H&r Real Estate Investment Trust · TSX:HR.UN
H&r Real Estate Investment Trust — Q2 2022 Earnings Presentation
28 slides from H&r Real Estate Investment Trust's earnings presentation, Aug 12, 2022
Slide 1: Repositioned for Growth
REPOSITIONED FOR GROWTH INVESTOR PRESENTATION August 2022 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: Repositioned for Growth
REPOSITIONED FOR GROWTH To be a leading owner, operator and developer of residential and industrial properties, surfacing value through asset redevelopment and greenfield development, funded by capital recycling. 3
Slide 4: Streamlining the Portfolio and Aligning for Better Results and Higher Growth
STREAMLINING THE PORTFOLIO AND ALIGNING FOR BETTER RESULTS AND HIGHER GROWTH Same-Property net operating income (cash basis)¹ Q2’22 Drivers Jackson Park occupancy increase and Residential rental increases on new leases and 43.7%² renewals. Increased occupancy and contractual Industrial 4.9% rent esc
Slide 5: H&R REIT Outperforms Canadian and US Markets
H&R REIT OUTPERFORMS CANADIAN AND US MARKETS Year-to-Date Price Performance1,2 10.0% 7.7% 5.0% 0.0% -5.0% -7.2% -10.0% -15.0% -13.3% -15.0% YTD H&R REIT S&P/TSX Capped REIT Index S&P/TSX S&P 500 1. H&R REIT’s Unit price for December 31, 2021 has been adjusted to exclude Primaris, which began indepen
Slide 6: Streamlining the Portfolio: Same-Property NOI Year-over-Year Growth
STREAMLINING THE PORTFOLIO AND ALIGNING FOR BETTER RESULTS AND HIGHER GROWTH Same-Property net operating income (cash basis)¹ Year-over-Year Growth 55% 45% 35% 25% 15% 5% -5% -15% Q4 2021 Q1 2022 Q2 2022 Residential Industrial Office Retail H&R REIT (overall) 1. This is a non-GAAP measure. Refer to
Slide 7: High-Growth, Business-Friendly Sunbelt Cities with Strong Net Migration
HIGH-GROWTH, BUSINESS-FRIENDLY, SUNBELT CITIES WITH STRONG NET MIGRATION AND EMPLOYMENT GROWTH Target market characteristics: • Strong population and employment growth EMPLOYMENT GROWTH • Low “cost of doing business” • Favourable individual income tax states NET MIGRATION STRONG TAX BASE MARKET RENT
Slide 8: Current Developments Commencing in the Next 12 Months
CURRENT DEVELOPMENTS COMMENCING IN THE NEXT 12 MONTHS Anticipated Costs Expected Industrial GLA Costs Remaining Yield on Expected (square feet)/ Total Dev. Incurred to Budgeted Completion Residential Rental Property1 Geography Use Ownership Acres Budget2 to Date2 Complete2 Cost Date Units Meadowvale
Slide 9: Rezoning of Office Properties into Highest and Best Use
REZONING OF OFFICE PROPERTIES INTO HIGHEST AND BEST USE Current GLA Anticipated Commercial Current Anticipated Expected Advance the rezoning Property Geography Use Ownership (Square Feet) GLA (Square feet)/ Residential Units Storeys Storeys Approval Status1 Approval Date of office properties into 14
Slide 10: Lantower Residential
LANTOWER RESIDENTIAL $3.7B1 Fair Value PRIME INCOME-PRODUCING RESIDENTIAL PROPERTIES WITH ATTRACTIVE GROWTH CHARACTERISTICS 3.8% Weighted Average Cap Rate Residential Fair Value Number of Units by Geography by Geography 43.7%1 New York Same-Property net North operating income (cash New York 12% Caro
Slide 11: High-Quality Distribution Facilities Located in Key Industrial Markets
HIGH-QUALITY DISTRIBUTION FACILITIES $1.4B1 Fair Value LOCATED IN KEY INDUSTRIAL MARKETS 8.5M REIT owned Square feet % of industrial Number of sq.ft. Avg lease Credit Ratings Tenant rentals locations (in 000s) TTM (years) (S&P) 1 Canadian Tire Corporation 23.2% 2 2,104 4.6 BBB Stable 2 Finning Inter
Slide 12: Office
27 OFFICE Number of Properties INVESTMENT-GRADE TENANTS WITH LONG LEASE TERMS1 7,349 Square feet • $3.4 billion of high-quality office properties $3.4B2 Fair Value • 23 Canadian properties totalling 5.7M square feet Office Fair Value • 14 properties located in GTA • 4 U.S. properties totalling 1.7M
Slide 13: Retail
286 RETAIL Number of Properties HIGH-QUALITY GROCERY-ANCHORED AND SINGLE- 5,924 Square feet TENANT PROPERTIES $1.8B1 Fair Value • $917 million of high-quality grocery-anchored and 6.21% single-tenant properties Retail Fair Value Weighted • 40 Canadian properties, totalling 2.5M square feet by Proper
Slide 14: Management Committed to Surfacing Value for Unitholders
MANAGEMENT COMMITTED TO SURFACING VALUE FOR UNITHOLDERS $22.14 Accelerating Same-Property net operating income (cash basis)¹ growth Increasing exposure to high growth residential $13.49 Value Creation Through Rezoning Unit buybacks Strong Board and Management Alignment Unit Price² Net Asset Value pe
