H&R Real Estate Investment Trust Q1 2026 Earnings Report

H&R Real Estate Investment Trust EPS Results

• Actual EPS: -C$0.13
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

H&R Real Estate Investment Trust Revenue Results

• Actual Revenue: $184.25 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

H&R Real Estate Investment Trust Announcement Details

• Quarter: Q1 2026
• Date: 5/14/2026
• Time: N/A
• Conference Call Date: Friday, May 15, 2026
• Conference Call Time: 9:30AM ET

H&R REIT is one of Canada's largest real estate investment trusts. H&R REIT has ownership interests in a Canadian and U.S. portfolio primarily comprised of high-quality residential (operating as Lantower Residential), industrial and office properties comprising approximately 21.3 million square feet.

H&R Real Estate Investment Trust Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: H&R said the Greystar transition for Lantower property management is off to a strong start, with April leads up 18%, tours up 13%, and approved leases up over 70% year over year.
• Neutral Sentiment: Residential same-property NOI in the Sunbelt rose 2.3% in Q1 on a cash basis, helped by lease-up at new Dallas assets, though occupancy slipped to 90.9% and Sunbelt lease trade-outs remained negative.
• Positive Sentiment: Management reiterated confidence in achieving about CAD 5 million of annual savings from the Greystar outsourcing, citing lower fees, better purchasing power, and overhead reductions across the platform.
• Neutral Sentiment: Several development projects are nearing completion, including Sunrise in Orlando and Lantower Bayside in Tampa, both expected to begin move-ins in June and finish construction by the end of June.
• Positive Sentiment: H&R expects to resume NCIB activity once planned asset sales close, and management said the broader strategic plan is nearing completion with a refreshed direction expected by year-end.

Presentation

[Operator]

Morning, and welcome to H&R Real Estate Investment Trust 2026 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 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 are therefore unlikely to be comparable to similar measures presented by other reporting issuers.

[Operator]

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 these 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 and 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 H&R's website and www.sedarplus.com. I would now like to introduce Mr. Tom Hofstedter, Chief Executive Officer of H&R REIT. Please go ahead, Mr. Hofstedter.

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

Good morning, everyone, and thanks for joining us. Larry Froom, our CFO, is not available today. Cheryl Fried and Jason Birken will be, taking the questions. In light of that, we're gonna bypass Larry's introductory comments and go right to Emily Watson, head of our Lantower division, to bring us up to date. Emily?

[Emily Watson, COO at Lantower Residential]

Thank you, Tom, and thanks to all of you for joining us. I'll begin with status update on externalizing property management and some operational highlights, followed by an overview of our first quarter performance before turning to development progress. Q1 operating conditions progressed as we anticipated. We successfully transitioned property management to Greystar as of April first. We are encouraged by our early post-transition indicators. April lead volume increasing 18% over prior year. Completed tours were 13% higher than April of last year, and approved leases increased over 70% year-over-year for the month of April. Additionally, our bulk Wi-Fi projects are progressing well. Four communities have launched and are expected to drive roughly CAD 800,000 in revenue for 2026, with another seven projects in the pipeline.

[Emily Watson, COO at Lantower Residential]

Greystar's early results, paired with strong demand driven by steady wage growth, low rent-to-income ratios, and high retention rates, reinforce our confidence that we are well-positioned to capitalize on a market recovery across our Sunbelt portfolio. Same property net operating income on a cash basis from residential properties in U.S. dollars increased by 2.3% for the 3 months ending March 31st, 2026, compared to the respective 2025 period. This growth was primarily driven by the lease-up of Lantower West Love and Lantower Midtown, both in Dallas, Texas. The increase was partially offset by a decrease in rental income from H&R Sunbelt properties as a result of higher vacancies and concessions. Same asset occupancy ended the quarter at 90.9%, a decrease of 1.2% from Q4 and 30 basis points from prior year.

