Investor Presentation - H&R REIT Information/current... · Investor Presentation ... 381 Properties...

Investor PresentationAs at March 31, 2018 unless otherwise noted

May 11, 2018

2STABILITY, SECURITY & GROWTH through QUALITY, DIVERSIFICATION & SCALE

Caution Regarding Forward-looking Statements

Certain statements made at this meeting will contain forward-looking information within the meaning of applicable securities laws (also known as forward-lookingstatements) including, among others, statements made or implied relating to the Trusts’ objectives, strategies to achieve those objectives, the Trusts’ beliefs, plans,estimates, projections and intentions and statements with respect to the Trusts’ development activities, including planned future expansions, redevelopment ofexisting properties and building of new properties; the return on investment and cost of the Trusts’ developments and other investments; the expected costs of anyof the Trusts’ projects; and the expected occupancy, budget, net leasable area or contributions to rental revenue from the Trusts’ developments and otherproperties. Statements concerning forward-looking information 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. Suchforward-looking statements reflect the Trusts’ current beliefs and are based on information currently available to management. Forward-looking statements areprovided for the purpose of presenting information about management’s current expectations and plans relating to the future and readers are cautioned that suchstatements may not be appropriate for other purposes. These statements are not guarantees of future performance and are based on the Trusts’ estimates andassumptions that are subject to risks and uncertainties, including those discussed in the Trusts’ materials filed with the Canadian securities regulatory authoritiesfrom time to time, which could cause the actual results and performance of the Trusts to differ materially from the forward-looking statements made at this meeting.Those risks and uncertainties include, among other things, risks related to: real property ownership, credit risk and tenant concentration; lease rollover risk, interestand other debt-related risk; construction risks; currency risk; liquidity risk, financing credit risk, cyber security risk, environmental risk; co-ownership interest inproperties, joint arrangement risks; unit price risk; availability of cash for distributions; ability to access capital markets; dilution; unitholder liability; redemption rightrisk; risks relating to debentures, tax risk and tax consequences to U.S. holders. Material factors or assumptions that were applied in drawing a conclusion or makingan estimate set out in the forward-looking statements include that the general economy is stable; local real estate conditions are stable; interest rates are relativelystable; and equity and debt markets continue to provide access to capital. The Trusts caution that this list of factors is not exhaustive. Although the forward-lookingstatements made at this meeting are based upon what the Trusts believe are reasonable assumptions, there can be no assurance that actual results will be consistentwith these forward-looking statements. Readers are also urged to examine the REIT and Finance Trust’s materials filed with the Canadian securities regulatoryauthorities from time to time as they may contain discussions on risks and uncertainties which could cause the actual results and performance of the REIT andFinance Trust to differ materially from the forward-looking statements made at this meeting. Neither Finance Trust nor any of its trustees or officers, assumes anyresponsibility for the completeness of the information contained in the REIT’s materials filed with the Canadian securities regulatory authorities or for any failure ofthe REIT or its trustees or officers to disclose events or facts which may have occurred or which may affect the significance or accuracy of any such information.Neither the REIT nor any of its trustees or officers, assumes any responsibility for the completeness of the information contained in Finance Trust’s materials filedwith the Canadian securities regulatory authorities or for any failure of Finance Trust or its trustees or officers to disclose events or facts which may have occurred orwhich may affect the significance or accuracy of any such information. All forward-looking statements made at this meeting are qualified by these cautionarystatements. These forward-looking statements are made as of August 10, 2017 and the Trusts, except as required by applicable law, assume no obligation to updateor revise them to reflect new information or the occurrence of future events or circumstances


H&RTotal Assets of $14.5 Billion

H&RTotal Assets of $14.5 Billion

OfficeOffice IndustrialIndustrial Retail(Primaris, ECHO and H&R Retail)

Retail(Primaris, ECHO and H&R Retail)

Multi-family (Lantower Residential)

Multi-family (Lantower Residential)

Long Term LeasesLong Term Leases Pension Fund JVPension Fund JV Stable PerformanceStable Performance High Growth OpportunityHigh Growth Opportunity

