H&R Announces 10% Growth in FFO Per Unit for Q3 2013

TORONTO, Nov. 14, 2013 /CNW/ - H&R Real Estate Investment Trust ("H&R REIT" or 
the "REIT") and H&R Finance Trust (collectively, "H&R") (TSX: HR.UN; HR.DB.D; 
HR.DB.E and HR.DB.H) today announced their financial results for the quarter 
ended September 30, 2013. 
Capital Transaction Highlights 


    --  In September 2013, the REIT completed its agreement with H&R
        Property Management Ltd. ("HRPM") to internalize the REIT's
        property management function effective July 1, 2013. On
        closing, a wholly-owned subsidiary of the REIT, H&R REIT
        Management Services LP ("HRRMSLP"), acquired HRPM's
        REIT-related property management business in return for 9.5
        million limited partnership units of HRRMSLP, which are
        exchangeable on a one-for-one basis for Stapled Units. The
        purchase price associated with the internalization did not
        utilize existing cash resources of the REIT, and HRPM has
        agreed to hold the exchangeable units (or Stapled Units upon
        exchange) for five years, subject to limited exceptions.  As a
        result of the internalization, the REIT saved $5.3 million in
        management and incentive fees which would otherwise have been
        payable to HRPM and incurred an additional $1.0 million in
        property operating costs for the three months ended September
        30, 2013.
    --  In August 2013, the REIT acquired a one-third interest in ECHO
        Realty LP ("ECHO"), which focuses on developing and owning a
        core portfolio of grocery anchored shopping centres in the
        United States.  ECHO's retail portfolio is primarily tenanted
        by Giant Eagle, Inc., the leading grocer in the western
        Pennsylvania and eastern Ohio regions.  ECHO's portfolio
        consists of 171 investment properties, excluding properties
        under development and vacant land, totaling approximately 7.3
        million square feet and is expected to generate, once its
        existing development projects are completed, in excess of U.S.
        $84.0 million in net operating income annually, with an average
        remaining lease term of 12.9 years.  The ECHO portfolio value
        amounts to approximately U.S. $1.2 billion at a weighted
        average capitalization rate of 7.3%. The REIT acquired ECHO
        limited partnership units issued from treasury for a total
        purchase price of approximately U.S. $296.4 million before
        closing costs.  One-third of this purchase price was paid on
        closing, with a further one-third payable 18 months from
        closing and the balance payable 30 months from closing. The
        proceeds from this transaction will be used by ECHO to further
        expand its retail portfolio by acquiring additional retail
        properties in the eastern United States. ECHO is accounted for
        as an equity investment and will be reporting its financial
        information to the REIT one month in arrears.  ECHO's August
        2013 results have been included in the REIT's results for the
        nine months ended September 30, 2013.  ECHO's results for
        August, September, October and November will be reported in
        H&R's year end combined financial statements and Management
        Discussion and Analysis ("MD&A").
    --  During the second quarter of 2013, the REIT acquired 100% of
        Primaris Retail Real Estate Investment Trust ("Primaris") which
        consisted of 26 properties valued at $3.1 billion.  The
        acquisition was funded through the issuance of 62.5 million
        Stapled Units with a value of $1.4 billion and the assumption
        of Primaris' outstanding mortgages, convertible debentures and
        bank indebtedness totalling $1.6 billion.  In addition, holders
        of 2.1 million exchangeable units of certain subsidiaries of
        Primaris received the same number of exchangeable units of
        subsidiaries of the REIT, each of which is exchangeable for
        1.166 Stapled Units.  The increased market capitalization
        relating to the acquisition of Primaris has substantially
        enhanced liquidity for unitholders.  Through this transaction,
        the REIT has achieved broader diversification by geographic
        region and tenant base into the enclosed shopping centre asset
        class at a time when U.S. and international retailers are
        expanding into Canada.  In July 2013, the REIT, through its
        Primaris platform, acquired Peter Pond Mall, a leading enclosed
        shopping centre in Fort McMurray, Alberta for $168.5 million,
        at a capitalization rate of 6.3% (before property management
        fee income).  The REIT also sold a 50% non-managing interest in
        Place d'Orleans, an enclosed shopping centre in the Ottawa
        region for $110.6 million, at a capitalization rate of 5.5%
        before property management fee income. This transaction
        leverages the Primaris management platform to act as both
        owners and third party managers of regional shopping centres. 
        The REIT has been pleased with its successful integration of
        the Primaris portfolio and platform.

