REPORT: Blackstone In Talks To Buy H&R REIT
Blackstone is reportedly looking to buy H&R REIT and its diversified portfolio of more than 20M SF of North American real estate.
The takeover talks began last year and included TPG and Crestpoint Real Estate Investments, but the pair has since walked away, leaving Blackstone at the negotiating table, anonymous sources told Bloomberg. There’s no guarantee that a deal will be reached and no whisper price, but H&R shares jumped 9% on the Toronto Stock Exchange on the news.
Blackstone declined to comment, and H&R didn’t respond to a request for comment Thursday afternoon.
The Toronto-based REIT said it owned roughly $5.8B in assets at the end of March and ended the first quarter with same-property net operating income at $64.5M, off 3.5% from the prior year.
H&R pulled in $1.1B in cash in the first quarter through the sale of three office buildings, 26 Canadian retail properties and its stake in grocery-anchored operator Echo Realty. TPG partnered with Norges Bank Investment Management, La Caisse and PSP Investments to buy Echo in a deal that was announced earlier this month. H&R used the proceeds to repay corporate debt.
The diversified REIT has spent several years pivoting its portfolio away from struggling office and retail holdings and into apartment and industrial assets in the U.S. and Canada, Bloomberg reported.
Residential assets made up 60% of its portfolio at the end of March, with industrial assets accounting for a quarter and the remainder split between office and retail. In 2021, the REIT had 37% exposure to office and 29% of its portfolio was retail assets, according to its most recent quarterly results. Two-thirds of its assets are in the U.S.
H&R’s multifamily property portfolio is operated through Lantower Residential, which has a portfolio of 26 properties at a 91% occupancy rate and a $2.7B fair-market value, according to a May investor presentation.
It owns 66 industrial properties totaling 8.3M SF with an average weighted cap rate of 5.86%. Its 12-office portfolio spans 3.3M SF, with H&R planning to sell the majority of the properties, which are concentrated in Canadian markets, as part of the REIT's strategic repositioning.
REIT mergers and acquisitions have taken off in the last year, including from Blackstone.
The investment giant and partners cut a $1.5B deal in December to buy Alexander & Baldwin, the largest owner of grocery-anchored shopping centers in Hawaii. Blackstone also launched a new data center mortgage REIT last month that raised its $1.75B target when it went public.
Two of the country’s largest apartment landlords, AvalonBay Communities and Equity Residential, also agreed to a merger in May that would create a 180,000-unit giant with a $69B enterprise value.
