H&R Sells $167.8 Million of Retail and Office Real Estate in Calgary, Toronto and Kingston

Nov 2,2022 1 Comment By The Lilly Commercial Team

Toronto-based H&R REIT has sold a quartet of office and retail properties for $167.8 million as it looks to “simplify” its portfolio and pivot to multifamily and industrial real estate.

The real estate investment trust said it had sold a Rona Home Improvement Centre at 2665 32nd St. in Calgary, an Altalink office at 2767 2nd Ave. also in Calgary, a Bell data centre at 100 Wynford Drive in Toronto and another Rona storefront at 2342 Princess St. in Kingston.

“The retail and office dispositions that closed today are moving H&R REIT closer to achieving our portfolio simplification strategy goals,” Thomas Hofstedter, executive chairman and chief executive, said in a statement.

H&R said in October 2021 that it planned to reposition itself as a multifamily and industrial REIT, creating a publicly traded spinoff called Primaris for its retail properties.

H&R said the sale price for its latest deal was based on a weighted 6.9% capitalization rate and was closed to that value as of June 30, based on International Financial Reporting Standards.

The REIT has the option to repurchase 100 Wynford for approximately $159.6 million in 2036 or earlier under certain circumstances.

“The option to repurchase 100 Wynford Drive will allow us to capture any development upside created through our continuing rezoning efforts. We are very confident in our plan, which we believe is driving growth and creating value for our unitholders,” said Hofstedter.

H&R said property sales for 2022 are now $406 million. The REIT has also entered into a binding agreement to sell two of its retail properties in America let to automotive tenants for 17.0 million U.S. dollars, or 22.3 million Canadian dollars, at a weighted average cap rate of 5.8%.

H&R’s units were trading as much as 26% below the net asset value the Bank of Montreal has placed on the REIT’s properties and 38% below International Financial Reporting Standards, according to Jenny Ma, an analyst with BMO Capital Markets.

“Management continues to make progress on its strategic repositioning plan, which should help narrow the gap to NAV,” said Ma in a report issued last month.

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