| TORONTO, Nov. 13, 2025 /CNW/ - H&R Real Estate Investment Trust ("H&R" or "the REIT") (TSX: HR.UN) today provided an update on its previously announced review of strategic alternatives led by a Special Committee of independent trustees (the "Special Committee") and announced its financial results for the Third Quarter of 2025. 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: |
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| 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: |
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| 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 |
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| 3,520,319 |
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(1) | Square feet are based on H&R's ownership interest. |
Transaction Highlights 2025 Property Dispositions In July 2025, H&R sold 69 Yonge St., a 89,276 square foot office property in Toronto, ON, which was classified as held for sale as at June 30, 2025, for $20.2 million. As at June 30, 2025, the property was 81.4% occupied with an average remaining lease term of 3.4 years. H&R provided a $3.0 million vendor take-back mortgage to the purchaser which bears interest at 10.0% per annum, maturing December 31, 2026. During the nine months ended September 30, 2025, H&R sold its ownership interests in seven Canadian retail properties, two U.S. retail properties, one Canadian office property noted above and one commercial unit adjacent to a Canadian office property totalling 450,633 square feet for $95.0 million, all at H&R's ownership interest. Leasing Update In June 2025, 6900 Maritz Drive in Mississauga, ON, a newly constructed 122,367 square foot industrial building reached substantial completion, at which point it was transferred from properties under development to investment properties. In September 2025, H&R entered into a binding letter of intent with a tenant to lease the full building at market rents commencing December 2025. The tenant has a 4-month free rent period commencing at the start of the lease term. In Q3 2025, H&R leased vacant space at three of its Toronto industrial properties totalling 107,984 square feet at H&R's ownership interest with lease commencements between Q4 2025 and Q1 2026. In addition, H&R re-located an existing tenant to a previously vacant space for 49,762 square feet at H&R's ownership interest at a Toronto industrial property commencing in September 2025. In Q3 2025, H&R completed lease renewals at two single tenanted Canadian office properties located in Markham, ON and Sydney, NS, totalling 143,641 square feet, with annual contractual rent increasing by an average of $6.15 per square foot commencing in Q4 2025. In Q3 2025, a retail tenant exercised a 5-year renewal option at two Ontario locations totalling 71,574 square feet. The original leases were set to expire in 2026. Liquidity As at September 30, 2025, H&R had cash and cash equivalents of $57.1 million, $345.6 million available under its unused lines of credit and an unencumbered property pool of approximately $4.1 billion. MONTHLY DISTRIBUTION DECLARED H&R today declared a distribution for the month of November scheduled as follows:
| Distribution per Unit | Annualized | Record date | Distribution date | November 2025 | $0.05 | $0.60 | November 28, 2025 | December 15, 2025 |
CONFERENCE CALL AND WEBCAST Management will host a conference call to discuss the financial results of the REIT on Friday, November 14, 2025 at 9.30 a.m. Eastern Time. Participants can join the call by dialing 1‐800‐717‐1738 or 1‐289‐514‐5100. For those unable to participate in the conference call at the scheduled time, a replay will be available approximately one hour following completion of the call. To access the archived conference call by telephone, dial 1‐289‐819‐1325 or 1‐888‐660‐6264 and enter the passcode 26728 followed by the "#" key. The telephone replay will be available until Friday, November 21, 2025 at midnight. A live audio webcast will be available through www.hr-reit.com/investor-relations/#investor-events. