H&r Real Estate Investment Trust · TSX:HR.UN
H&r Real Estate Investment Trust — Q2 2023 Earnings Presentation
41 slides from H&r Real Estate Investment Trust's earnings presentation, Aug 11, 2023
Slide 1: Repositioned for Growth
REPOSITIONED FOR GROWTH INVESTOR PRESENTATION August 2023 1
Slide 2: Caution Regarding Forward-Looking Statements
CAUTION FORWARD-LOOKING STATEMENTS Certain statements made in this presentation will contain forward‐looking information within the meaning of applicable securities laws (also known as forward‐looking statements) including, among others, statements made or implied relating to H&R Real Estate Investm
Slide 3: Table of Contents
TABLE OF CONTENTS Transformational Strategic Repositioning Plan 4 Independent Board of Trustees and Senior Leadership Team 12 Portfolio Overview 15 Strong and Flexible Balance Sheet 22 Investment Proposition 25 Appendix 27 3
Slide 4: Transformational Strategic Repositioning Plan
TRANSFORMATIONAL STRATEGIC REPOSITIONING PLAN 4
Slide 5: Repositioned for Growth
REPOSITIONED FOR GROWTH To be a leading owner, operator and developer of residential and industrial properties, surfacing value through development and rezoning, funded by capital recycling. 5
Slide 6: Transformational Strategic Repositioning Plan
TRANSFORMATIONAL STRATEGIC REPOSITIONING PLAN REPOSITIONING FOR GROWTH REPOSITION GROWTH DIVERSIFIED TO Exit Retail Over Time Grow class A residential property exposure SIMPLIFIED through acquisitions and developments in Advance the rezoning of $756 million of high growth U.S. gateway and sunbelt ci
Slide 7: Moving H&R Towards Higher Growth
MOVING H&R TOWARDS HIGHER GROWTH AFTER FULL YEAR OF EXECUTION AGAINST PLAN AUGUST 2021 DECEMBER 2021 FEBRUARY 2023 APRIL 2023 $1.67 billion in Primaris REIT Strong Q4 and Sale of 160 Elgin Strategic Spinout with H&R Year-end 2022 Street Office Transactions contributing 27 Financial and Property for
Slide 8: Repositioning Underway
REPOSITIONING UNDERWAY WITH ASSET ALLOCATION SHIFTING TOWARDS HIGHER GROWTH ASSET CLASSES I N V E S T M E N T P R O P E R T I E S 1,2 Q2 2021 Q2 2023 Office 38% Residential 39% Retail 31% Residential 23% Office Industrial 20% Retail 16% 17% Industrial 8% Rezoning 8%3 Residential Industrial Office Re
Slide 9: Same-Property Net Operating Income (Cash Basis) Growth
SAME -PROPERTY NET OPERATING INCOME (CASH BASIS) GROWTH 1 YEAR OVER YEAR GROWTH SUPPORTED BY HIGHER ALLOCATION TO HIGH GROWTH RESIDENTIAL 11.7% 11.5% 10.9% 10.5% Q3 2022 Q4 2022 Q1 2023 Q2 2023 1. This is a non-GAAP measure. Refer to the “Non-GAAP Measures” section of this presentation. 9
Slide 10: Streamlining the Portfolio
STREAMLINING THE PORTFOLIO AND ALIGNING FOR BETTER RESULTS AND HIGHER GROWTH SAME-PROPERTY NET OPERATING INCOME • +11.7% growth in Same-Property net operating income (cash basis)1 (CASH BASIS)¹ Q2, 2023 • 96.6% occupancy • $0.297 FFO per Unit2 in Q2 2023 Drivers • $0.246 AFFO per Unit2 in Q2 2023 St
Slide 11: Enhanced Balance Sheet Supporting Growth
ENHANCED BALANCE SHEET SUPPORTING GROWTH CREATE FLEXIBILITY AND MAINTAIN INVESTMENT–GRADE CREDIT RATING Key Metrics June 30, 2021 June 30, 2023 Positive Impact Reduce Leverage – Debt to Total Assets at the REIT’s proportionate share1,2 50.0% 44.8% Debt to Adjusted EBITDA at the REIT’s proportionate
Slide 12: Independent Board of Trustees and Senior Leadership Team
INDEPENDENT BOARD OF TRUSTEES AND SENIOR LEADERSHIP TEAM 12
Slide 13: Board Renewal and Refreshment
BOARD RENEWAL AND REFRESHMENT STRONG AND SKILLFUL BOARD WITH UNITHOLDER ALIGNMENT Leonard Abramsky • President of The Dunloe Group Inc. • Current trustee of First Capital REIT and Dream Residential REIT 2023 Yes Member • Former Managing Partner of Brookfield Financial Corp. Lindsay Brand • Former Ch
Slide 14: Experienced and Tenured Executive Team
H&R REIT AND LANTOWER RESIDENTIAL EXPERIENCED AND TENURED EXECUTIVE TEAM TOM HOFSTEDTER LARRY FROOM ROBYN KESTENBERG CHERYL FRIED BLAIR KUNDELL MATT KINGSTON Executive Chairman & CEO CFO EVP, Office & Industrial EVP, Finance EVP, Operations EVP, Development & H&R REIT H&R REIT H&R REIT H&R REIT H&R
Slide 15: Portfolio Overview
PORTFOLIO OVERVIEW 15
Slide 16: Portfolio Overview
PORTFOLIO OVERVIEW WELL LOCATED PROPERTIES IN STRONG MARKETS LEASED TO INVESTMENT-GRADE TENANTS WITH LONG WEIGHTED AVERAGE LEASE TERMS $9.4B1 Fair Value Retail $1.6 Office $1.8 Rezoning $0.8 Industrial $1.5 Residential $3.7 7900 AIRPORT RD. JACKSON PARK RIVER LANDING BRAMPTON, ON LONG ISLAND CITY, N
