HealthLease Properties Real Estate Investment Trust Announces Approval of CDN$200.6 Million of Property Acquisitions and CDN$60.0 Million Equity Financing

TORONTO, ONTARIO--(Marketwired - July 2, 2013) -

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

• Upon closing, acquisition of 12 operating properties and mezzanine financing of two development properties will increase the REIT's real estate portfolio to 45 properties in seven U.S. states and two Canadian provinces, triple the number of properties at the time of the IPO in June 2012 representing over CDN$600 million of asset value; post-acquisition, annual cash rents will exceed CDN$46 million, more than twice the annual cash rents at the time of the IPO in June 2012
  • Acquisition of six operating properties in the U.S. for US$77.6 million totaling 495 beds; the properties are triple-net leased with an average lease term of approximately 7 years
  • Acquisition of six operating properties in Canada for CDN$69.7 million and mezzanine financing of two development properties in Canada for CDN$5.3 million totaling 751 beds; the properties are triple-net leased with an average lease term of approximately 10 years
    • The two development properties are to be acquired upon completion of construction for CDN$53.3 million
• The Acquisitions will be funded through the issuance of units, assumption of new and existing debt and a CDN$60 million equity offering
• The Acquisitions are expected to be immediately accretive to 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 two senior housing and care property portfolios, with one of the portfolios located in Ohio, Virginia, and North Carolina totaling 495 beds (the "SP II Senior Care Portfolio") and the other portfolio located in Alberta totaling 468 beds along with 283 beds under development ("Continuum Senior Care Portfolio" and, together with the SP II Senior Care Portfolio, the "Senior Care Portfolios"), for an aggregate purchase price (excluding the mezzanine financing of the two properties under development) of approximately CDN$200.6 million (the "Acquisitions"). It is expected that the development properties will be acquired by the REIT upon completion of construction in May 2014.

The acquisition of the SP II Senior Care Portfolio increases the REIT's geographic diversity with its entry into the Ohio market. The SP II Senior Care Portfolio consists of five skilled nursing facilities ("SNFs") comprised of a total of 405 beds and one combination assisted living/Alzheimer's facility ("AL/ALZs") comprised of 90 beds and is being acquired for a purchase price of US$77.6 million. The acquisition of the SP II Senior Care Portfolio will be financed in part by a term loan in the amount of US$53.1 million from PNC Bank with a 4.0 year term and an interest rate (after hedging) of 4.64%.

The acquisition of the Continuum Senior Care Portfolio expands the REIT's portfolio in Canada. The Continuum Senior Care Portfolio consists of six assisted living and independent living facilities ("ALF and ILF") comprised of 468 beds and is being acquired for a purchase price of CDN$69.7 million. The acquisition of the Continuum Senior Care Properties will be financed in part by the assumption of five loans (and related interest rate swaps) in the amount of CDN$45.2 million. The five loans have a weighted average maturity of 13.1 years and a weighted average interest rate (after hedging) of 4.98%. In addition, subject to TSX approval, a portion of the consideration will be satisfied through the issuance of limited partnership units (the "Canadian Partnership Units") of a newly formed limited partnership (the "Canadian Partnership"), which units will be economically equivalent to, and exchangeable for, trust units of the REIT ("Units"). The REIT has also entered into an agreement to (i) provide mezzanine financing of CDN$5.3 million for two additional properties in the Continuum Senior Care Portfolio currently under development and (ii) to purchase such development properties upon completion for an aggregate purchase price of CDN$53.3 million, which is expected to occur in May 2014. The two properties under development are expected to be acquired using a combination of cash and the assumption of debt, and will have a total of 283 beds upon completion. "We are excited about these acquisitions to expand our presence in both Canada and the U.S.," said Zeke Turner, Chairman and CEO of HealthLease. "This continues the growth momentum we set at our initial public offering and increases our portfolio diversity. We began with 15 properties when we went public just about a year ago; with this acquisition we have now grown to 45 properties, triple our initial size, while maintaining one of the youngest real estate portfolios in the industry. Our continued growth more firmly establishes the REIT as one of the premier seniors housing and care real estate owners in North America. In addition, this transaction is expected to be immediately accretive for unitholders and reduce our payout ratio."