Development Highlights
Effective December 31, 2012, the REIT reached practical completion on the 
construction of the Bow, a two million square foot office building in Calgary, 
Alberta, which is fully leased to Encana Corporation for a 25-year term. On 
March 15, 2013, the final floors were delivered to Encana Corporation and the 
25-year lease term commenced, which will continue until 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. Consistent with the REIT's 
strategy to secure long-term fixed rate financing, on June 20, 2013, the REIT 
issued $300.0 million, Series C bonds at an annual rate of 3.797% due June 13, 
2023. These bonds rank pari passu to the $250.0 million, 3.690% Series A 
bonds due June 14, 2021 and the $250.0 million, 3.693% Series B bonds due June 
14, 2022, which were both issued on June 14, 2012.

Operating Highlights
H&R REIT's average remaining term to maturity as at September 30, 2013 was 
10.4 years for leases and 7.2 years for outstanding mortgages. Occupancy at 
September 30, 2013 was 98.2%, down slightly from 98.5% at September 30, 
2012. Leases representing only 4.3% of total rentable area will expire 
during the balance of 2013 and 2014. As at September 30, 2013, the ratio of 
H&R's debt to fair market value of assets was 49.3% compared to 50.3% as at 
December 31, 2012.

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 Funds from Operations ("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 presented.

 ___________________________________________________________________
|                 |3 months ended September|9 months ended September|
|                 |           30           |           30           |
|                 |________________________|________________________|
|                 |   2013 |        2012   | 2013 |         2012    |
|_________________|________|_______________|______|_________________|
|Rentals from     |        |               |      |                 |
|investment       |        |               |      |                 |
|properties       |        |               |      |                 |
|(millions)       | $305.8 |      $200.0   |$822.4|        $582.6   |
|_________________|________|_______________|______|_________________|
|Property         |        |               |      |                 |
|operating income | $201.6 |      $135.8   |$545.3|        $397.4   |
|_________________|________|_______________|______|_________________|
|Net income (loss)|        |               |      |                 |
|(millions)       |($112.0)|      $100.7   |$208.3|        $406.2   |
|_________________|________|_______________|______|_________________|
|FFO (millions)(  |        |               |      |                 |
|(1)(2))          | $129.1 |       $78.8   |$338.5|        $243.7   |
|_________________|________|_______________|______|_________________|
|FFO per Stapled  |        |               |      |                 |
|Unit (basic)((2))|  $0.45 |       $0.41   |$1.35 |         $1.31   |
|_________________|________|_______________|______|_________________|
|FFO per Stapled  |        |               |      |                 |
|Unit (diluted)(  |        |               |      |                 |
|(2))             |  $0.45 |       $0.40   |$1.32 |         $1.25   |
|_________________|________|_______________|______|_________________|
|Cash provided by |        |               |      |                 |
|operations       |        |               |      |                 |
|(millions)       | $220.0 |      $133.4   |$414.4|        $374.8   |
|_________________|________|_______________|______|_________________|
|Cash             |        |               |      |                 |
|distributions    |        |               |      |                 |
|(millions)( (3)) |  $69.3 |       $40.4   |$186.5|        $113.9   |
|_________________|________|_______________|______|_________________|
|Distributions per|        |               |      |                 |
|Stapled Unit     |  $0.33 |       $0.30   |$1.01 |         $0.86   |
|_________________|________|_______________|______|_________________|
|Payout ratio per |        |               |      |                 |
|Stapled Unit (as |        |               |      |                 |
|a % of FFO)      |  73.3% |       73.2%   |74.8% |         65.6%   |
|_________________|________|_______________|______|_________________|
         
         

((1))   H&R's combined MD&A includes reconciliations of: net income to
        FFO; FFO to Adjusted Funds from Operations ("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 per Stapled Unit.

