H&R REIT CREATES LANTOWER REAL ESTATE DEVELOPMENT TRUST IPO FOR TWO FLORIDA PROJECTS

TORONTO, Feb. 20, 2024 /CNW/ - H&R Real Estate Investment Trust ("H&R" or the "REIT") (TSX: HR.UN) today announced that it has created a Real Estate Development Trust (the "REDT"), known as Lantower Residential Real Estate Development Trust (No. 1), in order to sell units of the REDT by way of an Initial Public Offering ("IPO") to raise up to US$52 million.

The Purpose of the REDT will be to partner with the REIT's subsidiary Lantower Residential on two residential development projects in Florida (the "Projects") expected to contain an aggregate of 601 units comprised as follows:

(i)  a project to build one contiguous building of four stories comprising approximately 261,000 net rentable square feet consisting of 271 residential rental units sitting on 8.4 acres of land in Largo, Florida (Tampa); and

(ii)  a project to build two residential buildings of four stories comprising approximately 342,000 net rentable square feet, consisting of 330 residential rental units on 17.2 acres of land in Kissimmee, Florida (Orlando).

The REDT will aim to develop the assets, commence lease-up and operate the Projects, and subsequently achieve a liquidity event.

Highlights:

• Formation of a REDT to accelerate H&R's project development process for the two projects
• Lower cash flow requirements and leverage impact for the two development projects on H&R
• H&R will have an option to acquire the Projects

"The creation of the REDT is expected to maximize value both for H&R REIT and the REDT," said Thomas J. Hofstedter, Executive Chairman and CEO of H&R REIT. "This strategic initiative positions H&R's development pipeline well for the future. We expect the REDT to not only unlock value for our unitholders, but also to enhance our financial flexibility and increase our financial capacity, with the longer term ability for H&R to acquire these assets following development."

"H&R REIT is proud to continue as a capital markets innovator being the first public issuer sponsor of a real estate development IPO dedicated to development assets inside its own pipeline. This vehicle represents a new and innovative capital source that will enable us to build on our longstanding commitment to owning and developing high quality real estate," continued Mr. Hofstedter.

The minimum offering size of the IPO is US$42 million with the maximum being US$52 million. H&R will contribute the two land parcels for the Projects to the REDT and will commit to invest up to an additional US$10 million of equity in the Projects assuming achievement of minimum IPO offering size. H&R is expected to own 42.7% of the Projects if only the minimum offering is raised, and 29.1% of the Projects if the maximum is raised with no additional equity investment from H&R. The REIT expects to account for this investment as an equity accounted investment.

The Projects are zoning compliant and entitled development projects with development expected to commence shortly following closing of the IPO. Total budgeted costs for the Projects are approximately US$210 million.

The REDT will be managed by an affiliate of the REIT, and administered by a board of trustees, a majority of whom are independent of the REIT.

The IPO is expected to be completed in late March 2024, subject to prevailing market conditions and receipt of required regulatory approvals.

CIBC World Markets Inc. is the sole agent for the IPO.

This press release does not constitute an offer to sell or the solicitation of an offer to buy securities of the Trust in the United States, nor shall there be any sale of the securities of the Trust in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities described herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the "1933 Act"), and may not be offered or sold within the United States unless registered under the U.S. Securities Act and applicable state securities laws or pursuant to exemptions from the registration requirements of the U.S. Securities Act and applicable state securities laws.

H&R REIT is one of Canada's largest real estate investment trusts with total assets of approximately $10.8 billion as at December 31, 2023. H&R REIT has ownership interests in a North American portfolio comprised of high-quality residential, industrial, office and retail properties comprising over 26.9 million square feet. H&R's strategy is to create a simplified, growth-oriented business focused on residential and industrial properties in order to create sustainable long term value for unitholders. H&R plans to sell its office and retail properties as market conditions permit. H&R's target is to be a leading owner, operator and developer of residential and industrial properties, creating value through redevelopment and greenfield development in prime locations within Toronto, Montreal, Vancouver, and high growth U.S. sunbelt and gateway cities.

Lantower Residential, a subsidiary of H&R REIT, is a vertically integrated multifamily real estate company based in Dallas, Texas, focused on acquiring, developing, financing, and managing multifamily communities in the U.S. Lantower Residential focuses on driving growth and maximizing value through its disciplined investment strategy and portfolio management. Lantower Residential consists of 24 residential properties in select markets in the United States comprising 8,166 residential rental units, at H&R REIT's ownership interest. In addition to hosting all capacities internally (property management, operations, accounting, human resources, marketing, asset management, etc.), Lantower Residential has an in-house development team that has over 5,000 residential rental units in the pipeline at various stages of development and construction.

Certain information in this news release contains forward-looking information within the meaning of applicable securities laws (also known as forward-looking statements) relating to H&R's objectives, beliefs, plans, estimates, targets, projections and intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts, including with respect to H&R's future plans and targets, the REIT's ability to take advantage of value-creating opportunities, H&R's strategy to grow its exposure to residential assets in U.S. sunbelt and gateway cities, H&R's expectations with respect to the development of the Projects, the timing of construction and completion, expected construction plans and costs, expected square footage, the achievement of a liquidity event by the REDT, the expected financial impact on the REIT, including accounting treatment, the expected ownership interest of the REIT in the Projects and the expected time frame for closing of the IPO. Forward-looking statements generally can be identified by words such as "outlook", "objective", "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "should", "plans", "project", "budget" or "continue" or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect H&R's current beliefs and are based on information currently available to management.

Forward-looking statements are provided for the purpose of presenting information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. These statements are not guarantees of future performance and are based on H&R's estimates and assumptions that are subject to risks, uncertainties and other factors including those risks and uncertainties discussed in H&R's materials filed with the Canadian securities regulatory authorities from time to time, which could cause the actual results, performance or achievements of H&R to differ materially from the forward-looking statements contained in this news release. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking statements include assumptions relating to the general economy, including the effects of increased inflation; debt markets continue to provide access to capital at a reasonable cost, notwithstanding rising interest rates; and assumptions concerning currency exchange and interest rates. Additional risks and uncertainties include, among other things, risks related to: real property ownership; the current economic environment; credit risk and tenant concentration; lease rollover risk; interest rate and other debt-related risk; development risks; residential rental risk; capital expenditures risk; currency risk; liquidity risk; risks associated with disease outbreaks; cyber security risk; financing credit risk; ESG and climate change risk; co-ownership interest in properties; general uninsured losses; joint arrangement and investment risks; dependence on key personnel and succession planning; potential acquisition, investment and disposition opportunities and joint venture arrangements; potential undisclosed liabilities associated with acquisitions; competition for real property investments; Unit price risk; potential conflicts of interest; availability of cash for distributions; credit ratings; ability to access capital markets; dilution; unitholder liability; redemption right risk; risks relating to debentures; tax risk; additional tax risks applicable to unitholders; investment eligibility; and statutory remedies. H&R cautions that these lists of factors, risks and uncertainties are not exhaustive. Although the forward-looking statements contained in this news release are based upon what H&R believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements.

Readers are also urged to examine H&R's materials filed with the Canadian securities regulatory authorities from time to time as they may contain discussions on risks and uncertainties which could cause the actual results and performance of H&R to differ materially from the forward-looking statements contained in this news release. All forward-looking statements contained in this news release are qualified by these cautionary statements. These forward-looking statements are made as of February 20, 2024 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.

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

SOURCE H&R Real Estate Investment Trust