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived on H&R's website following the call date. The investor presentation is available on H&R's website at www.hr-reit.com/investor-relations/#investor-presentation. ADVISORS The Special Committee had retained National Bank Financial as independent financial advisor, Fasken Martineau Dumoulin LLP as independent legal counsel, and Gagnier Communications as its strategic communications advisor. CIBC Capital Markets was financial advisor to the REIT and Blake, Cassels & Graydon LLP is legal counsel to the REIT. ABOUT H&R REIT H&R REIT is one of Canada's largest real estate investment trusts with total assets of approximately $9.6 billion as at September 30, 2025. H&R REIT has ownership interests in a Canadian and U.S. portfolio comprised of high-quality residential, industrial, office and retail properties comprising over 25.7 million square feet. FORWARD-LOOKING DISCLAIMER Certain information in this news release contains forward‐looking information within the meaning of applicable securities laws (also known as forward‐looking statements) including, among others, statements relating to H&R's objectives, beliefs, plans, estimates, targets, projections and intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts, including with respect to H&R's future plans and targets, the outcome of negotiations relating to the potential sale of approximately $2.6 billion in assets, H&R's expectations with respect to the activities of its development properties, including the building of new properties and the redevelopment of existing properties, the sale of assets under contract or held for sale, management's expectations regarding future distributions by the REIT, and management's expectation to be able to meet all of the REIT's ongoing obligations. Forward‐looking statements generally can be identified by words such as "outlook", "objective", "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "should", "plans", "project", "budget" or "continue" or similar expressions suggesting future outcomes or events. Such forward‐looking statements reflect H&R's current beliefs and are based on information currently available to management. Forward‐looking statements are provided for the purpose of presenting information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. These statements are not guarantees of future performance and are based on H&R's estimates and assumptions that are subject to risks, uncertainties and other factors including those risks and uncertainties discussed in H&R's materials filed with the Canadian securities regulatory authorities from time to time, which could cause the actual results, performance or achievements of H&R to differ materially from the forward‐looking statements contained in this news release. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward‐looking statements include assumptions relating to the general economy, including the continuing effects of inflation; debt markets continue to provide access to capital at a reasonable cost; and assumptions concerning currency exchange and interest rates. Additional risks and uncertainties include, among other things, risks related to: real property ownership; the current economic environment, including the impact of any tariffs and retaliatory tariffs on the economy; strategic transformational repositioning plan; credit risk and tenant concentration; lease rollover risk; interest rate and other debt-related risks; inflation risk; development risks; residential rental risk; capital expenditure risk; currency risk; liquidity risk; cyber security risk; financing credit risk; ESG and climate change risk; risks associated with disease outbreaks; co-ownership interest in properties; general uninsured losses; joint arrangement and investment risks; dependence on key personnel and succession planning; potential acquisition, investment and disposition opportunities and joint venture arrangements; potential undisclosed liabilities associated with acquisitions; competition for real property investments; potential conflicts of interest; litigation and regulatory risk; Unit prices; availability of cash for distributions; credit ratings; ability to access