November 13, Investor Presentation As at September 30, 2017 unless otherwise noted

Transcription

1 November 13, 2017 Investor Presentation As at September 30, 2017 unless otherwise noted

2 Caution Regarding Forward-looking Statements Certain statements made at this meeting will contain forward-looking information within the meaning of applicable securities laws (also known as forward-looking statements) including, among others, statements made or implied relating to the Trusts objectives, strategies to achieve those objectives, the Trusts beliefs, plans, estimates, projections and intentions and statements with respect to the Trusts expectation with respect to contributions to rental revenue by new tenants in former Target locations; the timing of completion and occupancy of any leases relating to such premises and the cost of subdividing and re-leasing such premises; the Trusts development activities, including planned future expansions, redevelopment of existing properties and building of new properties; the return on investment and cost of the Trusts developments and other investments; the expected costs of any of the Trusts projects; and the expected occupancy, budget, net leasable area or contributions to rental revenue from the Trusts developments and other properties. Statements concerning forward-looking information 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 the Trusts 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 the Trusts estimates and assumptions that are subject to risks and uncertainties, including those discussed in the Trusts materials filed with the Canadian securities regulatory authorities from time to time, which could cause the actual results and performance of the Trusts to differ materially from the forward-looking statements made at this meeting. Those risks and uncertainties include, among other things, risks related to: real property ownership, credit risk and tenant concentration; lease rollover risk, interest and other debt-related risk; construction risks; currency risk; liquidity risk, financing credit risk, environmental risk; co-ownership interest in properties, joint arrangement risks; unit price risk; availability of cash for distributions; ability to access capital markets; dilution; unitholder liability; redemption right risk; risks relating to debentures, tax risk and tax consequences to U.S. holders. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking statements include that the general economy is stable (other than in Alberta); local real estate conditions are stable (other than in Alberta); interest rates are relatively stable; and equity and debt markets continue to provide access to capital. The Trusts caution that this list of factors is not exhaustive. Although the forward-looking statements made at this meeting are based upon what the Trusts believe 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 the REIT and Finance Trust 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 the REIT and Finance Trust to differ materially from the forward-looking statements made at this meeting. Neither Finance Trust nor any of its trustees or officers, assumes any responsibility for the completeness of the information contained in the REIT s materials filed with the Canadian securities regulatory authorities or for any failure of the REIT or its trustees or officers to disclose events or facts which may have occurred or which may affect the significance or accuracy of any such information. Neither the REIT nor any of its trustees or officers, assumes any responsibility for the completeness of the information contained in Finance Trust s materials filed with the Canadian securities regulatory authorities or for any failure of Finance Trust or its trustees or officers to disclose events or facts which may have occurred or which may affect the significance or accuracy of any such information. All forward-looking statements made at this meeting are qualified by these cautionary statements. These forward-looking statements are made as of August 10, 2017 and the Trusts, except as required by applicable law, assume no obligation to update or revise them to reflect new information or the occurrence of future events or circumstances. 2

3 Stability, Security & Growth through Quality, Diversification & Scale Largest Diversified REIT in Canada With a Market Cap of $6.6 billion H&R Total Assets of $14.0 Billion Fully Internalized Management (Insiders own 6%) Office Industrial Retail (Primaris, ECHO and H&R Retail) Multi-family (Lantower Residential) 36 Properties (96.7% Occupancy) ~12,290,000 Square Feet 99 Properties (98.6% Occupancy) ~11,878,000 Square Feet 379 Properties (94.4% Occupancy) ~18,346,000 Square Feet 12 Properties (93.3% Occupancy) 3,779 Residential Units The Bow, Calgary Atrium, Toronto Corus Quay, Toronto Canadian Tire, Brampton Unilever, Mississauga Orchard Park, Kelowna Dufferin Mall, Toronto Tribeca, Dallas Tortuga Bay, Orlando Long Term Leases Pension Fund JV Stable Performance High Growth Opportunity (1) Includes the proportionate share of equity accounted investments. 3

4 Portfolio Diversification Fair Value of Investment Properties (1) By Segment (As at September 30, 2017) By Region (As at September 30, 2017) Office 48% Ontario 32% $13.5 Billion $13.5 Billion United States 32% Multi-family 6% Alberta 26% Retail (2) 38% Industrial 8% Other Canadian Provinces 10% (1) Includes the proportionate share of equity accounted investments. (2) Retail includes Primaris, ECHO and H&R Retail. 4

