HealthLease Properties Real Estate Investment Trust

TSX : HLP.UN


HealthLease Properties Real Estate Investment Trust

April 15, 2014 16:27 ET

HealthLease Properties Real Estate Investment Trust Announces Acquisitions and CDN$50.0 Million Equity Financing

TORONTO, ONTARIO--(Marketwired - April 15, 2014) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

  • Upon closing, the acquisition of seven operating properties will increase the REIT's real estate portfolio to 54 properties in eight U.S. states and two Canadian provinces
    • Acquisition of four operating properties for US$49.4 million totaling 365 beds
    • Acquisition of one operating property from Mainstreet Property Group totaling 100 beds (purchase price to be determined based on third party appraisal)
    • Acquisition of two operating properties for CDN$53.3 million totaling 283 beds
  • The average age of the acquisition properties is approximately three years
  • The Acquisitions will be funded through the issuance of units, assumption of existing debt and available capacity under the REIT's secured operating line of credit
  • The Acquisitions are expected to be immediately accretive to the REIT's AFFO per unit

HealthLease Properties Real Estate Investment Trust (TSX:HLP.UN) ("HealthLease" or "the REIT") announced today that its Board of Trustees has approved the acquisition of a seniors housing and care property portfolio from Smith Packett (the "SP III Senior Care Portfolio"), the acquisition of a Next Generation® seniors housing and care facility from Mainstreet Property Group (the "Mainstreet Acquisition") and the acquisition of two newly developed properties that HealthLease agreed to purchase, and which were previously announced, as part of the Continuum acquisition in July 2013 (the "Continuum II Portfolio" and, together with SPIII Senior Care Portfolio and the Mainstreet Acquisition, the "Acquisitions"). The Acquisitions will be acquired at a weighted average capitalization rate of approximately 7.8% and are expected to be immediately accretive to the REIT's AFFO per unit.

SP III Senior Care Portfolio

The SPIII Senior Care Portfolio is being acquired for an aggregate purchase price of US$49.4 million, representing an 8.3% capitalization rate. The portfolio will be financed with available capacity under the REIT's US$250 million secured operating line of credit and a portion of the net proceeds from the equity offering. The portfolio consists of two skilled nursing facilities ("SNFs") and two assisted living facilities ("ALFs") located in North Carolina, Virginia and Pennsylvania with 186 SNF beds and 179 ALF beds. The average age of the four properties is approximately 7 years. The portfolio is triple-net leased and operated by Saber Healthcare Group, LLC ("Saber"). Saber, headquartered in Bedford Heights, Ohio, operates more than 70 facilities across six states, including 12 properties currently owned by the REIT. Management estimates that Saber is the 24th largest skilled nursing operator in the United States.

Mainstreet Acquisition

The REIT will also acquire a newly-built and triple-net leased seniors housing and care facility from Mainstreet Property Group. The purchase price of the facility will be determined based on a third party appraisal and the acquisition capitalization rate is expected to range between 7.5% and 8.5%. The Mainstreet Acquisition will be financed with available capacity under the REIT's US$250 million secured operating line of credit and a portion of the net proceeds from the equity offering. The newly-built and triple-net leased property is a 100-unit facility located in Kokomo, Indiana. The facility is a product of the most recent Next Generation® Medical Resorts developed by Mainstreet. The facility carries Mainstreet's vision to transform seniors housing and care into a hospitality experience by incorporating hotel-like amenities and concierge-based services.

Continuum II Portfolio

The Continuum II Portfolio is being acquired for an aggregate purchase price of CDN$53.3 million, representing a 7.3% capitalization rate. The portfolio is comprised of two newly developed properties that the REIT provided mezzanine financing for and committed to purchase once construction was completed as part of the Continuum acquisition in July 2013. The portfolio will be financed with the assumption of outstanding secured property level debt and a portion of the net proceeds from the equity offering. The portfolio is comprised of two assisted living and independent living facilities ("ALF" and "ILF") with a total of 283 beds, is triple-net leased and operated by Continuum Health Care Holdings Ltd., an Alberta-based care provider specializing in the operation of supportive and assisted living facilities.

"As we continue to execute on our strategic growth plan, these acquisitions continue to demonstrate the REIT's ability to acquire high quality, current generation assets on an accretive basis for unitholders," stated Zeke Turner, Chairman and CEO of the REIT.

