Strategic Review Process
The Special Committee was initially formed in response to the receipt of a non-binding expression of interest from multiple parties for an acquisition of all of the assets of the REIT. Through the late winter and spring of this year, the Special Committee engaged with the interested parties. Ultimately, the prices and terms proposed were not acceptable to the Special Committee.
Following the announcement that the Special Committee was reviewing strategic alternatives in July, the Special Committee and the advisors to the REIT received additional indications of interest for certain assets of the REIT. On instruction from the Special Committee, the advisors to the REIT conducted a full sale process. At the end of this process, the Special Committee received multiple offers for specific assets, however, no en bloc offers were received for the REIT.
As a result, management of the REIT is currently in negotiations with various parties for the sale of assets of approximately $2.6 billion. The REIT expects to enter into binding agreements of sale by the end of the year. Accordingly, the Special Committee has now been dissolved and the Board will continue to oversee the entering into, and implementation, of any such transactions. At this time, there is no certainty that any of these negotiations will result in transactions.
"The Special Committee's mandate was to evaluate all potential strategic alternatives in the best interests of the REIT," said Donald E. Clow, Independent Lead Trustee and Chair of the Special Committee. "The extensive work completed has provided the Board with a clearer view of the market and the value-maximization opportunities available to H&R."
FINANCIAL HIGHLIGHTS
September 30
December 31
December 31
2025
2024
2023
Total assets (in thousands)
$9,608,267
$10,620,487
$10,777,643
Debt to total assets per the REIT's Financial Statements(1)
36.4 %
33.4 %
34.2 %
Debt to total assets at the REIT's proportionate share(1)(2)
47.3 %
43.7 %
44.0 %
Debt to Adjusted EBITDA at the REIT's proportionate share(1)(2)(3)
9.3x
9.4x
8.5x
Unitholders' equity (in thousands)
$4,462,226
$5,278,743
$5,192,375
Units outstanding (in thousands)
262,566
262,016
261,868
Exchangeable units outstanding (in thousands)
17,424
17,974
17,974
Unitholders' equity per Unit
$16.99
$20.15
$19.83
Net Asset Value ("NAV") per Unit(2)(4)
$17.74
$20.92
$20.75
Three months ended September 30
Nine months ended September 30
(in thousands except for per Unit amounts)
2025
2024
2025
2024
Rentals from investment properties
$201,728
$200,344
$611,378
$614,640
Net operating income
$139,187
$140,112
$365,976
$378,769
Same-Property net operating income (cash basis)(5)
$117,844
$119,002
$367,848
$360,424
Net income (loss) from equity accounted investments
($46,014)
$16,478
($29,316)
($79,831)
Fair value adjustment on real estate assets
($419,543)
($26,142)
($752,897)
($372,619)
Net loss
($322,868)
($9,722)
($541,256)
($250,596)
Funds from Operations ("FFO")(5)
$81,098
$82,313
$252,000
$251,010
Adjusted Funds from Operations ("AFFO")(5)
$64,256
$67,776
$205,649
$205,368
Weighted average number of Units and exchangeable units
279,990
279,990
279,990
279,914
FFO per basic and diluted Unit(2)
$0.290
$0.294
$0.900
$0.897
AFFO per basic and diluted Unit(2)
$0.229
$0.242
$0.734
$0.734
Cash distributions per Unit
$0.150
$0.150
$0.450
$0.450
Payout ratio as a % of FFO(2)
51.7 %
51.0 %
50.0 %
50.2 %
Payout ratio as a % of AFFO(2)
65.5 %
62.0 %
61.3 %
61.3 %
(1)
Debt includes mortgages payable, debentures payable, unsecured term loans, lines of credit and liabilities classified as held for sale.
(2)
These are non-GAAP ratios. Refer to the "Non-GAAP Measures" section of this news release.
(3)
Adjusted EBITDA is based on the trailing 12 months and is calculated in the non-GAAP measures section of this news release.
(4)
See page 12 of this news release for a detailed calculation of NAV per Unit.
(5)
These are non-GAAP measures. Refer to the "Non-GAAP Measures" section of this news release.
