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H&R REIT Reports First Quarter 2026 Financial Results

News Provided by PR Newswire2026-05-14

H&R REIT Reports First Quarter 2026 Financial Results

[14-May-2026]

TORONTO, May 14, 2026 /CNW/ - H&R Real Estate Investment Trust ("H&R" or "the REIT") (TSX: HR.UN) is pleased to announce its financial results for the three months ended March 31, 2026. During the quarter, the REIT continued to successfully execute on its strategic plan, continuing to sell assets during the quarter to focus on residential and industrial properties. See "Completion of $1.5 Billion of Retail and Office Property Sales" below.

(1)	At the REIT's proportionate share, excluding 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.

FINANCIAL HIGHLIGHTS

	March 31	December 31
	2026	2025
Total assets (in thousands)	$8,065,061	$9,108,286
Debt to total assets per the REIT's Financial Statements⁽¹⁾	31.7 %	38.4 %
Debt to total assets at the REIT's proportionate share⁽¹⁾⁽²⁾	42.6 %	49.8 %
Debt to Adjusted EBITDA at the REIT's proportionate share^(1)(2)(3)	7.0x	9.3x
Unitholders' equity (in thousands)	$4,117,616	$4,135,718
Units outstanding (in thousands)	264,567	264,558
Exchangeable units outstanding (in thousands)	15,442	15,442
Unitholders' equity per Unit	$15.56	$15.63
Net Asset Value ("NAV") per Unit⁽²⁾⁽⁴⁾	$15.96	$16.09

	Three months ended March 31
(in thousands except for per Unit amounts)	2026	2025
Rentals from investment properties	$184,253	$205,639
Net operating income	$85,869	$82,963
Same-Property net operating income (cash basis)⁽⁵⁾	$90,107	$93,403
Net loss from equity accounted investments	($7,264)	($10,082)
Fair value adjustment on real estate assets	($79,053)	($52,698)
Net loss	($34,870)	($52,018)
Funds from Operations ("FFO")⁽⁵⁾	$76,265	$83,098
Adjusted Funds from Operations ("AFFO")⁽⁵⁾	$65,499	$68,013
Weighted average number of Units and exchangeable units	280,003	279,990
FFO per basic and diluted Unit⁽²⁾	$0.272	$0.297
AFFO per basic and diluted Unit⁽²⁾	$0.234	$0.243
Cash distributions per Unit	$0.150	$0.150
Payout ratio as a % of FFO⁽²⁾	55.1 %	50.5 %
Payout ratio as a % of AFFO⁽²⁾	64.1 %	61.7 %

(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 EBITDA is based on the trailing 12 months and is calculated on page 7 of this news release.
(4)	See page 9 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.

COMPLETION OF $1.5 BILLION OF RETAIL AND OFFICE PROPERTY SALES

The assets listed below were sold for approximately $1.5 billion in Q1 2026. Total debt assumed by the purchaser of the REIT's interest in ECHO Realty, L.P. ("ECHO") was approximately $424.5 million. The net proceeds of approximately $1.0 billion were used to repay corporate debt, including $375.0 million of unsecured term loans, and the remaining balance was used to repay unsecured operating lines of credit.

1)	H&R's non-managing 33.1% ownership interest in ECHO;
2)	26 Canadian retail properties;
3)	145 Wellington Street West, a downtown Toronto office property;
4)	88 McNabb Street, an office property in the Greater Toronto Area; and
5)	Hess Tower, a Houston, TX office property.

In aggregate, the assets sold in Q1 2026 contributed the following:

	Three months ended March 31
(in thousands of Canadian dollars)	2026	2025	Change
Net operating income per the REIT's Financial Statements	$8,439	$6,534	$1,905
Net operating income from equity accounted investments⁽¹⁾	9,198	12,122	(2,924)
Net operating income at the REIT's proportionate share⁽¹⁾	17,637	18,656	(1,019)
Adjusted for:
Straight-lining of contractual rent at the REIT's proportionate share⁽¹⁾	181	684	(503)
Realty taxes in accordance with IFRIC 21 at the REIT's proportionate share⁽¹⁾⁽²⁾	—	14,173	(14,173)
Net operating income (cash basis) at the REIT's Proportionate share⁽¹⁾	17,818	33,513	(15,695)
FFO⁽¹⁾⁽³⁾	$14,568	$25,686	($11,118)

(1)	These are non-GAAP measures. Refer to the "Non-GAAP Measures" section of this news release.
(2)	Realty taxes in accordance with IFRIC 21 was $10,333 per the REIT's Financial Statements and $3,840 from equity accounted investments.
(3)	Excludes finance costs savings from repayment of corporate debt.

