Mr. Tom Hofstedter reports

H&R REIT REPORTS STRONG FOURTH QUARTER AND YEAR-END 2023 RESULTS

H & R Real Estate Investment Trust has released its financial results for the three months and year ended Dec. 31, 2023.

"We are pleased with our strong progress in executing our strategic plan over the last 30 months. Our team has been determined and resilient in the face of a challenging economic environment, and volatility in the capital and real estate markets. We are determined to surface significant unitholder value by transforming into a simplified growth-oriented company focused on residential and industrial properties" said Tom Hofstedter, Executive Chairman & Chief Executive Officer.

STRATEGIC REPOSITIONING HIGHLIGHTS DURING THE LAST 30 MONTHS:

• Completed a spin off, on a tax-free basis, of 27 properties including all of the REIT's enclosed shopping centres to a new publicly-traded REIT, Primaris REIT, valued at approximately $2.4-billion;
• 45 investment properties totaling approximately $2.4-billion were sold including the Bow and 100 Wynford;
• H & R to date has contracted to sell a further $293.2-million of properties in 2024;
  • H & R's residential real estate assets at the REIT's proportionate share increased from approximately $3.4-billion as at June 30, 2021 to approximately $4.4-billion as at Dec. 31, 2023;
• H & R's industrial real estate assets at the REIT's proportionate share increased from approximately $1.3-billion as at June 30, 2021 to approximately $1.9-billion as at Dec. 31, 2023;
• H & R's office portfolio exposure at the REIT's proportionate share was reduced from approximately $5.1-billion at June 30, 2021 to approximately $2.5-billion at Dec. 31, 2023 ($703.5-million are properties advancing through the rezoning process);
• H & R's retail portfolio at the REIT's proportionate share decreased from approximately $4.0-billion as at June 30, 2021 to approximately $1.6-billion as at Dec. 31, 2023;
• H & R's portion of residential and industrial real estate assets at the REIT's proportionate share increased from 35 per cent as at June 30, 2021 to 61 per cent as at Dec. 31, 2023;
• Debt per the REIT's Financial Statements was reduced from approximately $6.1-billion as at June 30, 2021 to approximately $3.7-billion as at Dec. 31, 2023;
• Debt to total assets at the REIT's proportionate share improved from 50.0 per cent at June 30, 2021 to 44.0 per cent as at Dec. 31, 2023;
• The unencumbered asset to unsecured debt coverage ratio improved from 1.65x as at June 30, 2021 to 2.16x as at Dec. 31, 2023;
• Debt to Adjusted EBITDA (based on trailing 12 months) at the REIT's proportionate share improved from 10.4x at June 30, 2021 to 8.5x at Dec. 31, 2023;
• The REIT repurchased 27-million Units totalling $339.8-million between June 30, 2021 and Dec. 31, 2023;
• Operating results improved with a 14.9 per cent increase in Same-Property net operating income (cash basis) in 2022 and a further 10.3 per cent in 2023;
• Overall Occupancy grew from 93.7 per cent at June 30, 2021 to 96.5 per cent at Dec. 31, 2023;
• H & R's exposure to Alberta real estate assets, at the REIT's proportionate share, was reduced from 16.9 per cent at June 30, 2021 to only 4.5 per cent at Dec. 31, 2023.

HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 2023:

• Net operating income increased by 2.2 per cent compared with 2022. Property dispositions in the last 12 months totaled $432.9-million.
• Same-Property net operating income (cash basis) increased by 10.3 per cent compared with 2022 driven by healthy gains across all our operating segments:
• Residential 18.7 per cent Driven by strong rent growth and the strengthening of the U.S. dollar
• Industrial 12.5 per cent Driven by strong rent growth and higher occupancy
• Office 5.2 per cent Driven by higher lease termination fees, bad debt recoveries and the strengthening of the U.S. dollar
• Retail 5.7 per cent Driven by increase in occupancy at River Landing Miami and the strengthening of the U.S. dollar
• Funds From Operations ("FFO") per Unit grew 13.0 per cent to $1.33 per Unit compared with $1.17 per Unit in 2022. The REIT's payout ratio as a percentage of FFO was 52.8 per cent compared with 50.3 per cent in 2022 .
• Cash distributions of $0.70 per Unit increased by 18.6 per cent compared with 2022.
• As a result of fair value adjustments, real estate assets decreased by $486.1-million ($197.6-million in Q4 2023), driven by capitalization rate expansion. The following weighted average capitalization rates were used to value the REIT's investment properties at the REIT's proportionate share:

• Overall portfolio occupancy was 96.5 per cent at Dec. 31, 2023.
• Unitholders' equity per Unit was $19.83 and Net Asset Value ("NAV") per Unit was $20.75 at Dec. 31, 2023.
• Liquidity was in excess of $950-million at Dec. 31, 2023.

