H&R REIT Reports Second Quarter 2025 Results

Executive Summary

• H&R REIT reported its financial results for the three and six months ended June 30, 2025, highlighting a strategic repositioning plan and ongoing evaluation of value-maximizing alternatives via a Special Committee.
• The REIT reported a Net Loss of $166.4 million for Q2 2025 and $218.4 million for the first half of 2025, driven largely by fair value adjustments on real estate assets, though Funds from Operations (FFO) improved to $0.61 per Unit for the six-month period.
• Significant operational activity included the sale of $121.6 million in real estate assets in the first half of 2025, a 3.4% increase in Same-Property Net Operating Income (cash basis), and the completion of a new industrial building in Mississauga.

Key Details

• Financial Performance (Six Months Ended June 30, 2025):
  • Net Loss: $218,388 thousand.
  • Funds from Operations (FFO): $170,902 thousand ($0.610 per Unit), up from $168,697 thousand ($0.603 per Unit) in the prior year period.
  • Adjusted Funds from Operations (AFFO): $141,393 thousand ($0.505 per Unit), up from $137,592 thousand ($0.492 per Unit) in the prior year period.
  • Same-Property Net Operating Income (cash basis): $251,161 thousand, a 3.4% increase from $242,859 thousand in the prior year.
  • Rentals from Investment Properties: $409,650 thousand.
• Financial Performance (Three Months Ended June 30, 2025):
  • Net Loss: $166,370 thousand.
  • FFO: $87,804 thousand ($0.314 per Unit).
  • AFFO: $73,380 thousand ($0.262 per Unit).
  • Same-Property Net Operating Income (cash basis): $124,751 thousand, a 2.5% increase from $121,733 thousand in the prior year.
• Balance Sheet & Liquidity:
  • Total Assets: $9,890,709 thousand.
  • Unitholders' Equity: $4,724,801 thousand.
  • NAV per Unit: $18.86 (down from $20.92 at Dec 31, 2024).
  • Debt to Total Assets (Proportionate Share): 45.5%.
  • Debt to Adjusted EBITDA (Proportionate Share): 9.2x.
  • Cash and Cash Equivalents: $60.1 million.
  • Unused Lines of Credit: $377.3 million.
  • Unencumbered Property Pool: ~$4.3 billion.
• Transaction Activity:
  • Dispositions (H1 2025): Sold ownership interests in seven Canadian retail properties, one U.S. retail property, and one commercial unit totaling 351,606 sq ft for $64.7 million.
  • Agreements to Sell (Q2 2025): Entered into agreements to sell one U.S. retail, one Canadian retail, and one Canadian office property for ~$56.9 million (classified as held for sale).
  • Post-Period Sales: Sold 69 Yonge St. (Toronto office, 89,276 sq ft) for $20.2 million and 3990 Red Cedar Dr. (Highlands Ranch, CO retail, 9,751 sq ft) for $10.1 million.
• Operational Updates:
  • Industrial Occupancy: Decreased from 98.9% (Dec 31, 2024) to 89.9% (June 30, 2025) due to three vacancies: 5550 Skyline Way N.E. (Calgary, 62,403 sq ft), 77 Union St. (Toronto, 195,000 sq ft), and 100 Metropolitan Rd. (Toronto, 369,051 sq ft).
  • New Construction: 6900 Maritz Drive (Mississauga, ON), a 122,367 sq ft industrial building, reached substantial completion in June 2025 and is available for lease.
  • Valuation Adjustments: Reduced valuations on downtown Toronto office properties advancing to residential use to an average of $120/sq ft; reduced valuations on industrial properties due to lower market rent assumptions; reduced valuations on U.S. land parcels due to softening economic conditions and high interest rates.
• Debt & Liquidity Actions:
  • Repaid one mortgage of ~$46.8 million (4.2% interest) in Q2 2025.
  • Redeemed all $400.0 million Series Q Senior Debentures (4.071% interest) in June 2025.
• Special Committee Process:
  • Formed in February 2025 following an unsolicited expression of interest.
  • Currently engaged in discussions with multiple parties to evaluate value-maximizing alternatives.
  • Incurred $8.7 million in transaction costs (legal/advisor fees) during the three and six months ended June 30, 2025.
• Development Projects:
  • 560 & 600 Slate Drive (Mississauga, ON): 50% interest. Total budget ~$66.3 million; costs remaining $13.1 million. Expected completion Q3 2025. Target yield on cost ~6.6%.
  • REDT Projects (Florida): 29.1% interest. 601 residential rental units under construction, completion mid-2026. H&R's share of total budget ~$83.0 million (U.S. $61.0 million); costs remaining $41.4 million (U.S. $30.4 million). Earned $5.7 million in fees/interest in H1 2025.
• Distribution:
  • Declared $0.05 per Unit for August 2025 (Annualized $0.60).
  • Record Date: August 29, 2025.
  • Distribution Date: September 15, 2025.

Notable Quotes

• "Our Q2 performance highlights our continued ability to drive operating results and execute against our strategy. In the first half of 2025, we completed or entered into agreements to sell $121.6 million of real estate assets. Same-Property net operating income (cash basis) increased 3.4%, and FFO improved to $0.61 per Unit from $0.60 per Unit in the prior year period. These results support our ongoing efforts to simplify the portfolio and enhance long-term value for unitholders." — Tom Hofstedter, Executive Chair and Chief Executive Officer