5 Alberta Exposure Office H&R s office tenants in Alberta are some of the strongest companies in the energy sector and their average remaining lease term is 16.7 years. Address City Total GLA (Sq.Ft.) Ownership Interest GLA at H&R's Interest % of H&R's Property Operating Income (cash basis) (1) Remaining Lease Term (years) Major Tenant S&P Tenant Credit Rating 5 th Ave. at Centre St. Calgary 2,024, % 2,024, % 20.4 Encana Corporation (3) BBB Negative 450-1st St., S.W. Calgary 931,187 50% 465, % 13.6 TransCanada Pipelines Limited A- Negative 411-1st St., S.E. (2) Calgary 706,279 50% 353, % 2.5 Telus Communications BBB+ Stable nd Ave. Calgary 69, % 69, % 4.3 Alta Link LP A Stable rd Ave. Calgary 95,225 50% 47, % 9.1 Alta Link LP A Stable Total / Average 3,826,666 2,960, % 16.7 Approximately 171,000 square feet currently vacant. (1) Property operating income (cash basis) excludes straight-lining of contractual rent and realty taxes accounted for under IFRIC 21. Includes the proportionate share of equity accounted investments. (2) Multi-tenanted property. (3) Encana Corporation has sublet 27 floors to Cenovus Energy. 5

6 Institutional Quality Assets - Office The Bow Calgary Atrium Toronto Place Bell Ottawa 2 Gotham Centre New York Hess Tower Houston Corus Quay Toronto 6

7 Institutional Quality Assets Industrial & Retail Orchard Park Kelowna Sunridge Calgary Dufferin Mall Toronto Canadian Tire Brampton Unilever Mississauga 7

8 Top 15 Tenants by Revenue (1) Predictable and stable income from long-term leases with high quality investment grade tenants Tenant % of rental income from investment properties (2) Number of locations H&R owned sq.ft. (in 000 s) Average lease term to maturity (years) (3) Credit Ratings (S&P) Encana Corporation (4) 12.0% 2 2, BBB Negative Bell Canada , BBB+ Stable Hess Corporation (9) BBB- Stable New York City Department of Health AA Stable Giant Eagle, Inc , Not Rated Lowe's Companies, Inc. (5) , A- Stable Canadian Tire Corporation (6) , BBB+ Stable TransCanada Pipelines Limited A- Negative Canadian Imperial Bank of Commerce A+ Stable Corus Entertainment Inc BB Stable Telus Communications BBB+ Stable Ontario Realty Corporation and other Ontario Agencies (7) A+ Stable Shell Oil Products A+ Positive Public Works and Government Services, Canada AAA Stable Empire Company Limited (8) BB+ Stable 49.5% , (1) Includes the proportionate share of equity accounted investments. (2) The percentage of rentals from investment properties is based on estimated annualized gross revenue excluding straight-lining of contractual rent, rent amortization of tenant inducements and capital expenditure recoveries. (3) Average lease term to maturity is based on net rent. (4) Encana Corporation has sublet 27 floors to Cenovus Energy at The Bow located in Calgary, AB. Encana Corporation s lease obligations expire on May 13, (5) Lowe s Companies, Inc. includes Rona. (6) Canadian Tire Corporation includes Canadian Tire, Mark s, Sport Chek, Atmosphere and Sports Experts. (7) Other Ontario Agencies include: Legal Aid Ontario, Ontario Lottery and Gaming Corporation, Liquor Control Board of Ontario and Hydro One Networks. (8) Empire Company Limited includes Sobeys, Safeway and Lawtons Drugs. (9) Due to the confidentiality under the tenant s lease, the term is not disclosed. 8

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10 Limited Lease Rollover (1)(2) Low-risk rollover schedule Well diversified by property and geography Average remaining lease term of 9.2 years, one of the longest in the industry Canadian Portfolio (in 000s sq.ft.) 2,169 3,406 2,117 2,077 2, % of the Trusts' GLA (2) 0.7% 5.1% 8.0% 5.0% 4.9% 6.0% Office Primaris (Retail) H&R Retail Industrial U.S. Portfolio (in 000s sq.ft.) ,016 1, % of the Trusts' GLA (2) 0.2% 2.1% 1.8% 1.1% 2.4% 3.3% Office H&R Retail ECHO (Retail) Industrial (1) Includes the proportionate share of equity accounted investments. (2) Excludes residential properties. 10

