H&R REIT: 6.3% Yield With A 50% Payout Ratio

Core Viewpoint - H&R Real Estate Investment Trust is undergoing a strategic repositioning to reduce its retail and office property exposure while focusing on residential and industrial segments, showing progress in its financial performance despite some challenges in the office sector [3][4][10]. Property Portfolio - H&R owns a total of 382 investment properties across approximately 27 million square feet, including retail, industrial, residential, and office properties in Canada and the United States [1][2]. - The breakdown of properties includes 270 retail, 68 industrial, 20 office, and 24 residential properties [2]. Financial Performance - For Q1 2024, H&R reported a total rental income of CAD 209.5 million, down from CAD 218.3 million in Q1 2023 [14]. - The net operating income (NOI) for the same period was CAD 94.2 million, compared to CAD 97.3 million in the previous year [14]. - Same-property NOI increased by 1.4% year-over-year, reaching CAD 128.3 million [14]. - The overall occupancy rate decreased to 96.3% from 97.0% year-over-year, with a notable drop in the office segment occupancy by almost 4% [10][11]. Strategic Initiatives - H&R has been actively selling off properties, including a significant sale of an office property for CAD 232.5 million and several smaller transactions totaling approximately CAD 29.5 million [20][21]. - The company has created a new residential development trust, Lantower Residential, to fund and develop residential projects in Florida, raising USD 52 million in equity capital [33]. Market Position and Outlook - H&R is perceived to be undervalued compared to its peers, trading at a significant discount to its IFRS NAV, which is currently CAD 21.05 per unit [16][30]. - The REIT's diversification into residential and industrial properties is expected to enhance its stability and growth potential moving forward [28][33].