Included in net income, FFO and AFFO for the year ended Dec. 31, 2023 is $30.6-million (U.S. $22.6-million) related to the proceeds on disposal of a purchase option. H & R had a mortgage receivable of approximately $37.2-million (U.S. $27.6-million) secured against industrial land in North Las Vegas, NV. In addition, H & R had an option to purchase the land. H & R sold its option to purchase the land and received repayment of its mortgage receivable from the borrower. The combined proceeds from the repayment of the mortgage receivable and the sale of the option amounted to $67.8-million (U.S. $50.2-million), which were received in August 2023. As a result, H & R recorded $30.6-million (U.S. $22.6-million) as proceeds on disposal of purchase option.

2023 Transaction Highlights

Property Dispositions

In January 2023, H & R sold its 50 per cent ownership interest in a 95,225 square foot single tenanted office property in Calgary, AB for approximately $16.8-million, which was classified as held for sale as at Dec. 31, 2022. The purchaser assumed H & R's 50 per cent share of the outstanding mortgage payable totalling approximately $6.3-million. In addition, H & R provided a vendor take-back mortgage to the purchaser for $7-million bearing interest at 5.5 per cent per annum maturing September 1, 2029.

In April 2023, H & R sold 160 Elgin Street, a 973,661 square foot office property in Ottawa, ON for $277-million. H & R received $67-million on closing and provided two vendor take-back mortgages ("VTB") to the purchaser: (i) $30-million which is subordinate to the first mortgage on the property, bearing interest at 4.5 per cent per annum, maturing April 20, 2028 and (i) $180-million secured by a first mortgage on the property, bearing interest at 6.5 per cent per annum, which was repaid in Q3 2023. The VTB proceeds of $180-million were used to repay debt, including a $125-million unsecured term loan, originally scheduled to mature on November 30, 2024.

In July 2023, H & R sold four single tenanted retail properties in Quebec totalling 476,802 square feet for $68-million. The proceeds were used to repay debt and repurchase Units under the REIT's normal course issuer bid.

In August 2023, H & R sold a 85,725 square foot single tenanted office property in Temple Terrace, FL for $17.7-million (U.S. $13.3-million). The tenant's lease expired on June 30, 2023 and the property was vacant at closing.

In August 2023, H & R sold a 13,510 square foot automotive-tenanted retail property in Roswell, GA for approximately $4.7-million (U.S. $3.6-million). The property was 37.5 per cent occupied at closing.

In October 2023, H & R sold a 92,694 square foot single tenanted office property in Dallas, TX for approximately $7-million (U.S. $5.1-million). The tenant had relocated its operations to another property and given notice to H & R that it was not going to renew its lease, which was scheduled to expire on Dec. 31, 2025.

In October 2023, H & R sold a 163,936 square foot single tenanted industrial property in Philadelphia, PA for approximately $37.7-million (U.S. $27.5-million). H & R has ownership interests in two remaining industrial properties in the U.S.

In December 2023, H & R announced it had entered into an agreement to sell 25 Dockside Drive for $232.5-million to George Brown College and Halmont Properties Corporation. The property is an office property located directly on the waterfront in downtown Toronto, comprising 479,437 square feet and is substantially leased to Corus Entertainment. The sale is expected to close in April 2024 and is subject to customary closing conditions.

Including 25 Dockside Drive, H & R's 2023 properties sold or under contract to be sold totalled $665.4-million, exceeding the disposition target of $600-million.

H & R's various property sales during 2023 (including properties under contract to be sold) are consistent with the REIT's strategic repositioning plan to surface significant value for unitholders, by transforming into a simplified, growth-oriented company focused on residential and industrial properties.

Q4 2023 Leasing Highlights:

In Q4 2023, H & R completed a new 10-year lease for a 39,741 square foot industrial property in Whitby, ON, at H & R's 50 per cent ownership interest. The current tenant will be vacating in March 2024. The new tenant's lease will commence in April 2024, and annual contractual rent will increase by $5.75 per square foot. The new tenant has a free rent period for the month of April 2024.

In Q4 2023, H & R received a lease termination fee of approximately $1.8-million from Telus Communications, who vacated 114,989 square feet at H & R's 50 per cent ownership interest at 3777 Kingsway in Burnaby, BC as part of H & R's plan to rezone this property from office to residential. Telus Communications continues to occupy 218,471 square feet at H & R's ownership interest until April 2026. IFRS 16 requires revenue from leases to be recognized on a straight-line basis over the contractual term of the lease. As a result of this lease amendment, a non-cash adjustment to straight-lining of contractual rent of negative $1.7-million at H & R's ownership interest was recorded in Q4 2023.

Development Update

Canadian Properties under Development

The REIT currently has two industrial properties under development located at 1965 Meadowvale Boulevard and 1925 Meadowvale Boulevard in Mississauga, ON totalling 336,800 square feet, which are both expected to be completed in Q1 2024. The REIT expects the costs remaining to complete these two properties under development to be approximately $9.4-million. In February 2023, H & R entered into a lease agreement to fully lease 1965 Meadowvale Boulevard, totalling 187,290 square feet, for a term of 10 years at market rents with annual contractual rental escalations. In March 2023, H & R entered into a lease agreement to fully lease 1925 Meadowvale Boulevard, totalling 149,510 square feet, for a term of 12.5 years at market rents with annual contractual rental escalations.