11 21 Years of Stable Occupancy Consistently strong and stable occupancy in excess of 95% since % 95.0% 98.0% 98.0% 99.0% 99.0% 99.0% 99.0% 99.0% 99.4% 99.3% 99.6% 99.7% 98.9% 99.0% 98.9% 99.1% 98.7% 98.1% (1) 97.8% 95.9% (2) 95.7% 96.0% 90.0% 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% Q (1) Due to acquisition of Primaris. (2) Primarily due to Target disclaiming their leases in Canada. 11

12 Primaris Mall Portfolio (1) Chief Operating Officer: Patrick Sullivan Property (3) Location Major Tenants GLA (sq.ft.) (1) Primaris has a 50% ownership interest. The total GLA of the shopping centre has been reported above. (2) For the rolling twelve months ended August 31, (3) Excludes Northland Village which is being redeveloped. Same Store Sales per sq.ft. ($) (2) Occupancy Enclosed Centres Sunridge Mall Calgary, AB Hudson's Bay, Sport Chek, Alberta Health Services 835, % Orchard Park Shopping Centre Kelowna, BC Hudson's Bay, Sears, Sport Chek 721, % Place d'orleans (1) Orleans, ON Hudson's Bay, Sport Chek, Canada Mortga ge a nd Housing Corporation 702, % Catarqui Town Centre (1) Kingston, ON Sears, Hudson's Bay, Sport Chek 619, % Place du Royaume (1) Chicoutimi, QC Wa l-mart, Winners, Sports Experts 604, % Dufferin Mall Toronto, ON Wa l-mart, No Frills, Marshalls 588, % Stone Road Mall Guelph, ON Sears, Sport Chek, Marshalls 565, % Medicine Hat Mall Medicine Ha t, AB Hudson's Bay, Sears, Gala xy Cinemas 509, % Regent Mall (1) Fredericton, NB Wa l-mart, Sea rs, Cineplex Odeon 503, % McAllister Place (1) Saint John, NB Sears, Sport Chek, Toys "R" Us 465, % Park Place Shopping Centre Lethbridge, AB Sears, Cineplex Odeon, Winners 477, % Sherwood Park Mall Sherwood Pa rk, AB Safeway, Gala xy Cinemas, Sobeys 463, % Kildonan Place (1) Winnipeg, MB Sears, Famous Players, Marshalls 446, % Grant Park (1) Winnipeg, MB Canadian Tire, Red River Co-Op, Goodlife Fitness 405, % St. Albert Centre St. Albert, AB Hudson's Bay, Sport Chek, Winners, Mark's, London Drugs 357, % Peter Pond Mall Fort McMurray, AB Boomtown Casino, Sport Chek, Atmosphere 203, % Total / Weighted Average 8,469, % 12

13 Primaris Tenant Sales Summary Significant growth in sales productivity since 2011 Same Store Sales Portfolio $476 $485 $512 $521 $545 $539 BC $485 $490 $522 $594 $639 $676 AB $465 $484 $561 $569 $571 $526 MB $537 $655 $469 $477 $486 $520 ON $498 $502 $504 $497 $532 $548 QC $419 $439 $413 $421 $420 $418 NB NA $457 $473 $477 $543 $547 Note: Note: MB 2012 sales productivity was high as Shoppers Drug Mart ( SDM ) sales were included (after SDM was expanded and became an Anchor tenant, their sales were excluded in the productivity calculation) AB sales excluded Northland Village Mall which is being redeveloped. 13

14 Target Tenant Replacements Annual Base Rental Revenue at H&R Interest $12.0 (in million of dollars) $10.0 $8.0 $6.0 $4.0 $2.0 $10.1M 3.0% 14.8% 8.9% 13.9% 59.4% $4.0M Former Target Rent Space currently being marketed Advanced discussions Conditional agreements Committed space not yet in occupancy Committed space and in Occupancy $0.0 New Tenants 252% increase in Annual Base Rent upon completion 14

15 Sears: Great Locations & Low Rent Current Sears Locations Former Target Locations # Locations 9 (8 Full line, 1 Home Store) 9 GLA (square feet) (1) 675, ,035 Annual Base Rent (1) $2.34M $4.01M Base Rent P.S.F. $3.47 $ Sears stores operate in shopping centres that perform above portfolio average Location Ownership Same Store Sales per sqft. (2) Orchard Park Shopping Centre (2 stores) 100% $699 Park Place Shopping Centre 100% $629 Stone Road Mall 100% $622 Kildonan Shopping Centre 50% $561 Regent Mall 50% $555 (1) At H&R s ownership interest. (2) For the rolling twelve months ended August 31,

