TORONTO, May 14, 2024 /CNW/ - H&R Real Estate Investment Trust ("H&R" or "the REIT") (TSX:HR) is pleased to announce its financial results for the three months ended March 31, 2024. Q1 2024 HIGHLIGHTS:  Net operating income decreased by 3.2% compared to Q1 2023 primarily due to $460.4 million of property sales between January 1, 2023 and March 31, 2024. Same-Property net operating income (cash basis)(1) increased by 1.4% compared to Q1 2023 driven by various factors across H&R's operating segments: Residential  3.2 %  Strong operating results from properties in gateway cities Industrial  5.1 %  Higher rent and occupancy Office  (3.7 %)  Lower occupancy primarily from properties advancing through rezoning Retail  5.7 %  Increase in occupancy at River Landing Miami Funds From Operations ("FFO") per Unit(2) was $0.30 per Unit compared to $0.31 per Unit in Q1 2023. The REIT's payout ratio as a % of FFO(2) was 50.5% compared to 48.4% in Q1 2023 . Overall portfolio occupancy was 96.4% at March 31, 2024. Unitholders' equity per Unit was $20.18 and Net Asset Value ("NAV") per Unit(2) was $21.05 at March 31, 2024. Liquidity was in excess of $805 million at March 31, 2024. Unencumbered assets(3) to unsecured debt(3) coverage was 2.2x as at March 31, 2024. As at March 31, 2024, properties sold or under contract to be sold in 2024 total $411.7 million. H&R's proforma March 31, 2024 real estate assets at the REIT's proportionate share(1)(4) post closing of the real estate assets held for sale is as follows: (1)   These are non-GAAP measures. Refer to the "Non-GAAP Measures" section of this news release. (2)   These are non-GAAP ratios. Refer to the "Non-GAAP Measures" section of this news release. (3) Unencumbered assets are investment properties and properties under development without encumbrances for mortgages or lines of credit. Unsecured debt includes debentures payable, unsecured term loans and unsecured lines of credit. (4)   Excludes the Bow and 100 Wynford, which were legally sold in October 2021 and August 2022, respectively. (5)   Includes six office real estate assets advancing through the rezoning and intensification process to be developed into residential properties. FINANCIAL HIGHLIGHTS  March 31 December 31 2024 2023 Total assets (in thousands) $10,874,352 $10,777,643 Debt to total assets per the REIT's Financial Statements(1) 34.7 % 34.2 % Debt to total assets at the REIT's proportionate share(1)(2) 44.5 % 44.0 % Debt to Adjusted EBITDA at the REIT's proportionate share(1)(2)(3) 8.8 8.5 Unitholders' equity (in thousands) $5,283,580 $5,192,375 Units outstanding (in thousands) 261,880 261,868 Exchangeable units outstanding (in thousands) 17,974 17,974 Unitholders' equity per Unit $20.18 $19.83 NAV per Unit(2) $21.05 $20.75   Three months ended March 31 2024 2023 Rentals from investment properties (in millions) $209.5 $218.3 Net operating income (in millions) $94.2 $97.3 Same-Property net operating income (cash basis) (in millions)(4) $128.3 $126.5 Net income from equity accounted investments (in millions) $12.6 $9.9 Fair value adjustment on real estate assets (in millions) ($44.2) $85.0 Net income (in millions) $31.8 $94.8 FFO (in millions)(4) $83.1 $87.9 Adjusted funds from operations ("AFFO") (in millions)(4) $68.8 $73.7 Weighted average number of Units and exchangeable units for FFO (in 000's) 279,847 283,892 FFO per basic and diluted Unit(2) $0.297 $0.310 AFFO per basic and diluted Unit(2) $0.246 $0.260 Cash Distributions per Unit $0.150 $0.150 Payout ratio as a % of FFO(2) 50.5 % 48.4 % Payout ratio as a % of AFFO(2) 61.0 % 57.7 % (1) Debt includes mortgages payable, debentures payable, unsecured term loans and lines of credit. (2) These are non-GAAP ratios. Refer to the "Non-GAAP Measures" section of this news release. (3) Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") is calculated by taking the sum of net operating income (excluding straight-lining of contractual rent, IFRIC 21, as well as the Bow and 100 Wynford non-cash rental adjustments) and finance income and subtracting trust expenses (excluding the fair value adjustment to unit-based compensation) for the trailing 12 months. Refer to the "Non-GAAP Measures" section of this news release. (4) These are non-GAAP measures. Refer to the "Non-GAAP Measures" section of this news release. SUMMARY OF SIGNIFICANT Q1 2024 ACTIVITY 2024 Net Operating Income Highlights: Three months ended March 31 (in thousands of Canadian dollars) 2024 2023 % Change Operating Segment: Same-Property net operating income (cash basis) - Residential(1) $42,340 $41,026 3.2 % Same-Property net operating income (cash basis) - Industrial(1) 17,386 16,535 5.1 % Same-Property net operating income (cash basis) - Office(1) 43,884 45,560 (3.7) % Same-Property net operating income (cash basis) - Retail(1) 24,691 23,367 5.7 % Same-Property net operating income (cash basis)(1) 128,301 126,488 1.4 % Net operating income (cash basis) from Transactions at the REIT's proportionate share(1)(2) 29,527 36,791 (19.7) % Realty taxes in accordance with IFRIC 21 at the REIT's proportionate share(1)(3) (43,821) (45,798) 4.3 % Straight-lining of contractual rent at the REIT's proportionate share(1) 4,976 3,758 32.4 % Net operating income