Slide 15: Appendix
APPENDIX 15
Slide 16: Strategic Priorities to Drive Growth
STRATEGIC PRIORITIES TO DRIVE GROWTH Class A Property High-Quality Disposition Program Financial Flexibility to Residential Redevelopment Distribution Facilities Drive Growth Grow class A residential Advance the rezoning Build and expand the Redeploy proceeds from Maintain a strong, flexible propert
Slide 17: Transform into a High-Growth Simplified Platform
TRANSFORM INTO A HIGH-GROWTH SIMPLIFIED PLATFORM Investment Properties Investment Properties June 30, 20221,2 June 30, 20221,2 Alberta Retail 5% 17% Other 21% GTA Residential 22% 36% Industrial 14% Gateway U.S. 24% Sunbelt U.S. Office Rezoning3 28% Office 8% 25% 1. Excludes the Bow. 17 2. At the REI
Slide 18: Target Business Metrics Support Value Creation Strategies
TARGET BUSINESS METRICS SUPPORT VALUE CREATION STRATEGIES Credit Metrics Q2 2022 Target Payout Ratio as a % of FFO1 47.5% 45-55% Debt / Adjusted EBITDA1 8.6x <9.2x Debt to Total Assets at the REIT’s proportionate share1 44.0% 40-50% Unencumbered Assets / Unsecured Debt 1.9x >2.0x 1. These are non-GA
Slide 19: Maintain a Strong and Flexible Balance Sheet with an Investment Grade Credit Rating
MAINTAIN A STRONG AND FLEXIBLE BALANCE SHEET BBB (High) by DBRS WITH AN INVESTMENT GRADE CREDIT RATING $4.6B Unencumbered Mortgages 18% Assets Debt1 to Total Assets at the REIT’s proportionate share2 $619.6M Available under Lines of Credit $10.0B Senior Unsecured Total Debentures Capitalization1 15%
Slide 20: Well-Laddered Debt Maturity Schedule
WELL-LADDERED DEBT MATURITY SCHEDULE $800 $700 Unsecured Debt 57% $600 $500 In millions $ $400 $300 $200 Secured Debt 43% $100 $0 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Mortgage Payments Unsecured Term Loans Senior Unsecured Debentures 20
Slide 21: Recently Completed Developments
RECENTLY COMPLETED DEVELOPMENTS River Landing Shoreline Gateway Hercules Phase II Hercules Miami, FL Long Beach, CA Hercules, San CACA Francisco Completed: Q2 2021 Completed: Q2 2022 The Pearl Austin, TX Completed: Q2 2022 Urban mixed-use property H&R ownership: 31.2% H&R ownership: 31.7% 341,000 sf
Slide 22: West Love, Bayside, Midtown Park
West Love Bayside Midtown Park. Dallas, TX Largo, FL Dallas, TX CONSTRUCTION IS EXPECTED TO BEGIN IN CONSTRUCTION IS EXPECTED TO BEGIN IN 2022 CONSTRUCTION IS EXPECTED TO BEGIN IN 2022 2022, WITH AN EXPECTED COMPLETION DATE AND AN EXPECTED COMPLETION DATE OF AND AN EXPECTED COMPLETION DATE OF OF 202
Slide 23: 145 Wellington St. W.
145 Wellington St. W. Toronto, ON ZBA APPROVED JULY 2022 SPA SUBMITTED AND APPROVAL IS EXPECTED IN 2023 In August 2019, H&R submitted a rezoning and site plan approval application for the redevelopment of 145 Wellington St. W., which is currently a 13-storey office building The proposed project woul
Slide 24: 3777 Kingsway
3777 Kingsway Burnaby, BC PPA SUBMITTED AND APPROVAL IS EXPECTED IN 2024 In June 2020, H&R along with its partner, submitted a re-zoning 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. W. The proposa
Slide 25: 310 Front St.
310 Front St. Toronto, ON ZBA & SPA SUBMITTED WITH APPROVAL EXPECTED IN 2023 In April 2021, H&R submitted a combined re-zoning application and official plan amendment application for a 69-storey development including retail, residential and office uses The development will replace the existing nine-
Slide 26: 55 Yonge St.
55 Yonge St. Toronto, ON ZBA & SPA SUBMITTED WITH APPROVAL EXPECTED IN 2023 The site encompass approximately 0.37 acres. The REIT submitted a re-zoning application in March 2021 to replace the existing 13-storey office building with a 66-storey residential and office tower with retail uses on the fi
Slide 27: Our Approach to Sustainability
OUR APPROACH Integrate sustainability priorities into decision making across all stages of an asset’s lifecycle TO SUSTAINABILITY Strategic Planning Acquisitions H&R’s Executive team The Investment Committee identifies and assesses oversees and approves acquisitions material inline with the REIT's s
Slide 28: Sustainability Highlights
SUSTAINABILITY HIGHLIGHTS CLIMATE AND DIVERSITY AND GOVERNANCE RESOURCE EFFICIENCY INCLUSION PRACTICES 4.1 % Reduction in normalized • Utility consumption and • 33% of the Board of Trustees • Tenure for all new Trustees is emissions intensity in 2019 vs. 2018 for H&R Utility emissions reporting boun
H&R Real Estate Investment Trust — Q2 2022 Earnings Presentation on 6ix