capital; dilution; unitholder liability; redemption right; investment eligibility; debentures; statutory remedies; tax risk; and additional tax risks applicable to the REIT and to unitholders. H&R cautions that these lists of factors, risks and uncertainties are not exhaustive. Although the forward‐looking statements contained in this news release are based upon what H&R believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward‐looking statements. Readers are also urged to examine H&R's materials filed with the Canadian securities regulatory authorities from time to time as they may contain discussions on risks and uncertainties which could cause the actual results and performance of H&R to differ materially from the forward‐looking statements contained in this news release. All forward‐looking statements contained in this news release are qualified by these cautionary statements. These forward‐looking statements are made as of November 13, 2025 and the REIT, except as required by applicable Canadian law, assumes no obligation to update or revise them to reflect new information or the occurrence of future events or circumstances. NON-GAAP MEASURES The unaudited condensed consolidated financial statements of the REIT and related notes for the three and nine months ended September 30, 2025 (the "REIT's Financial Statements") were prepared in accordance with International Financial Reporting Standards ("IFRS"). However, H&R's management uses a number of measures, including NAV per Unit, FFO, AFFO, FFO and AFFO per basic and diluted Unit, payout ratio as a % of FFO, payout ratio as a % of AFFO, debt to total assets at the REIT's proportionate share, debt to Adjusted EBITDA at the REIT's proportionate share, Same‐Property net operating income (cash basis) and the REIT's proportionate share, which do not have meanings recognized or standardized under IFRS or GAAP. These non‐GAAP measures and non‐GAAP ratios should not be construed as alternatives to financial measures calculated in accordance with GAAP. Further, H&R's method of calculating these supplemental non‐GAAP measures and ratios may differ from the methods of other real estate investment trusts or other issuers, and accordingly may not be comparable. H&R uses these measures to better assess H&R's underlying performance and provides these additional measures so that investors may do the same. For information on the most directly comparable GAAP measures, composition of the measures, a description of how the REIT uses these measures and an explanation of how these measures provide useful information to investors, refer to the "Non‐GAAP Measures" section of the REIT's management's discussion and analysis as at and for the three and nine months ended September 30, 2025 available at www.hr‐reit.com and on the REIT's profile on SEDAR+ at www.sedarplus.com, which is incorporated by reference into this news release. FINANCIAL POSITION The following table reconciles the REIT's Statement of Financial Position from the REIT's Financial Statements to the REIT's proportionate share (a non-GAAP measure):
| September 30, 2025 | December 31, 2024 | (in thousands of Canadian dollars) | REIT's Financial Statements | Equity
accounted investments | REIT's
proportionate
share | REIT's Financial Statements | Equity
accounted investments | REIT's
proportionate
share | Assets |
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| Real estate assets |
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| Investment properties | $6,455,872 | $2,130,579 | $8,586,451 | $7,996,810 | $2,275,559 | $10,272,369 | Properties under development | 806,313 | 260,034 | 1,066,347 | 1,010,648 | 208,898 | 1,219,546 |
| 7,262,185 | 2,390,613 | 9,652,798 | 9,007,458 | 2,484,457 | 11,491,915 | Equity accounted investments | 1,186,870 | (1,186,870) | — | 1,275,549 | (1,275,549) | — | Assets classified as held for sale | 865,384 | — | 865,384 | 59,880 | — | 59,880 | Other assets | 236,708 | 33,211 | 269,919 | 177,246 | 34,758 | 212,004 | Cash and cash equivalents | 57,120 | 17,836 | 74,956 | 100,354 | 41,000 | 141,354 |
| $9,608,267 | $1,254,790 | $10,863,057 | $10,620,487 | $1,284,666 | $11,905,153 | Liabilities and Unitholders' Equity |
