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A view of 310, 320 and 330 Front St. West, an office complex in downtown Toronto.EDUARDO LIMA/The Globe and Mail
After searching for the better part of two years, H&R Real Estate Investment Trust HR-UN-T has finally found buyers for one of Canada’s largest property portfolios.
H&R is selling all of its assets to a consortium, almost exactly three decades after Tom Hofstedter founded the business in 1996. The consortium consists of multiple individual buyers who are acquiring different parts of the portfolio, including GO Residential Real Estate Investment Trust, U.S. private equity giant Blackstone Inc., Crestpoint Real Estate Investments Ltd., the Public Sector Pension Investment Board and a company controlled by members of the Hofstedter family.
The complex transaction values H&R at $3.4-billion, or $6.7-billion when including debt. In a Tuesday morning note to clients, Scotia Capital analyst Mario Saric said it was the culmination of a long process, but the end result looks initially underwhelming.
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H&R unitholders will mostly be paid with units of GO, making them the majority owners of that REIT, with the cash component making up $4.28 of the total per-unit price of $12. That equates to a 19-per-cent discount relative to Scotia’s calculation of H&R’s net asset value, Mr. Saric said, in contrast to a 3-per-cent average premium to net asset value in post-COVID mergers and acquisitions.
Investors also appear underwhelmed by the announcement, with H&R units closing Tuesday at $10.75, a 1.3-per-cent drop, on the Toronto Stock Exchange. During a Tuesday morning conference call with analysts, the company would not comment on how the $12-a-unit price breaks down among the various consortium members.
H&R units last traded above the $12 threshold in September of 2025.
“We negotiated hard to arrive at the terms we are announcing today,” Stephen Gross, H&R’s lead independent trustee, said on the call. “This has been a long process. We are proud of where it has landed.”
The company initially launched a strategic review in February, 2025, after receiving an unsolicited takeover offer from a potential buyer, but the process ended in failure later that year. The company instead pledged to sell $2.6-billion worth of its assets.
REITs generally focus on owning a single type of property. H&R, however, holds assets spanning residential, industrial, office and retail, making a sale of the entire portfolio to a single buyer more complicated.
“H&R demonstrated last year how difficult such portfolios can be to transact, particularly given what we believe is a motivated seller,” TD Securities analyst Sam Damiani said in a note to clients on Tuesday. “The discount reflects the challenges of monetizing a portfolio that is highly diversified across both geographies and property types.”
A majority of H&R’s portfolio – 60 per cent – is residential, consisting mostly of apartment buildings in several U.S. states. GO is acquiring much of that, including 23 properties held by Lantower Residential, which is H&R’s Dallas-based U.S. multi-family division.
GO is also buying two of H&R’s premier New York assets: the Gotham Center office building and a 50-per-cent interest in the Jackson Park high-rise apartment complex.
Roughly 25 per cent of H&R’s portfolio is industrial. The vast majority of that is warehouse and logistical space. For example, H&R has a 50-per-cent ownership interest in a dozen distribution centres across four provinces used by Canada Post-owned Purolator Inc.
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Canadian Tire Corp. Ltd., Sleep Country Canada Inc. and Caterpillar heavy-machinery dealer Finning International Inc. are also among H&R’s major industrial tenants.
Blackstone is buying some of H&R’s Canadian industrial properties, though exactly which ones were not disclosed. H&R confirmed it was in talks with Blackstone about a potential transaction in June.
The U.S. private equity firm is one of the world’s largest real estate investors. In 2024, Blackstone bought Toronto-based rental property owner Tricon Residential Inc. for US$3.5-billion.
Crestpoint and PSP Investments are buying out H&R’s 50-per-cent stake in industrial assets, based on a partnership that was first struck between all three parties in 2014.
The Hofstedter family is acquiring mostly office properties, which account for roughly 11 per cent of H&R’s total portfolio. Among the REIT’s notable office assets are Bell Canada’s office in Dorval, Que., and a 50-per-cent stake in the nearly million-square-foot TC Energy tower in downtown Calgary.
H&R will hold a special unitholder meeting in October to approve the transaction. At least two-thirds of votes cast at that meeting must support the proposal in order for the deal to proceed, with closing expected in late 2026.
“We believe the transaction will be supported,” TD’s Mr. Damiani said, citing the board’s unanimous recommendation “as well as some unitholder exhaustion.”