36 Properties ~12,297,000 Square Feet

91 Properties~9,670,000 Square Feet

381 Properties~18,274,000 Square Feet

17 Properties5,633 Multi-family Units

The Bow, Calgary

Corus Quay, Toronto

Atrium, Toronto

Dufferin Mall, Toronto

Orchard Park, Kelowna

Unilever, Mississauga

Grande Pines, Orlando

Legacy Lake, Lewisville

Stability, Security & Growth through Quality,

Diversification & Scale

Fully Internalized Management

(Insiders own 6%)

Fully Internalized Management

(Insiders own 6%)

One of Largest Diversified REIT in Canada With a Market Cap

of $6.4 billion

One of Largest Diversified REIT in Canada With a Market Cap

of $6.4 billion

Purolator, Calgary


Ontario31%

United States34%

Other Canadian Provinces10%

Alberta25%

$13.9Billion

Office48%

Multi-family9%

Industrial7%

Retail(2)

36%

$13.9Billion

Portfolio Diversification

By Segment

Fair Value of Investment Properties(1)

(1) Includes the proportionate share of equity accounted investments.(2) Retail includes Primaris, ECHO and H&R Retail.

By Region


Alberta Exposure – Office

(1) Same-asset property operating income (cash basis) excludes straight-lining of contractual rent and realty taxes accounted for under IFRIC 21. Includes the proportionate share of equity accounted investments.

(2) Encana Corporation has sublet 27 floors to Cenovus Energy.

H&R’s office tenants in Alberta are some of the strongest companies in the energy sector and their average remaining lease term is 18.2 years.

Address City

Total GLA

(Sq.Ft.)

Ownership

Interest

GLA at H&R's

Interest

% of H&R's Same-Asset

Property Operating

Income

(cash basis)(1)Remaining Lease

Term (years) Major Tenant

S&P Tenant

Credit Rating

5th Ave. at Centre St. Calgary 2,024,182 100% 2,024,182 12.5% 19.9 Encana Corporation(2) BBB Negative

450-1st St., S.W. Calgary 931,187 50% 465,594 2.0% 13.1 TransCanada Pipelines Limited A- Negative

2767-2nd Ave. Calgary 69,793 100% 69,793 0.1% 8.6 Alta Link LP A Stable

2611-3rd Ave. Calgary 95,225 50% 47,613 0.2% 8.6 Alta Link LP A Stable

Total / Average 3,120,387 2,607,182 14.8% 18.2

As at April 30, 2018

In April 2018, H&R sold its 50% ownership interest in F1RST Tower. There are currently no vacancies in H&R’s Alberta Office Portfolio.


Top 15 Tenants by Revenue

Predictable and stable income from long-term leases with high quality investment grade tenants

(1) Includes the proportionate share of equity accounted investments.(2) The percentage of rentals from investment properties is based on estimated annualized gross revenue excluding straight-lining of contractual rent, rent amortization of tenant inducements and capital

expenditure recoveries.(3) Average lease term to maturity is based on net rent.(4) Encana Corporation has sublet 27 floors to Cenovus Energy at The Bow located in Calgary, AB. Encana Corporation’s lease obligations expire on May 13, 2038.(5) Canadian Tire Corporation includes Canadian Tire, Mark’s, Sport Chek, Atmosphere and Sports Experts. (6) Lowe’s Companies, Inc. includes Rona.(7) Due to the confidentiality under the tenant’s lease, the term is not disclosed.

(1)

Tenant

% of rental income

from investment

properties(2)

Number of

locations

H&R owned

sq.ft. (in 000’s)

Average lease

term to maturity

(years)(3)

Credit Ratings

(S&P)

Encana Corporation(4) 11.6% 2 2,016 20.0 BBB Negative

Bell Canada 8.4 24 2,539 7.4 BBB+ Stable

Hess Corporation 5.0 2 848 (7) BBB- Stable

New York City Department of Health 3.5 1 660 12.6 AA Stable

Giant Eagle, Inc. 3.5 192 1,924 12.5 Not Rated

Canadian Tire Corporation(5) 2.6 19 2,636 7.8 BBB+ Stable

Lowe's Companies, Inc.(6) 2.4 21 2,561 3.4 A- Stable

TransCanada Pipelines Limited 2.1 2 542 11.9 A- Negative

Canadian Imperial Bank of Commerce 1.7 9 555 6.2 A+ Stable

Corus Entertainment Inc. 1.7 1 472 15.0 BB Stable

Telus Communications 1.6 18 427 5.6 BBB+ Stable

Government of Ontario 1.2 4 359 3.0 A+ Stable

Shell Oil Products 1.2 17 223 4.2 A+ Positive

Toronto-Dominion Bank 1.0 8 280 8.7 AA- Stable

Public Works and Government Services, Canada 0.9 5 307 4.2 AAA Stable

48.4% 325 16,349 11.2


Limited Lease Rollover(1)(2)