As the proceeds from these sales were used to repay corporate debt, finance costs were lower in Q1 2026 compared to Q4 2025 by approximately $7.0 million. H&R expects a further reduction in finance costs in Q2 2026 compared to Q1 2026 by approximately $3.0 million.

LANTOWER RESIDENTIAL UPDATE

Effective April 1, 2026, Lantower Residential, the REIT's residential division, externalized its property management operations and entered into a master management agreement with Greystar Real Estate Partners ("Greystar"). This strategic action is intended to enhance operating efficiency, improve cost structure, and increase strategic flexibility across the residential platform. The transition to a third-party management model is expected to yield cost savings of approximately U.S. $5.0 million annually.

Greystar hired the majority of Lantower's onsite property management employees and key home office associates, supporting operational continuity at the property level. Emily Watson is continuing as Chief Operating Officer of Lantower Residential, and Hunter Webb continues to lead the development platform, ensuring continuity of leadership, strategy, and execution. Lantower Residential has retained approximately 20 employees in asset management, development and accounting functions for Lantower Residential's properties.

Included in trust expenses for the three months ended March 31, 2026 were employee termination costs, legal costs and other one-time costs relating to Lantower Residential externalizing its property management operations, totalling approximately $2.6 million.

DEBT & LIQUIDITY HIGHLIGHTS

Liquidity

As at March 31, 2026, H&R had cash and cash equivalents of $68.5 million and $897.0 million available under its unused lines of credit. H&R has an unencumbered property pool of approximately $3.2 billion, which is 2.99x unsecured debt.

As at March 31, 2026, debt to total assets per the REIT's Financial Statements was 31.7% compared to 38.4% as at December 31, 2025. As at March 31, 2026, debt to total assets at the REIT's proportionate share (a non-GAAP ratio, refer to the "Non-GAAP Measures" section of this news release) was 42.6% compared to 49.8% as at December 31, 2025. Debt to Adjusted EBITDA at the REIT's proportionate share (a non-GAAP ratio, refer to the "Non-GAAP Measures" section of this news release) was 7.0x as at March 31, 2026.

MONTHLY DISTRIBUTION DECLARED

H&R today declared a distribution for the month of May scheduled as follows:

	Distribution per Unit	Annualized	Record date	Distribution date
May 2026	$0.05	$0.60	May 29, 2026	June 15, 2026

CONFERENCE CALL AND WEBCAST

Management will host a conference call to discuss the financial results of the REIT on Friday, May 15, 2026 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 46736 followed by the "#" key. The telephone replay will be available until Friday, May 22, 2026 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.

ABOUT H&R REIT

H&R is one of Canada's largest real estate investment trusts. H&R has ownership interests in a Canadian and U.S. portfolio primarily comprised of high‐quality residential (operating as Lantower Residential), industrial and office properties totalling approximately 20.3 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 made or implied 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 the statements made under the heading "Completion of $1.5 Billion of Retail and Office Property Sales" including with respect to H&R's future plans and targets, future reductions in finance costs, the benefits of the externalization of Lantower Residential's property management operations, the value of assets and liabilities held for sale, capitalization rates and cash flow models used to estimate fair values, expectations regarding future operating fundamentals, 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 described below under "Risks and Uncertainties" and those 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 debt markets continuing 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, those related to: real property ownership; the current economic environment; tariffs and other international trade disputes; property valuations; 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 and breach of privacy or information security systems; artificial intelligence and related technologies; expanding social media vehicles; financing credit risk; ESG and climate change risk; public health crises; co-ownership interest in properties; business continuity; general uninsured losses; joint arrangement and investment risks; talent management 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; unitholder activism; 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 in this news release are qualified by these cautionary statements. These forward-looking statements are made as of May 14, 2026 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 months ended March 31, 2026 (the "REIT's Financial Statements") were prepared in accordance with IFRS Accounting 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 months ended March 31, 2026 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):

