Chartwell Seniors Housing REIT

Chartwell Seniors Housing REIT

October 19, 2006 15:56 ET

Chartwell Seniors Housing Real Estate Investment Trust: Treasury Offering of Trust Units and Convertible Debentures

Announces Unit Financing of $150 MM and Convertible Debenture Financing of $125 MM to Finance its Proportionate Share of Acquisitions and Mezzanine Loans Totaling $670 MM

MISSISSAUGA, ONTARIO--(CCNMatthews - Oct. 19, 2006) -


Chartwell Seniors Housing Real Estate Investment Trust (the "REIT") (TSX:CSH.UN) of Mississauga, Ontario today announced that it has agreed to sell, subject to regulatory approval, 10,750,000 Units for $14.00 per unit ("Units") for aggregate gross proceeds of $150,500,000 and $125,000,000 of 5.75% subordinated unsecured convertible debentures due December 1, 2011 (the "Debentures") to a syndicate of underwriters led by RBC Capital Markets on a bought-deal basis. The REIT has granted to the Underwriters an option (the "Underwriters Over-allotment Option"), exercisable in whole or in part up to 30 days after closing, to purchase up to an additional 10% of the Units issued in the Unit Offering on the same terms as set forth above. This offering is expected to increase the REIT's market capitalization to over $1.2 billion, based on the offering price for the Units.

The REIT will, within the next few days, file with the securities commissions and other similar regulatory authorities in each of the provinces of Canada, a preliminary short form prospectus relating to the issuance of the Units and the Debentures. Closing of the offering is expected to take place on or about November 8, 2006.

The estimated net proceeds from the Unit and concurrent Debenture offering will be used to fund certain acquisitions, mezzanine loans, to repay amounts outstanding under the REIT's operating facility and for general trust purposes and future acquisitions.

Use of Offering Proceeds (Chartwell's Proportionate Share)
(C$ '000's)
Cost(1) Mortgages/ Funding Via Offer
1) Acquisitions
From third parties:
Bristal Portfolio $331,652 $287,264 $44,388
Regency Care Portfolio $137,136 $81,874 $55,262
Domaine Bellerive $79,092 $56,046 $23,046
Horizon Bay Management $31,296 $3,912 $27,384
Empress Arms $20,474 $12,938 $7,536
Hampton House $18,340 $13,250 $5,090
Treemont $10,210 $6,846 $3,364
Van Horne $6,285 $4,165 $2,120
Subtotal $634,485 $466,295 $168,190
From Spectrum:
Southwind Retirement
Residence $14,192 $11,810 $2,383
2) Mezzanine Loan Advances $21,401 $21,401
3) Repay Operating Line $32,880
4) Remaining Cash From
Offering $38,439
Grand Total
(net of offering costs) $670,078 $478,105 $263,293

(1) Includes closing costs and foreign currency exchange rate of
$1.1177 for US acquisitions
(2) Includes deferred consideration, repayment of mezzanine loans
and the issuance of LP Units to Spectrum

The REIT, through the Chartwell-ING Joint Venture, intends to use approximately $44.4 million of the proceeds from the concurrent offerings to acquire the Bristal Portfolio, which consists of five 100% private pay communities comprising 640 assisted living units located in a concentrated area on Long Island, New York. The properties are all located within a 15 mile radius in Nassau County. Four of the buildings opened between 2001 and 2004 and the fifth building opened in July 2006. The properties have generous common areas, upscale amenities and average suite sizes in excess of 800 sq. ft.

The REIT intends to use approximately $55.3 million of the proceeds to acquire the Regency Care Portfolio. Chartwell has engaged in discussions with a third party to provide 50% of the cash portion of the purchase price and expects to enter into a joint venture agreement with such third party in respect of the acquisition and subsequent operation of the Regency Care Portfolio prior to closing of the acquisition. The Regency Care Portfolio includes eight new Class A long term care ("LTC") facilities in the greater Toronto area ("GTA") with 1,384 beds. The Regency Care Portfolio also includes 814 suites in six other LTC facilities that the REIT will manage on behalf of third parties and excess land zoned for the addition of approximately 400 assisted or independent living suites in the future.

The REIT intends to use approximately $23.0 million to acquire Domaine Bellerive, a three tower apartment complex comprised of 810 suites located in Laval, a suburb of Montreal, on the banks of the Riviere des Prairies. It is the REIT's intention, through its joint venture management company with Groupe Melior, to convert the property into an independent living community. The property includes 5.38 acres of excess land with development potential, as well as 15,200 square feet of commercial space.

The REIT intends to use approximately $27.4 million to acquire a 49% interest in Horizon Bay Management ("HBM"), a US seniors' housing management company, which is an existing joint venture partner of the REIT in the management of the REIT's US seniors housing facilities. Through its 49% interest, the REIT will be acquiring a leased interest in 27 US seniors housing properties and an interest in management contracts pertaining to HBM's management of these 27 leased properties, which include 5,740 mainly independent and assisted living suites.

The REIT intends to use approximately $7.5 million to acquire Empress Kanata, a 3-storey building comprising 90 suites (64 independent and 26 assisted Living). The building is located in the former city of Kanata, now part of the amalgamated City of Ottawa.

The REIT intends to use approximately $5.1 to acquire Hampton House, a 97-suite independent living facility in Chilliwack, British Columbia.