1,104

3,116

2,019 1,897

2,667

2018 2019 2020 2021 2022

Industrial

H&R Retail

Primaris (Retail)

Office

(1) Includes the proportionate share of equity accounted investments.(2) Excludes residential properties.

268 519 463

772 1,301

2018 2019 2020 2021 2022

Industrial

ECHO (Retail)

H&R Retail

Office

Low-risk rollover schedule Well diversified by property and geography Average remaining lease term of 9.0 years, one of the longest in the industry

% of the Trusts' GLA(2) 3% 8% 5% 5% 7%

Canadian Portfolio(in ‘000s sq.ft.)

U.S. Portfolio(in ‘000s sq.ft.)

% of the Trusts' GLA(2) 1% 1% 1% 2% 3%


22 Years of Stable Occupancy

Consistently strong and stable occupancy in excess of 94% since 1997

98.0% 98.0%99.0% 99.0% 99.0% 99.0% 99.0% 99.4% 99.3% 99.6% 99.7%

98.9% 99.0% 98.9% 99.1% 98.7% 98.1%(1)97.8%

95.9%(2) 95.7% 95.6%94.1%(3)

50%

60%

70%

80%

90%

100%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Q1

(1) Due to acquisition of Primaris.(2) Primarily due to Target disclaiming their leases in Canada.(3) Primarily due to Sears filing for bankruptcy and vacating eight locations in Q1 2018.


Primaris Mall Portfolio

(1) Primaris has a 50% ownership interest. The total GLA of the shopping centre has been reported above.(2) For the rolling twelve months ended February 28, 2018. Same store sales have been reported as if Primaris owned 100% of these enclosed

shopping centers.(3) Excludes Northland Village which is being redeveloped.

Chief Operating Officer: Patrick Sullivan

Property Location Major Tenants GLA (sq.ft.)

Same Store

Sales per

sq.ft. ($)(2)

Enclosed Centres

Sunridge Mal l Ca lgary, AB Hudson's Bay, Sport Chek, Alberta Health Servi ces 835,203 509

Orchard Park Shopping Centre Kelowna, BC Hudson's Bay, Sport Chek, Bes t Buy 712,953 702

Place d'Orleans(1) Orl eans , ON

Hudson's Bay, Sport Chek, Ca nada Mortgage and

Housi ng Corpora tion712,526 473

Catarqui Town Centre(1) Kingston, ON Hudson's Bay, Sport Chek 612,983 533

Place du Royaume(1) Chicoutimi , QC Wal -Mart, Winners, Sports Experts 604,411 439

Dufferi n Ma l l Toronto, ON Wal -Mart, No Fri l l s , Ma rshal ls 588,331 690

Stone Road Ma l l Guel ph, ON Sport Chek, Mars hal ls 565,616 632

Medicine Hat Mal l Medi cine Hat, AB Hudson's Bay, Safeway, Galaxy Ci nemas 510,736 390

Regent Mal l(1) Fredericton, NB Wal -Mart, Cinepl ex Odeon, Sport Chek 503,957 566

Park Pl ace Shoppi ng Centre Lethbri dge, AB Ci neplex Odeon, Winners , Sport Chek 480,540 624

McAl l i s ter Place(1) Sa int John, NB Sport Chek, Toys "R" Us, Goodl i fe Fi tnes s 465,248 484

Ki l donan Pl ace(1) Winni peg, MB Mars hal l s , Famous Players, H&M 446,910 544

Sherwood Pa rk Mal l Sherwood Park, AB Sobeys, Gal axy Cinemas , Goodl i fe Fi tness 435,358 494