	March 31, 2026			December 31, 2025
(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
Real estate assets
Investment properties	$6,343,489	$1,050,380	$7,393,869	$6,370,453	$1,053,283	$7,423,736
Properties under development	771,599	262,771	1,034,370	785,184	240,930	1,026,114
	7,115,088	1,313,151	8,428,239	7,155,637	1,294,213	8,449,850
Equity accounted investments	489,424	(489,424)	—	484,702	(484,702)	—
Assets classified as held for sale	91,500	—	91,500	1,142,900	—	1,142,900
Other assets	300,529	7,030	307,559	272,910	6,979	279,889
Cash and cash equivalents	68,520	13,545	82,065	52,137	6,503	58,640
	$8,065,061	$844,302	$8,909,363	$9,108,286	$822,993	$9,931,279
Liabilities and Unitholders' Equity
Liabilities
Debt	$2,553,815	$823,631	$3,377,446	$3,501,891	$800,889	$4,302,780
Exchangeable units	150,865	—	150,865	157,968	—	157,968
Deferred revenue	850,637	—	850,637	862,139	—	862,139
Deferred tax liability	199,241	—	199,241	212,781	—	212,781
Accounts payable and accrued liabilities	192,887	20,671	213,558	237,789	22,104	259,893
	3,947,445	844,302	4,791,747	4,972,568	822,993	5,795,561
Unitholders' equity	4,117,616	—	4,117,616	4,135,718	—	4,135,718
	$8,065,061	$844,302	$8,909,363	$9,108,286	$822,993	$9,931,279

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):

	March 31	December 31
(in thousands of Canadian dollars)	2026	2025
Debt per the REIT's Financial Statements⁽¹⁾	$2,553,815	$3,501,891
Debt - REIT's proportionate share of equity accounted investments⁽¹⁾	823,631	800,889
Debt at the REIT's proportionate share⁽¹⁾	3,377,446	4,302,780
H&R's share of ECHO's debt classified within assets held for sale⁽¹⁾⁽²⁾	—	361,423
Total Debt⁽¹⁾	3,377,446	4,664,203

(Figures below are for the trailing 12 months)
Net loss per the REIT's Financial Statements	(774,416)	(791,564)
Net (income) loss from equity accounted investments (within equity accounted investments)	101	(57)
Finance costs - operations	241,417	253,893
Fair value adjustments on financial instruments and real estate assets	1,318,610	1,324,237
Loss on sale of real estate assets, net of related costs	10,130	748
Loss on foreign exchange (within equity accounted investments)	878	879
Income tax recovery	(191,103)	(182,420)
Non-controlling interest	941	1,171
Adjustments:
The Bow and 100 Wynford non-cash rental income adjustments	(94,766)	(94,559)
Straight-lining of contractual rent	(13,458)	(13,898)
IFRIC 21 - realty tax adjustment	(16,324)
Fair value adjustment to unit-based compensation	1,369	3,168
Adjusted EBITDA at the REIT's proportionate share	$483,379	$501,598
Debt to Adjusted EBITDA at the REIT's proportionate share⁽¹⁾	7.0x	9.3x

⁽¹⁾	Debt includes mortgages payable, debentures payable, unsecured term loans, lines of credit and liabilities classified as held for sale.
⁽²⁾	For the year ended December 31, 2025, H&R included ECHO's debt classified within assets held for sale within Total Debt.

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 March 31, 2026			Three months ended March 31, 2025
(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	$184,253	$29,246	$213,499	$205,639	$41,566	$247,205
Property operating costs	(98,384)	(9,372)	(107,756)	(122,676)	(14,722)	(137,398)
Net operating income	85,869	19,874	105,743	82,963	26,844	109,807
Net income (loss) from equity accounted investments	(7,264)	7,160	(104)	(10,082)	10,136	54
Finance costs - operations	(43,199)	(8,722)	(51,921)	(52,009)	(12,388)	(64,397)
Finance income	5,258	431	5,689	3,190	222	3,412
Trust expenses, net	(6,630)	(939)	(7,569)	(7,237)	(2,045)	(9,282)
Fair value adjustment on financial instruments	3,278	89	3,367	(22,105)	(96)	(22,201)
Fair value adjustment on real estate assets	(79,053)	(17,471)	(96,524)	(52,698)	(23,885)	(76,583)
Gain (loss) on sale of real estate assets, net of related costs	(8,891)	(2)	(8,893)	(1,103)	1,592	489
Gain on foreign exchange	—	1	1	—	—	—
Transaction costs	—	(255)	(255)	—	—	—
Net income (loss) before income taxes and non-controlling interest	(50,632)	166	(50,466)	(59,081)	380	(58,701)
Income tax (expense) recovery	15,762	(35)	15,727	7,063	(19)	7,044
Net income (loss) before non-controlling interest	(34,870)	131	(34,739)	(52,018)	361	(51,657)
Non-controlling interest	—	(131)	(131)	—	(361)	(361)
Net loss	(34,870)	—	(34,870)	(52,018)	—	(52,018)
Other comprehensive income (loss):
Items that are or may be reclassified subsequently to net loss	56,355	—	56,355	(62)	—	(62)
Total comprehensive income (loss) attributable to unitholders	$21,485	$—	$21,485	($52,080)	$—	($52,080)