The REIT, in connection with a joint venture partner, intends to use approximately $3.4 to acquire a 50% interest in Treemont, a 256-suite independent living home in Dallas, Texas. The joint venture's participation in this transaction is subject to satisfactory completion of due diligence and necessary approvals.

The REIT intends to use approximately $2.1 million to acquire Van Horne Manor, a single storey independent living apartment building comprising 58 suites, situated in Smiths Falls, Ontario.

The REIT will use approximately $2.4 million to acquire Southwind Retirement Residence, a 79-suite light care retirement home located in Sudbury, Ontario from Spectrum Seniors Housing Development LP ("Spectrum").

In addition, approximately $21.4 million is intended to be used to fund various mezzanine loans to be made by Chartwell Master Care LP over the quarter ending December 31, 2006 in relation to facilities under development.

Finally, approximately $32.9 million is intended to be used to repay the REIT's operating facility, which was in part used to fund various mezzanine loans (approximately $6.1 million) made by Chartwell Master Care LP over the quarter ended September 30, 2006 and thereafter, in relation to internal development projects (approximately $3.5 million), general trust purposes (approximately $10.7 million) and to fund the following completed acquisitions:

a) the REIT used its operating facility (approximately $6.1 million) to acquire Manoir Kirkland, a 7 storey building comprising 191 independent living suites located in Kirkland within the West Island of Montreal; and

b) the REIT used its operating facility (approximately $6.5 million) to acquire Heritage Glen, a 323-suite, 2 -building apartment complex recently to be converted into a light care seniors residence in Mississauga, Ontario.

While the REIT expects to complete the above acquisitions, the completion of certain of these acquisitions remains subject to the fulfillment of certain customary conditions, including the completion of due diligence. Until such time as all conditions have been satisfied or waived, there can be no assurance that these acquisitions will be completed. Any cash remaining from the offering (after Underwriters' fees and offering expenses) will be used to finance potential future acquisitions and mezzanine loans consistent with the REIT's growth strategy, capital expenditures and for general trust purposes.

The REIT intends to make monthly cash distributions to Unitholders of record on each record date, on or about the 15th day of the month following the record date. The REIT's current monthly cash distribution is $0.08875 per Unit. The first cash distribution to which purchasers of the Units under this offering will be entitled to participate will be for the month of November, with a record date of November 30, 2006 and a payment date of December 15, 2006.

The Debentures will bear interest at a rate of 5.75% per annum payable semi-annually in arrears on December 1st and June 1st in each year commencing December 1, 2006. The December 1, 2006 interest payment will represent accrued interest for the period from closing to December 1, 2006. Each Debenture will be convertible into freely tradeable REIT trust units at the option of the holder at any time prior to maturity at a conversion price of $16.00 per Unit (the "Conversion Price"), being a ratio of approximately 62.5 Units per $1,000 principal amount of Debentures, and representing a premium of approximately 14.3% to the unit offer price. The Debentures will mature on December 1, 2011.

The Units and Debentures are being offered have not been and will not be registered under the United States Securities Act of 1933 and state securities laws. Accordingly, the Units and Debentures may not be offered or sold to U.S. persons except pursuant to applicable exemptions from registration.

Chartwell Seniors Housing REIT is an unincorporated, open-end real estate investment trust governed by the laws of the Province of Ontario. Chartwell REIT is a growth-oriented investment trust which indirectly invests in Chartwell Master Care LP, which owns and manages a complete spectrum of seniors housing properties in selected centers across Canada. (References in this press release to "Chartwell Seniors Housing REIT", the "REIT" and "Chartwell REIT" shall be deemed to mean Chartwell Seniors Housing Real Estate Investment Trust and its subsidiaries including Chartwell Master Care LP, as appropriate.) Chartwell REIT is currently the largest participant in the Canadian seniors housing business. Chartwell REIT will capitalize on the strong demographic trends present in its markets to grow internally and through accretive acquisitions. Chartwell REIT also has an exclusive option to purchase stabilized facilities from Spectrum Seniors Housing Development LP, a seniors' housing development company.

Additional information on Chartwell Seniors Housing REIT is available on the REIT's web site at:

This press release contains forward-looking statements that reflect the current expectations of management of the REIT and Master LP (Master LP together with its general partner and subsidiaries, the "Operator") about the future results, performance, achievements, prospects or opportunities for the REIT, the Operator and the seniors housing industry. Chartwell REIT has tried to identify these forward-looking statements relating to the general affairs of the REIT as well as for statements concerning the completion of any proposed transaction, intended financing arrangements and the effects on the REIT of such acquisitions and financings as a result thereof by using words such as "may", "will", "expect", "anticipate", "believe", "intend", "plan", "estimate", "potentially" and similar expressions. Such forward-looking statements necessarily involve known and unknown risks and uncertainties that may cause Chartwell REIT or the Operator or the industry's actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, risks related to: business risks; real property ownership and lack of diversity; geographic concentration; continued growth; acquisition and development; competition; government regulation; debt financing; mezzanine financing; environmental liabilities; third party liability and insurance; personnel costs; labour relations; conflicts of interest; management contracts; availability of cash flows; redemption right; accounting; dilution; nature of Units; Unitholder liability; market for Units and Unit price; and tax. There can be no assurance that the expectations of management of the REIT will prove to be correct.

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