H&R REIT (HR-UN-T) has ended its strategic review with plans to continue operating in its present form, although its portfolio is expected to be several billion dollars smaller by the end of 2025, according to its Q3 financial report and corporate update.

The REIT did not receive any takeover offers acceptable to management during the review process, but did receive interest in numerous properties and as a result has agreements to divest approximately $2.6 billion of assets.

H&R REIT owns and operates a diverse portfolio of commercial and multifamily assets valued at approximately $9.6 billion – though that is down considerably from a value of $10.6 billion at the end of 2024. It comprises approximately 25.7 million square feet of leasable space.

Much of the decline is attributable to asset writedowns of $753 million so far in 2025 – and $420 million in Q3 alone.

The reduction in the asset values was the main factor in H&R reporting a net loss of $322 million during the quarter – and $541 million so far in 2025.

The strategic review process

H&R had confirmed the ongoing strategic review during the summer, when it reported receipt of a non-binding expression of interest from “multiple parties” to acquire all assets of the REIT.

“Through the late winter and spring of this year, the special committee engaged with the interested parties. Ultimately, the prices and terms proposed were not acceptable to the special committee,” the update states.

However, the REIT also received acquisition offers for some of its assets. Although it continued to conduct a full sale process, no further “en bloc offers” were received so, the special committee has been dissolved. REIT management will now conduct the process to sell the $2.6 billion in assets which are under binding agreements of sale.

"The special committee's mandate was to evaluate all potential strategic alternatives in the best interests of the REIT," said Donald E. Clow, independent lead trustee and chair of the special committee, in the announcement. "The extensive work completed has provided the board with a clearer view of the market and the value-maximization opportunities available to H&R."

While the announcement does not list which assets are specifically under contract, it does provide a list of assets which are considered “held for sale.”

These are:

• 10450 42nd Ave., Edmonton: (Retail), 150,457 square feet, 100 per cent ownership interest;
• its remaining 26 Canadian retail properties: 1,362,893 square feet, 99.9 per cent ownership interest;
• 310, 320 & 330 Front St. W., Toronto: (Office) 611,840 square feet, 94.3 per cent ownership interest;
• 25 Sheppard Ave. W., Toronto: (Office), 390,268 square feet, 83.4 per cent ownership interest;
• 1501 McKinney St., Houston: (Office), 844,763 square feet, 100 per cent ownership interest; 
• and, 145 Wellington St. W., Toronto: (Office), 160,098 square feet, 88.2 per cent ownership interest.

The announcement also states the fair value adjustments made during Q3 “were primarily due to properties classified as held for sale, to be in-line with the expected selling prices of these properties.”

During Q3, H&R wrote down the value of its office assets by $298 million, its retail assets by $83 million and its land and properties under development by $74 million.

Prior to the end of Q3, H&R had completed the sales of seven Canadian retail properties, two U.S. retail properties, a Canadian office property noted and one Canadian commercial, unit totalling 450,633 square feet, for $95 million (at H&R's ownership interest).

H&R’s other Q3 financial metrics

The trust completed several leases across retail, industrial and office properties during the quarter:

• leasing vacant space at three Toronto industrial properties totalling 107,984 square feet (at H&R's ownership interest) with lease commencements between Q4 2025 and Q1 2026;
• one existing industrial tenant was relocated to a previously vacant space for 49,762 square feet at H&R's ownership interest;
• lease renewals at two single-tenanted office properties located in Markham, Ont. and Sydney, N.S., totalling 143,641 square feet, with annual contractual rent increasing by an average of $6.15 per square foot;
• and, a retail tenant exercised a five-year renewal option at two Ontario locations totalling 71,574 square feet. The original leases were set to expire in 2026.

H&R said at quarter end, it maintained cash and cash equivalents of $57.1 million, $345.6 million available under its unused lines of credit and an unencumbered property pool of approximately $4.1 billion.

It reported a dividend payable of $0.05 per unit for November, based on its annual dividend of $0.60 per unit.

H&R reported FFO per basic and diluted unit of $0.290, compared to $0.294 for the year-ago period. Its AFFO per unit was $0.229, compared to $0.242 a year ago. 

The REIT’s debt-to-total assets ratio (at H&R’s ownership share) was 47.3 per cent at the end of the quarter, up from 43.7 per cent at year-end 2024.

Net asset value per unit was $17.74, down from $20.92 at year-end 2024.