H&R Real Estate Investment Trust

Good morning, and welcome to H&R Real Estate Investment Trust's 2020 Third Quarter Earnings Conference call. Before beginning the call, H&R would like to remind listeners that certain statements, which may include predictions, conclusions, forecasts, or projections, in the remarks that follow may contain forward-looking information, which reflect the current expectations of management regarding future events and performance, and speak only as of today's date. Forward-looking information requires management to make assumptions or rely on certain material factors and is subject to inherent risks and uncertainties, and actual results could differ materially from the statements in the forward-looking information. In discussing H&R's financial and operating performance and in responding to your questions, we may reference certain financial measures which do not have a meaning recognized or standardized under IFRS, or Canadian generally accepted accounting principles, and therefore, unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of H&R's performance, liquidity, cash flows, and profitability. H&R's management uses the measures to aid in assessing the REIT's underlying performance and provides these additional measures so that investors can do the same. Additional information about the material factors, assumptions, risks, and uncertainties that could cause actual results to differ materially from the statements in the forward-looking information and the material factors or assumptions that may have been applied in making such statements together with details on H&R's use of non-GAAP financial measures, are described in more detail in H&R's public filings, which can be found on our website and www.cdar.com. I would now like to introduce Mr. Tom Hofstetter, Chief Executive Officer of H&R REIT. Please go ahead, Mr. Hofstetter.

Thank you, and good morning, everyone. I'd like to thank you all for coming. Joining us on call today with me here are Larry Frum, our CFO, Pat Sullivan, CEO of Primaris, Philippe Lapointe, CEO of LandTower, Robin Kesterberg, Executive Vice President, Corporate Development, Al Savory, Executive Vice President, Asset Management and Strategic Initiatives. A lot has happened since our last conference call. The U.S. election is finally over. Progress on treatments and vaccines for COVID-19 continue covering employment, economic activity, And it seems that society is getting better at living more normally as we wait for the end of the pandemic. We have continued to prioritize the safety of our employees, tenants, and visitors to our properties following all of the recommended protocols, including social distancing and frequent cleaning. From a business perspective, Q3 results reflect the high quality of our portfolio and the appeal of our properties to the creditworthy tenants that occupy them. Rent collections averaged over 93% in the quarter and continue to improve. Q3 FFO per unit was down less than 5%, primarily due to bad debts of the quarter, absent which FFO per unit would have risen by 5%. Net asset value per unit increased slightly, primarily driven by increased investment demand for Sunbelt Apartments. We are pleased with how well our portfolio has performed through these exceptional times. We are clearly not through this pandemic yet and may feel a further economic impact over the next few quarters, but the stability and resilience of our business is clear. Our team continues to work closely with our tenants to find mutually beneficial solutions to support the success of our properties. We are confident that H&R Reid is adequately capitalized, owns great real estate, and has the flexibility to take advantage of opportunities in the market that may arise over the coming quarters. And with that, I'll hand over the call to Larry, who will review our quarterly results, followed by Pat, who will provide an update on our retail portfolio, and then over to Sleep, who will update us on our multi-res portfolio. Larry? Larry?

Thank you Tom, good morning everyone. Overall we collected 93% of the rent bills in Q3 2020, an increase from 90% in Q2. Q4 looks like the trend will continue as we have already collected 95% of October's total billings. We increased our bare debt provision by $13.4 million in Q3 in addition to the $24.5 million booked in Q2. $5 million was for tenants who had filed for Predator Protection. $2.8 million was for the 25% rent abatements we agreed to under the Canada Emergency Commercial Rent Assistance Program. And $5.5 million was for other rent abatements we expected wrong in a general provision. Net of these provisions, our accounts receivable balance at September 30th at H&R's ownership interest was $23.6 million, down from $32.5 million at June 30th, 2020. As can be expected, most of our $13.5 million provision for bad debts arose from our retail division, which accounted for 95% of the total, and specifically in our enclosed mall portfolio. Split of our provision for bad debts amongst our four segments can be found in the press release and the MD&A. As a reminder, we own 100% of 10 enclosed malls and own 50% of seven other enclosed malls. These malls at our proportionate share of ownership account for 21% of our total billings. Same asset property operating income on a cash basis decreased by 5.5% and 3.8% respectively for the three and nine months ended September 30th, 2020 compared to the respective 2019 periods, primarily due to the provision for bad debts. Excluding the provision for bad debts, same asset property operating income would have increased by 1.5% and 2.7% respectively. Same asset property operating income from office properties increased by 2% and for the three months ended September 30th, 2020 increased 0.1% for the nine months ended September 30th compared to the respective periods in 2019. Included in the nine months ended September 30th, 2020 were lease termination fees of 3.2 million compared to 5.8 million for the nine months ended September 30th, 2019. Excluding these termination fees, Same asset property operating income from this office division would have increased by 1.1% for the nine months ended September 30th. The average term remaining on our office leases at September 30th was 11.7 years. Subsequent to the quarter, we extended HESA's lease on two-thirds of our office tower in Houston for an additional 10 years beyond the original expiry of June 2026. Same-asset property operating income on a cash basis from our retail properties decreased by 15.7% and 17.2% for the three and nine months ended September 30th, 2020, compared to the respective 2019 period, primarily due to the provision for bad debt as a result of the impact of COVID. Excluding the provision for bad debt, same-asset property operating income would have increased by 5.3% and 2.1% respectively. Same as the property operating income from industrial properties increased by 7.4% and 5.8% respectively for the three and nine months end of September 30th, 2020, primarily due to an increase in occupancy and rental rates. Our new tenant, Nature Post, is busy fitting out the first industrial construction property, totaling just under 343,000 square feet on our Caledon lands, and expense rate rent payments to commence on November 14th. Same asset property operating income cash basis from residential properties in U.S. dollars decreased by 12.7% for the three months end of September 30th, 2020, compared to the respective 2019 period, primarily due to Jackson Park in New York, which has been negatively affected by lower than average lease renewals and apartment traffic due to COVID. Excluding Jackson Park, same-asset property operating income in U.S. dollars increased by 4.1% and 8.5% for the three and nine months end of September 30, 2020, compared to the respective 2019 periods. Over the course of the next 12 months, construction will be completed on one mixed-use development and five residential developments, totaling 969 additional units at our share. Funds from operations FFO was $0.41 per unit for Q3 2020, up from $0.38 per unit in Q2 2020 and down from $0.43 per unit in Q3 2019. Excluding the provision for bad debts, FFO would have been $0.46, an increase of $0.03 compared to Q3 2019. Adjusted funds from operations FFO was 35 cents per unit in Q3 2020, up from 29 cents per unit in Q2, and flashed with Q3 2019 of 35 cents per unit. Distributions paid as a percentage of AFFO, more commonly known as the payout ratio, was 49% in Q3 2020. Debt to total assets decreased to 47.2% at the end of Q3 2020, compared to 48.1% at the end of Q2 2020. As far as liquidity goes, as of September 30th, 2020, H&R had $1 billion of unused borrowing capacity available under its lines of credit, had $54 million of cash on hand and an unencumbered asset pool of approximately $3.5 billion with only 39 million mortgages maturing during the remainder of 2020. I will now turn the call over to Pat to give an update on our retail division.