TORONTO, Feb. 11, 2021 /CNW/ - H&R Real Estate Investment Trust ("H&R" or "the REIT") (TSX: HR.UN) announces its financial results for the year ended December 31, 2020.

BUSINESS UPDATE             

H&R is pleased to report financial and operating results from 2020 that demonstrate the resilient nature of the REIT's portfolio, and also reflect the prudent actions taken by management in response to the extraordinary events that followed the arrival of the COVID-19 pandemic.  Management believes this resilience is a function of the REIT's long-term strategic focus on high-quality properties, high credit quality tenants, and strong balance sheet, and required the concerted efforts of the team at H&R working collaboratively with stakeholders to protect its tenants, employees and investors.

Highlights from 2020 include:

• FFO per Unit of $1.67 in 2020 compared to $1.76 in 2019
• Expansion of liquidity to $1.1 billion of undrawn credit facilities to fortify the REITs financial position
• A significant 10-year lease extension with Hess Corporation at Hess Tower
• Substantial completion of the REIT's U.S. $496 million River Landing trophy mixed-use development in Miami
• Agreement to sell the REIT's 172,000 sq.ft. Culver City office property for U.S. $165 million, which closed in January 2021
• Achieving the REIT's 25% gender diversity target for its board of trustees
• Recognition by the Globe & Mail's Women Lead Here initiative for gender diversity in senior management

President & CEO Tom Hofstedter commented: "Notwithstanding the extraordinary events and challenges faced in 2020, I am proud of how our team and our business performed.  Bad debt expenses were less than 4% of revenues, our balance sheet is as strong as it has ever been, and H&R is well positioned to take advantage of the opportunities that seem likely to emerge in 2021, as the economy and society begin to return to a post-pandemic new normal."

FINANCIAL HIGHLIGHTS

The primary reason for the decrease in rentals from investment properties is net disposition activity over the past two years.  The REIT completed approximately $1.0 billion of asset sales compared to $218.1 million of acquisitions over the past two years, substantially repositioning its portfolio and enhancing its internal growth profile. H&R continues to actively reallocate capital through property dispositions to fund value-creating developments, expand its residential rental platform and strengthen its balance sheet.

Property operating income also decreased for the three months and year ended December 31, 2020 compared to the respective 2019 periods, due to bad debt expense as a result of the impact of COVID-19, which predominantly impacted H&R's retail segment.  The REIT's bad debt expense is detailed below under the heading "Bad Debt Expense".

Net income (loss) before income taxes decreased by $68.9 million for the three months ended December 31, 2020 compared to the respective 2019 period, primarily due to a fair value adjustment on financial instruments and a decrease in income from equity accounted investments, partially offset by positive fair value adjustments on real estate assets (primarily industrial properties) as discussed below. 

Net income (loss) before income taxes decreased by approximately $1.1 billion for the year ended December 31, 2020 compared to the respective 2019 period primarily due to the following: (i) a decrease in fair value adjustments of real estate assets (primarily certain office and retail properties) of approximately $1.2 billion as discussed below; (ii) the decrease in property operating income discussed above; and (iii) a decrease in net income (loss) from equity accounted investments.  This was partially offset by fair value adjustments on financial instruments.

FFO per Unit in Q4 2020 was $0.42 compared to $0.41 in Q3 2020 and $0.44 in Q4 2019.  Excluding the Q4 2020 bad debt expense of $3.9 million, Q4 2020 FFO would have been $0.44 per Unit.

AFFO per Unit was $0.22 in Q4 2020 compared to $0.35 in Q3 2020 and $0.30 in Q4 2019.  H&R deducts actual capital and leasing expenditures in determining AFFO.  These expenditures were elevated in Q4 2020 primarily due to leasing expenditures incurred with respect to the Hess Corporation lease extension discussed below.  Distributions paid as a percentage of AFFO was 72.3% for the year ended December 31, 2020, resulting in significant retained cash flow. 

Fair Value Adjustment on Real Estate Assets

The financial results for the year ended December 31, 2020 include significant fair value adjustments recorded in Q1 2020. These adjustments are a result of H&R's regular quarterly IFRS fair value process, and reflect: (i) an acceleration of challenging conditions in the retail landscape impacting the valuation assumptions of retail properties; and (ii) energy sector volatility that may have impacted the credit quality of many companies operating in this industry and the related impacts on office property market fundamentals in markets with significant energy industry employment.

