H&R Reports Significant Increase in Q1 2013 FFO

TORONTO, May 13, 2013 /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, HR.DB.F and HR.DB.H) announced their financial results for the three 
months ended March 31, 2013. 
Operating Highlights
H&R REIT's average remaining term to maturity as at March 31, 2013 was 11.9 
years for leases and 7.5 years for outstanding mortgages. Occupancy at March 
31, 2013 was 99.0%, down slightly from 99.1% at March 31, 2012. Leases 
representing 1.7% of total rentable area will expire during 2013. As at 
March 31, 2013, the ratio of H&R's debt to fair market value of assets was 
49.5% compared to 50.3% as at December 31, 2012. H&R's debt excluding 
convertible debentures to fair market value of assets ratio was 46.0% compared 
to 46.9% as at December 31, 2012. 
Capital Transaction Highlights
During the first quarter of 2013, H&R REIT sold three Canadian industrial 
properties and one Canadian office property totalling 427,029 square feet for 
gross proceeds of approximately $37.5 million; and repaid one Canadian 
mortgage totalling $69.5 million bearing interest at a rate of 8.16%. 
Development Highlights
H&R REIT's new 58-storey, downtown office complex in Calgary's financial 
district (The "Bow") has recently been recognized as one of the world's most 
spectacular corporate buildings. Germany-based Emporis, with its 
internationally renowned database of building and construction project 
information, formed a jury of building experts to select the world's most 
dazzling buildings in terms of innovative design, visual impact and function 
of significant corporate architecture. Among the 16 buildings selected, The 
Bow is the most recently built and the only Canadian property. The Bow is a 
two-million-square-foot, Class AAA skyscraper with a unique, energy efficient, 
bow-shaped building footprint, and three "Sky Garden" common areas with trees. 
The Emporis Skyscraper Award is the world's most renowned prize for high-rise 
On March 15, 2013, the final floors of The Bow were delivered to Encana 
Corporation and its 25-year lease term will mature on May 14, 2038. 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. H&R REIT estimates a further 
$36.0 million in costs will be incurred to complete this project. As at 
March 31, 2013, the total cost incurred on the project, including the South 
Block, amounted to $1.68 billion (December 31, 2012 - $1.67 billion) which 
includes the costs for the construction of 1,358 underground parking stalls. 
Encana Corporation was entitled to a 60-day free rent fixturing period and a 
rent credit equal to the delay penalty of approximately $32.0 million. As at 
March 31, 2013, this rent credit has been fully utilized by the tenant. This 
rent free period, combined with the interest expense that was capitalized, 
resulted in an AFFO loss of $1.7 million in Q1 2013 as shown in the table 
below. The table below also provides an estimate of FFO and AFFO for the 
next two quarters in 2013. 
|                                   | Actual|Estimate( (2)(3))|
|In Millions                        |Q1 2013|Q2 2013|  Q3 2013|
|Basic rent                         |   $2.2|  $21.9|    $23.3|
|Straight-lining of contractual rent|   20.6|    3.0|      1.9|
|Interest capitalized               |    0.5|      -|        -|
|Mortgage interest                  |  (4.4)|  (4.6)|    (4.6)|
|Expected Bow impact on FFO((1))    |   18.9|   20.3|     20.6|
|Expected Bow impact on AFFO((1))   |  (1.7)|   17.3|     18.7|
       H&R's combined MD&A includes reconciliations of: net income
((1))      to FFO; FFO to AFFO; and AFFO to cash provided by 

           operations.  Readers are encouraged to review such
           reconciliations in the combined MD&A.

       This information is being provided so that investors are
((2))      able to understand the expected impact of the Bow to H&R 
       REIT's operations.  This information may not be appropriate 
       for other purposes. 
((3))      The estimates for Q2 2013 and Q3 2013 supersede the 
       estimates previously provided by H&R REIT. 
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 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 
|                                             |3 months ended March 31|
|                                             |_______________________|
|                                             | 2013 |         2012   |
|Rentals from investment properties (millions)|$222.6|       $183.0   |
|Net income (millions)                        |$132.1|       $199.3   |
|FFO (millions)((1)(2))                       |$90.0 |        $72.4   |
|FFO per Stapled Unit (basic)((2))            |$0.45 |        $0.40   |
|Cash provided by operations (millions)       |$137.1|       $140.7   |
|Distributions (millions)( (3))               |$49.2 |        $35.1   |
|Distributions per Stapled Unit               |$0.34 |        $0.27   |
       H&R's combined MD&A includes reconciliations of: net income
((1))      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 FFO and FFO per Stapled Unit. 
((3))      Cash distributions exclude distributions reinvested in units 

           pursuant to H&R's unitholder distribution reinvestment plan.