[Emily Watson, COO at Lantower Residential]

Sunbelt blended lease trade-outs were negative 3.5% in Q1, a 50 basis point decrease over Q4, and a 114 basis point decrease over Q1 of 2025. New lease trade-outs were negative 14.8%, and renewal lease rates increased 3.8%. Importantly, our Sunbelt resident retention remains strong at 58.3% in Q1. Turning to developments, our new REIT projects in Florida, of which H&R has a 29.1% ownership interest, continue to progress well and remain on budget. Sunrise in Orlando received their TCO this week, expecting first move-ins by June. We expect Lantower Bayside in Tampa, Florida, to receive TCO next week and also expect first move-ins in June. Construction completion for both assets is expected by the end of June.

[Emily Watson, COO at Lantower Residential]

Lantower currently has 9 Sunbelt developments in the pipeline, totaling approximately 2,900 suites at H&R's ownership interest. Multiple sites are fully permitted and ready for construction, we are advancing design, drawing, and permitting on the remainder. In summary, the partnership between the Greystar teams and our asset management, development, and accounting teams has begun well. We believe this transition will result in long-term value creation through efficiency at scale, enhanced oversight, and significant overhead savings. We are encouraged by the strong fundamentals in the multifamily sector and specifically our markets. Improving market conditions, a laser-focused operating platform with buying power and market presence of our third-party management company has positioned our portfolio to take advantage of the recovery expected in the second half of this year. Short-term pricing power remains soft in a few regions, but the broader fundamentals for multifamily are gaining traction.

[Emily Watson, COO at Lantower Residential]

Supply pipelines are thinning, affordability continues to draw demand, and our early operational indicators under Greystar are moving in the right direction. I also want to recognize and thank our team for a successful transition to Greystar and for their continued partnership and drive to deliver strong performance across the portfolio. With that, I'll turn the call back to Tom.

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

Thanks, Emily. operator, you can open up the call for, questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. First question comes from Jimmy Shan with RBC Capital Markets. Please go ahead.

[Jimmy Shan, Analyst at RBC Capital Markets]

Oh, hi. Thanks. Maybe just on Lantower, occupancy did decline sequentially, as you mentioned. I'm just kind of wondering sort of what do you think drove that and where is occupancy sitting today?

[Emily Watson, COO at Lantower Residential]

Occupancy is right around that 90 mark. Jimmy, thanks for the question, and good morning. I would not be surprised, and then obviously can't put an attribution to it, but, you know, the Q1 was our transition month to Greystar. I think that we had a lot of operational focus on transitioning our websites, transitioning our property, our folks learning new roles, just, you know, if you can remember back when you started a new job. I do think that that had an effect. To what extent? I don't know. Is it 1, 2%? Probably. But I do think that, you know, the April getting everybody marching in the right direction proves that everybody's kind of settling in and expect that number to continue to grow.

[Jimmy Shan, Analyst at RBC Capital Markets]

Okay. The CAD 5 million of savings, you still think that's gonna be realized over the course of 2026?

[Emily Watson, COO at Lantower Residential]

I do. You know, just our management fees alone is a big bump, we just continue to get better savings on virtually almost every line item. I think I shared the painting, our discount last year, or on the last quarter was 40%, theirs is 85%. You extrapolate that, group insurance alone for our employees is a 30% discount to what we were able to. Just kind of in every corner, you just get better buying power when you're 1 million units versus 9,000 units. Yeah, I feel very confident for our overhead cost and things that will are hitting the property that will see those savings.

[Jimmy Shan, Analyst at RBC Capital Markets]

Then just turning to a couple of kind of big leases, the industrial lease, the former HBC, I'm wondering if there's any update on leasing that space and then the 330 Front Street, the RBC move-out. What's your expectation on releasing that space?