While the strong recovery in same-store sales at the REIT's shopping centres and the improved cost and access to credit enjoyed by energy sector tenants are encouraging, there have not been a sufficient number of transactions in the applicable property markets to warrant changes in these sectors in Q4 2020.     

Residential properties in U.S. Sun Belt cities have seen increased investment demand since the start of COVID-19 and this has resulted in a decrease in the capitalization rates used as part of H&R's regular quarterly IFRS fair value process in Q3 2020.  In Q4 2020, H&R transferred an industrial property from properties under development to investment properties resulting in a $44.0 million fair value gain.  This fair value adjustment and the remaining fair value adjustments to industrial properties are due to a continued rise in rental rates and an increase in investor demand which have resulted in a decrease in the capitalization rates used for these properties as part of H&R's regular quarterly IFRS fair value process in Q4 2020. The total fair value adjustment for the year ended December 31, 2020 of $1.2 billion resulted in an overall NAV per Unit decrease of approximately $3.86.

Bad Debt Expense

Bad debt expense is classified as an expense and is grouped together with other expenses in property operating costs. The following table discloses H&R's bad debt expense by segment.  In determining these amounts, the REIT performed a tenant-by-tenant assessment considering the payment history and future expectations of default based on actual and expected insolvency filings.  H&R's retail segment was impacted more than other segments due to government-mandated closures primarily affecting the REIT's enclosed shopping centres.

Tenant Closures

Many retailers have faced very challenging conditions in 2020.  Several filed for Canada Companies' Creditors Arrangement Act ("CCAA") creditor protection and several have announced store closures.  The REIT's focus on maintaining affordable cost structures for its mall-based retailers has resulted in above-average rent collections as compared to other large mall owners, and high retention of store locations by tenants planning store closures elsewhere.

To date, tenants occupying 138 stores and totalling 329,092 square feet have filed for creditor protection under the CCAA.  H&R expects to retain 89 of these stores, totalling 219,524 square feet.

H&R REIT continues to work collaboratively with its tenants that have been affected by the pandemic.  Retailers undergoing CCAA restructuring has been an area of particular focus for management, where retention of stores has exceeded 64%.  Management expects no closures from GAP, H&M, or L Brands in the REIT's portfolio, and the REIT does not have any locations with Brooks Brothers, Lucky Brands, J. Crew, Mendocino, Frank & Oak, Lole or Microsoft Corporation, each of which has announced plans for store closures.

In relation to the REIT's initial 2020 budget of approximately $1.1 billion of gross revenue, Primaris accounted for approximately $285 million.  Of that amount, approximately $21.2 million of gross rent was attributable to tenants undergoing restructurings or liquidations. Annualized rental revenue has been reduced by approximately $12.3 million at the REIT's share, as a result of both store closures and lease amendments, at the REIT's share.  Store closures, which provide the opportunity to re-lease space to new tenants, account for $6.1 million of this amount, while temporary lease amendments to rental rates for retained tenancies accounts for the remaining $6.2 million of this amount. 

Among the 49 store closures for tenants that have filed for creditor protection under the CCAA aggregating 109,568 square feet across H&R's 13,704,000 square foot retail portfolio, leases have been signed with replacement tenants for 23 stores for 35,672 square feet, with many having commenced occupancy.  The rental revenues from these new tenancies are expected to partially offset the annualized $6.1 million reduction in gross revenues relating to store closures in 2021, though the magnitude of that offset depends significantly on tenant sales and percentage rent participation.  Similarly, the annualized $6.2 million of gross revenue reduction due to temporary lease amendments assumes no percentage rent is collected under the temporary lease terms.

Rent Collection

Rent collection has been a key focus during the pandemic, and one where H&R believes it has performed well while also accommodating the needs of its tenants. As of February 5, 2021,  H&R's rent collections since the onset of COVID-19 are as follows:

H&R's high-quality, long-term leased office portfolio delivered strong rent collection consistent with the profile of the tenant base, with 85.5% of revenues coming from investment-grade rated tenants.  Rent collection was also strong in H&R's industrial and residential portfolios, reflecting the stronger-than-average credit profile of the REIT's tenant base across both of these portfolios.

