Staying the course on H&R REIT

I may be tiring some readers with my bullishness on H&R REIT, but I felt compelled to write an update due to a few new known facts. On June 12th, H&R confirmed public news releases that the REIT was once again in touch with Blackstone. While the trading price pulled back a few percent on the confirmation from H&R, it was because the REIT disclosed that a sale to Blackstone was only for a “some” of the REITs assets rather then the entire REIT. For those of us who followed the story, that shouldn’t come as a surprise as it always seemed likely that the REIT would be sold to more then one buyer, even after finetuning the portfolio. While it is possible that Blackstone takes both the residential and industrial assets, either or would likely put upward pressure on the trading unit price given wide discount to private markets.

Over the past year, after the perceived “failed” strategic review process, I believe H&R has intentionally been positioning itself for a better priced sale since. Over the past year, the REIT has in fact made tremendous progress selling hard to sell assets such as offices, including the million square foot Hess Tower in Houston which was sold to Chevron. They also disposed of their entire retail portfolio in the United States and numerous Canadian offices with more to come. On the last call, Thomas Hofstedter indicated he expects the New York City land parcel known as Gowanus to be dealt with by the end of quarter, and alluded, an outcome may be known for the Caledon lands which are sought after by the Ontario government to build a new highway. These would be the harder to sell assets left in the portfolio and make the REIT a much more transactable story if that is the route the REIT is going to pursue.