Included in net income is the fair value adjustment on real estate assets 
which could be subject to large fluctuations. The fair value adjustment on 
real estate assets was $38.6 million for the three months ended March 31, 2013 
(Q1 2012 - $127.0 million).

Included in FFO are the following items which can be a source of significant 
variances between different periods:

|                                            |3 months ended March 31|
|In millions                                 |2013|              2012|
|Additional recoveries for capital           |$2.1|              $1.0|
|expenditures                                |    |                  |
|Incentive fee waived by the Property Manager|$1.1|                 -|
|                                            |$3.2|              $1.0|

Excluding the above items, FFO would have been $86.8 million for the three 
months ended March 31, 2013 (Q1 2012 - $71.4 million) and $0.43 per basic 
Stapled Unit (Q1 2012 - $0.40 per basic Stapled Unit).

Subsequent to March 31, 2013, H&R REIT:
    --  Completed the acquisition of 27 properties from Primaris Retail
        Real Estate Investment Trust ("Primaris") with a fair value of
        approximately $3.1 billion, and assumed indebtedness of
        approximately $1.4 billion of which $339.0 million was
        subsequently repaid.  In relation to this acquisition, H&R REIT
        and Finance Trust issued approximately 62.5 million Stapled
        Units for delivery to certain Primaris unitholders, and H&R
        REIT assumed the 6.75% convertible debentures (the "6.75%
        Debentures") (remaining aggregate principal amount outstanding
        is approximately $1.2 million, as of April 4, 2013), 6.30%
        convertible debentures (the "6.30% Debentures") (remaining
        aggregate principal amount outstanding is approximately $7.7
        million, as of April 4, 2013) and 5.40% convertible debentures
        (remaining aggregate principal amount outstanding is
        approximately $75.0 million, as of April 4, 2013) issued by
        Primaris.  On April 8, 2013, H&R REIT issued notices of intent
        to redeem all the remaining 6.75% Debentures on May 27, 2013
        and 6.30% Debentures on May 13, 2013 in accordance with their
        terms.  In connection with the Primaris transaction, holders of
        approximately 2.1 million exchangeable units of certain
        subsidiaries of Primaris now hold an equal number of
        exchangeable units of certain subsidiaries of H&R REIT each of
        which is exchangeable for 1.166 Stapled Units.
    --  Sold 1235 Bay St., an office property in Toronto, ON for gross
        proceeds of approximately $25.0 million.
    --  Repaid two U.S. mortgages totalling U.S. $22.8 million bearing
        interest at an average rate of 5.95%.

June's Monthly Distributions Declared
June's declared distribution is scheduled as follows:

|         |Distribution/Stapled|Annualized| Record date |Distribution |
|         |        Unit        |          |             |    date     |
|June 2013|         $0.11250   |   $1.35  |June 14, 2013|June 28, 2013|

2013 Annual and Special Unitholders' Meeting
H&R will host their Annual and Special Unitholders' meeting this year on 
Thursday, June 20 at 1:00 pm at the TSX Gallery, 130 King Street West, 
Toronto, Ontario.

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 40 office, 112 industrial and 163 retail properties 
comprising over 53 million square feet and 3 development projects, with a fair 
value of approximately $13 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 for long terms 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. As at March 31, 2013, the note receivable balance is U.S. $163.2 
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, H&R 
REIT's expectation in connection with the financial impact of The Bow and the 
amount of distributions to unitholders. 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, the completion of the acquisition 
of Primaris, risks related to: prices and market value of securities of H&R 
availability of cash for distributions; 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 

SOURCE: H&R Real Estate Investment Trust

To view this news release in HTML formatting, please use the following URL: 

CO: H&R Real Estate Investment Trust
ST: Ontario

-0- May/13/2013 15:00 GMT

Press spacebar to pause and continue. Press esc to stop.