H&R achieved an overall rent collection of 94% in January 2021, compared to 95% in Q4 2020, 95% in Q3 2020 and 91% in Q2 2020.

Liquidity

Management took precautionary measures to further bolster the REIT's liquidity as a result of the severity of the pandemic's impact on economic conditions. During Q2 2020, the REIT secured a new $500.0 million unsecured line of credit from a syndicate of five Canadian banks maturing April 17, 2021. The REIT also arranged a new $100.0 million secured mortgage on a previously unencumbered property, maturing in 2029. Further, during Q2 2020, H&R issued $400.0 million Series Q Senior Debentures maturing June 16, 2025, the proceeds of which were used to repay lines of credit. During Q4 2020, H&R issued $250.0 million Series R Senior Debentures maturing June 2, 2026, the proceeds of which were used to repay lines of credit. Notably, all of these financing measures were arranged following the onset of the COVID-19 economic disruption, underscoring H&R's strong access to capital availability and cash on hand.

As at December 31, 2020, H&R had $1.1 billion of unused borrowing capacity available under its lines of credit, $62.9 million of cash on hand and an unencumbered asset pool of approximately $3.7 billion. 

Distributions

As previously announced in May 2020, in light of current operating and capital market conditions, management recommended and the Board approved a 50% reduction of monthly distributions effective May 2020, from $0.115 per Unit to $0.0575 per Unit, or $0.690 per Unit annually. For the year ended December 31, 2020, this resulted in a distribution decrease of 33.3%. This distribution rate provides additional financial flexibility to absorb potential income interruption related to the pandemic in the near term, and allows for significant capital reinvestment into the REIT's developments and properties to address tenant turnover without increasing the REIT's financial leverage. The Board will continue to re-evaluate the distribution on a quarterly basis taking into account a variety of relevant factors including the REIT's taxable income.

SUMMARY OF SIGNIFICANT 2020 ACTIVITY  

Developments

United States:

H&R's active development pipeline in the United States currently comprises five residential developments with a total development budget of U.S. $354.3 million. As at December 31, 2020, U.S. $305.2 million had been spent on properties under development with U.S. $49.1 million of budgeted costs remaining to be spent of which U.S. $45.1 million is available to be funded through secured construction facilities, in each case at the REIT's proportionate share.

The REIT's largest current development project is River Landing, an urban in-fill mixed use development site in Miami, FL, which is adjacent to the Health District with approximately 1,000 feet of waterfront on the Miami River, two miles from downtown Miami. River Landing includes approximately 347,000 square feet of retail space, approximately 149,000 square feet of office space and 528 residential rental units. In Q4 2020, the retail and office portion of this project, known as "River Landing Commercial", reached substantial completion and was transferred from properties under development to investment properties. Retail occupancy was 65.3% as at December 31, 2020, which includes the following major tenants: Publix Super Markets Inc., Hobby Lobby, Burlington, Ross Stores Inc., Old Navy and Planet Fitness. Committed occupancy for retail space as at December 31, 2020 was 80.3% with the remaining retail lease-up expected to occur during 2021. The REIT is continuing negotiations with multiple parties on the office space. As at December 31, 2020, 134 residential leases have been entered into and occupancy was 21.4%, exceeding management's expectations on leasing velocity. The residential portion of River Landing is expected to be transferred from properties under development to investment properties in Q1 2021. The total cost of the project is expected to be completed on budget at approximately U.S. $495.9 million of which $300.0 million was allocated to River Landing Commercial and the remaining $195.9 million has been allocated to the residential space.

H&R has a 31.7% non-managing ownership interest in 38.4 acres of land located in Hercules, CA, adjacent to San Pablo Bay, northeast of San Francisco, for the development of residential rental units (the "Hercules Project"). Phase 1 of the Hercules Project, known as "The Exchange at Bayfront", consists of 172 residential rental units, including lofts and townhomes and 13,762 square feet of ground level retail space. The four-storey podium project sits on 2.2 acres over a one-level subterranean parking garage. Construction commenced in June 2018 and substantial completion was achieved in Q4 2020, resulting in the REIT transferring this property from properties under development to investment properties. As at December 31, 2020, 120 leases had been entered into and occupancy was 68.0%. As at December 31, 2020, The Exchange at Bayfront, at the 100% ownership level, was valued at approximately U.S. $87.8 million compared to costs of approximately U.S. $81.3 million, resulting in a fair value gain of U.S. $6.5 million since the start of the project. The annualized unlevered yield on budgeted cost is approximately 5.4% and the project was completed on budget.

