Why H&R REIT Stock Plunged 20% Today

The news about H&R REIT’s (TSX:HR.UN) Primaris properties spinoff completion seemingly didn’t please most investors, triggering a selloff in its stock.

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What happened?

The shares of H&R Real Estate Investment Trust (TSX:HR.UN) dived by more than 21% this morning to as low as $12.49 per share, despite the broader market optimism. With this, the stock hit its lowest level since February 2021, coming closer to its 52-week low of around $11.91 per share.

So what?

H&R REIT is a North York-based real estate company that mainly focuses on maximizing the value of units by actively managing its assets. It currently has a market cap of about $4.6 billion.

Today’s sharp selloff in H&R REIT stock came after the company announced the completion of its Primaris properties spinout. This news came slightly more than two months after H&R revealed its intentions to spin off its Primaris properties on October 27, 2021. After this spinoff, the company plans to reposition itself into a simplified, growth-oriented REIT. It intends to reinvest the funds from this spinoff to fund its other major multi-residential and industrial development projects.

However, the news of Primaris spinoff completion seemingly didn’t please most investors, triggering a big selloff in HR.UN stock this morning.

Now what?

Apart from providing funds for its key development projects, the Primaris spinoff will also allow H&R to make some quality acquisitions in prime locations in Toronto, Montréal, Vancouver, and high-growth U.S. sunbelt and gateway cities. These acquisitions could help the company boost its long-term growth prospects as a major growth-focused REIT. That’s why I expect its stock to see a gradual recovery in the near term after today’s big selloff.

In 2021, H&R REIT stock rose by 23% after witnessing 37% value erosion in the previous year. With this, the stock is still trading well below its 2019 closing level of $20.97 per share. While the COVID-19 woes badly affected its business in 2020, its 2021 earnings are expected to be higher than its pre-pandemic levels. That’s why long-term investors may want to take advantage of the recent drop in H&R stock to buy it cheap.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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