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

Hey. Morning. Thanks, Jimmy. The HBC is currently just leased us on a temporary basis to a film studio. I can't tell you which movie it is. There's some activity. It's a weak market, but we're optimistic. I hope by the end of the year it'll be leased out. The office in Front Street is seeing large demand from large users. It's the financial institutions, as you'd expect. Again, we're optimistic that we should see some leases signed this year, hopefully this quarter, actually, for the RBC space that's currently available. I'm hoping that all of it will be taken by one tenant. We are seeing, as I said, large user demand for Front Street.

[Jimmy Shan, Analyst at RBC Capital Markets]

Okay. I guess just on Front Street asset sales, I suspect that's gonna be pushed further out once you get the lease done. Maybe if you could also update us on some of the asset sales that you're working on right now?

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

We're working, Front Street is not on the market. We're not gonna be selling it until we get further ahead in leasing. My guess is that it won't be put on the market this year. 26 Wellington is on the market. We expect to have signed a deal. We have an unconditional deal done, conditional deal signed right now. We're hoping that it gets signed up firm in the second quarter. 25 Sheppard, I can say the same thing. Gowanus, we also hope to have something firm to be able to announce probably this quarter. Those three assets, I'm hoping this will be this quarter, maybe the next, and Front Street off the market.

[Jimmy Shan, Analyst at RBC Capital Markets]

Okay. okay. That's it for me. I'll chime back.

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

Thank you.

[Operator]

Thank you. The next question comes from Tal Woolley with CIBC Capital Markets. Please go ahead.

[Tal Woolley, Analyst at CIBC Capital Markets]

Hey. Good morning, everybody. Just on the savings from the Greystar transaction, that's all gonna be captured within operating expenses. There's no impact on the trust corporate expenses?

[Emily Watson, COO at Lantower Residential]

yeah, there will be considerable amount on the trust as well, just from the overhead that we had in our property management vertical that is now on Greystar's payroll and not on ours, and doesn't encumber our NOI at the property. You know, I can't tell you the split off the top of my head, but there was considerable savings on trust as well as the operational things that hit NOI.

[Tal Woolley, Analyst at CIBC Capital Markets]

Okay. Tom, I think you have 1 unsecured bond issue coming due this year. I know when you were in the draft review process, you know, you had looked maybe at using credit facilities more. I'm just wondering how you're thinking about addressing that maturity.

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

We have the asset sales that I talked about just now should cover the unsecured that rolls. We do not plan on issuing any unsecured right now.

[Tal Woolley, Analyst at CIBC Capital Markets]

Okay. Just lastly, any comments on I think the fees this year or your management fees were sort of flat roughly year-over-year? Any sort of expected changes to those over the course of 2026?

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

No.

[Tal Woolley, Analyst at CIBC Capital Markets]

Okay. That's great. Thanks very much, everyone.

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

Thank you.

[Operator]

Thank you. Ladies and gentlemen, as a reminder, if you have any questions, please press star one. Next question comes from Sam Damiani with TD Cowen. Please go ahead.

[Sam Damiani, Analyst at TD Cowen]

Thank you, and good morning, everyone. Maybe just looking at the top tenant list, there's two or three with relatively short remaining terms to their maturity. Wonder if you could comment on the prospects for renewing some of those tenants. I'm thinking of Bell and O-I Canada Corp..

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

The answer to the question is, Bell, we I don't I don't see why we would have Bell. Just the only Bell we have is Richelieu, and that comes up in end of the year, and we do not expect them to renew. That's that asset is being rezoned for residential townhouse use, not for high-rise residential, so we expect to demolish that building and to reduce residential and build a residential development on that. That's We're not even talking to them about renewal of that asset. As far as the other one that you mentioned, we're in discussions.

[Sam Damiani, Analyst at TD Cowen]

Okay. Just on the, on remaining some of the remaining, you know, office tower, office buildings, you discussed a few, but, you know, there's the big one in Calgary, the big one in Long Island City.

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

Both of those tenants are sticky tenants. We're not gonna be selling them right now until we negotiate some form of extension. As they're sticky, we're very optimistic that we will get an extension, but it won't happen. We will not do anything this year. We're not in discussions with either one of them at this point in time.