In December 2020, H&R acquired 5.4 acres of land in Dallas, TX for U.S. $9.7 million, which is expected to be developed into approximately 414 residential rental units. The site is located within close proximity to Downtown/Uptown Dallas and is also located near Dallas Love Field Airport.

Canada:

Construction continued on the first phase of a 2.7 million square foot industrial development in Caledon, ON. The first phase consists of three buildings, which will total approximately 526,000 square feet upon completion. In January 2020, H&R completed a 10-year lease with Deutsche Post AG to occupy the largest of the three buildings ("205 Speirs Giffen Ave.") totalling 342,821 square feet. Deutsche Post AG commenced occupancy in November 2020 and a fair value gain of $44.0 million was recorded as the property was transferred from properties under development to investment properties. As a result of COVID-19, H&R has temporarily suspended construction of the second and third buildings (140 & 34 Speirs Giffen Ave.).

In July 2020, H&R acquired 15.4 acres of land in Mississauga, ON for $18.7 million which is expected to be developed into two industrial buildings totalling approximately 329,000 square feet.

In November 2020, H&R acquired a 50% interest in 24.6 acres of land in Mississauga, ON which is expected to be developed into one industrial building totalling approximately 500,000 square feet. The REIT's partner contributed the land valued at approximately $36.9 million, and H&R has contributed $2.1 million with the balance of capital to be contributed as development costs are incurred.

Future Intensification Opportunities

The REIT has many intensification opportunities embedded in its portfolio.  The fair market value that management ascribes to these properties excludes the value that may be unlocked as these projects progress.

In June 2020, the REIT along with its partner, submitted a re-zoning application for the east and north portions of its 3777 & 3791 Kingsway sites in Burnaby, B.C.  The proposal could add over 2,000 residential rental units in four mixed-use high density towers including retail and residential uses with approximately 1,800,000 square feet of residential area and 44,000 square feet of commercial area. The REIT expects to obtain approval for its re-zoning and site plan applications in Q4 2021.

In November 2020, the REIT acquired 53 Yonge St. in Toronto, ON, a five-storey 11,110 square foot office property, for $11.5 million. The REIT acquired this property as it shares its northern property line with the REIT's 55 Yonge St. office property. The two properties encompass approximately 0.37 acres and the REIT submitted a re-zoning application in January 2021 to replace the existing 13-storey and five-storey office buildings with a 66-storey residential and office tower with retail uses on the first two floors. This further breaks down into approximately 12,000 square feet of retail space, 146,000 square feet of office space and 283,000 square feet of residential space (approximately 500 residential rental units). The REIT expects to obtain approval for its re-zoning and site plan applications in Q4 2022.

The REIT plans to submit a re-zoning application at its Front St. property in Toronto, ON for a 69-storey mixed use development including retail, residential and office uses. The development will replace the existing eight-storey office building at 310 Front St., and will integrate into H&R's larger office block which incudes 320 and 330 Front St. The project will include approximately 118,000 square feet of office, 2,000 square feet of retail and 463,000 square feet of residential space. The REIT expects to obtain approval for its re-zoning and site plan applications in Q4 2022.

In addition to these projects, the REIT continues to advance its intensification pipeline of projects within its existing portfolio. Dufferin Grove Village at Dufferin Mall, which will include 1,135 residential rental units and 75,000 square feet of retail space and the redevelopment of 145 Wellington St., which will include a 65-storey mixed-use tower consisting of 476 residential rental units, 157,500 square feet of office space and 1,750 square feet of retail space are both expected to receive re-zoning and site plan approval in Q4 2021.

Office

In January 2020, the $256.0 million mortgage receivable secured by The Atrium associated with the sale of the property in June 2019 was repaid.

During Q2 2020, H&R completed an agreement with the tenant of one of H&R's office properties located in Dallas, TX that had been significantly damaged by a tornado and a concurrent agreement with the insurance company resulting in H&R receiving the following: (i) a lease termination payment of U.S. $2.3 million in exchange for the tenant's lease expiring at September 30, 2020 (previously December 31, 2025); and (ii) a settlement with the insurance company for U.S. $10.9 million. As part of this agreement, H&R repaid the associated mortgage totalling U.S. $5.3 million at an interest rate of 5.4%. The property was transferred from investment properties to properties under development in Q4 2020 and was recorded at the land value of U.S. $0.5 million as at December 31, 2020 compared to U.S. $10.0 million for land and building as at December 31, 2019.

