of 25 years. The North Block budget is 
currently $1.67 billion leaving approximately $58.5 million remaining to be 
spent. Floors 3 to 22, floors 29 to 40 and floors 23-28 were delivered to 
Encana Corporation on May 2, 2012, October 4, 2012 and November 8, 2012, 
respectively. Delivery of further floors will occur in December 2012 and 
January 2013 after which time the 25-year lease will commence. Encana 
Corporation is entitled to a 60-day rent free fixturing period and a rent 
credit equal to the delay penalty estimated to be $33.0 million in respect of 
all the floors. This rent free period combined with the interest expense 
that will no longer be capitalized, as floors of the project become available 
for their intended use, will result in an estimated funds from operations 
("FFO")((1)) gain of $0.8 million and an adjusted funds from operations 
("AFFO")((1)) loss of $28.9 million in 2012 as shown in the table below.

 _____________________________________________________________________
|               |      Actual   |                  Estimate((2))      |
|_______________|_______________|_____________________________________|
|In Millions    |    Q2 |       |       | Total |       |       |
|               | 2012  |       |Q4 2012| 2012  |Q1 2013|       |
|               |       |Q3 2012|       |       |       |Q2 2013|
|_______________|_______|_______|_______|_______|_______|_______|
|Basic rent     |       |       |       |       |       |       |
|               |$     -|       |$     -|       |$     -|       |
|               |       |$     -|       |$     -|       |  $23.2|
|_______________|_______|_______|_______|_______|_______|_______|
|Straight-lining|       |       |       |       |       |       |
|of contractual |       |       | 15.4  | 29.7  | 24.6  |       |
|rent           |5.7    |    8.6|       |       |       |    2.0|
|_______________|_______|_______|_______|_______|_______|_______|
|Interest no    |       |       |       |       |       |       |
|longer         |(3.6)  |       | (11.1)| (23.3)| (14.4)|       |
|capitalized    |       |  (8.6)|       |       |       | (15.5)|
|_______________|_______|_______|_______|_______|_______|_______|
|Mortgage       |(0.5)  |       |(3.1)  |(5.6)  |(4.2)  |       |
|interest       |       |  (2.0)|       |       |       |  (4.6)|
|_______________|_______|_______|_______|_______|_______|_______|
|Depreciation   |(1.6)  |       |(6.9)  | (13.2)|(9.2)  |       |
|               |       |  (4.7)|       |       |       | (10.2)|
|_______________|_______|_______|_______|_______|_______|_______|
|Expected Bow   |       |       |       |       |       |       |
|FFO((1))       |1.6    |  (2.0)|1.2    |0.8    |6.0    |    5.1|
|_______________|_______|_______|_______|_______|_______|_______|
|Expected Bow   |(4.1)  |       | (14.2)| (28.9)|       |       |
|AFFO((1))      |       | (10.6)|       |       | (18.6)|    3.1|
|_______________|_______|_______|_______|_______|_______|_______|

((1))      H&R's combined Management Discussion and Analysis ("MD&A")
           includes reconciliations of: net income to FFO; FFO to AFFO;
           and AFFO to cash provided by operations.  Readers are
           encouraged to review such reconciliations in the combined
           MD&A.

((2))      This information is being provided so that investors are
           able to understand the expected impact of the Bow to H&R
           REIT's operations.  This information may not be appropriate
           for any other purposes


Upon full occupancy and following the expiration of the free rent period, the 
Bow is expected to generate approximately $93.5 million of net operating 
income on an annualized basis and H&R REIT will have additional annual 
interest expense, due to interest expense no longer being capitalized to the 
project, of approximately $62.0 million and interest of $18.5 million on the 
Bow bonds. Rent escalations will be at 0.75% per annum on the office space 
and 1.5% per annum on the parking income for the full 25-year term.

Financial Highlights

The following table includes non-Generally Accepted Accounting Principles 
("GAAP") information that should not be construed as an alternative to 
comprehensive income (loss) or cash provided by operations and may not be 
comparable to similar measures presented by other issuers as there is no 
standardized meaning of FFO and AFFO under GAAP. Management believes that 
these are meaningful measures of operating performance. Readers are 
encouraged to refer to H&R's combined MD&A for further discussion of non-GAAP 
information presented.

