/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES/
TORONTO, Dec. 23 /CNW/ - H&R Real Estate Investment Trust (the "REIT";
TSX: HR.UN, HR.DB) announced today that it has entered into an agreement with
Fairfax Financial Holdings Limited ("Fairfax"), pursuant to which Fairfax has
agreed to purchase, at par on a private placement basis, $200 million of 11.5%
debentures (the "Debentures") due on the fifth anniversary of the issue date
with interest payable semi-annually (the "Private Placement"). Completion of
the Private Placement is subject to the satisfaction of certain conditions.
The Debentures will be redeemable after the fourth anniversary of the
issue date, at a redemption price equal to the principal amount thereof plus
accrued and unpaid interest. The Debentures will require the REIT, at the
holders' option, to effect repurchases upon a change of control at 101% of the
principal amount plus accrued and unpaid interest, and will contain similar
covenants, events of defaults and remedies as the REIT's outstanding
convertible debentures. Furthermore, the Debentures will be unsecured and will
rank equally with the REIT's current and future unsecured debt including the
REIT's outstanding convertible debentures.
Contemporaneously with the issue of these Debentures, Fairfax will be
granted warrants to purchase 28,571,428 stapled units at an exercise price of
$7.00 per stapled unit (or net proceeds of approximately $200 million if
exercised in full) which are exercisable for a period of 5 years from the date
of grant.
The Private Placement is conditional upon, among other things, the
occurrence of the following events by closing: (i) receipt by the REIT of
construction financing commitments of no less than $400 million for the
development of "The Bow" in Calgary; (ii) monthly unitholder cash
distributions of $0.06 per stapled unit will be maintained until closing; and
(iii) TSX approval. Closing of the Private Placement is expected to occur on
the second business day following satisfaction of all conditions to the
Private Placement and if conditions are not satisfied or waived within 120
days from the date hereof, the Private Placement will be cancelled.
The REIT also announced that coincident with arranging the above-noted
Private Placement, it will reduce its monthly cash distributions to
unitholders by half to $0.06 per stapled unit (or $0.72 per stapled unit on an
annualized basis) commencing with the January 2009 distribution. The cashflow
retained from the reduced distribution will be used to finance construction of
The Bow. The new distribution level represents an annual yield of
approximately 11.4% based on the December 23, 2008 stapled unit closing price
of $6.30 on the Toronto Stock Exchange ("TSX").
