H&R has entered into binding agreements with multiple buyers to sell retail and office properties in Canada and the United States for a total price of $1.5 billion, the REIT announced Tuesday.

The REIT expects the deals to produce net proceeds of approximately $1.1 billion, which will be used to repay corporate debt. Following the sale program, the portfolio’s residential and industrial components will rise to 83% from 69% of total assets. The buyer of H&R’s stake in Echo Realty, L.P. will also assume debts of about $369 million at H&R’s interest.

The deals come after H&R announced plans earlier this month to sell $2.6 billion worth of assets following a strategic review that did not result in a sale of the entire business, but still generated multiple bids for specific properties.

H&R took a $322-million loss in the third quarter, and reported year-to-date losses of $541 million, primarily due to writedowns of asset values. The REIT said the agreed sales reflect the properties IFRS valuations.

The assets under sale are:

• H&R’s non-managing 33.1% ownership interest in Echo Realty, L.P.’s U.S. retail portfolio;
• 27 Canadian unidentified retail properties;
• Hess Tower, a Houston office property;
• 145 Wellington, a downtown Toronto office property; and
• 88 McNabb Street, an office property in Markham, Ont.

“These sales accelerate the REIT’s portfolio simplification strategy of selling office and retail properties, while reducing leverage and positioning the REIT to drive sustainable long-term value for all unitholders,” Tom Hofstedter, H&R’s executive chair and CEO. “In June 2021 when we announced the strategy, our residential and industrial segments amounted to 35% of our total portfolio.”

Following these sales, the REIT will begin to market a number of other properties to aggressively accelerate its portfolio-repositioning strategy, he added

The assets generated $33.3 million in the third quarter same-property net operating income on a cash basis, a figure that does not yet reflect Hess Corporation’s plan to vacate one-third of Hess Tower in June 2026. Had the sales and planned debt repayments occurred at the end of the third quarter, the third-quartrer funds from operations would have been lower by roughly $0.06 per unit. H&R expects its pro forma debt-to-adjusted EBITDA ratio to be 8.7 times before any unit repurchases and intends to keep the ratio below 9.0x going forward. The REIT also expects to incur about US$0.9 million in U.S. taxes upon closing.

H&R plans to apply for approval to launch a normal-course issuer bid and may use up to $200 million of newly created debt capacity, over time, to repurchase units.

One retail property sale is expected to close in the fourth quarter of 2025, with the remaining transactions targeted for January 2026, subject to customary closing conditions. The sale of 88 McNabb, a 74,592-square-foot Greater Toronto Area office property, remains subject to buyer due diligence.

The REIT continues negotiations to sell two Toronto office properties at 310, 320 & 330 Front Street West and 25 Sheppard Avenue West and does not anticipate entering any additional binding sale agreements in 2025.

H&R previously announced plans to sell the approximately $2.6 billion in assets followed a months-long review of strategic alternatives.

The REIT’s special committee engaged with multiple interested parties that had initially submitted a non-binding expression of interest to acquire all of H&R’s assets. Through late winter and spring, the committee evaluated the proposals, but the prices and terms offered were deemed unacceptable.

After the REIT disclosed in July that it was exploring strategic options, additional parties came forward with interest in acquiring select assets, H&R said previously. A full sale process was conducted, generating several offers for specific properties but no bids for the REIT as a whole.

As a result, H&R began negotiating individual asset sales and expected to enter the binding agreements by year-end, though the REIT cautioned that there was no certainty transactions would be completed. With the sale process now proceeding under management and the board, the special committee has been dissolved.

During a conference call with analysts, Hofstedter declined to identify the types of assets that the REIT intended to sell.

Photo: H&R office property at 88 McNabb Street in Markham, Ont., under sale.

Photo: Realtor.ca