 ____________________________________________________________________
|                  |3 months ended September|9 months ended September|
|                  |           30           |           30           |
|                  |________________________|________________________|
|                  | 2012 |         2011    |2012  |         2011    |
|__________________|______|_________________|______|_________________|
|Rentals from      |      |                 |      |                 |
|investment        |      |                 |      |                 |
|properties        |      |                 |      |                 |
|(millions)        |$213.9|        $169.6   |$604.8|        $478.7   |
|__________________|______|_________________|______|_________________|
|Net income        |      |                 |      |                 |
|(millions)        | $5.3 |         $58.3   |$35.9 |         $36.1   |
|__________________|______|_________________|______|_________________|
|FFO (millions) (  |      |                 |      |                 |
|(1))              |$78.8 |         $70.2   |$244.1|        $204.1   |
|__________________|______|_________________|______|_________________|
|FFO per Stapled   |      |                 |      |                 |
|Unit (basic)      |$0.41 |         $0.43   |$1.31 |         $1.30   |
|__________________|______|_________________|______|_________________|
|AFFO (millions) ( |      |                 |      |                 |
|(1)(2))           |$62.6 |         $62.9   |$202.4|        $177.3   |
|__________________|______|_________________|______|_________________|
|AFFO per Stapled  |      |                 |      |                 |
|Unit (basic)((2)) |$0.33 |         $0.39   |$1.08 |         $1.13   |
|__________________|______|_________________|______|_________________|
|Cash provided by  |      |                 |      |                 |
|operations        |      |                 |      |                 |
|(millions)        |$140.5|        $104.1   |$397.6|        $300.5   |
|__________________|______|_________________|______|_________________|
|Cash distributions|      |                 |      |                 |
|paid (millions)(  |      |                 |      |                 |
|(3))              |$42.0 |         $31.1   |$118.6|         $87.8   |
|__________________|______|_________________|______|_________________|
|Distributions per |      |                 |      |                 |
|Stapled Unit      |$0.30 |         $0.25   |$0.86 |         $0.71   |
|__________________|______|_________________|______|_________________|

((1))      H&R's combined MD&A includes reconciliations of: net income
           to FFO; FFO to AFFO; and AFFO to cash provided by
           operations.  Readers are encouraged to review such
           reconciliations in the combined MD&A.

((2))      See below for significant and non-recurring items included
           in AFFO.

((3))      Cash distributions paid exclude distributions reinvested in
           units pursuant to H&R's unitholder distribution reinvestment
           plan and include distributions paid to the Class B Limited
           Partnership unitholders who can exchange their units for
           Stapled Units.


Under International Financial Reporting Standards at each reporting period, 
H&R REIT fair values its convertible debentures and exchangeable units using 
closing market prices. This is shown as a gain (loss) on change in fair 
value. Also included in the gain (loss) on change in fair value is the net 
gain (loss) on derivative instruments. The total gain (loss) on change in 
fair value was ($7.9 million) for the three months ended September 30, 2012 
(September 30, 2011 - $22.0 million) and ($25.5 million) for the nine months 
ended September 30, 2012 (September 30, 2011 - ($39.2 million)). For the 
three months ended September 30, 2012, there was a gain (loss) on 
extinguishment of debt of ($0.1 million) (September 30, 2011 - $5.0 million) 
and for the nine months ended September 30, 2012, there was a gain on 
extinguishment of debt of $10.5 million (September 30, 2011 - $19.6 
million). Excluding the gain (loss) on change in fair value and the gain 
(loss) on extinguishment of debt, net income would have been $13.3 million for 
the three months ended September 30, 2012 (September 30, 2011 - $31.3 million) 
and $50.9 million for the nine months ended September 30, 2012 (September 30, 
2011 - $55.7 million). 
Included in AFFO are the following items which can be a source of significant 
variances between different periods: 
 _____________________________________________________________
|                  |3 months ended September|   9 months ended|
|                  |                      30|     September 30|
|__________________|________________________|_________________|
|In Millions       |   2012|            2011|   2012|     2011|
|__________________|_______|________________|_______|_________|
|Additional        |   $3.8|            $1.6|   $8.5|     $2.6|
|recoveries for    |       |                |       |         |
|capital           |       |                |       |         |
|expenditures      |       |                |       |         |
|__________________|_______|________________|_______|_________|
|Capital and tenant| ($8.7)|          ($3.7)|($19.5)|  ($11.9)|
|expenditures      |       |                |       |         |
|__________________|_______|________________|_______|_________|
|One-time          | ($1.3)|            $1.2| ($1.6)|     $1.9|
|non-recurring     |       |                |       |         |
|items*            |       |                |       |         |
|__________________|_______|________________|_______|_________|
|The Bow           |($10.6)|               -|($14.7)|        -|
|__________________|_______|________________|_______|_________|
|                  |($16.8)|          ($0.9)|($27.3)|   ($7.4)|
|__________________|_______|________________|_______|_________| 
*  One-time non-recurring items may include lease termination payments, 
mortgage pre-payment penalties, sundry income, one-time 
occupancy and realty tax adjustments and unusual trust expenses. 
Excluding the above items, AFFO would have been $79.4 million for the three 
months ended September 30, 2012 (September 30, 2011 - $63.8 million) and $0.41 
per basic Stapled Unit (September 30, 2011 - $0.39 per basic Stapled Unit). 
For the nine months ended September 30, 2012, AFFO would have been $229.7 
million (September 30, 2011 - $184.7 million) and $1.23 per basic Stapled Unit 
(September 30, 2011 - $1.18 per basic Stapled Unit). 
Subsequent to September 30, 2012, H&R REIT: 