((3))   Cash distributions exclude distributions reinvested in units
        pursuant to H&R's unitholder distribution reinvestment plan.


Net income (loss) has been reduced for the three and nine months ended 
September 30, 2013 due to transaction costs relating to the Primaris 
acquisition and the property management internalization by $198.2 million and 
$204.8 million, respectively, which were expensed during these periods. 
Included in FFO are the following items which can be a source of significant 
variances between different periods: 
 ____________________________________________________________________
|                  |3 months ended September|9 months ended September|
|                  |           30           |           30           |
|__________________|________________________|________________________|
|In millions       | 2013 |         2012    | 2013 |         2012    |
|__________________|______|_________________|______|_________________|
|Additional        | $3.0 |         $3.8    | $7.2 |         $8.5    |
|recoveries for    |      |                 |      |                 |
|capital           |      |                 |      |                 |
|expenditures      |      |                 |      |                 |
|__________________|______|_________________|______|_________________|
|Gain (loss) on    |   -  |        ($0.1)   |   -  |         $10.2   |
|extinguishment of |      |                 |      |                 |
|debt              |      |                 |      |                 |
|__________________|______|_________________|______|_________________|
|Adjustment to     |($0.9)|        ($0.3)   |($3.4)|        ($0.3)   |
|straight-lining of|      |                 |      |                 |
|contractual rent  |      |                 |      |                 |
|__________________|______|_________________|______|_________________|
|Sundry income     | $1.5 |        ($1.3)   | $2.9 |        ($1.6)   |
|__________________|______|_________________|______|_________________| 
Excluding the above items, FFO would have been $125.5 million for the three 
months ended September 30, 2013 (Q3 2012 - $76.7 million) and $0.44 per basic 
Stapled Unit (Q3 2012 - $0.40 per basic Stapled Unit). For the nine months 
ended September 30, 2013, FFO would have been $331.8 million (nine months 
ended September 30, 2012 - $226.9 million) and $1.32 per Stapled Unit (nine 
months ended September 30, 2012 - $1.22 per Stapled Unit). 
Subsequent to September 30, 2013, H&R REIT: 


    --  issued, by way of private placement, $235.0 million Series H
        senior floating rate unsecured debentures maturing on October
        9, 2015.  The REIT entered into an interest rate swap to fix
        the interest rate at 2.95% per annum.
    --  issued, by way of private placement, $60.0 million Series I
        senior floating rate unsecured debentures maturing on January
        23, 2017.

Monthly Distribution Declared
H&R's declared distribution for the month of December is scheduled as follows:

 __________________________________________________________________
|        |Distribution/Stapled|Annualized|Record date |Distribution|
|        |                Unit|          |            |date        |
|________|____________________|__________|____________|____________|
|December|$0.11250            |$1.35     |December 13,|December 31,|
|2013    |                    |          |        2013|        2013|
|________|____________________|__________|____________|____________|


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 42 office, 112 industrial and 164 retail properties 
comprising over 53 million square feet and 2 development projects, with a fair 
value of approximately $13 billion. In addition, H&R REIT has a one-third 
interest in ECHO Realty LP which owns 171 properties, excluding properties 
under development and vacant land, totalling 7.3 million square feet. 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 September 30, 2013, the note receivable balance is U.S. $219.8 
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 statements in this news release contain 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, 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 risks 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, H&R REIT's expectation with respect 
to Primaris and ECHO's future financial results, 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 
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. 

SOURCE  H&R Real Estate Investment Trust 
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. 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/November2013/14/c7317.html 
CO: H&R Real Estate Investment Trust
ST: Ontario
NI: REL ERN DIV  
-0- Nov/14/2013 15:55 GMT
 
 
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