In November 2020, the REIT entered into a lease extension and amending agreement ("Hess Lease Amendment") with Hess Corporation ("Hess") for its premises in Houston, TX, under which Hess has agreed to extend the term of its lease on approximately two-thirds of the building for an additional term of 10 years beyond its current expiry of June 30, 2026. As part of the lease renewal, Hess received a tenant inducement and H&R paid related broker commissions which together totalled $36.1 million.

Same-Asset property operating income (cash basis) from office properties decreased by 3.4% and 1.6%, respectively, for the three months and year ended December 31, 2020 compared to the respective 2019 periods primarily due to the Hess Lease Amendment. Included in the year ended December 31, 2020 were lease termination fees of nil compared to $5.8 million for the year ended December 31, 2019. Excluding lease termination fees and the impact of the Hess Lease Amendment, Same-Asset property operating income (cash basis) increased by 1.0% in both periods.

Industrial

In January 2020, H&R purchased a 50% ownership interest in a 93,330 square foot single-tenanted property in Whitby, ON for approximately $6.6 million.

In February 2020, H&R purchased the remaining 49.5% interest in 7575 Brewster Ave., Philadelphia, PA for U.S. $11.6 million. As H&R owns 100% of this property, it is now consolidated in the REIT's Financial Statements. The property is leased to Amazon.com, Inc.

In April 2020, H&R sold a 50% ownership interest in a 363,983 square foot single-tenanted property in Boucherville, QC for approximately $17.4 million. This property was previously classified as held for sale as at December 31, 2019.

In Q4 2020, H&R completed construction of 205 Speirs Giffen Ave., a 342,821 square foot property in Caledon, Ontario which is fully leased to Deutsche Post AG for a 10-year term.  H&R recorded a fair value gain of $44.0 million as this development was transferred to investment properties.

Same-Asset property operating income (cash basis) from industrial properties increased by 5.7% and 5.8%, respectively, for the three months and year ended December 31, 2020 compared to the respective 2019 periods, primarily due to an increase in occupancy and increased rental rates on lease renewals.

Residential

Same-Asset property operating income (cash basis) from residential properties in U.S. dollars decreased by 20.5% for the three months ended December 31, 2020 compared to the respective 2019 period, primarily due to Jackson Park in New York which has been negatively impacted by lower than average lease renewals and prospective tenant inquiries as a result of COVID-19. H&R believes this decline is temporary and expects operating fundamentals to improve in the second half of 2021.  Excluding Jackson Park, Same-Asset property operating income (cash basis) from residential properties in U.S. dollars increased by 2.5% and 6.9%, respectively, for the three months and year ended December 31, 2020 compared to the respective 2019 periods, primarily due to an increase in revenue from rental rate growth and the stabilization of various assets in the portfolio, partially offset by an increase in bad debt expense as a result of the impact of COVID-19. 

Retail

Same-Asset property operating income (cash basis) from retail properties decreased by 1.7% and 13.2%, respectively, for the three months and year ended December 31, 2020 compared to the respective 2019 periods, primarily due to bad debt expense as a result of the impact of COVID-19. This was partially offset by a decrease in operating expenses as a result of the impact of properties being closed or partially closed due to COVID-19.

Debt Highlights

As at December 31, 2020, debt to total assets was 47.7% compared to 44.4% as at December 31, 2019.  This is primarily due to the negative fair value adjustment of certain office and retail properties of approximately $1.2 billion. The weighted average interest rate of H&R's debt as at December 31, 2020 was 3.6% with an average term to maturity of 3.5 years. 

Mortgages:

During the year ended December 31, 2020, H&R secured seven new mortgages totalling $214.8 million at a weighted average interest rate of 3.5% for an average term of 7.4 years and repaid eight mortgages totalling $120.8 million at a weighted average interest rate of 4.2%.

