H&R Real Estate Investment Trust Announces $250 Million Offering of Trust Units and Convertible Unsecured Subordinated Debentures

TORONTO, ONTARIO--(Marketwire - May 20, 2008) - H&R Real Estate Investment Trust ("H&R") (TSX: HR-UN.TO) has announced that it has entered into an agreement to sell, to a syndicate of underwriters led by CIBC World Markets Inc. and RBC Capital Markets, on a bought deal basis, a combination of $100 million principal amount 6.65% convertible unsecured subordinated debentures ("Debentures") and 7,595,000 trust units ("Trust Units") at a price of $19.75 per unit to raise, in aggregate, gross proceeds of approximately $250 million. H&R has granted the underwriters an over-allotment option, exercisable in whole or in part up to 30 days after closing, to purchase an additional $15 million of Debentures and an additional 15% of Trust Units at the same offering prices. Should the over-allotment option be fully exercised, the total gross proceeds of the financing will be approximately $287.5 million. Closing is expected to occur on or about June 6, 2008, subject to regulatory approval.

The net proceeds of the offering will be used to fund future developments including The Bow development in Calgary, Alberta and Phase III expansion of Bell Canada's office complex in Mississauga, Ontario and in the interim reduce bank indebtedness.

The Debentures bear interest at a rate of 6.65% per annum payable semi-annually in arrears on June 30 and December 31 in each year commencing on December 31, 2008, and will mature on June 30, 2013 (the "Maturity Date"). The Debentures will be convertible at the holder's option into units of H&R (the "Units") at any time prior to the earlier of the Maturity Date and the date fixed for redemption at a conversion price of $23.11 per Unit (the "Conversion Price"). The Debentures will not be redeemable on or before June 30, 2011. After June 30, 2011 and prior to June 30, 2012, the Debentures may be redeemed in whole or in part from time to time at H&R's option provided that the volume weighted average trading price for the Units is not less than 125% of the Conversion Price. On and after June 30, 2012 and prior to the Maturity Date, the Debentures may be redeemed in whole or in part from time to time at H&R's option at a price equal to their principal amount plus accrued interest. Subject to regulatory approval, H&R may satisfy its obligation to repay the principal amount of the Debentures on redemption or at maturity, in whole or in part, by delivering that number of Units equal to the amount due divided by 95% of the market price for the units at that time, plus accrued interest in cash.

The first distribution for which purchasers of the Trust Units offered hereunder will be entitled to receive is the distribution expected to be paid June 30, 2008 to holders of record on June 19, 2008.

About H&R

H&R REIT is a TSX-listed, open-ended real estate investment trust, which owns a North American portfolio of 35 office, 124 industrial and 141 retail properties comprising approximately 44.2 million square feet, with a net book value of $4.7 billion. The foundation of the REIT's success is a disciplined strategy that leads to consistent and profitable growth.

Additional information regarding H&R REIT is available at www.hr-reit.com.

The securities being offered have not been, nor will be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or applicable exemption from the registration requirement of such Act. This release does not constitute an offer for sale of securities in the U.S. and any public offering of securities in the U.S. will be made by means of a prospectus.

Certain information in this news release may contain forward-looking statements within the meaning of applicable securities laws including, among others, statements relating to the REIT's objectives, strategies to achieve those objectives, the REIT's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be identified by words such as "outlook", "objective", "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "should", "plans" or "continue" or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect the REIT's current beliefs and are based on information currently available to management. Forward-looking statements are provided for the purpose of presenting information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. These statements are not guarantees of future performance and are based on the REIT's estimates and assumptions that are subject to risks and uncertainties, including those described under "Risk Factors" in the REIT's annual information form and those discussed in the REIT's materials filed with the Canadian securities regulatory authorities from time to time, which could cause the actual results and performance of the REIT to differ materially from the forward-looking statements contained in this news release. Those risks and uncertainties include, among other things, risks related to: the tax position and consequence unique to each unitholder; the failure to obtain all approvals required to implement the Reorganization; Unit prices; availability of cash for distributions; development and financing relating to the Bow Development; credit risk and tenant concentration; interest rate and other debt related risks; tax risk; ability to access capital markets; dilution; lease rollover risk; construction risks; real property ownership; currency risk; government regulation; investment eligibility; unitholder liability; co-ownership interest in properties; dependence on key personnel; mezzanine financing credit risk; competition for real property investments; influence of H&R Property Management Ltd. over the REIT; potential conflicts of interest; redemption right; and statutory remedies. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward looking statements include that the information utilized by the REIT to determine the tax consequences of the Reorganization to the REIT and its unitholders is accurate and remains unchanged, the general economy remains stable; interest rates are relatively stable; and equity and debt markets continue to provide access to capital. The REIT cautions that this list of factors is not exhaustive. Although the forward looking statements contained in this news release are based upon what the REIT believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward looking statements. All forward looking statements in this news release are qualified by these cautionary statements. The forward looking statements are made only as of the date that such statements are made and the REIT, except as required by applicable law, assumes no obligation to update or revise them to reflect new information or the occurrence of future events or circumstances.

Contacts

Larry Froom
H&R Real Estate Investment Trust
Chief Financial Officer
(416) 635-7520
Email: info@hr-reit.com
Website: www.hr-reit.com