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| Liabilities |
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| Debt | $3,494,261 | $1,170,071 | $4,664,332 | $3,537,384 | $1,199,391 | $4,736,775 | Exchangeable units | 196,022 | — | 196,022 | 166,800 | — | 166,800 | Deferred Revenue | 873,465 | — | 873,465 | 906,363 | — | 906,363 | Deferred tax liability | 309,036 | — | 309,036 | 413,186 | — | 413,186 | Accounts payable and accrued liabilities | 273,257 | 64,814 | 338,071 | 304,978 | 64,744 | 369,722 | Liabilities classified as held for sale | — | — | — | 13,033 | — | 13,033 | Non-controlling interest | — | 19,905 | 19,905 | — | 20,531 | 20,531 |
| 5,146,041 | 1,254,790 | 6,400,831 | 5,341,744 | 1,284,666 | 6,626,410 | Unitholders' equity | 4,462,226 | — | 4,462,226 | 5,278,743 | — | 5,278,743 |
| $9,608,267 | $1,254,790 | $10,863,057 | $10,620,487 | $1,284,666 | $11,905,153 |
DEBT TO ADJUSTED EBITDA AT THE REIT'S PROPORTIONATE SHARE The following table provides a reconciliation of Debt to Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") at the REIT's proportionate share (a non-GAAP ratio):
| September 30 | December 31 | (in thousands of Canadian dollars) | 2025 | 2024 | Debt per the REIT's Financial Statements(1) | $3,494,261 | $3,550,417 | Debt - REIT's proportionate share of equity accounted investments(1) | 1,170,071 | 1,199,391 | Debt at the REIT's proportionate share(1) | 4,664,332 | 4,749,808 |
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| (Figures below are for the trailing 12 months) |
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| Net loss per the REIT's Financial Statements | (410,374) | (119,714) | Net income from equity accounted investments (within equity accounted investments) | (187) | (430) | Finance costs - operations | 263,205 | 296,538 | Fair value adjustments on financial instruments and real estate assets | 823,227 | 491,319 | (Gain) loss on sale of real estate assets, net of related costs | (187) | 12,156 | Gain on foreign exchange (within equity accounted investments) | (56) | (856) | Income tax recovery | (68,820) | (58,951) | Non-controlling interest | 1,159 | 1,256 | Adjustments: |
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| The Bow and 100 Wynford non-cash rental income adjustments | (94,352) | (93,736) | Straight-lining of contractual rent | (14,141) | (18,256) | IFRIC 21 - realty tax adjustment | 1,095 | — | Fair value adjustment to unit-based compensation | 961 | (1,791) | Adjusted EBITDA at the REIT's proportionate share | $501,530 | $507,535 | Debt to Adjusted EBITDA at the REIT's proportionate share(1) | 9.3x | 9.4x |
(1) | Debt includes mortgages payable, debentures payable, unsecured term loans, lines of credit and liabilities classified as held for sale. |
RESULTS OF OPERATIONS The following table reconciles the REIT's Results of Operations from the REIT's Financial Statements to the REIT's proportionate share (a non-GAAP measure):
| Three months ended September 30, 2025 | Three months ended September 30, 2024 | (in thousands of Canadian dollars) | REIT's Financial Statements | Equity
accounted investments | REIT's
proportionate
share | REIT's Financial Statements | Equity
accounted investments | REIT's
proportionate
share | Rentals from investment properties | $201,728 | $40,723 | $242,451 | $200,344 | $39,013 | $239,357 | Property operating costs | (62,541) | (10,799) | (73,340) | (60,232) | (9,751) | (69,983) | Net operating income | 139,187 | 29,924 | 169,111 | 140,112 | 29,262 | 169,374 | Net income (loss) from equity accounted investments | (46,014) | 46,021 | 7 | 16,478 | (16,385) | 93 | Finance costs - operations | (51,463) | (12,006) | (63,469) | (82,981) | (12,403) | (95,384) | Finance income | 3,923 | 502 | 4,425 | 3,425 | 306 | 3,731 | Trust expenses, net | (4,769) | (1,173) | (5,942) | (7,829) | (1,163) | (8,992) | Fair value adjustment on financial instruments | (12,159) | (289) | (12,448) | (66,453) | (1,189) | (67,642) | Fair value adjustment on real estate assets | (419,543) | (62,623) | (482,166) | (26,142) | 2,799 | (23,343) | Gain (loss) on sale