U.S. Properties under Development

The REIT commenced construction on two U.S. residential development properties in 2022. The total development budget for these two properties is approximately $276.9-million (U.S. $209.8-million) with costs remaining to complete of approximately $118.2-million (U.S. $89.5-million). Both properties are expected to be completed on budget in the latter half of 2024.

Q4 Future Intensification Highlights

In October 2023, H & R submitted a Site Plan approval application for 6900 Maritz Drive to the City of Mississauga to replace the existing 104,689 square foot office building with a new 122,413 square foot industrial building. Demolition of the existing office building has commenced and Site Plan approval with conditions was received in January 2024. Construction is expected to commence in Spring 2024.

Normal Course Issuer Bid

During the year ended Dec. 31, 2023, the REIT purchased and cancelled 4,147,200 Units at a weighted average price of $10.30 per Unit, for a total cost of $42.7-million, representing an approximate 50.4 per cent discount to NAV per Unit (a non-GAAP ratio, refer to the "Non-GAAP Measures" section of this news release).

2023 Cash Distributions

H & R's cash distributions amounted to $0.70 per Unit during 2023 (2022 - $0.59 per Unit) which comprised: (i) monthly cash distributions in aggregate of $0.60 per Unit (2022 - $0.54 per Unit); and (ii) a special cash distribution of $0.10 per Unit, further described below (2022 - $0.05 per Unit).

For the year ended Dec. 31, 2023, H & R's payout ratio as a per cent of AFFO (a non-GAAP ratio, refer to the "Non-GAAP Measures" section of this news release) was 63.0 per cent.

2023 Taxation Consequences for Taxable Canadian Unitholders

H & R's cash distributions amounted to $0.70 per Unit during 2023 (including a $0.10 per Unit special cash distribution to unitholders of record on December 29, 2023). The REIT also made a special distribution to unitholders of record on December 29, 2023 of $0.52 per Unit payable in additional Units, which were immediately consolidated such that there was no change in the number of outstanding Units. The cash portion of the special distribution was intended to provide liquidity to unitholders to cover all or part of an income tax obligation that may arise from the additional taxable income being distributed via the special distribution. The amount of the special distribution payable in Units ($0.52 per Unit) will increase the adjusted cost basis of unitholders' consolidated Units.

Debt & Liquidity Highlights

As at Dec. 31, 2023, debt to total assets per the REIT's Financial Statements was 34.2 per cent compared with 34.4 per cent as at Dec. 31, 2022. As at Dec. 31, 2023, debt to total assets at the REIT's proportionate share (a non-GAAP ratio, refer to the "Non-GAAP Measures" section of this news release) was 44.0 per cent, which was the same as at Dec. 31, 2022.

As at Dec. 31, 2023, H & R had cash and cash equivalents of $64.1-million, $886.5-million available under its unused lines of credit and an unencumbered property pool of approximately $4.2-billion.

Subsequent to Dec. 31, 2023, H & R redeemed all of its $350-million Series N Senior Debentures in January 2024, which bore interest at 3.369 per cent per annum.

MONTHLY DISTRIBUTIONS DECLARED

H & R today declared distributions for the months of February and March scheduled as follows:

CONFERENCE CALL AND WEBCAST

Management will host a conference call to discuss the financial results of the REIT on Wednesday, February 14, 2024 at 9.30 a.m. Eastern Time. Participants can join the call by dialing 1-888-886-7786 or 1-416-764-8658. For those unable to participate in the conference call at the scheduled time, a replay will be available approximately one hour following completion of the call. To access the archived conference call by telephone, dial 1-416-764-8692 or 1-877-674-7070 and enter the passcode 698509 followed by the "#" key. The telephone replay will be available until Wednesday, February 21, 2024 at midnight.

A live audio webcast will be available through www.hr-reit.com/investor-relations/#investor-events . Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived on H & R's website following the call date.

The investor presentation is available on H & R's website at www.hr-reit.com/investor-relations/#investor-presentation .

About H & R REIT

H & R REIT is one of Canada's largest real estate investment trusts with total assets of approximately $10.8-billion as at Dec. 31, 2023. H & R REIT has ownership interests in a North American portfolio comprised of high-quality residential, industrial, office and retail properties comprising over 26.9 million square feet. H & R's strategy is to create a simplified, growth-oriented business focused on residential and industrial properties in order to create sustainable long term value for unitholders. H & R plans to sell its office and retail properties as market conditions permit. H & R's target is to be a leading owner, operator and developer of residential and industrial properties, creating value through redevelopment and greenfield development in prime locations within Toronto, Montreal, Vancouver, and high growth U.S. sunbelt and gateway cities.

We seek Safe Harbor.