Grant Park(1) Winni peg, MB Canadian Tire, Red River Co-Op, Goodl i fe Fi tness 405,726 455

St. Albert Centre St. Albert, AB Hudson's Bay, Sport Chek, London Drugs, Wi nners 357,003 485

Peter Pond Mal l Fort McMurray, AB Boomtown Cas ino, Sport Chek, Atmosphere 203,208 696

Total / Weighted Average (3) 8,440,709 555


Primaris Tenant Sales Summary

Significant growth in sales productivity since 2011

Same Store Sales

per Square Foot (1)

2011 2012 (2)

2013 2014 2015 2016 2017 Q1 2018 (3)

British Columbia $485 $490 $522 $594 $639 $676 $699 $702

Alberta $465 $484 $561 $569 $571 $526 $530 $535

Manitoba $537 $655 $469 $477 $486 $520 $516 $521

Ontario $498 $502 $504 $497 $532 $548 $567 $575

Quebec $419 $439 $413 $421 $420 $418 $413 $439

New Brunswick N/A $457 $473 $477 $543 $547 $527 $531

Total (4)

$476 $485 $512 $521 $545 $539 $545 $555

(1) Reported as if Primaris owed 100% of these enclosed shopping centers.(2) 2012 MB sales productivity was high as Shoppers Drug Mart (“SDM”) sales were included (after SDM was expanded and became an Anchor tenant, their

sales were excluded in the productivity calculation).(3) For the rolling twelve months end February 28, 2018.(4) 2016, 2017 and Q1 2018 Alberta sales excluded Northland Village Mall which is being redeveloped.

Enclosed Shopping Centers


Sears: Great Locations & Low Rent

(1) At H&R’s ownership interest.(2) For the rolling twelve months ended February 28, 2018.

Former Sears Locations Former Target Locations

# Locations 9 (8 Full line, 1 Home Store) 9

GLA (square feet)(1) 675,613 774,035

Annual Base Rent(1) $2.34M $4.01M

Base Rent P.S.F. $3.47 $5.18

New Tenants Committed T.B.D $8.50M

5 Sears stores previously operated in shopping centres that perform above portfolio average

Location Ownership Same Store Sales per sqft. (2)

Orchard Park Shopping Centre (2 stores) 100% $702

Park Place Shopping Centre 100% $624

Stone Road Mall 100% $632

Regent Mall 50% $566


Lantower Residential

Chief Operating Officer: Philippe Lapointe

17 properties, 5,633 multi-family units

• Average property age of 8.3 years

• Fair value of investment properties: U.S. $946 million

• Mortgage payable: U.S. $469 million

Strategy: to build a portfolio of class A properties in U.S. Sun

Belt cities where there are strong job growth and to develop in

Gateway cities

See www.lantowerresidential.com for further information

As at March 31, 2018


Acquired October 10, 2017

Class A Units: 451

Year Built: 2010

Purchase Price: $78,865,000

Purchase Price/Unit: $174,867

Average Rent: U.S. $1,251 per month

Rationale: Institutionally built product in desirable Tampa submarket characterized by affluent demographics and “A” rated public schools.

Lantower Residential – 2017 AcquisitionsSeneca at Cypress Point – Tampa, FL


Acquired November 15, 2017

Class A Units: 282

Year Built: 2017




Rationale: New construction located in Orlando’s strongest renter submarket, largely benefitting from Orlando’s $60 billion tourism industry.

Lantower Residential – 2017 AcquisitionsLantower Grande Pines – Orlando, FL


Acquired December 11, 2017

Class A Units: 450

Year Built: 2016




Rationale: Modern new construction with excellent highway visibility and quick access to major Tampa employment centers.

Lantower Residential – 2017 AcquisitionsLantower Brandon Crossroads– Tampa, FL


Acquired December 12, 2017

Class A Units: 301

Year Built: 2016




Rationale: New construction with proximity to Legacy West in north Dallas, home to major corporate campuses including Toyota North American Headquarters.

Lantower Residential – 2017 AcquisitionsLantower Legacy Lakes – Dallas, TX


New York City

San Francisco

Austin

Miami

Seattle

Residential Developments


Jackson Park Construction Update

H&R has a 50% interest in a landmark luxury residential rental development in Long Island City, New York.