[Sam Damiani, Analyst at TD Cowen]

When would you envision sort of entering into those discussions to in order to extend the lease and then open the door to a sale?

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

In case of TransCanada, I'm pretty sure that they had some changes on the real estate side recently. I expect that they're very comfortable having renewal rights, so there's not exactly there's a gun to anybody's head to talk renewal. They are occupying the entire building. Again, they're using it. They're using it fully. They work in the office five days a week. I don't expect them to have any reason to talk to us for another year or so. I would say exactly the same thing with Tuthill. It's occupied by a tenant that uses the space four days a week.

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

It's used fully, and I know that they don't like, because the nature of their use, they don't like to have other tenants within their building. I expect optimistic results in discussing renewals over there as well. They have another 2 years to go before or just under 2 years to go before they have to give us notice, and then they have a renewal for a 10-year option. The rent is only pegged 1.5 years after that. I don't expect to have any discussions with them for probably I don't see any reason to have for another 18 months or so, maybe 12-18 months. We would not be selling that asset either until we enter into those discussions.

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

Again, they're sticky tenants, both of them, and as such, we're optimistic in getting renewals, and therefore, there'd be no point in taking the small chance that they'd be leaving and reducing the price and selling it.

[Sam Damiani, Analyst at TD Cowen]

Okay. All right. Understood. Just lastly, Emily, thank you very much again for the good overview of the business and it's great to see that the transition has been smooth and is opening up some new opportunities. You, you did answer, I think, Jimmy's question on the occupancy, but would you see a similar response on the slight worsening in leasing spreads that's, I guess, seem to occur in Q1?

[Emily Watson, COO at Lantower Residential]

I think they're gonna stay stable in Q2. We see a lot of the supply really coming down in Q3 and Q4, so we see a much better pricing power. Probably the end of Q2, we'll start seeing a little bit of the new lease trade-outs get a little bit more favorable. I do expect similar results for Q2, higher occupancy. Q3, Q4 should be much, much better positioned for really the multifamily market, but definitely our markets should be stronger in Q3 and Q4.

[Sam Damiani, Analyst at TD Cowen]

That's great. Okay. Thanks very much, and I'll turn it back. Thank you.

[Operator]

Thank you. The next question is a follow-up from Jimmy Shan with RBC Capital Markets. Please go ahead.

[Jimmy Shan, Analyst at RBC Capital Markets]

Thanks. Yeah, just in terms of capital allocation, should we expect the proceeds from further asset sales to go towards NCIB now that your leverage metrics is, they've improved quite a bit?

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

Yes, you could expect us initiating NCIB activity, once we hopefully get through the sales of the three assets that I mentioned.

[Jimmy Shan, Analyst at RBC Capital Markets]

Okay. Then maybe tell me big, big picture question on strategy. Like, it's been 5 years since you did the last strategic plan, office is now down to 10% or so of the portfolios. Could argue it's almost there. When should we expect or when should investors expect like a refresh sort of strategic plan in terms of the what the go-forward plan would be to close, continue to close that NAV gap?

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

Your question is very, very apropos and valid. We are pretty close to finishing our plan. The assets that I mentioned that we'd be keeping are probably not gonna be sold at this point in time. You can basically assume by the end of the year, the strategic plan will be completed, at which point in time we'll be really having industrial and Lantower at that point in time will have to really figure out before the year is out, is my guess, giving you some indication as to timing, figure out what is next, if it's gonna be a rollout of one of the assets, keeping them or what we're gonna be doing. We're on top of it. We're having discussions among our trustees, and we hope to have a resolution by before the year is out.

[Jimmy Shan, Analyst at RBC Capital Markets]

Okay. Thank you.

[Operator]

Thank you. The next question comes from Mario Saric with Scotiabank. Please go ahead.

