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TORONTO-H&R REIT has acquired 2.17 million sf of industrial in three large distribution properties that are leased long-term to Nestle USA. The locally based REIT focused on US real estate says it paid $143.74 million (C$169 million) in cash and assumed debt for the portfolio.

The properties were constructed in 1993 and are located near major interstate highways and rail lines. Nestle has invested heavily in the buildings. Its average remaining term on the leases is 12 years. The properties have a combined 90 acres of expansion land.

As part of the transaction H&R is assuming existing financing of $100 million. The nonrecourse loan is due February 2012.

H&R REIT’s main strategy is to acquire US properties leased long term to creditworthy tenants. H&R chief executive Tom Hofstedter says the Nestle transaction was the major reason for H&R’s recent public offering, which generated gross proceeds of $150 million.

Listed on TSX, H&R owns 35 million sf of industrial, retail and office properties with a net book value of $3.7 billion. The mix includes 106 industrial properties, 88 retail properties and 34 office properties.

Last week, it completed a public offering of 7.67 million Trust Units at a price of $19.55 per unit. The units were sold to a syndicate of underwriters led by CIBC World Markets Inc.

In June, H&R unitholders approved the REITs conversion to an open-ended unit trust under the provisions of the Income Tax Act (Canada). Effected by the addition of a unit redemption right exercisable by the unitholders, the conversion aligns H&R REIT with a significant number of the other existing Canadian real estate investment trusts.

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