16 Lantower Residential As at September 30, 2017 Chief Operating Officer: Philippe Lapointe 12 properties, 3,779 multi-family units Average property age of 10.0 years Fair value of investment properties: U.S. $607 million Mortgage payable: U.S. $368 million 2 properties currently under construction (Jackson Park and Ambrosio), 1,305 multi-family units, at H&R s ownership interest Strategy: to build a portfolio of class A properties in Southern US where there is strong job growth and to develop in Gateway cities See for further information 16

17 Lantower Residential 2017 Acquisition NXNE - Austin, Texas Acquired April 7, 2017 Class A Units: 375 Year Built: 2016 Purchase Price: $51,900,000 Purchase Price/Unit: $138,400 Average Rent: U.S. $1,094 per month Rationale: New construction located in the heart of Austin s Tech Ridge district, a hub for several major tech employers including Dell, Apple, Samsung and IBM. 17

18 Lantower Residential 2017 Acquisition Ambrosio - Austin, Texas Acquired May 26, 2017 Class A: 370 Units Expected Completion: Late November 2017 Purchase Price: $52,785,000 Purchase Price/Unit: $142,662 Major Employers: Dell, Apple, Samsung, IBM Rationale: Brand new garden style construction located across the street from NXNE, creating economies of scale, efficiencies that will enhance market position 18

19 Residential Developments New York City San Francisco Austin Miami 19

20 Jackson Park Construction Update Long Island City, NY H&R has a 50% interest in a landmark luxury residential rental development in Long Island City, New York. Total cost of the project of all three phases at the 100% level is expected to be approximately U.S. $1.16 billion. H&R s total cash investment in the LIC Project is $260.7 million. As at September 30, 2017, total costs incurred amounted to $899.6 million. The remaining costs are expected to be funded through the construction financing facility. Upon completion and stabilized occupancy, the first year s property operating income at H&R s ownership interest is projected to be U.S. $36.9 million

21 Jackson Park Long Island City, NY H&R Ownership: 50% Average Unit Size: 708 sf Projected Rent: $5.08 psf Return on Cost: 6.15% KEY DESTINATIONS Subway Rockefeller Center 8 min. Grand Central Terminal 10 min. Penn Station 14 min. Wall St. & Broadway 25 min. Driving LaGuardia Airport 13 min. JFK Airport 20 min. Newark Airport 30 min

22 Jackson Park Long Island City, NY 1,871 Luxury Residential Units Over 120,000 sf of Amenities 2 Acre Private Park Parking for 120 Cars and 1,000 Bicycles Pre-Leasing: Late Nov 2017 Occupancy Phase 1: Early

23 Hercules San Francisco, CA Mixed-Use Development H&R Ownership: 31.7% 38.4 acres 1,476 Unit Mixed-Use Waterfront Master-Planned Community Phase 1: 172 Multi-family Units Construction Start: Q Development Cost: $71 Million U.S. ($413,000/unit) Projected Rent: $3.03 psf Return on Cost: 5.96% 23 23

24 1301 Koenig Lane Austin, TX H&R Ownership: 33.3% 391 Multi-family Units Development Budget: $72.5 Million U.S. ($185,500/Unit) Projected Rent: $2.03 psf Construction Start: Q Return on Cost: 5.87% 24 24

25 Close Proximity to Major Employers: Apple Oracle IBM Samsung University of Texas Texas Capitol Koenig Lane Austin, TX 25 25

26 River Landing Miami, FL 26 26

27 River Landing Miami, FL Civic Center 27 27

28 River Landing Miami, FL 28 28

29 River Landing Miami, FL 29 29

30 River Landing Miami, FL 526 Luxury Residential Rental Units 420,000 sf Retail Major Tenants: Publix, TJ Maxx, Hobby Lobby, Burlington, Ross, West Marine Occupancy:

31 Solutions 2 Go Brampton, ON Industrial Construction Square Footage: 215,020 Lease Term: 15 years Lease Commencement: May

32 Sleep Country Brampton, ON Industrial Construction Square Footage: 130,537 Lease Term: 15 years Lease Commencement : September

33 Caledon Brampton, ON Industrial Lands 144 Acres 2.7M Buildable sf 33 33

34 Dallas Office Development 93,000 sf of Office Total Cost: $44 Million U.S. Leased: 63% Completion Date: Q Future Residential Development (4.8 acres) 2217 Bryan St

