H&R Real Estate Investment Trust T.HR.UN

Alternate Symbol(s): HRUFF

Real Estate REIT - Diversified

H&R Real Estate Investment Trust is a Canada-based real estate investment trust. The Company owns, operates and develops residential and commercial properties across Canada and in the United States. The Company operates through the four segments: Residential, Industrial, Office and Retail. The Residential segment consists of approximately 24 residential properties in select markets in the United States and its portfolio comprises 8,166 residential rental units. The Industrial segment consists of 66 industrial properties in Canada and two properties in the United States comprising 8.7 million square feet. The Office segment consists of 17 properties in Canada and three properties in select markets in the United States, aggregating 5.5 million square feet. The Retail segment consists of 34 properties in Canada, which are single tenant properties as well as two single tenant retail properties and one multi-tenant retail property in the United States.

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H&R Real Estate Investment Trust

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Post by incomedreamer11on Nov 15, 2023 8:42am

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Post# 35736369

Scotia comments

Q3 Glance: In-Line Recurring; Progressing on $600M Disposition Target for 2023

OUR TAKE: Neutral. Reported FFOPU was $0.42. Ex. a $31M gain on disposal of a U.S. land purchase option ($0.11/un), $0.7M of net lease termination fees (net of $1.8M straight-line write-off) and $0.3M of bad debt, we est. recurring FFOPU was $0.306, flat q/q and +9% y/y, in line with our $0.307 and $0.308 consensus (range = $0.29-$0.32)

IFRS NAVPU increased 2% to $21.49 (Q2 = -4.1%) vs. our $18.25 as a $140M IPP FV loss or 5.5% of unit price (Q2 = $274M loss or 9%) was offset by the $31M gain; we’re still trying to figure out the rest (cash retention is one item). Equity value per unit (i.e., incl. the DTL in NAV like we do = $20.62 vs. $20.09 q/q). Total portfolio IFRS cap rate was +8bp q/q to 5.59% (Q2 = +11bp q/q) vs. our ~6.1%.

H&R reiterated its 2023 Target dispositions of $600M (vs. $432M completed YTD; +$45M q/q); nothing new in Q3 but another ~$45M sold post-Q (i.e. ~$500M YTD).

Same-asset (SA) cash NOI was +12.6% y/y (Q2 = +11.7%). In local currency, Canada was +11.0% y/y (Q2 = +3.6%) and U.S. was +9.4% y/y (+9.9%); we think Canada was closer to 3%-5% ex. one-time Office termination fees.

Full update post c/c tomorrow, November 15, at 9:30 a.m. ET (1-888-886-7786).

Capital recycling update. Two smaller U.S. assets were sold (single-tenant office in Florida and an automotive centre in Georgia) for ~US$17M, both of which were listed as subsequent events in the Q2 statements. H&R noted selling an Office and Industrial property in the U.S. for US$33M so far in Q4 (were the only HFS assets as at Q3). No update on expected quantum of Q4/23 special distribution. H&R repurchased 1.3M units at an avg. $10.38 (vs. 2.8M YTD as of Q2 at $10.26/un) with no mention of post-Q3 activity (that we saw). Regarding intensifications, expected residential zoning at 53/55 Yonge Street was pushed into Q1/24 (from Q3/23; 511 resi units + 0.17Msf commercial), while residential rezoning at 310 Front St. (578 resi suites + 0.12Msf commercial) was obtained in August.

Operations update. Total and SP occupancy +40bp q/q to 97.0%-97.1% (Q2 = -40bp q/q), with Residential, Industrial, and Retail all +70bp q/q (Residential to 95.2%) offset by 70bp of Office erosion (to 98.1%). The 12.6% y/y SANOI growth (Q2 = +11.7%) was driven by 19.5% and 11.1% y/y growth in Residential and Industrial, respectively, along with 9.9% in Retail and 8.8% in Office.

Financial leverage falls on asset sales (liquidity increases). Liquidity was +$118M q/q to $1,064M (Q2 = -$3M), including $146M in cash and $918M in credit facilities. H&R unencumbered assets of $4.1B = 109% of total debt (Q2 = 82%). Debt/GBV fell 90bp q/q to 43.9% (at HR share; Q2 = +90bp) with Debt-to-EBITDA 0.7x lower to 8.7x (Q2 = -0.2x). The 8bp higher IFRS cap rate to 5.59% (Q2 = +11bp) included a 29bp jump in Office to 6.87% (Q2 = +26bp) and a 12bp increase in Retail to 6.47%. Residential and Industrial were flat q/q at 4.49% and 5.28%, respectively. During the quarter, HR repaid $125M unsecured loan maturing in Nov/2024 and extended a $250M unsecured loan from Mar/2024 to Mar/2025, a $150M LoC from Sep/2023 to Sep/2024 and a $750M LoC from Dec/2026 to Dec/2027.