H&R REIT and its Property Manager Agree to Fee Waiver for Primaris Transaction

H&R Real Estate Investment Trust is pleased to announce that, in connection with its agreement to acquire Primaris Retail Real Estate Investment Trust, H&R REIT and its property manager have agreed to the following changes to the current omnibus property management agreement between the parties:
 
the property manager has waived, in whole, its entitlement to the acquisition fee that would otherwise be payable upon completion of the acquisition;
the property manager has confirmed that no property management fees relating to the Primaris properties will be payable to the property manager as it is expected that the Primaris properties will be internally managed by the existing Primaris management team; and the property manager has further agreed with H&R REIT that, following H&R REIT's acquisition of Primaris, no acquisition fees or property management fees will be payable to the property manager by H&R REIT in connection with the future acquisition by H&R REIT of enclosed shopping centers in Canada.
 
H&R REIT is also pleased to announce that DBRS Limited has completed its review of the Primaris transaction and confirmed on January 17, 2013 that H&R REIT's senior unsecured debentures remain rated at BBB with a stable trend.
 
The Primaris transaction provides H&R REIT unitholders with the following benefits:
 
High-Quality Portfolio of Scarce Retail Assets: The transaction is a unique opportunity to acquire a professional retail platform, with an irreplaceable Canadian enclosed shopping centre portfolio.
 
Increased Scale: The transaction creates the largest REIT in Canada by enterprise value. The increased scale will provide more stability in volatile markets and further improve H&R's cost of capital.  In addition, the increased market capitalization will result in substantially enhanced liquidity for unitholders.
 
Improved Portfolio Diversification: The addition of Primaris' retail properties will broaden H&R REIT's portfolio diversification geographically, by asset class and by tenant base.
 
Strong Financial Metrics: The REIT's balance sheet will be deleveraged to 51.9 per cent Debt/FV (assuming full take-up of the cash consideration).  With expected savings from synergies of up to $10 million over the next two years, the transaction will be accretive to FFO.
 
Complimentary Management Styles: The transaction combines two businesses having similar philosophies with respect to asset and tenant quality and their disciplined approach to real estate investing.
 
The Primaris transaction, structured as a plan of arrangement, is subject to various closing conditions, including the approval of 66 2/3 per cent of Primaris units voted at a special meeting of Primaris unitholders and a majority of H&R units voted at a special meeting of H&R unitholders.  Each of H&R and Primaris will prepare and mail meeting circulars to their respective investors in early February and the special unitholder meetings will be held in mid-March. The Boards of Trustees of each of H&R and Primaris have unanimously agreed to recommend that their respective unitholders vote in favour of the transaction.
 
Assuming the requisite approvals and consents are received and other conditions are met or waived, the plan of arrangement is expected to be completed by late March.
 

on January 27, 2013