    --  sold four retail properties in Georgia, United States for gross
        proceeds of approximately U.S. $51.4 million, including a gain
        on sale of approximately $5.4 million.

Distribution Increases:

Consistent with H&R's positive outlook and Encana and Cenovus's occupancy of 
the Bow, the trustees have adopted an updated distribution policy to replace 
the distribution policy previously announced in February 2011. Under the 
updated policy, it is intended that distributions will increase by 8% in 
January 2013 to $1.35 per Stapled Unit on an annualized basis (consistent with 
the previous policy).

About H&R REIT and H&R Finance Trust

H&R REIT is an open-ended real estate investment trust, which owns a North 
American portfolio of 41 office, 116 industrial, 135 retail properties 
comprising over 43 million square feet, and 3 development projects with a fair 
value of approximately $10.0 billion. The foundation of H&R REIT's success 
since inception in 1996 has been a disciplined strategy that leads to 
consistent and profitable growth. H&R REIT leases its properties long term to 
creditworthy tenants and strives to match those leases with primarily 
long-term, fixed-rate financing.

H&R Finance Trust is an unincorporated investment trust, which primarily 
invests in notes issued by a U.S. corporation which is a subsidiary of H&R 
REIT. The current note receivable is U.S. $156.5 million. In 2008, H&R REIT 
completed an internal reorganization which resulted in each issued and 
outstanding H&R REIT unit trading together with a unit of H&R Finance Trust as 
a "Stapled Unit" on the Toronto Stock Exchange.

Forward-looking Statements

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 
the objectives of H&R REIT and H&R Finance Trust, strategies to achieve those 
objectives, H&R's beliefs, plans, estimates, and intentions, and similar 
statements concerning anticipated future events, results, circumstances, 
performance or expectations that are not historical facts including, in 
particular, H&R REIT's expectation regarding future developments in connection 
with and financial impact of The Bow, and the amount of actual distributions 
to unitholders notwithstanding the trustees adoption of a distribution 
policy. 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. These statements are not 
guarantees of future performance and are based on H&R's estimates and 
assumptions that are subject to risk and uncertainties, including those 
discussed in H&R's materials filed with the Canadian securities regulatory 
authorities from time to time, which could cause the actual results and 
performance of H&R to differ materially from the forward-looking statements 
contained in this news release. Those risks and uncertainties include, among 
other things, risks related to: prices and market value of securities of H&R 
availability of cash for distributions; development and financing relating to 
The Bow development; restrictions pursuant to the terms of indebtedness; 
liquidity; credit risk and tenant concentration; interest rate and other debt 
related risk; tax risk; ability to access capital markets; dilution; lease 
rollover risk; construction risks; currency risk; unitholder liability; 
co-ownership interest in properties; competition for real property 
investments; environmental matters; reliance on one corporation for management 
of substantially all H&R REIT's properties; and changes in legislation and 
indebtedness of H&R. 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 stable; local real estate 
conditions are stable; interest rates are relatively stable; and equity and 
debt markets continue to provide access to capital. H&R cautions that this 
list of factors is 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. All forward-looking statements in this 
news release are qualified by these cautionary statements. These 
forward-looking statements are made as of today, and H&R, except as required 
by applicable law, assumes no obligation to update or revise them to reflect 
new information or the occurrence of future events or circumstances.









Additional information regarding H&R REIT and H&R Finance Trust is  available 
atwww.hr-reit.com and onwww.sedar.com. For more information, please 
contact Larry Froom, Chief Financial  Officer, H&R REIT, 416-635-7520, or 
e-mailinfo@hr-reit.com.

SOURCE: H&R Real Estate Investment Trust

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CO: H&R Real Estate Investment Trust
ST: Ontario
NI: REL ERN 

-0- Nov/14/2012 15:28 GMT