H&R Real Estate Investment Trust

Good morning and welcome to H&R Real Estate Investment Trust 2024 First 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 reflects 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 risk 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 are 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 Asian Arts performance, liquidity, cash flows, and profitability. Asian Arts Management uses these measures to aid in assessing the REIT's underlying performance and provides this additional measure 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 people's and H&R's use of non-GAAP financial measures, are described in more details in AsianR's public filings, which can be found on AsianR's website and www.cedarplus.com. I would now like to introduce Mr. Tom Hofstadter, Chief Executive Officer of AsianRV. Please go ahead.

Good morning, and thank you all for joining us today to discuss our first quarter results. With me on the call are Larry Thrum, our Chief Financial Officer, and Emily Watson, Chief Operating Officer of our Land Tower Division. This year to date, properties and properties under contract to be sold total $411.7 million. This is in addition to the $2.5 billion of property sales and $2.4 billion of assets spun out between the announcement of the plan and the end of last year. As of March 31st, 2024, the residential and industrial segments comprise 62% of our total real estate portfolio, And as at March 31st, 2024, our total office portfolio comprised 23% of total real estate assets. After the sales, of course, tell us we will be left with 18 office properties with a total value of $2.2 billion. Based on our current unit price of $9.30 compared to our NAV per unit of $21.05, it's as if the market is giving us zero value for these properties. highlighting the value inherent in our unit price. Average terms of maturity in our office leases are 6.6 years. 81.2% of our office tenants have investment grade ratings, underscoring the quality and location of our properties. And six of our office properties can be redeveloped into residential properties with a significant increase to the current square footage. We will continue to realize value through the sale of our office properties and execution of our strategic plan. And with that, I'll turn the call over to Tom for an update on our results.

Thank you, Tom. Good morning, everyone. My comments to follow, references to growth and increases in operating results are in reference to the three months ended March 31st, 2024 compared to the three months ended March 31st, 2023. H&R same property net operating income on a cash basis increased by 1.4%. Breaking the growth down between our segments, Land Tower, our residential division had a 3.2% increase and Emily will provide more details on this shortly. Industrial same property NOI on a cash basis increased by 5.1% driven by rent increases for new and renewed tenants as well as an increase in occupancy. The tenants at our two new industrial developments in Mississauga, totaling 336,000 square feet, have taken possession and their rent-free fixturing period will end in Q2 and Q3 2024 respectively. The average rent of $8.57 per square foot on our Canadian industrial portfolio is well below market rent, which bodes well for our industrial portfolio. continuing to deliver strong results. Office same property NOI on a cash basis decreased by 3.7%. This decrease was largely attributable to a decrease in occupancy at our properties slated for future development including 3777 Kingsway in Burnaby, BC which is under contract to be sold. Our office properties on strong urban centres with a weighted average lease term of approximately six and a half years and lease to strong credit worthy tenants with 81.2% of office revenue coming from tenants with investment grade ratings. Last year, H&R received a lease termination payment of $3.4 million from a tenant at one of their office properties, 6900 Moritz Drive in Mississauga. In Q1 2024, this property was transferred from investment property to properties under development. The former 105,000 square foot office property is being converted into a brand new 122,000 square foot industrial building. Construction of the new building has just begun. Lastly, retail spent property NOI on a cash basis increased by 5.7%, primarily driven by increased occupancy at River Landing. Q1 2024's FFO was 29.7 cents per unit compared to 31 cents per unit in Q1 of 2023. H&R's cash distributions of $0.15 per unit for the quarter resulted in an SFO payout ratio of 50.5% and an AFFO payout ratio of 61%. Net asset value per unit at March 31, 2024 was $21.05 per unit, an increase from $20.75 at the end of 2023. Debt to total assets at the rich proportion of share at March 31st, 2024 was 44.5% and liquidity at March 31st, 2024 was in excess of 800 million with an unencumbered property pool of approximately $4.3 billion. Our unencumbered assets to unsecured debt coverage ratio was 2.2 times at March 31st, 2024. Looking at our debt stack, we only have $243 million of mortgages due in 2024. $111 million of those are secured by properties which we have under contract to be sold and the balance will be refinanced or repaid from the proceeds from our assets held for sale. With that, I will now turn the call over to Emily.