Total cost of the project of all three phases at the 100% level is expected to be approximately U.S. $1.16 billion.

H&R’s total cash investment in the LIC Project is U.S. $260.7 million.

As at March 31, 2018, the project is on budget with approximately $149.3 million of costs remaining to complete, which will be funded from the construction facility.

Upon completion and stabilized occupancy, the first year’s property operating income at H&R’s ownership interest is projected to be U.S. $36.9 million, equating to a 6.1% yield on budgeted cost.

Long Island City, NY

21


Jackson Park

KEY DESTINATIONS

Subway Rockefeller Center 8 min.

Grand Central Terminal

10 min.

Penn Station 14 min.

Wall St. & Broadway 25 min.

Driving LaGuardia Airport 13 min.

JFK Airport 20 min.

Newark Airport 30 min.

H&R Ownership: 50%

Average Unit Size: 708 sf

Projected Rent: $5.08 psf

Return on Cost: 6.15%


22


Jackson Park Leasing Update

1,871 luxury residential units with over 120,000 sf of amenities, 2 acre private park, and parking for 120 cars and 1,000 bicycles.

864 units had received certificates of occupancy, 353 leases had been signed and 241 units were occupied as at April 30, 2018.

Stabilized occupancy is expected to be achieved by Q4 2019. The lobby in Tower A, the first of three towers has been substantially completed and the roof amenity space in this tower is now open.

Project is slightly ahead of the development lease-up schedule with rental rates slightly higher than projected.


23


Mixed-Use Development H&R Ownership: 31.7%

38.4 acres

1,081 Unit Mixed-Use

Waterfront Master-Planned Community

Phase 1: 172 Multi-family Units

Construction Start: June 2018

Development Cost (Phase 1): $83.0 Million U.S. ($482,500/unit)


Return on Cost (Phase 1): 6.48%

HerculesSan Francisco, CA

24


H&R Ownership: 33.3%

383 Multi-family Units

Development Budget:

$71.1 Million U.S. ($185,600/Unit)


Construction Start: June 2018


25

1301 Koenig LaneAustin, TX

26STABILITY, SECURITY & GROWTH through QUALITY, DIVERSIFICATION & SCALE 26

Close Proximity to Major Employers:

Apple

Oracle

IBM

Samsung

University of Texas

Texas Capitol

Koenig LaneAustin, TX


River LandingMiami, FL

27



28


Civic Center



528 multi-family units

345,000 sf of retail space

145,000 sf of office space

Major Tenants: Publix, TJ Maxx, Hobby Lobby, Burlington, Ross, West Marine

Occupancy: Q1 2020


30


Microsoft Headquarters

Esterra ParkS E AT T L E

ESTERRAPARK


H&R Ownership: 33%

7 Stories

263 Units

Development Cost:

$90.1 Million U.S. ($342,500/Door)

Market Rent: $2.86 psf

Construction Start: August 2018


Esterra Park-Block 10S E AT T L E


CaledonBrampton, ON

Industrial Lands 144 Acres 2.7M Buildable sf

Land Held for Development


Dallas Office Development

Future Residential Development (4.8 acres)

34

2217 Bryan St.

93,000 sf of Office

Total Cost: U.S. $44 Million

Leased: 63%


Acquisition & Disposition History (1)

(1) Includes the proportionate share of equity accounted investments.

(In Millions)

2018 Q1 2017 2016 2015 2014 Total

Acquisitions $4 $561 $354 $404 $220 $1,543

Dispositions (46) (431) (793) (481) (958) (2,709)

Net ($42) $130 ($439) ($77) ($738) ($1,166)


Mortgage 29%

Unsecured Debentures

14%

Bank Indebtedness

4%Unitholder's Equity and Exchangeable

Units 53%

Strong Financial Condition

Total Capitalization

$14.0B

(1) Weighted average interest rate; outstanding debt includes outstanding mortgages and debentures payable(2) Weighted average term to maturity; outstanding debt includes outstanding mortgage and debentures payable (3) Debt includes mortgages payable, debentures payable and bank indebtedness

3.0 x Interest Coverage

BBB (High) Stable Trend by

DBRS

Unencumbered Asset $3.5B

WAIR1

3.9%WATM2

4.6 years

$600 M Available under Bank Facilities

46.3% 46.2%

44.3%44.6%

44.8%

40%

42%

44%

46%

48%

2014 2015 2016 2017 Q1 2018

Debt to Total Assets(3)


Debt and Equity

114 unencumbered properties with fair value ~$3.5B, expected to grow substantially over the next 5 years

Significant untapped debt capacity through 52 encumbered properties valued at ~$1.5B with mortgages of $294.8M; average loan to value 19.5%; weighted average remaining term to maturity 3.6 years

Financing capacity

(1) Face value of debentures.

