Blackstone Eyeing Acquisition of Canadian REIT

The conversations over the future of Canadian real estate investment trust H&R are back on, but without two of the previous parties involved.

H&R said it is in “preliminary, non-exclusive discussions” with Blackstone over an acquisition, Bloomberg reported. It’s unclear if the talks involve the whole company, as H&R’s statement mentioned “certain assets.” There’s also no guarantee a deal is completed, which Blackstone knows all too well from recent memory.

The Canadian firm, which primarily deals with multifamily properties, proved to be an attractive acquisition target last year when a consortium including Blackstone, TPG and Crestpoint Real Estate Investments engaged in takeover talks. Those fell apart, though, and Blackstone appears poised to go it alone this time.

Hedge fund K2 & Associates Investment Management has pressured H&R to consider a sale, noting how the company is trading at a big discount compared to the value of its real estate. The stock has lagged behind the rest of the Canadian real estate sector, returning roughly 22 percent over the last decade.

At the end of the third quarter, H&R managed more than C$8 billion in assets. It’s been shifting its portfolio, however, trying to get out of retail and office properties and more into multifamily and industrial properties, both in Canada and the United States. In November, it agreed to sell a portfolio of office and retail assets across both countries for C$1.5 billion.

But in March 2024, H&R bought the site at 459 Smith Street in Brooklyn’s Gowanus neighborhood from an entity backed by All Year Management’s Yoel Goldman for $76.5 million. Lantower Residential, a subsidiary of H&R REIT, had already been eyed as a potential developer of the site, which is in the area rezoned by the city in November 2021 to allow for higher density, mixed-use development.

As of the end of day on Thursday, the market capitalization of H&R was roughly C$3.1 billion, or $2.2 billion USD. Its portfolio spans more than 20 million square feet, largely centered in residential assets.

— Holden Walter-Warner