from equity accounted investments(1) (24,796) (23,939) (3.6) % Net operating income per the REIT's Financial Statements $94,187 $97,300 (3.2) % (1)   These are non-GAAP measures. Refer to the "Non-GAAP Measures" section of this news release. (2)   Transactions includes acquisitions, dispositions, and transfers of investment properties to or from properties under development during the 15-month period ended March 31, 2024. (3)  Realty taxes in accordance with IFRS Interpretations Committee Interpretation 21, Levies ("IFRIC 21") relates to the timing of the liability recognition for U.S. realty taxes. By excluding the impact of IFRIC 21, U.S. realty tax expenses are evenly matched with realty tax recoveries received from tenants throughout the period. Q1 2024 and Subsequent Transaction Highlights Property Dispositions In December 2023, H&R announced it had entered into an agreement to sell 25 Dockside Drive for $232.5 million. The property is an office property located directly on the waterfront in downtown Toronto, comprising 479,437 square feet and is substantially leased to Corus Entertainment. The sale closed in April 2024. The property was encumbered with a $60.0 million mortgage bearing interest at 4.9%, which was repaid on closing. H&R used the remaining proceeds to repay its lines of credit. In March 2024, H&R sold two automotive-tenanted retail properties in Georgia totalling 23,830 square feet for approximately $10.3 million (U.S. $7.7 million). In March 2024, H&R sold two vacant industrial properties and one single tenanted industrial property which was occupied by a tenant on a month-to-month lease in British Columbia, totalling 60,797 square feet for approximately $8.7 million, all at H&R's 50% ownership interest. In March 2024, H&R sold a 155,552 square foot single tenanted industrial property in Varennes, QC for approximately $8.5 million, all at H&R's 50% ownership interest. The property was sold to the tenant who exercised its option to purchase. In March 2024, H&R entered into an agreement to sell its 50% ownership interest in 3777/3791 Kingsway, Burnaby, BC (the "Kingsway Property") for $82.5 million. The Kingsway Property comprises 671,555 of office space. The sale is expected to close in May 2024 and is subject to customary closing conditions. In addition, a tenant exercised their option to purchase one Canadian industrial property. Gross proceeds at H&R's 50% ownership interest are expected to be $60.7 million and closing is expected to occur in Q4 2024. H&R also entered into an agreement to sell its 100% ownership interest in one U.S. industrial property for approximately U.S. $6.3 million and closing is expected to occur in Q2 2024. H&R continues to successfully execute on its strategic repositioning plan with properties sold or under contract to be sold in 2024 totalling approximately $411.7 million. Development Update Canadian Properties under Development In January 2024, development of two of the REIT's industrial properties, 1965 and 1925 Meadowvale Boulevard in Mississauga, ON were substantially complete and transferred from properties under development to investment properties. The properties are fully leased with annual contractual rental escalations, with both leases commencing in February 2024 and expiring in May 2036 and January 2037, respectively. The REIT recognized a fair value increase of $19.3 million on these properties between the start of construction and substantial completion. In Q1 2023, H&R entered into a lease amendment with its tenant at 6900 Maritz Drive in Mississauga, ON to terminate their lease in December 2023. In January 2024, H&R received approval from the City of Mississauga to replace the existing 104,689 square foot office building on the property with a new 122,413 square foot industrial building. The property was transferred from investment properties to properties under development during Q1 2024. Demolition of the existing office building was completed in April 2024. Construction has commenced and substantial completion is expected in December 2024. As at March 31, 2024, the total development budget for this property is approximately $43.6 million with costs remaining to complete the new building of approximately $22.5 million. U.S. Properties under Development The REIT commenced construction on two U.S. residential development properties in 2022. As at March 31, 2024, the total development budget for these two properties is approximately $283.2 million (U.S. $209.8 million) with costs remaining to complete of approximately $88.6 million (U.S. $65.6 million). Both properties are expected to be completed on budget in the latter half of 2024. Creation of Lantower Real Estate Development Trust In February 2024, the REIT created Lantower Residential Real Estate Development Trust (No. 1) (the "REDT") which completed an initial public offering in April 2024 and raised U.S. $52.0 million of equity capital to acquire an interest in and fund the development of two residential development projects ("the Projects") in Florida that had been wholly-owned by a subsidiary of the REIT. The Projects are expected to contain an aggregate of 601 residential rental units. The REIT contributed the Projects to a ...