Slide 17: Residential: Lantower Residential
LANTOWER RESIDENTIAL $3.7B Fair Value1 PRIME INCOME-PRODUCING RESIDENTIAL PROPERTIES WITH ATTRACTIVE GROWTH CHARACTERISTICS 4.49% Weighted Average Cap Rate RESIDENTIAL FAIR VALUE NUMBER OF UNITS by Geography1 by Geography1 4.75% Weighted Average Cap Rate for North New York properties in U.S. Sun Car
Slide 18: Industrial
72 HIGH-QUALITY DISTRIBUTION FACILITIES Number of Properties LOCATED IN KEY INDUSTRIAL MARKETS 8.7M Square feet $1.5B1 % of Industrial Number of REIT Owned Avg Lease Fair Value Tenant Rentals Locations sq.ft. (in 000s) TTM (Years) 1 Canadian Tire Corporation 20.3% 2 2,104 3.6 5.28% Weighted Average
Slide 19: Office
23 HIGH-QUALITY OFFICE PORTFOLIO Number of Properties 5.8M Square feet OFFICE FAIR VALUE • High-quality office properties located in Properties by Geographic Region strong major centres $2.6B Fair Value1,2 • Long weighted average lease terms Gateway U.S. 23% Other Canada 1% • 81.1% of revenue from i
Slide 20: Office Rezoning
REZONING PROPERTIES INTO HIGHEST AND BEST USE Anticipated Commercial GLA Rezoning Current (Square feet) Current Submitted Approval Property1,2 Geography Use Ownership Square Feet /Residential Units Storeys Storeys Approval Status3 Date ZBA adopted by City 156,000 GLA/ 145 Wellington St. W. Toronto,
Slide 21: Retail
278 EXIT RETAIL OVER TIME Number of Properties HIGH-QUALITY GROCERY-ANCHORED AND SINGLE-TENANT PROPERTIES 5.7M Square feet RETAIL FAIR VALUE by Property $1.6B Fair Value1 • $770 million of high-quality grocery-anchored and single-tenant properties 6.35% • 38 Canadian properties, totalling 2.3M squar
Slide 22: Strong and Flexible Balance Sheet
STRONG AND FLEXIBLE BALANCE SHEET 22
Slide 23: Maintain a Strong and Flexible Balance Sheet with Investment-Grade Rating
MAINTAIN A STRONG AND FLEXIBLE BALANCE SHEET BBB by DBRS WITH AN INVESTMENT-GRADE CREDIT RATING $4.1B Unencumbered Assets 9.4x Mortgages Debt to total assets Debt to Adjusted 17% at the REIT’s proportionate share1,2 EBITDA at the REIT’s proportionate share1,2 Senior Unsecured $891.9M Available under
Slide 24: Well-Laddered Debt Maturity Schedule
WELL-LADDERED DEBT MATURITY SCHEDULE $1,000 $900 Unsecured $800 Debt2 53% $700 $600 In millions $ $500 $400 $300 Secured Debt1 $200 47% $100 $0 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Mortgages Maturities Unsecured Term Loans Senior Unsecured Debentures Lines of Credit 1. Secured debt incl
Slide 25: Investment Proposition
INVESTMENT PROPOSITION 25
Slide 26: Management Committed to Surfacing Value for Unitholders
MANAGEMENT COMMITTED TO SURFACING VALUE FOR UNITHOLDERS ACCELERATING SAME-PROPERTY NET OPERATING INCOME (CASH BASIS)¹ GROWTH $21.04 INCREASING EXPOSURE TO HIGH GROWTH RESIDENTIAL VALUE CREATION THROUGH REZONING $10.25 UNIT BUYBACKS STRONG BOARD AND Unit Price² NAV per Unit¹ MANAGEMENT ALIGNMENT 1. T
Slide 27: Appendix
APPENDIX 27
Slide 28: Residential: Recently Completed Developments
RECENTLY COMPLETED DEVELOPMENTS River Landing Shoreline Gateway Hercules Phase II MIAMI, FL LONG BEACH, CA HERCULES, CA RESIDENTIAL COMPLETED: Q2 2021 COMPLETED: Q2 2022 COMPLETED: Q2 2022 Urban mixed-use property H&R ownership: 31.2% H&R ownership: 31.7% 341,827 sf of retail space 35-storey residen
Slide 29: Industrial: Recently Completed Developments
RECENTLY COMPLETED DEVELOPMENTS 34 Speirs Giffen Avenue. INDUSTRIAL 140 Speirs Giffen Avenue CALEDON, ON CALEDON, ON COMPLETED: Q3 2022 COMPLETED: Q3 2022 105,014 square feet of industrial space 77,754 square feet of industrial space Leased to Lindstrom Fastener (Canada) Ltd. for a term Leased to Co
Slide 30: Current Developments
CURRENT DEVELOPMENTS Anticipated Industrial GLA Costs Costs Expected Yield Expected (square feet)/ (in thousands of Canadian Dollars) Total Dev. Incurred Remaining on Budgeted Completion Residential Property Geography Use Ownership Acres Budget to Date to Complete Cost Date Rental Units 1965 Meadowv
Slide 31: Lantower West Love Progress Updates
Address LANTOWER RESIDENTIAL 2223 Hawes Ave. Dallas, TX LANTOWER WEST LOVE H&R Ownership PROGRESS UPDATES Interest 100% The garage structure has topped out and is complete. Stage Under Construction Turns one, two, and three (out of seven total turns) are fully framed and the roof has been dried in.