The SP II Senior Care Portfolio is triple-net leased to tenants affiliated with leading national operators of assisted living, memory care, and skilled nursing facilities. Five facilities will be managed by Saber Healthcare Group, LLC ("Saber"). Saber, headquartered in Bedford Heights, Ohio, operates 56 facilities across six states, including seven properties currently owned by the REIT. Management estimates that Saber is the 24^th largest skilled nursing operator in the U.S. One facility will be managed by Meridian Senior Living ("Meridian"). Meridian, headquartered in Hickory, North Carolina, operates 91 facilities across 12 states, including six properties currently owned by the REIT. Management estimates that Meridian is the 11^th largest assisted living operator in the U.S. The average age and weighted average lease term of the SP II Senior Care Portfolio is approximately 5 years and 7 years, respectively.

The Continuum Senior Care Portfolio properties consist of six facilities with 468 ALF and ILF beds along with two properties under development that will have 283 beds upon completion all of which are located across Alberta. The average age and weighted average lease term of the Continuum Senior Care Portfolio (excluding the two development properties) is approximately 5 years and 10 years, respectively. Principal lease terms have been negotiated and settled for each of the Continuum Senior Care Portfolio properties; however, the leases have not been executed as of the date of this press release. The facilities (including the development properties) will continue to be operated by an Alberta-based care provider specializing in the operation of supportive and assisted living facilities, Continuum Health Care Holdings Ltd., ("Continuum"). The two properties that are currently under development are expected to be completed in May 2014.

Upon completion of the Acquisitions, the REIT's portfolio will increase to 43 facilities (excluding the two development properties) comprised of 4,243 beds/suites geographically diversified across seven 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 (excluding the two development properties) will consist of 57% SNF/long-term care beds, 32% AL/ALZ beds/suites, and 11% independent living beds/suites. The Acquisitions (other than the two development properties) are anticipated to close by July 31, 2013.

Completion of the Acquisitions is conditional upon the receipt of mortgagee approval and health authority approval, in the case of the acquisition of the Continuum Senior Care Portfolio, as well as the receipt of all other necessary consents and waivers from third parties relating to the Acquisitions and the satisfaction of certain other customary conditions.

Equity Financing of the Acquisition

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 Canaccord Genuity Corp., acting as joint-bookrunners (collectively, the "Underwriters"), to sell on a bought deal basis, 5.8 million Units at a price of CDN$10.45 per Unit for gross proceeds to HealthLease of approximately CDN$60.0 million (the "Offering"). HealthLease has also granted the Underwriters an over-allotment option to purchase up to an additional 862,500 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 July 23, 2013 and is subject to customary conditions, including regulatory approval. 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 and for general trust purposes. In the event the REIT is unable to consummate one or both 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 of Canada, pursuant to National Instrument 44-101 - Short Form Prospectus Distributions.

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.

Board of Trustee Resignation

In addition, HealthLease today announced that James Bremner, a member of the Board of Trustees, has tendered his resignation to the REIT for personal reasons. HealthLease and the Board of Trustees would like to thank James for his substantial contribution to the REIT. HealthLease is currently conducting a process to replace James on the Board of Trustees.

About HealthLease Properties Real Estate Investment Trust

HealthLease Properties Real Estate Investment Trust (TSX:HLP.UN) owns a premier portfolio of senior housing and care real estate in the United States and Canada. The properties are fully leased to experienced, high-quality 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 portfolio of properties meets the needs of modern seniors by emphasizing features such as hotel-like design, private rooms and baths, and hospitality-inspired amenities. For more information, visit www.hlpreit.com.

Exchange Rate Information

Where there is a conversion of United States dollars to Canadian dollars in this press release, the conversion was based on a rate of exchange of US$1.00 equals $1.00.

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 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 the acquisition of one or both of the Senior Care Portfolios or the failure to satisfy or waive any other condition to the acquisition of one or both of the Senior Care Portfolios, 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, 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 and the Offering 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 (under the heading "Risk Factors") and MD&A (under the heading "Risks and Uncertainties"). These filings are also available at HealthLease's website at www.hlpreit.com.