H&R s Acquisition of Primaris. February 5, 2013

Transcription

1 H&R s Acquisition of Primaris February 5, 03

2 Caution Regarding Forward Looking Statements This presentation may contain forward-looking statements with respect to H&R Real Estate Investment Trust and H&R Finance Trust (collectively, H&R") and Primaris Retail Real Estate Investment Trust ( Primaris ) and their operations, strategy, financial performance and condition. The actual results and performance discussed herein could differ materially from those expressed or implied by such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Some important factors that could cause actual results to differ materially from expectations, include, among other things, general economic and market factors, competition, changes in government regulation and the factors described under "Risk Factors" in the Annual Information Forms of H&R and Primaris. The cautionary statements qualify all forward-looking statements attributable to H&R and Primaris and persons acting on their behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of the press release to which this presentation refers. Net operating income ("NOI"), funds from operations ("FFO") and adjusted funds from operations ("AFFO") are not measures recognized under International Financial Reporting Standards ("IFRS") and do not have standardized meanings prescribed by IFRS. NOI, FFO and AFFO computed by H&R and Primaris may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to similar measures reported by such organizations. For a reconciliation with the most directly comparable measures calculated in accordance with IFRS, please refer to H&R and/or Primaris MD&As for the third quarter ended September 30, 0.

3 Opportunity Unique opportunity to acquire irreplaceable Canadian enclosed shopping centres and a platform assembled over 0 years 3

4 Transaction Benefits H&R has reached an agreement to acquire Primaris along with KingSett Capital (the Transaction ) This acquisition solidifies H&R s position as Canada s leading diversified real estate investment trust Rationale High-Quality Portfolio of Scarce Retail Assets Canada s Largest Diversified REIT Improved Portfolio Diversification Strong Financial Metrics Robust retail platform with irreplaceable enclosed shopping centre assets Similar business and operating philosophies with respect to asset and tenant quality The new H&R REIT: World class portfolio of office, retail, and industrial real estate Well positioned for U.S. and international retail expansion and future growth Acquiring a professional established management team which is expected to become H&R s Canadian retail platform H&R acquiring: 6 high-quality retail properties totaling ~8.6 million sq.ft. (including Primaris recently announced Alberta Acquisition) High occupancy with marquee and major anchor tenants 7 Target stores opening in the portfolio in 03 Coast-to-coast solution for regional shopping centre tenants Balance of assets being acquired by KingSett-led consortium Increases H&R s asset base by 9% to ~53.7 million sq.ft. Creates largest REIT in Canada by Fair Value of total assets as at September 30, 0 Market cap increases by 33% to $6.3 billion Addition of high barrier to entry enclosed shopping centres Pro forma asset mix (by NOI) : Office (5%), Retail (34%), Industrial (5%) Increasing Canadian exposure (by NOI) from 77% to 8% Transformational transaction provides the opportunity for portfolio revaluation based on inclusion of high quality retail assets Enhanced capital markets profile through increased market capitalization and greater liquidity Transaction accretive to H&R FFO by $0.0 per unit Reduces H&R leverage from 5.% to 5.%. Based on the H&R close price on February 4, 03. Based on three-month period ended September 30, 0; adjusted to include impact of the Bow, Primaris New Brunswick Acquisition and Alberta Acquisition 4

5 Terms of the Transaction Cash Alternative Unit Alternative Prorated Value Transaction Support Deal Protection Financing Transaction Timeline $8.00 in cash per Primaris unit % premium to unaffected 0-day VWAP (ending December 4, 0) Maximum cash consideration of $,78 million.66 H&R stapled units per Primaris unit Substantial tax deferred rollover 4% increase in distribution per unit for Primaris unitholders (assuming unit election) annual per unit distribution of $.7 for Primaris vs. $.57 pro forma (.66x current $.35 H&R distribution) $7.98 per Primaris unit 45% of prorated consideration in cash % premium to unaffected 0-day VWAP Unanimous support of both the Primaris and H&R Boards of Trustees Primaris Trustees and Senior Executive Management team will vote their units in favour of the Transaction KingSett will vote its Primaris units in favour of the Transaction $00 million cash break fee payable to H&R and KingSett Consortium in certain circumstances 5-business-day right-to-match any superior proposal 65. million H&R units $.3 billion in cash from KingSett H&R and Primaris to mail circulars to unitholders within coming weeks Vote of unitholders of both REITs are expected to be held in March, with court approval expected shortly thereafter Transaction expected to be completed in April KingSett KingSett Consortium acquiring 8 properties totalling 7.3 million sq.ft. for $.3 billion 5

6 Platform for Growth Office Retail Industrial 4 Properties 4.0 million sq.ft. GLA 5 Properties.4 million sq.ft. GLA 5 Provinces 5 States Primaris Assets H&R Canadian Assets H&R U.S. Assets 8 Provinces 0 States 6 Properties 46 Properties 9 Properties 8.6 million sq.ft. GLA 3.5 million sq.ft. GLA 5. million sq.ft. GLA 6 Provinces 5 Provinces 3 States Fully diversified commercial portfolio emulating the real estate investment model adopted by Canadian pension funds Note: GLA adjusted for ownership; Primaris Assets include Alberta Acquisition announced February, 03 6