Slide 32: Lantower Midtown Progress Updates
Address LANTOWER RESIDENTIAL 10650 N. Central Expy. Dallas, TX LANTOWER MIDTOWN H&R Ownership Interest PROGRESS UPDATES 100% The garage has topped out and is complete. Stage Under Construction Structural steel installation is complete. # of Suites 350 Elevator shafts are complete. # of Stories RESID
Slide 33: Development Pipeline – U.S. Sun Belt States
LANTOWER RESIDENTIAL DEVELOPMENT PIPELINE – U.S. SUN BELT STATES 1 Dallas, TX Under Const. Q2 2022 5.4 413 Dallas, TX Under Const. Q2 2022 4.2 350 Dallas, TX Shovel Ready TBD 3.7 295 Dallas, TX Early Design TBD 2.4 250 RESIDENTIAL Dallas, TX In Permitting TBD 5.8 436 Lantower Bayside Tampa, Lantower
Slide 34: Office Rezoning: 145 Wellington St. W.
145 Wellington St. W TORONTO, ON ZBA APPROVED IN JULY 2022, SPA SUBMITTED In August 2019, H&R submitted a rezoning and site plan approval application for the redevelopment of 145 Wellington St. W., which is OFFICE REZONING currently a 13-storey office building. The rezoning approval contemplates a n
Slide 35: Office Rezoning: 55 Yonge St.
55 Yonge St TORONTO, ON ZBA & SPA SUBMITTED ZBA APPROVAL EXPECTED IN Q3 2023 In March 2021, the REIT submitted a rezoning application to replace the existing 13-storey office building with a mixed used tower OFFICE REZONING including residential, office and retail uses. In June 2023, H&R made a re-s
Slide 36: Office Rezoning: 310 Front St.
310 Front St TORONTO, ON ZBA & SPA SUBMITTED ZBA APPROVAL EXPECTED IN Q3 2023 In April 2021, H&R submitted a combined rezoning application and official plan amendment application for a mixed use tower including residential, office and retail uses. OFFICE REZONING This tower would replace the existin
Slide 37: Industrial Rezoning: Union St.
77 Union St TORONTO, ON ZBA & SPA SUBMITTED ZBA APPROVAL EXPECTED IN 2024 H&R acquired this existing industrial property in December 2021 for INDUSTRIAL REZONING the purposes of intensification. The site consists of approximately 4.8 acres and is located in Toronto’s rapidly growing Stockyards Distr
Slide 38: Office Rezoning: 3777 Kingsway
3777 Kingsway BURNABY, BC SPoD SUBMITTED AND APPROVAL IS EXPECTED IN 2024 In June 2020, H&R along with its partner, submitted a rezoning OFFICE REZONING application for the east and north portions of its 3777 & 3791 Kingsway sites. H&R has a 50% ownership interest in this property. 145 Wellington St
Slide 39: Our Approach to Sustainability
OUR APPROACH TO SUSTAINABILITY STRATEGIC PLANNING ACQUISITIONS In line with our strategic planning H&R REIT has well established processes, H&R’s Executive team governance structures, such as the identifies and assesses material Board Investment Committee, to environmental, social and governance ove
Slide 40: Sustainability Highlights
SUSTAINABILITY HIGHLIGHTS 1 556 CARS3 CLIMATE AND DIVERSITY AND GOVERNANCE 2.5% = RESOURCE INCLUSION PRACTICES EFFICIENCY • 40% of the Board of • Tenure for all new Trustees • Utility consumption and Trustees are female as of is limited to 10 years emissions reporting June 2023 • Achieved the 30% bo
Slide 41: HR.UN - TSX
HR.UN - TSX Ticker For further information contact: Tom Hofstedter, Chief Executive Officer 1-416-635-7520 Larry Froom, Chief Financial Officer 1-416-635-7520 info@hr-reit.com Additional information regarding H&R REIT is available at www.hr-reit.com and on www.sedar.com. 41 41
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