of real estate assets, net of related costs | (389) | (69) | (458) | 1,383 | (638) | 745 | Loss on foreign exchange | — | (29) | (29) | — | (217) | (217) | Transaction costs | (1,590) | — | (1,590) | — | — | — | Net income (loss) before income taxes and non-controlling interest | (392,817) | 258 | (392,559) | (22,007) | 372 | (21,635) | Income tax (expense) recovery | 69,949 | (39) | 69,910 | 12,285 | (53) | 12,232 | Net income (loss) before non-controlling interest | (322,868) | 219 | (322,649) | (9,722) | 319 | (9,403) | Non-controlling interest | — | (219) | (219) | — | (319) | (319) | Net loss | (322,868) | — | (322,868) | (9,722) | — | (9,722) | Other comprehensive income (loss): |
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| Items that are or may be reclassified subsequently to net loss | 99,678 | — | 99,678 | (63,036) | — | (63,036) | Total comprehensive loss attributable to unitholders | ($223,190) | $— | ($223,190) | ($72,758) | $— | ($72,758) |
RESULTS OF OPERATIONS The following table reconciles the REIT's Results of Operations from the REIT's Financial Statements to the REIT's proportionate share (a non-GAAP measure):
| Nine months ended September 30, 2025 | Nine months ended September 30, 2024 | (in thousands of Canadian dollars) | REIT's Financial Statements | Equity
accounted investments | REIT's
proportionate
share | REIT's Financial Statements | Equity
accounted investments | REIT's
proportionate
share | Rentals from investment properties | $611,378 | $123,860 | $735,238 | $614,640 | $115,846 | $730,486 | Property operating costs | (245,402) | (34,895) | (280,297) | (235,871) | (31,997) | (267,868) | Net operating income | 365,976 | 88,965 | 454,941 | 378,769 | 83,849 | 462,618 | Net income (loss) from equity accounted investments | (29,316) | 29,364 | 48 | (79,831) | 80,122 | 291 | Finance costs - operations | (154,682) | (36,496) | (191,178) | (187,250) | (37,261) | (224,511) | Finance income | 9,844 | 1,260 | 11,104 | 8,618 | 654 | 9,272 | Trust expenses, net | (15,495) | (4,892) | (20,387) | (18,665) | (4,475) | (23,140) | Fair value adjustment on financial instruments | (42,282) | (402) | (42,684) | (47,469) | (1,234) | (48,703) | Fair value adjustment on real estate assets | (752,897) | (77,363) | (830,260) | (372,619) | (119,714) | (492,333) | Gain (loss) on sale of real estate assets, net of related costs | (1,200) | 1,496 | 296 | (11,422) | (625) | (12,047) | Loss on foreign exchange | — | (879) | (879) | — | (79) | (79) | Transaction costs | (10,259) | — | (10,259) | — | — | — | Net income (loss) before income taxes and non-controlling interest | (630,311) | 1,053 | (629,258) | (329,869) | 1,237 | (328,632) | Income tax (expense) recovery | 89,055 | (147) | 88,908 | 79,273 | (234) | 79,039 | Net income (loss) before non-controlling interest | (541,256) | 906 | (540,350) | (250,596) | 1,003 | (249,593) | Non-controlling interest | — | (906) | (906) | — | (1,003) | (1,003) | Net loss | (541,256) | — | (541,256) | (250,596) | — | (250,596) | Other comprehensive income (loss): |
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| Items that are or may be reclassified subsequently to net loss | (162,276) | — | (162,276) | 99,990 | — | 99,990 | Total comprehensive loss attributable to unitholders | ($703,532) | $— | ($703,532) | ($150,606) | $— | ($150,606) |
SAME-PROPERTY NET OPERATING INCOME (CASH BASIS) The following table reconciles net operating income per the REIT's Financial Statements to Same-Property net operating income (cash basis) (a non-GAAP measure):
| Three months ended September 30 | Nine months ended September 30 | (in thousands of Canadian dollars) | 2025 | 2024 | Change | 2025 | 2024 | Change | Rentals from investment properties | $201,728 | $200,344 | $1,384 | $611,378 | $614,640 | ($3,262) | Property operating costs | (62,541) | (60,232) | (2,309) | (245,402) | (235,871) | (9,531) | Net operating income per the REIT's Financial Statements | 139,187 | 140,112 | (925) | 365,976 | 378,769 | (12,793) | Adjusted for: |
