Will Result in the Effective Replacement of
H&R Finance Trust with H&R Finance (2017) Trust
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SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS
RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES
LAW./
TORONTO, Oct. 19, 2017 /CNW/ - H&R Real Estate
Investment Trust ("H&R REIT" or "H&R") and
H&R Finance Trust ("H&R Finance Trust" and, together
with H&R REIT, the "Trusts") (TSX: HR.UN and HR.DB.D)
have announced today that they are proposing to complete an
internal reorganization (the "Reorganization") which is
intended to continue and enhance the benefits of the existing
Stapled Unit structure that was approved by unitholders of H&R
REIT in 2008 (the "2008 Reorganization") and has been in
place since that time. The Reorganization is being
contemplated due to the growth in H&R's U.S. investment
portfolio since the 2008 Reorganization. The result of the
Reorganization will be to effectively replace H&R Finance Trust
in H&R's stapled unit ("Stapled Unit") structure with a
newly formed entity called H&R Finance (2017) Trust
("H&R F17 Trust"), which will have substantively the
same characteristics as H&R Finance Trust.
The Reorganization will be effected by way of a plan of
arrangement involving H&R REIT, H&R Finance Trust and
certain of H&R REIT's subsidiaries resulting in, among other
things, holders of Stapled Units, through a series of steps,
disposing of their H&R Finance Trust units and acquiring units
of H&R F17 Trust. Following completion of the Reorganization,
investments that are currently held through H&R REIT and
H&R Finance Trust will instead be held through H&R REIT and
H&R F17 Trust, units of H&R REIT and H&R F17 Trust will
trade together as stapled units ("New Stapled Units") on the
TSX under the ticker symbol "HR.UN", and H&R F17 Trust
will be expected to hold a note ("U.S. Holdco Notes")
evidencing a debt obligation in the principal amount of
approximately US$1 billion issued by
H&R REIT (U.S.) Holdings Inc. ("U.S. Holdco") (an
increase from the approximately US$225
million principal amount of notes currently held by H&R
Finance Trust, which increase is reflective of the growth in
H&R's U.S. investment portfolio).
Following completion of the Reorganization, H&R REIT and
H&R F17 Trust intend to file combined financial statements in
the same manner as H&R REIT and H&R Finance Trust currently
file with the effect of the U.S. Holdco Notes continuing to be
eliminated as a result of the combined reporting. A request
for an exemption from the local securities regulatory authority or
regulator in each of the provinces of Canada for such reporting (among other things)
has been filed by H&R REIT.
Joint special meetings (the "Meetings") of unitholders of
the Trusts (the "Unitholders") will be held on Thursday, December 7, 2017 at the offices of
Blake, Cassels & Graydon LLP, 199 Bay Street, Suite 4000,
Commerce Court West, Toronto,
Ontario to consider the Reorganization, as further described
in the joint management information circular (the
"Circular") to be filed in connection with the Meetings.
The Reorganization is subject to the approval of the Unitholders
by way of the affirmative vote of at least two-thirds of the votes
cast by Unitholders present in person or by proxy at the Meetings,
together with certain other customary conditions. The board of
trustees of H&R REIT (the "H&R REIT Trustees") and the
board of trustees of H&R Finance Trust (the "H&R Finance
Trust Trustees") have unanimously determined that the
Reorganization is in the best interests of H&R REIT and H&R
Finance Trust, respectively, and accordingly, the H&R REIT
Trustees and the H&R Finance Trust Trustees unanimously
recommend that Unitholders vote IN FAVOUR OF the
Reorganization, in each case, for the reasons to be set out in
detail in the Circular. Certain of such reasons are similar to
those disclosed to the H&R REIT unitholders when they were
considering the 2008 Reorganization.
In connection with the Reorganization, H&R REIT will apply
to the Court of Queen's Bench of Alberta for an interim order confirming, among
other things, the calling and holding of the Meetings. In
addition, H&R REIT has (i) applied to the Canada Revenue Agency
for an advance income tax ruling confirming certain Canadian
federal income tax consequences of the Reorganization (the "CRA
Ruling"), (ii) received conditional approval from the TSX for
the listing and posting for trading of the New Stapled Units, and
(iii) requested the exemptive relief from securities regulatory
authorities described above. If the Reorganization is
approved by the Unitholders and assuming timely satisfaction (or
waiver) of all other closing conditions, including receipt of a
final order of the Court of Queen's Bench of Alberta and the CRA Ruling, it is anticipated
that the Reorganization will be completed by the end of
December 2017.
The Trusts believe that the Reorganization will occur without
significant adverse tax consequences to Unitholders resident in
Canada. U.S. holders
may have different tax consequences as a result of the
Reorganization depending on their individual circumstances.
U.S. holders are encouraged to read the U.S. federal income tax
consequences of the Reorganization, which will appear under the
heading "Material U.S. Federal Income Tax Consequences" in the
Circular. In addition, U.S. holders may face an increased
average rate of Canadian withholding tax on their New Stapled Unit
distributions following implementation of the
Reorganization.
The foregoing is qualified in its entirety by the more detailed
information appearing in the Circular. Unitholders are urged
to carefully read the Circular, once available, before making their
decision with regards to the Reorganization.
About H&R REIT and H&R Finance
Trust
H&R REIT is Canada's
largest diversified real estate investment trust with total assets
of approximately $14.1 billion at
June 30, 2017. H&R REIT is a
fully internalized real estate investment trust and has ownership
interests in a North American portfolio of high quality office,
retail, industrial and residential properties comprising over 46
million square feet.
H&R Finance Trust is an unincorporated investment trust,
which primarily invests in notes issued by a U.S. corporation which
is a subsidiary of H&R REIT. The note receivable balance was
US$222.7 million as at June 30, 2017. In 2008, H&R REIT completed an
internal reorganization which resulted in each issued and
outstanding H&R REIT unit trading together with a unit of
H&R Finance Trust as a "Stapled Unit" on the TSX.
Forward-looking Statements
Certain statements in this news release contain forward-looking
statements within the meaning of applicable securities laws (also
known as forward-looking statements). These forward-looking
statements include, but are not limited to the Trusts' plans,
objectives, expectations and intentions, including concerning the
ability to obtain the final order and the CRA Ruling on the terms
and timing contemplated by the parties, to complete the
Reorganization on the terms and on the timing contemplated by
management, the assumption that all necessary conditions will be
met for the completion of the Reorganization and the amount of the
increase expected in the principal amount of U.S. Holdco Notes.
Such forward-looking statements reflect the Trusts' current beliefs
and are based on information currently available to management.
These statements are not guarantees of future performance and are
based on the Trusts' estimates and assumptions that are subject to
risks and uncertainties, including those to be set forth in the
Circular and in H&R REIT's materials filed with the Canadian
securities regulatory authorities from time to time, which could
cause the actual results and performance of the Trusts to differ
materially from the forward-looking statements contained in this
news release. Although the forward-looking statements contained in
this news release are based upon what the Trusts believe are
reasonable assumptions, there can be no assurance that actual
results will be consistent with these forward-looking statements.
All forward-looking statements in this news release are qualified
by these cautionary statements. These forward-looking statements
are made as of today and the Trusts, except as required by
applicable law, assume no obligation to update or revise them to
reflect new information or the occurrence of future events or
circumstances.
Additional information regarding H&R REIT and H&R
Finance Trust is available at http://www.hr-reit.com and on
www.sedar.com.
SOURCE H&R Real Estate Investment Trust