The following is a summary of the H&R Real Estate Investment Trust (HRUFF) Q3 2024 Earnings Call Transcript:

Financial Performance:

• FFO per unit for Q3 2024 was $0.294 compared to $0.42 in Q3 2023, showing a decrease primarily because previous year included a gain from disposal.

• Overall, the company is pleased with the results despite facing challenges like a weak office market and inflation.

• The strong balance sheet was highlighted, with debt to total assets at 44.9%, and debt-to-EBITDA at 9.1x, while liquidity exceeded $900 million as of September 30, 2024.

Business Progress:

• H&R sold $344.8 million of income-producing properties up to September 30, 2024, continuing their strategic repositioning plan.

• Office occupancy remained high at 96.8% with significant revenue from investment-grade tenants.

• The residential portfolio growth remains robust, benefiting from positive immigration trends and higher average rents which grew from $21.16 to $26.97 per sq ft from June 2021 to September 2024.

• Introduction of Lantower West Love as an investment property after reaching substantial completion, with it being 40% occupied and continuing to lease well. Likewise, Lantower Midtown also progressing with leasing activities.

• Retail portfolio displayed stability with growth from leases like the River Landing in Miami.

Opportunities:

• Positive shifts back to office work environments could enhance demand for H&R's office spaces.

• Continued strong immigration bolstering the residential rental market, especially in the U.S. where the company's residential portfolio is expanding.

• Development projects like Lantower West Love and Lantower Midtown transitioning to leased properties potentially boosting revenue.

Risks:

• The gradual increase in FFO per unit despite asset sales indicates ongoing pressures from the weak office market and economic factors such as inflation and rising interest rates which could affect profitability.

• Large amount of new multifamily supply could put pressure on occupancy and rental growth rates in the near term.

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