Debentures:

In June 2020, H&R issued $400.0 million principal amount of 4.071% Series Q Senior Debentures maturing June 16, 2025. In December 2020, H&R issued $250.0 million principal amount of 2.906% Series R Senior Debentures maturing June 2, 2026. The proceeds from both issuances were used to repay lines of credit.

Lines of Credit:

In Q2 2020, H&R bolstered its liquidity by securing a $500.0 million unsecured line of credit from a syndicate of five Canadian banks for a one-year term.

Taxation of Distributions

18.4% of 2020 distributions will be designated as taxable capital gains. For taxable Canadian unitholders, 18.4% (2019 – 22.3%) of the distributions will not be subject to current income taxes.

Monthly Distributions Declared

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

Conference Call and Webcast

Participants can join the call by dialing 647-427-7450 or 1-888-231-8191. For those unable to participate in the conference call at the scheduled time, it will be archived for replay beginning approximately one hour following completion of the call. To access the archived conference call by telephone, dial 416-849-0833 or 1-855-859-2056 and enter the passcode 7580319 followed by the pound key.  The telephone replay will be available until Friday, February 19, 2021 at midnight.

A live audio webcast will be available through https://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 https://www.hr-reit.com/investor-relations/#investor-presentation 

About H&R REIT

H&R REIT is one of Canada's largest real estate investment trusts with total assets of approximately $13.4 billion at December 31, 2020. H&R REIT has ownership interests in a North American portfolio of high quality office, retail, industrial and residential properties comprising over 40 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, 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 headings "Business Update", "Financial Highlights" and "Summary of Significant 2020 Activity" including with respect to H&R's future plans, including significant development projects, H&R's expectation with respect to the activities of its development properties, including the building of new properties, the timing of construction, the expected total cost from development properties and the timing of transfer from properties under development to investment properties, management's expectations regarding future intensification opportunities including the timing of approvals for re-zoning and site plan applications, the impact of the COVID-19 virus on the REIT and the REIT's tenants, the REIT's bad debt expense, expectations regarding tenant retention and closures, the expected rental revenues from leases with replacement tenants, including any offset of a reduction in gross revenues relating to store closures, and the significant revenue opportunity represented by percentage rent participation, the state of the retail market, expected capital and tenant expenditures, capitalization rates and cash flow models used to estimate fair values, management's expectations regarding the REIT's leverage and portfolio quality, management's belief that Jackson Park's decline is temporary and expectations regarding future operating fundamentals, management's expectations regarding future distributions, management's belief that H&R has sufficient funds and liquidity for future commitments and management's expectation to be able to meet all of its 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 that the general economy is currently volatile and in an economic downturn as a result of the COVID-19 pandemic and low oil and gas prices, the extent and duration of which is unknown; interest rates are volatile as a result of general economic conditions; and debt markets continue to provide access to capital at a reasonable cost, notwithstanding the ongoing economic downturn. Additional risks and uncertainties include, among other things, risks related to: real property ownership; the current economic environment; COVID-19; credit risk and tenant concentration; lease rollover risk; interest and other debt-related risk; construction risks; currency risk; liquidity risk; financing credit risk; cyber security risk; environmental and climate change risk; co-ownership interest in properties; joint arrangement and investment risks; Unit price risk; availability of cash for distributions; ability to access capital markets; dilution; unitholder liability; redemption right risk; risks relating to debentures and the inability of the REIT to purchase senior debentures on a change of control; tax risk, and additional tax risk applicable 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 February 11, 2021 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 Financial Measures

The REIT's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). H&R's management uses a number of measures which do not have a meaning recognized or standardized under IFRS or Canadian Generally Accepted Accounting Principles ("GAAP").  The non-GAAP measures NAV per Unit, FFO, AFFO, Payout Ratio per Unit, Same-Asset property operating income (cash basis) and the REIT's proportionate share as well as other non-GAAP measures discussed elsewhere in this news release, should not be construed as an alternative to financial measures calculated in accordance with GAAP.  Further, H&R's method of calculating these supplemental non-GAAP financial measures may differ from the methods of other real estate investment trusts or other issuers, and accordingly may not be comparable. H&R use these measures to better assess H&R's underlying performance and provide these additional measures so that investors may do the same. These non-GAAP financial measures are more fully defined and discussed in H&R's MD&A as at and for the year ended December 31, 2020, available at www.hr-reit.com and on www.sedar.com.

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

SOURCE H&R Real Estate Investment Trust

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