7 Acquired Portfolio Summary Property Location Tenants (>50,000 sq. ft.) Build Date / Last Renovation GLA (sq.ft.) Occupancy Enclosed Centres Sunridge Mall Calgary, AB The Bay, Target 98 / , % Place d'orleans Orleans, ON Target, The Bay, Sport Chek, Fed. Govt. 979 / , % Orchard Park Shopping Centre Kelowna, BC The Bay, Sears 97 / 007 7, % Cataraqui Centre Kingston, ON Sears, The Bay, Target 98 / , % Place du Royaume Saguenay, QC Wal-Mart, Canadian Tire* 973 / , % Dufferin Mall Toronto, ON Wal-Mart, No Frills 956 / , % Stone Road Mall Guelph, ON Sears 975 / , % Northland Village Mall Calgary, AB Wal-Mart 97 / , % McAllister Place Saint John, NB Sears, Target 978 / 0 488, % Regent Mall Fredericton, NB Sears, Walmart 976 / , % Park Place Shopping Centre Lethbridge, AB Sears 988 / 00 47, % Grant Park Winnipeg, MB Target, Safeway 96 / , % Total / Weighted Average 6,885, % Other Properties South Cambridge Centre Cambridge, ON Zehrs , % Garden City Winnipeg, MB Home Depot* 976 / 004 6, % Edinburgh Market Place Guelph, ON Metro 996 / 008 3, % Northland Professional Centre Calgary, AB n/a 978 5, % Northland Shoppes Calgary, AB n/a 974 / 999 4, % Total / Weighted Average 59, % Alberta Acquisition Medicine Hat Mall Medicine Hat, AB Target, The Bay, Sears, Safeway 980 / ,8 00.0% Sherwood Park Mall Sherwood Park, AB Target, Safeway 97 / 0 460, % Park Plaza Medicine Hat, AB n/a 98 / , % Sherwood Park Plaza Sherwood Park, AB n/a 988 / , % Dunmore Plaza Medicine Hat, AB n/a 989 / ,5 00.0% Carry Drive Plaza Medicine Hat, AB n/a 989 / 004 9, % Trans-Canada Plaza Medicine Hat, AB n/a 005 0,5 00.0% Scotia Plaza Medicine Hat, AB n/a 996, % Development Land Sherwood Park, AB n/a Total / Weighted Average,96,4 99.6% Total / Weighted Average 8,60, % Enclosed Centres Percent of Total GLA 9.6%. As at September 30, 0; Regent Mall and McAllister Place as at December 3, 0 * Shadow anchor 7

8 New H&R REIT BC AB SK MB ON 5 QC 3 NB NS 3 NL 3 Properties 53.7 million sq.ft. of GLA Primaris Retail 7 Office, 9 Retail, and 7 Industrial Properties across the United States Commercial Properties Number of Properties GLA (sq.ft.) Retail 64 7,4,55 Office 4 4,033,8 Industrial 5,386,736 Total 3 53,66,08 Primaris Alberta Acquisition Retail H&R Retail H&R Office H&R Industrial Note: GLA adjusted for ownership; includes Alberta Acquisition announced February, 03 8

9 Thousands Enhanced Size & Scale (C$ billions, as at 30-Sep-) Fair Value of Total Assets , 3 Pro Forma The combination of H&R and Primaris assets will form Canada s largest diversified REIT by Fair Value. Adjusted for IFRS. Adjusted for Alberta Acquisition announced February, Represents Gross Book Value 9

10 Improved Portfolio Diversification H&R Current H&R Pro Forma Property NOI by Asset Class (3-Months Ended 30-Sep-) Adjusted to include the Bow Office 65% $65 million Industrial 8% Office 5% $07 million Industrial 5% Retail 7% Retail 34% Property NOI by Geography (3-Months Ended 30-Sep-) Adjusted to include the Bow Canada 77% $65 million Canada 8% $07 million United States 3% United States 8% Note: Adjusted for 3-month NOI of the New Brunswick Acquisitions and the Alberta Acquisition, based on Primaris 03 acquisition underwriting 0

11 Strong Pro-Forma Metrics H&R Pre-Transaction $4.7 billion Market Capitalization $0.0 billion Fair Value $58 million LTM NOI 5.% Total Debt / FV 95 Properties 45. million sq.ft. of GLA 33% 3% 3% (.0)% 9% 9% H&R Post-Transaction $6.3 billion Market Capitalization $3. billion Fair Value $696 million LTM NOI 5.% Total Debt / FV 3 Properties 53.7 million sq.ft. of GLA. Adjusted for -month NOI of the New Brunswick Acquisitions and the Alberta Acquisition, which are based on Primaris 03 acquisition underwriting. Excludes inter-company Notes Payable

12 Comparable Trading Metrics Price / 03E FFO Price / 03E AFFO 8.8x 8.7x 3.6x 4.6x 6.5x 6.9x 5.7x 7.3x, 3, 3. Figures based on Bloomberg consensus estimates (i.e. not adjusted for the Transaction). Based on February 4, 03 closing price 3. Based on unaffected unit price (04-Dec-) Source: Bloomberg consensus estimates

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