[Mario Saric, Analyst at Scotiabank]

Hi. Good morning. Maybe just coming back to Emily on the, on the lease spreads for Lantower, the expectation of them getting better in the second half of the year. Where would you like to see kind of the new lease spread and the, and the blended lease spread kind of end the year? Like, how much upside do you think there is once the supply really tapers off, heading into 2027?

[Emily Watson, COO at Lantower Residential]

Great question. I think that Q3, I think that we should get back to kind of a flat, by the end of Q2, early Q3, get back to a flat lease spread and see maybe positive 2, positive 3% going into the end of the 4th quarter, which obviously has some seasonality, so it might be a little bit tepid there. 2 or 3% favorable or positive on the blended should be where we have some inverted rent rolls out there, but we see concessions starting to taper down. We see, you know, folks starting to be a little bit more resilient, that we want to get our pricing power for the leasing season and get really strong.

[Emily Watson, COO at Lantower Residential]

Q3, Q4, with the fundamentals really falling back into line, we should revert back to the pre-COVID leasing seasons that we've had historically.

[Mario Saric, Analyst at Scotiabank]

Okay. Then last quarter, there was some discussion of potentially exiting some Lantower markets. Can you perhaps give us an update in terms of where that stands today?

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

The market that we were referring to was Austin, and at that point in time, last quarter, we told you that we're gonna wait a quarter. We're still waiting a quarter. That is the next target that we're putting on the market. I would tend to say probably later on this year, we probably will be putting that on the market. We also have the Hercules project with Ledcor, our JV in outside San Francisco that is on the market, and we hope to be able to tell you the results of that asset sale this quarter.

[Mario Saric, Analyst at Scotiabank]

Got it. Okay. Then just sticking to the asset sales, Tom, based on kind of the commentary with respect to some of the long lease duration office assets, is it fair to say the targeted CAD 500 million-CAD 1 billion+ that we talked about last quarter, maybe it's a bit lower than that? Is that still the plan going forward?

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

CAD 500 is definitely achievable. CAD 1 billion is probably not, is not on the guaranteed horizon, but I'd be comfortable with it at the 500 level.

[Mario Saric, Analyst at Scotiabank]

Got it. How much of the CAD 500 would be attributable to the 3 assets that you highlighted?

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

Round numbers, CAD 300-ish.

[Mario Saric, Analyst at Scotiabank]

Is there a cap rate range you'd like to provide on the CAD 500 million?

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

No. A cap rate would not be very relevant. I don't think it's relevant when you have a piece of this, the largest part of that is a piece of land which has no cap rate. I can't really talk cap rate on that.

[Mario Saric, Analyst at Scotiabank]

You know, I am trying to understand the potential FFO impact associated with the CAD 500.

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

Oh, I see. On the 500, the Gowanus has 0, therefore, the cap rate on the office buildings, I don't know, I would say probably around 8%, 7.5%, in that range.

[Mario Saric, Analyst at Scotiabank]

Got it. Okay. Sorry, last one for me, just on Caledon. Any update there in terms of a transaction?

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

We're in discussions. No updates. It's in their court to decide. My guess is you'll have something done by the end of the quarter as well. As far as what that is, the decision is I have zero visibility because they haven't decided. All I can tell you is that they're building the highway, so something's gonna happen. What it is, though, we really don't know.

[Mario Saric, Analyst at Scotiabank]

Okay. That's it for me. Thank you.

[Operator]

Thank you. We have no further questions. I will turn the call back over to Tom Hofstedter for closing comments.

[Tom Hofstedter, CEO at H&R Real Estate Investment Trust]

Thanks, everybody. Have a great long weekend.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.

Participants

Executives

• Tom Hofstedter, CEO

Analysts

• Emily Watson, COO at Lantower Residential
• Jimmy Shan, Analyst at RBC Capital Markets
• Mario Saric, Analyst at Scotiabank
• Sam Damiani, Analyst at TD Cowen
• Tal Woolley, Analyst at CIBC Capital Markets