35 Acquisition & Disposition History (1) (in Millions) Q Total Acquisitions $176.7 $353.7 $403.8 $219.8 $1,154.0 Dispositions (291.8) (792.8) (481.2) (957.7) (2,523.5) Net ($115.1) ($439.1) ($77.4) ($737.9) ($1,369.5) (1) Includes the proportionate share of equity accounted investments. 35

36 Strong Balance Sheet September 30, 2017 December 31, 2016 December 31, 2013 Total Assets $14.0 B $14.2 B $13.4 B Debt to total assets (1) 43.6% 44.3% 49.2% Interest Coverage 3.0x 2.8x 2.4x Debt/EBITDA (1)(2) 8.3x 8.2x 9.4x Available liquidity $746.2 M $400.3 M $328.9 M (1) Debt includes mortgages payable, debentures payable and bank indebtedness. (2) Adjusted EBITDA represents earnings before interest expenses, income tax expense, depreciation and amortization, and fair value gain(loss) while also excluding other income, transaction costs and non-cash items. 36

37 Debt and Equity As at September 30, 2017 ($ millions) Percentage Mortgages $3,949 30% Unsecured debentures (1) 1, Convertible debentures (1) Bank indebtedness Unitholders' Equity plus Exchangeable Units 7, Total $13, % Financing capacity 106 unencumbered properties with fair value ~$3.2B, expected to grow substantially over the next 5 years Significant untapped debt capacity through 48 encumbered properties valued at ~$1.3B with mortgages of $248.6M; average loan to value 19.1%; weighted average remaining term to maturity 3.3 years (1) Face value of debentures. 37

38 Unencumbered Asset Coverage Ratio Q Unsecured Debentures (carrying value) 1,747,547 1,312,693 1,297,420 1,274,400 1,272,235 H&R unsecured operating facility #1 3, , , H&R unsecured operating facility #2 185, , Unsecured Debt 1,935,901 1,684,611 1,462,919 1,274,400 1,272,235 Unencumbered Assets 3,231,814 2,968,480 2,015,464 1,657,865 1,340,406 Coverage Ratio 1.67x 1.76x 1.38x 1.30x 1.05x 38

39 Mortgage Maturity Schedule As at September 30, 2017 Year Number of Properties Mortgage Debt due on Maturity ($000's) (1) Weighted Average Interest Rate on Maturity Fair Value of Investment Properties ($000 s) (1) Loan to Value 2017* 12 $60, % $85,705 71% , % 436,388 31% , % 335,060 36% , % 916,929 39% , % 3,388,975 23% , % 3,246,243 18% 127 $2,027, % $8,409,300 24% * For the balance of the year. (1) Converting U.S. dollars to Canadian dollars at an exchange rate of $1.25 as at September 30,

40 Debenture Maturity Schedule As at September 30, 2017 Unsecured Senior Debentures Maturity Contractual Face Value Interest Rate (000 s) Series E Senior Debentures February 2, % $100,000 Series J Senior Debentures (1) February 9, % 156,250 Series G Senior Debentures June 20, % 175,000 Series C Senior Debentures December 1, % 125,000 Series K Senior Debentures March 1, % 200,000 Series M Senior Debentures (2) July 23, % 150,000 Series F Senior Debentures March 2, % 175,000 Series L Senior Debentures May 6, % 325,000 Series N Senior Debentures January 30, % 350, % $1,756,250 Contractual Conversion Face Value Convertible Debentures Maturity Interest Rate Price (000 s) 2020 Convertible Debentures HR.DB.D June 30, % $ ,652 (1) Denominated as $125,000 U.S. dollars and bears interest at a rate equal to 3-month London Interbank Offered Rate plus 108 basis points. The REIT entered into an interest rate swap on the Series J senior debentures to fix he interest rate at 2.04% (2) Bears interest at a rate equal to 3-month Canadian Dealer Offered Rate plus 123 basis points. The interest rate for the period from July 23, 2017 to October 22, 2017 is 2.47%. 40

41 Summary Largest diversified REIT in Canada with a market cap of $6.6 billion High quality real estate Predictable income Creditworthy tenants Long-term leases, with contractual rent escalations High, stable occupancy Minimal near term lease expiries and debt maturities Development pipeline expected to create significant value and enhance cash flows Solid balance sheet with a conservative payout ratio Fully internalized and aligned management CEO, founders and trustees own approximately 6% of the REIT Average annual return to unitholders since inception of 14% 41