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| Net operating income from equity accounted investments | 29,924 | 29,262 | 662 | 88,965 | 83,849 | 5,116 | Straight-lining of contractual rent at the REIT's proportionate share | (3,095) | (4,305) | 1,210 | (10,614) | (14,729) | 4,115 | Realty taxes in accordance with IFRIC 21 at the REIT's proportionate share | (16,593) | (14,757) | (1,836) | 15,781 | 14,686 | 1,095 | Net operating income (cash basis) from Transactions at the REIT's proportionate share | (31,579) | (31,310) | (269) | (92,260) | (102,151) | 9,891 | Same-Property net operating income (cash basis) | $117,844 | $119,002 | ($1,158) | $367,848 | $360,424 | $7,424 |
NAV PER UNIT The following table reconciles Unitholders' equity per Unit to NAV per Unit (a non-GAAP ratio): Unitholders' Equity per Unit and NAV per Unit | September 30 | December 31 | (in thousands except for per Unit amounts) | 2025 | 2024 | Unitholders' equity | $4,462,226 | $5,278,743 | Exchangeable units | 196,022 | 166,800 | Deferred tax liability | 309,036 | 413,186 | Total | $4,967,284 | $5,858,729 |
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| Units outstanding | 262,566 | 262,016 | Exchangeable units outstanding | 17,424 | 17,974 | Total | 279,990 | 279,990 | Unitholders' equity per Unit(1) | $16.99 | $20.15 | NAV per Unit | $17.74 | $20.92 |
(1) | Unitholders' equity per Unit is calculated by dividing unitholders' equity by Units outstanding. |
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS The following table reconciles net loss per the REIT's Financial Statements to FFO and AFFO (non-GAAP measures): FFO AND AFFO | Three Months ended September 30 | Nine months ended September 30 | (in thousands of Canadian dollars except per Unit amounts) | 2025 | 2024 | 2025 | 2024 | Net loss per the REIT's Financial Statements | ($322,868) | ($9,722) | ($541,256) | ($250,596) | Realty taxes in accordance with IFRIC 21 | (15,322) | (13,548) | 14,528 | 13,474 | FFO adjustments from equity accounted investments | 62,734 | (961) | 81,155 | 124,321 | Exchangeable unit distributions | 2,614 | 2,696 | 7,841 | 8,088 | Provision for expected credit loss | — | 32,000 | 268 | 32,000 | Fair value adjustments on financial instruments and real estate assets | 431,702 | 92,595 | 795,179 | 420,088 | Fair value adjustment to unit-based compensation | 1,281 | 3,265 | 4,428 | 1,676 | (Gain) loss on sale of real estate assets, net of related costs | 389 | (1,383) | 1,200 | 11,422 | Transaction costs | 1,590 | — | 10,259 | — | Deferred income tax recovery applicable to U.S. Holdco | (70,420) | (12,716) | (90,450) | (80,429) | Incremental leasing costs | 585 | 539 | 1,746 | 1,694 | The Bow and 100 Wynford non-cash rental income and accretion adjustments | (11,187) | (10,452) | (32,898) | (30,728) | FFO | $81,098 | $82,313 | $252,000 | $251,010 | Straight-lining of contractual rent | (2,717) | (4,109) | (9,684) | (14,308) | Rent amortization of tenant inducements | 1,112 | 1,136 | 3,391 | 3,407 | Capital expenditures | (11,990) | (9,085) | (32,196) | (26,481) | Leasing expenses and tenant inducements | (108) | (541) | (1,363) | (2,697) | Incremental leasing costs | (585) | (539) | (1,746) | (1,694) | AFFO adjustments from equity accounted investments | (2,554) | (1,399) | (4,753) | (3,869) | AFFO | $64,256 | $67,776 | $205,649 | $205,368 | Basic and diluted weighted average number of Units and exchangeable units (in thousands of Units)(1) | 279,990 | 279,990 | 279,990 | 279,914 | FFO per basic and diluted Unit | $0.290 | $0.294 | $0.900 | $0.897 | AFFO per basic and diluted Unit | $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 | 51.7 % | 51.0 % | 50.0 % | 50.2 % | Payout ratio as a % of AFFO | 65.5 % | 62.0 % | 61.3 % | 61.3 % |
(1) | For the three and nine months ended September 30, 2025, included in the weighted average and diluted weighted average number of Units are exchangeable units of 17,424,186 and 17,440,303, respectively. For the three and nine months ended September 30, 2024, included in the weighted average and diluted weighted average number of Units are exchangeable units of 17,974,186. |
Additional information regarding H&R is available at www.hr-reit.com and on www.sedarplus.com. SOURCE H&R Real Estate Investment Trust | |