Upon completion of the Acquisitions, the REIT's portfolio will increase to 54 facilities comprised of 5,383 beds/suites geographically diversified across eight states and two provinces with a total of 13 operators. In addition, the Acquisitions will result in greater diversification of need driven care services. The REIT's portfolio will consist of 32% Post-Acute Care beds, 23% Long-Term Care beds, 35% Assisted Living beds and 10% Independent Living beds. The Acquisitions are anticipated to close at various times throughout the next 120 days.

Equity Financing

In connection with the Acquisitions, HealthLease announced today that it has entered into an agreement with a syndicate of underwriters led by BMO Capital Markets and National Bank Financial Inc. (collectively, the "Underwriters"), to sell on a bought deal basis, 5.0 million Units at a price of CDN$10.00 per Unit for gross proceeds to HealthLease of approximately CDN$50.0 million (the "Offering"). HealthLease has also granted the Underwriters an over-allotment option to purchase up to an additional 750,000 Units on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the closing of the Offering. The Offering is expected to close on or about May 5, 2014 and is subject to customary conditions, including regulatory approval and the approval of the Toronto Stock Exchange. The Offering is not conditional upon closing of the Acquisitions.

The REIT intends to use the net proceeds from the Offering primarily for the funding of a portion of the purchase price in respect of the Acquisitions, for repayment of debt in respect of the Clearvista Lake Campus and Arlington Place Health Campus acquisitions announced on March 17, 2014 and for general trust purposes. In the event the REIT is unable to consummate one or all of the Acquisitions and the Offering is completed, the REIT would use the net proceeds of the Offering to fund future acquisitions and for general trust purposes.

The Units will be offered by way of a short form prospectus to be filed with the securities commissions and other similar regulatory authorities in each of the provinces and territories of Canada.

The Units have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the "1933 Act") and may not be offered, sold or delivered, directly or indirectly, in the United States, or to, or for the account or benefit of, "U.S. persons" (as defined in Regulation S under the 1933 Act), except pursuant to an exemption from the registration requirements of the 1933 Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any Units in the United States or to, or for the account or benefit of, U.S. persons.

About HealthLease Properties Real Estate Investment Trust

HealthLease Properties Real Estate Investment Trust (TSX:HLP.UN) owns one of the youngest and highest quality portfolios of seniors housing and care facilities with 54 properties - 14 in two Canadian provinces and 40 in eight U.S. states, for a total of 5,383 beds. The facilities are leased to experienced tenant operators who have significant operational experience. The leases are structured as long-term and triple-net: features that provide stability and dependability to the REIT's cash flow and distributions. The REIT's best-in-class portfolio meets the growing demands of modern seniors by emphasizing features such as hotel-like design, private rooms and baths and hospitality-inspired amenities.

Forward-Looking Information:

This press release contains forward-looking statements with respect to HealthLease and its operations, strategy, financial performance and financial condition, as well as with respect to the Acquisitions. These statements generally can be identified by the use of forward-looking words such as "forecast", "may", "will", "would", "expect", "estimate", "anticipate", "intend", "believe" or "continue" or the negative thereof or similar variations. The actual results and performance of HealthLease and the senior care portfolios discussed herein (including HealthLease's existing portfolio and those to be acquired pursuant to the Acquisitions) (the "Senior Care Portfolio") could differ materially from those expressed or implied by such statements. See the risk factors in the public filings of HealthLease. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Some important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, the failure to receive any required approvals or consents in connection with one or more of the Acquisition or the failure to satisfy or waive any other condition to one or more of the Acquisitions, the failure of HealthLease to realize expected benefits from the acquisition of one or both of the Senior Care Portfolios, the failure of HealthLease to satisfy the conditions of the Offering or otherwise close the Offering, the performance of the Senior Care Portfolios generally, and changes in securities or other laws or regulations or the application thereof. The cautionary statements qualify all forward-looking statements attributable to HealthLease and persons acting on its behalf. The assumptions made in making forward-looking statements are referred to in the public filings of HealthLease. The assumptions made in making forward-looking statements in this press release also include the assumption that HealthLease will be in a position to satisfy the conditions in respect of the Acquisitions, the Offering and the replacement of its current operating line and complete those transactions. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release. Except as required by applicable law, HealthLease specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. Additional information about these assumptions and risks and uncertainties is contained in HealthLease's filings with securities regulators, including its latest annual information form and MD&A. These filings are also available at HealthLease's website at www.hlpreit.com.

Contact Information

  • HealthLease Properties REIT
    Scott White
    Executive Vice-President - Finance
    (317) 420-0205

    TMX Equicom
    Renee Lam
    Investor Relations
    (416) 815-0700 ext. 258