($ millions) Percentage

Mortgages $4,019 29%

Unsecured debentures(1) 1,911 14

Bank indebtedness 595 4

Unitholders' Equity plus

Exchangeable Units7,477 53

Total $14,002 100%

In Q1 2018, 3,609,720Stapled Units were purchased and cancelled at a weighted average price of $20.83 per Stapled Unit, for a total cost of $75.2 million.


Unencumbered Asset Coverage Ratio

Q1 2018 2017 2016 2015 2014

Unsecured Debentures (carrying value) 1,902,011 1,749,650 1,312,693 1,297,420 1,274,400

H&R unsecured operating facility #1 35,000 208,713 166,089 165,499 -

H&R unsecured operating facility #2 190,829 186,629 205,829 - -

H&R unsecured operating facility #3 52,890 - - - -

Unsecured Debt 2,180,730 2,144,992 1,684,611 1,462,919 1,274,400

Unencumbered Assets 3,502,442 3,614,735 2,968,480 2,015,464 1,657,865

Coverage Ratio 1.61x 1.69x 1.76x 1.38x 1.30x


Mortgage Maturity Schedule

(1) Converting U.S. dollars to Canadian dollars at an exchange rate of $1.29 as at March 31, 2018.

YearNumber of

Properties

Mortgage Debt due on

Maturity ($000's)(1)

Weighted Average Interest

Rate on Maturity

Fair Value of Investment

Properties ($000’s)(1) Loan to Value

2018 24 $89,229 4.8% $334,539 27%

2019 16 124,118 3.7% 333,703 37%

2020 15 351,106 4.5% 965,484 36%

2021 13 844,280 3.9% 3,524,638 24%

2022 48 591,034 4.0% 3,248,328 18%

116 $1,999,767 4.1% $8,406,692 24%


Debenture Maturity Schedule

(1) Bears interest at a rate equal to 3-month Canadian Dealer Offered Rate plus 123 basis points. The interest rate for the period from January 23, 2018 to March 31, 2018 is 2.90%.(2) Denominated as $125,000 U.S. dollars and bears interest at a rate equal to 3-month London Interbank Offered Rate plus 79 basis points. The interest rate for the period from

February 13, 2018 to March 31, 2018 is 2.61%.

Unsecured Senior Debentures MaturityContractual

Interest Rate

Face Value

(000’s)

Series G Senior Debentures June 20, 2018 3.34% $175,000

Series C Senior Debentures December 1, 2018 5.00% 125,000

Series K Senior Debentures March 1, 2019 2.36% 200,000

Series M Senior Debentures(1) July 23, 2019 2.90% 150,000

Series P Senior Debentures(2) February 13, 2020 2.61% 161,250

Series F Senior Debentures March 2, 2020 4.45% 175,000

Series L Senior Debentures May 6, 2022 2.92% 325,000

Series O Senior Debentures January 23, 2023 3.42% 250,000

Series N Senior Debentures January 30, 2024 3.37% 350,000

3.30% $1,911,250


Summary

One of the largest REITs in Canada with a market cap of $6.4 billion

High quality real estate

Predictable income

• Creditworthy tenants

• Long-term leases, with contractual rent escalations

• High, stable occupancy

• Minimal near term lease expiries and debt maturities

Development pipeline expected to create significant value and enhance cash flows

Solid balance sheet with a conservative payout ratio

Fully internalized and aligned management

CEO, founders and trustees own approximately6% of the REIT

Average annual return to unitholders since

inception of 13%

Investor Presentation - H&R REIT Information/current... · Investor Presentation ... 381 Properties...

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