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Attention Business/Financial Editors: H&R REIT CONTINUES GROWTH IN THIRD QUARTERCloses the Acquisition of Two PropertiesTSE SYMBOL: HR.UNTORONTO, Nov. 15 /CNW/ - H&R Real Estate Investment Trust today announced continued growth in distributable income and net earnings for the nine months ended September 30, 1999. Net earnings and distributable income for the period increased 49%. The strong performance of the REIT is attributable to continued asset growth that totaled 30% when compared to 1998, bringing the REIT's total assets to almost $900 million. Distributable income for the nine month period was $37.5 million or $0.9292 per unit, representing increases of 49% and 11% respectively compared to last year. Operating revenue of $98.5 million represents 38% growth over 1998's first nine months' result of $71.6 million. The $35.0 million or $0.867 per unit net earnings reflect a 49% increase on a dollar basis and 11% growth on a per unit basis. ``We are pleased with our results to date this year and expect the fourth quarter to continue to reflect the effectiveness of our strategy for building Unitholder value,'' said Tom Hofstedter, H&R REIT President and CEO. ``We continue to generate excellent returns while maintaining our conservative 90% payout philosophy and raising sufficient funds to finance future growth.'' On a quarter over quarter basis, distributable income increased 32% to $13.4 million, representing $0.3108 per unit. This compares with $10.1 million or $0.30 per unit last year. Operating revenue of $33.6 million represents 25% growth over 1998 third quarter results of $27 million. Net earnings rose 36% to $12.5 million from $9.2 million and to $0.2902 from $0.27 on a per unit basis. During the third quarter, the REIT announced that it expanded its portfolio by $76.3 million through the addition of $33.1 million in income producing properties and $43.2 million in mezzanine financings. The two income producing properties are expected to produce a blended leveraged return of approximately 15.0%. The three mezzanine financings will provide an average initial rate of return of 11.4%, increasing significantly after completion of the development phase. Subsequent to the completion of the third quarter, H&R REIT exercised its option to acquire two newly-constructed distribution facilities in Mississauga, Ontario, leased to Livingston Contract Logistics Inc. and NFC Canada Ltd. for which the REIT had previously provided mezzanine and construction financing. With permanent financing now in place, the REIT is earning a 16.3% return on its $8 million equity investment. ``These buildings represent the second and third properties H&R REIT has acquired through its development program. To date, the REIT has completed 11 mezzanine financings and expects to exercise a number of similar purchase options over the next twelve months,'' added Mr. Hofstedter. ``This process generates superior returns on investment and enhances Unitholder value, the result of H&R's in-house development expertise.'' H&R REIT is a TSE-listed, closed end real estate investment trust. The REIT holds interests in 20 office properties, 38 single-tenant industrial properties, 3 retail properties and 11 development projects, principally in the Greater Toronto Area. << H & R REAL ESTATE INVESTMENT TRUST Balance Sheet and Statement of Unitholders' Equity (In thousands of dollars) September 30 1999 1998 ------------------------------------------------------------------------ Assets Income properties $651,657 $540,364 Mortgages receivable 218,215 133,730 Accounts receivable 9,083 3,149 Deferred expenses 6,738 4,470 Accrued rent receivable 5,650 3,588 Prepaid expenses and sundry assets 4,163 2,914 Cash 1,427 1,413 ------------------------------------------------------------------------ $896,933 $689,628 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Liabilities and Unitholders' Equity Liabilities: Mortgages payable $324,577 $217,362 Bank indebtedness 86,552 107,277 Accounts payable 19,936 14,314 ------------------------------------------------------------------------ 431,065 338,953 Unitholders' equity 465,868 350,675 45,293,649 units (1998 - 34,368,649) ------------------------------------------------------------------------ $896,933 $689,628 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Unitholders' Equity Unitholders' equity, beginning of period $397,223 $254,785 Proceeds of offering of units 70,208 100,000 Issue costs (3,165) (4,669) Net earnings 35,032 23,448 Distributions to unitholders (33,430) (22,889) ------------------------------------------------------------------------ Unitholders' equity, end of period $465,868 $350,675 ------------------------------------------------------------------------ ------------------------------------------------------------------------ H & R REAL ESTATE INVESTMENT TRUST Statement of Earnings and Distributable Income (In thousands of dollars, except per unit amounts) For the Nine Months ended September 30 1999 1998 ------------------------------------------------------------------------ Operating revenue: Rentals from income properties $83,984 $68,041 Mortgage interest income and other 14,482 3,558 ------------------------------------------------------------------------ 98,466 71,599 Operating expenses: Property operating costs 33,634 27,858 Mortgage and other interest 22,965 15,066 Depreciation 3,853 3,082 Amortization 593 247 ------------------------------------------------------------------------ 61,045 46,253 ------------------------------------------------------------------------ Earnings from operations 37,421 25,346 Trust expenses 2,389 1,898 ------------------------------------------------------------------------ Net earnings 35,032 23,448 Add (deduct): Depreciation 3,853 3,082 Accrued rent (1,404) (1,559) Imputed mortgage interest 65 154 ------------------------------------------------------------------------ Distributable income 37,546 25,125 ------------------------------------------------------------------------ Net earnings per unit $0.8670 $0.7823 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Distributable income per unit $0.9292 $0.8382 ------------------------------------------------------------------------ ------------------------------------------------------------------------ H & R REAL ESTATE INVESTMENT TRUST Statement of Cash Flows (In thousands of dollars) For the Nine Months ended September 30 1999 1998 ------------------------------------------------------------------------ Cash provided by (used in): Operations: Net earnings $35,032 $23,448 Items not affecting cash: Depreciation and amortization 4,446 3,329 Net changes in: Accounts receivable (3,163) (2,242) Deferred expenses (2,370) (2,688) Accrued rent receivable (1,360) (1,436) Prepaid expenses and sundry assets (1,372) (1,370) Accounts payable 3,575 3,760 ------------------------------------------------------------------------ 34,788 22,801 ------------------------------------------------------------------------ Financing: Bank indebtedness 27,548 106,052 Mortgages payable: Acquisitions 44,300 31,933 Repayments (3,978) (3,480) Proceeds of offering of units, net 67,043 95,331 Distributions to unitholders (33,430) (22,889) ------------------------------------------------------------------------ 101,483 206,947 ------------------------------------------------------------------------ Investments: Income properties (70,213) (102,905) Mortgages receivable (65,106) (125,430) ------------------------------------------------------------------------ (135,319) (228,335) ------------------------------------------------------------------------ Increase in cash 952 1,413 Cash, at beginning of period 475 - ------------------------------------------------------------------------ Cash, at end of period $1,427 $1,413 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Supplementary information: Interest revenue received $7,014 $1,120 Interest expense paid 21,977 14,079 Interest capitalized paid 95 342 Acquisition of income properties through assumption of mortgages payable - 2,577 ------------------------------------------------------------------------ ------------------------------------------------------------------------ H & R REAL ESTATE INVESTMENT TRUST Statement of Earnings and Distributable Income (In thousands of dollars, except per unit amounts) For the period ended September 30 Third Quarter Nine Months ------------------------------------- 1999 1998 1999 1998 ------------------------------------------------------------------------ Operating revenue: Rentals from income properties $27,907 $25,031 $83,984 $68,041 Mortgage interest income and other 5,736 1,966 14,482 3,558 ------------------------------------------------------------------------ 33,643 26,997 98,466 71,599 Operating expenses: Property operating costs 10,979 9,960 33,634 27,858 Mortgage and other interest 7,783 5,492 22,965 15,066 Depreciation 1,346 1,454 3,853 3,082 Amortization 201 100 593 247 ------------------------------------------------------------------------ 20,309 17,006 61,045 46,253 ------------------------------------------------------------------------ Earnings from operations 13,334 9,991 37,421 25,346 Trust expenses 787 785 2,389 1,898 ------------------------------------------------------------------------ Net earnings 12,547 9,206 35,032 23,448 Add (deduct): Depreciation 1,346 1,454 3,853 3,082 Accrued rent (458) (548) (1,404) (1,559) Imputed mortgage interest 0 47 65 154 ------------------------------------------------------------------------ Distributable income 13,435 10,159 37,546 25,125 ------------------------------------------------------------------------ Net earnings per unit $0.2902 $0.2700 $0.8670 $0.7823 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Distributable income per unit $0.3108 $0.3000 $0.9292 $0.8382 ------------------------------------------------------------------------ ------------------------------------------------------------------------ >> Notes to Financial Statements ----------------------------- Year 2000 Issue In 1997, the Trust implemented a plan to address Year 2000 issues relevant to its operations and properties. The Trust's information systems are currently compliant. All purchases of new technology are required to be Year 2000 compliant. The Trust has completed its inventory and assessment of its office portfolio operation systems. We have obtained Y2K compliance information from vendors. 98% of our vendors have confirmed that all current systems are Y2K compliant. Random testing has also been done on these systems and no problems were found. We have three retail properties on which testing has been completed. These tests confirmed that these buildings are compliant. For single tenant industrial buildings, where most systems are manually operated, confirmation confirming compliancy has been received from all of our tenants. Testing of these systems is substantially complete. The costs of these initiatives and new systems have not been material, and have been appropriately expensed or capitalized as they were incurred. They are mostly recoverable from tenants. With respect to property acquisitions, the assessment of the Y2K status of a building is part of the due diligence customarily performed and the costs are appropriately capitalized. The Trust relies on third party providers for key services such as electrical, gas, water and telecommunications services. Interruption of these services due to Y2K issues could affect the Trust's operations. The Trust has developed transition and contingency plans for each property. The Trust has actively communicated with its tenants to encourage them to address their Y2K issues. There is no assurance, however, that their systems will be timely or uniformly corrected or that they will not experience business interruptions as a result of Y2K problems. The Trust's rental stream comes from a broad base of credit tenants under long-term leases. This broad base inherently serves as a hedge against any short-term disruption of business. Given the interdependencies that exist with tenants, suppliers, financial service providers and other third parties, the Trust cannot, with absolute assurance, quantify all financial and operational consequences related to the Y2K issue. Furthermore, insurance coverage to protect against loss arising from system failures directly related to date recognition is generally unavailable. While the Trust believes its compliance initiative will be effective, if Y2K modifications and conversions are not completed in time, either by third-party service providers or tenants, the Y2K issue could have a material adverse impact on the operations and financial condition of the Trust on, before or after January 1, 2000. In its ongoing efforts to address these issues, the Trust will continue to give priority to its Y2K compliance initiative. %SEDAR: 00002857E -30- |
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