Key Points
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H&R’s U.S. multifamily operations are showing early improvement after switching property management to Greystar, with April leads up 18%, tours up 13% and approved leases up more than 70% year over year. Management still expects CAD 5 million in 2026 savings from the transition.
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Residential NOI rose 2.3% in Q1, helped by lease-up at Dallas assets, but occupancy fell to 90.9% and Sunbelt lease spreads remained weak, with blended trade-outs at negative 3.5%. Management expects occupancy to improve and spreads to recover later in the year as supply eases.
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Asset sales remain central to H&R’s strategy, with 26 Wellington, 25 Sheppard and likely Gowanus expected to generate about CAD 300 million in proceeds. CEO Tom Hofstedter said the broader repositioning is nearly complete, with office down to about 10% of the portfolio and the plan likely finished by year-end.
H&R Real Estate Investment Trust (TSE:HR.UN) said its U.S. multifamily operations are showing early signs of improvement following the transition of property management to Greystar, while management continues to work through asset sales and the final stages of its multiyear strategic repositioning.
On the REIT’s 2026 first-quarter earnings call, Chief Executive Officer Tom Hofstedter said CFO Larry Froom was unavailable and that Cheryl Fried and Jason Birken would take questions. Emily Watson, head of H&R’s Lantower division, provided the operating update for the company’s residential portfolio.
Greystar transition completed as multifamily demand indicators improve
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Watson said H&R successfully transitioned property management to Greystar effective April 1 and described the early post-transition indicators as encouraging. April lead volume rose 18% year over year, completed tours were 13% higher than April of last year, and approved leases increased more than 70% year over year for the month.
Watson said the transition is expected to create long-term value through “efficiency at scale, enhanced oversight, and significant overhead savings.” She pointed to strong demand supported by steady wage growth, low rent-to-income ratios and high retention rates across the Sunbelt portfolio.
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Bulk Wi-Fi projects are also advancing. Watson said four communities have launched and are expected to generate about CAD 800,000 in revenue for 2026, with another seven projects in the pipeline.
In response to a question from RBC Capital Markets analyst Jimmy Shan, Watson said she remained confident in achieving CAD 5 million of savings in 2026 from the Greystar transition. She cited lower management fees, better purchasing power and savings on line items such as painting and employee group insurance.
Residential NOI rises, but occupancy and lease spreads remain under pressure
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Same-property net operating income on a cash basis from residential properties, measured in U.S. dollars, increased 2.3% for the three months ended March 31, 2026, compared with the same period in 2025. Watson said the growth was primarily driven by the lease-up of Lantower West Love and Lantower Midtown, both in Dallas. The gain was partly offset by lower rental income from H&R’s Sunbelt properties due to higher vacancies and concessions.
Same-asset occupancy ended the quarter at 90.9%, down 1.2 percentage points from the fourth quarter and 30 basis points from a year earlier. In response to Shan’s question, Watson said occupancy was “right around that 90 mark” and said the first quarter was a transition period as the company moved systems, websites and property operations to Greystar.
Sunbelt blended lease trade-outs were negative 3.5% in the first quarter, 50 basis points worse than the fourth quarter and 114 basis points worse than the prior-year quarter. New lease trade-outs were negative 14.8%, while renewal lease rates increased 3.8%. Resident retention remained strong at 58.3% in the quarter.
Asked by TD Cowen analyst Sam Damiani about the weaker leasing spreads, Watson said she expected similar results in the second quarter but with higher occupancy. She said supply should decline more meaningfully in the third and fourth quarters, improving pricing power. In response to Scotiabank analyst Mario Saric, Watson said she would like to see blended lease spreads return to flat by the end of the second quarter or early third quarter and potentially reach positive 2% to 3% by the end of the fourth quarter, though she noted normal seasonal factors.
Florida developments nearing completion
Watson said H&R’s new REIT projects in Florida, in which H&R has a 29.1% ownership interest, remain on budget. Sunrise in Orlando received its temporary certificate of occupancy during the week of the call, with first move-ins expected by June. Lantower Bayside in Tampa is expected to receive its temporary certificate of occupancy the following week, with first move-ins also expected in June.
Construction completion for both assets is expected by the end of June. Watson said Lantower currently has nine Sunbelt developments in the pipeline totaling about 2,900 suites at H&R’s ownership interest. Multiple sites are fully permitted and ready for construction, while the company is advancing design, drawings and permitting on the remainder.
Asset sales remain a focus as office exposure declines
Hofstedter provided several updates on asset sales and leasing. He said the former HBC industrial space is currently leased on a temporary basis to a film studio and that there is some leasing activity, though he described the market as weak. He said he hoped the space would be leased by the end of the year.
At 330 Front Street, where RBC is moving out, Hofstedter said the property is seeing demand from large users, particularly financial institutions. He said H&R is optimistic that leases could be signed this year, potentially this quarter, and said he hopes the available RBC space will be taken by one tenant.
Hofstedter said Front Street is not on the market and likely will not be put up for sale this year until leasing advances. He said 26 Wellington and 25 Sheppard are on the market and that H&R has a conditional deal signed for 26 Wellington. He also said the company hopes to have something firm to announce on Gowanus, likely this quarter. Together, those three assets represent roughly CAD 300 million of expected sales proceeds, he said.
Asked by Saric about the broader disposition target previously discussed at CAD 500 million to more than CAD 1 billion, Hofstedter said CAD 500 million is “definitely achievable,” while CAD 1 billion is “not on the guaranteed horizon.” He said the cap rate on the office components of the CAD 500 million would likely be around 7.5% to 8%, while noting that Gowanus has no income and therefore no cap rate.
Hofstedter also said the REIT may initiate normal course issuer bid activity after completing the expected asset sales. He told CIBC Capital Markets analyst Tal Woolley that proceeds from the asset sales should cover the unsecured bond maturity coming due this year, and that H&R does not plan to issue unsecured debt at this time.
Strategic plan nearing completion
Asked by Shan about the company’s strategic plan, Hofstedter said the REIT is “pretty close” to finishing it, with office now reduced to about 10% of the portfolio. He said investors could “basically assume” the plan will be completed by the end of the year, after which the company will need to determine its next steps for its industrial and Lantower platforms, including whether to roll out one of the assets, keep them or pursue another course.
Hofstedter said discussions are underway among H&R’s trustees and that the company hopes to have a resolution before year-end.
About H&R Real Estate Investment Trust (TSE:HR.UN)
H&R REIT is one of Canada’s largest real estate investment trusts. H&R REIT has ownership interests in a Canadian and U.S. portfolio primarily comprised of high-quality residential (operating as Lantower Residential), industrial and office properties comprising approximately 21.3 million square feet.
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The article “H&R Real Estate Investment Trust Q1 Earnings Call Highlights” was originally published by MarketBeat.
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