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 March 31
(in thousands of Canadian dollars)	2026	2025	Change
Rentals from investment properties	$184,253	$205,639	($21,386)
Property operating costs	(98,384)	(122,676)	24,292
Net operating income per the REIT's Financial Statements	85,869	82,963	2,906
Adjusted for:
Net operating income from equity accounted investments	19,874	26,844	(6,970)
Straight-lining of contractual rent at the REIT's proportionate share	(3,218)	(3,658)	440
Realty taxes in accordance with IFRIC 21 at the REIT's proportionate share	32,870	49,194	(16,324)
Net operating income (cash basis) from Transactions at the REIT's proportionate share	(45,288)	(61,940)	16,652
Same-Property net operating income (cash basis)	$90,107	$93,403	($3,296)

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	March 31	December 31
(in thousands except for per Unit amounts)	2026	2025
Unitholders' equity	$4,117,616	$4,135,718
Exchangeable units	150,865	157,968
Deferred tax liability	199,241	212,781
Total	$4,467,722	$4,506,467

Units outstanding	264,567	264,558
Exchangeable units outstanding	15,442	15,442
Total	280,009	280,000
Unitholders' equity per Unit⁽¹⁾	$15.56	$15.63
NAV per Unit	$15.96	$16.09

(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 March 31
(in thousands of Canadian dollars except per Unit amounts)	2026	2025
Net loss per the REIT's Financial Statements	($34,870)	($52,018)
Realty taxes in accordance with IFRIC 21	31,136	45,354
FFO adjustments from equity accounted investments	20,598	27,110
Exchangeable unit distributions	2,316	2,614
Provision for expected credit loss	—	268
Fair value adjustments on financial instruments and real estate assets	75,775	74,803
Fair value adjustment to unit-based compensation	(285)	1,514
Loss on sale of real estate assets, net of related costs	8,891	1,103
Deferred income tax recovery applicable to U.S. Holdco	(16,407)	(7,495)
Incremental leasing costs	613	589
The Bow and 100 Wynford non-cash rental income and accretion adjustments	(11,502)	(10,744)
FFO	$76,265	$83,098
Straight-lining of contractual rent	(2,926)	(3,612)
Rent amortization of tenant inducements	811	1,150
Capital expenditures	(5,610)	(10,357)
Leasing expenses and tenant inducements	(586)	(657)
Incremental leasing costs	(613)	(589)
AFFO adjustments from equity accounted investments	(1,842)	(1,020)
AFFO	$65,499	$68,013
Basic and diluted weighted average number of Units and exchangeable units (in thousands of Units)⁽¹⁾	280,003	279,990
FFO per basic and diluted Unit	$0.272	$0.297
AFFO per basic and diluted Unit	$0.234	$0.243
Cash distributions per Unit	$0.150	$0.150
Payout ratio as a % of FFO	55.1 %	50.5 %
Payout ratio as a % of AFFO	64.1 %	61.7 %

(1)	For the three months ended March 31, 2026 and 2025, included in the weighted average and diluted weighted average number of Units are the weighted average number of exchangeable units of 15,441,644 and 17,473,075, respectively.

Additional information regarding H&R is available at www.hr-reit.com and on www.sedarplus.com.

SOURCE H&R Real Estate Investment Trust

Company Codes: Toronto:HR.DB,Toronto:HR.DB.D,Toronto:HR.DB.E,Toronto:HR.DB.H,Toronto:HR.UN

2026

The news, reports, views and opinions of authors (or source) expressed are their own and do not necessarily represent the views of CRWE World.