UPDATED: H&R REIT (HR-UN-T) has announced the first of a promised series of major property sales, confirming agreements with “multiple buyers” to divest interests in dozens of North American office and retail assets worth $1.5 billion.

The announcement Tuesday morning states this round of divestments will reap proceeds that “approximate the aggregate IFRS values for the divested assets.”

"These sales accelerate the REIT's portfolio simplification strategy of selling office and retail properties, while reducing leverage and positioning the REIT to drive sustainable long-term value for all unitholders, H&R executive chair and CEO Tom Hofstedter said in the announcement.

“In June 2021, when we announced the strategy, our residential and industrial segments amounted to 35 per cent of our total portfolio. After these sales, our residential and industrial segments will amount to 83 per cent of our total real estate assets.

“We will begin to market a number of other properties to aggressively accelerate this strategy."

H&R has not identified any of the buyers for the properties. It has also not offered a timeline for closing of the sales.

The office and retail assets being sold

Assets being divested as part of this announcement are:

• H&R's non-managing 33.1 per cent ownership interest in Echo Realty, L.P.'s U.S. retail portfolio (228 U.S. properties, excluding properties under development and vacant land);
• 27 Canadian retail properties;
• Hess Tower, a 29-storey, 844,763-square-foot, LEED Platinum downtown Houston office property completed in 2011;
• 145 Wellington, a 160,000-square-foot downtown Toronto office property; and
• 88 McNabb, a fully leased suburban 74,592-square-foot office property in Markham, north of Toronto.

These assets contributed $33.3 million to H&R’s Q3 2025 same-property net operating income, which the trust said does not reflect the impact of Hess Corporation's previously announced plan to vacate one-third of the Hess Tower in June 2026. That will result in increased vacancy of 278,850 square feet of space. 

Had these sales and the anticipated debt repayments been made at the end of Q2 2025, the trust reports its funds from operations in Q3 2025 would have been lower by approximately $0.06 per unit.

H&R expects its pro forma debt-to-adjusted-EBITDA to be 8.7 times following the transactions. H&R states it plans to keep this ratio below nine times on a go-forward basis. 

H&R's recent strategic update

H&R had announced the pending sales of a total of $2.6 billion of assets in its Q3 2025 financial report a few weeks ago. The trust has been actively marketing retail and office assets, transitioning its portfolio to focus on industrial and multifamily.

It also announced the end of a strategic review in releasing its Q3 financials, noting that while it had not recieved a suitable offer for the sale of the entire REIT and its assets, it was in negotiations for the sale of the $2.6 billion in assets. During its Q3 2025 financials call and webcast, in response to analysts' questions about how it will use proceeds from sales, Hofstedter provided some high-level detail.

"Obviously, it's pay down debt. We have a debenture that's coming due, so that's priority No. 1, would be pay down debt. If you do $2.6 billion, you have excess funds, and we really haven't addressed that nor at a stage to identify how we'll use the proceeds, because we don't know what the proceeds are," Hofstedter said, according to a transcript of the call on the trust's website.

He then summarized further for a followup question: "Pay down debt No. 1, get our balance sheet in order, and then if there's any excess funds, depending on the quantum, obviously, an NCIB would be maybe giving back (to) the unit holders, and an NCIB would be a high priority." 

Asset value writedowns hit bottom line

The REIT reported a $322 million loss in Q3 - $541 million so far in fiscal 2025 - mainly due to asset value writedowns.

"You're quite right," CFO Larry Froom said in response to another question during the call. "We've taken sizable write-downs not
only this quarter, but in the nine months, $830 million. To help give you a sense of size, I will just comment on the assets that we have marked as held for sale. That is $865 million there.

"We've probably comprised almost the majority of the write-down this quarter. So we had $482 (million in writedowns), and most of it was in office through Hess, Front Street, and Sheppard. So most of that writedown from the office came from there. It wasn't solely there. There were other office properties that were written down, but I'd say just over 50 per cent was from that."

Prior to the closing of these transactions, H&R REIT's total portfolio comprises residential, industrial, retail and office properties totalling over 25 million square feet across North America. Residential space comprised 55 per cent of the portfolio, industrial 22 per cent, retail 13 per cent and office 10 per cent.

H&R reported total assets of $9.6 billion, according to its website, and a market cap of $3.1 billion.

EDITOR'S NOTE: This article has been significantly update with addition context and financial background information, both from H&R's website and its Q3 2025 financial report.