(1)
At the REIT's proportionate share, including assets classified as held for sale. Refer to the "Non-GAAP Measures" section of this news release.
(2)
June 30, 2021 has been used as a benchmark since H&R's Strategic Repositioning Plan was announced prior to the release of H&R's Q3 2021 results.
(3)
Excludes the Bow and 100 Wynford, which were legally sold in October 2021 and August 2022, respectively.
SUMMARY OF SIGNIFICANT Q3 2025 ACTIVITY
Net Operating Income Highlights:
Three months ended September 30
Nine months ended September 30
(in thousands of Canadian dollars)
2025
2024
% Change
2025
2024
% Change
Operating Segment:
Same-Property net operating income (cash basis) - Residential(1)
$38,867
$40,228
(3.4 %)
$126,361
$124,858
1.2 %
Same-Property net operating income (cash basis) - Industrial(1)
15,642
16,915
(7.5 %)
49,512
50,455
(1.9 %)
Same-Property net operating income (cash basis) - Office(1)
38,294
38,088
0.5 %
116,129
114,450
1.5 %
Same-Property net operating income (cash basis) - Retail(1)
25,041
23,771
5.3 %
75,846
70,661
7.3 %
Same-Property net operating income (cash basis)(1)
117,844
119,002
(1.0 %)
367,848
360,424
2.1 %
Net operating income (cash basis) from Transactions at the REIT's proportionate share(1)(2)
31,579
31,310
0.9 %
92,260
102,151
(9.7 %)
Realty taxes in accordance with IFRIC 21 at the REIT's proportionate share(1)(3)
16,593
14,757
12.4 %
(15,781)
(14,686)
7.5 %
Straight-lining of contractual rent at the REIT's proportionate share(1)
3,095
4,305
(28.1 %)
10,614
14,729
(27.9 %)
Net operating income from equity accounted investments(1)
(29,924)
(29,262)
2.3 %
(88,965)
(83,849)
6.1 %
Net operating income per the REIT's Financial Statements
$139,187
$140,112
(0.7 %)
$365,976
$378,769
(3.4 %)
(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 21-month period ended September 30, 2025.
(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.
Fair Value Adjustment on Real Estate Assets
Three months ended September 30
Nine months ended September 30
(in thousands of Canadian dollars)
2025
2024
Change
2025
2024
Change
Operating Segment:
Residential
($21,456)
($11,855)
($9,601)
($59,699)
($95,411)
$35,712
Industrial
(5,888)
9,690
(15,578)
(68,996)
(30,097)
(38,899)
Office
(297,815)
(28,260)
(269,555)
(436,599)
(238,863)
(197,736)
Retail
(82,774)
2,789
(85,563)
(84,815)
(100,299)
15,484
Land and properties under development
(74,233)
4,293
(78,526)
(180,151)
(27,663)
(152,488)
Fair value adjustment on real estate assets per the REIT's proportionate share(1)
(482,166)
(23,343)
(458,823)
(830,260)
(492,333)
(337,927)
Less: equity accounted investments
62,623
(2,799)
65,422
77,363
119,714
(42,351)
Fair value adjustment on real estate assets per the REIT's Financial Statements
($419,543)
($26,142)
($393,401)
($752,897)
($372,619)
($380,278)
(1)
The REIT's proportionate share is a non-GAAP measure defined in the "Non-GAAP Measures" section of this news release.
During the three months ended September 30, 2025, the fair value adjustments on real estate assets were primarily due to properties classified as held for sale, to be in-line with the expected selling prices of these properties.
Assets held for Sale as at September 30, 2025:
Property
Segment
Expected Sale Date
Square
Feet(1)
Occupancy
10450-42nd Ave., Edmonton, AB
Retail
November 27, 2025
150,457
100.0 %
Remaining 26 Canadian Retail Properties
Retail
2026
1,362,893
99.9 %
310, 320 & 330 Front St. W., Toronto, ON
Office
2026
611,840
94.3 %
25 Sheppard Ave. W., Toronto, ON
Office
2026
390,268
83.4 %
1501 McKinney St., Houston, TX
Office
2026
844,763
100.0 %
145 Wellington St. W., Toronto, ON
Office
2026
160,098
88.2 %
Total
