Leisureworld Senior Care Corporation

Leisureworld Senior Care Corporation

April 05, 2011 08:02 ET

Leisureworld Announces Acquisition of Two Luxury Retirement Residences and Public Offering of $40 Million of Subscription Receipts

Accretive Transaction Diversifies Company's Asset Base

MARKHAM, ONTARIO--(Marketwire - April 5, 2011) -


Leisureworld Senior Care Corporation (the "Company") (TSX:LW) today entered into an agreement (the "Acquisition Agreement") to acquire two luxury retirement residences for a total consideration of $94.8 million (the "Acquisition"). The Royalton retirement residences are located in Kingston, Ontario and Kanata, Ontario (a suburb of Ottawa). In conjunction with this transaction, the Company also announced an agreement to sell, on a bought-deal basis, $40 million of subscription receipts ("Subscription Receipts") at a price of $10.50 per Subscription Receipt.

The two properties, which together are comprised of 294 suites, complement the Company's existing retirement facilities and long-term care homes and further grow its existing expertise in seniors housing. The residences are brand new luxury retirement living properties featuring top quality amenities and are competitively positioned in attractive markets. Following closing, which is expected on or about April 27, 2011, the Company intends to change the name of the facilities to 'The Royale'.

"This transaction is consistent with Leisureworld's stated strategy of broadening our product and service offering along the continuum of care," said David Cutler, President and Chief Executive Officer of Leisureworld. "With the acquisition of these properties, we will increase Leisureworld's asset base by approximately 16%, diversifying our business through expansion in one of the fastest growing segments of the seniors living market."

As new properties, both residences are currently in the lease-up period. Accordingly, the total consideration includes an income guarantee of $5.5 million for a three year term to be held in escrow and used by the Company to complement cash flow from the properties in accordance with the Acquisition Agreement. The amounts received from the income guarantee will be included in the Company's Adjusted Funds From Operations (AFFO) going forward. The Company's management anticipates the properties will achieve stabilized occupancy within this term. The acquisition is expected to be immediately accretive to the Company's AFFO per share. Based on stabilized Net Operating Income (NOI), the cap rate on the transaction is approximately 8.0%.

Financing the Acquisition

In order to partially finance the purchase price of the Acquisition and acquisition costs, the Company has agreed to sell 3,810,000 Subscription Receipts, on a bought-deal basis, at a price of $10.50 per Subscription Receipt to a syndicate of underwriters led by TD Securities Inc. for gross proceeds of $40,005,000. The underwriters will have an over-allotment option to purchase up to an additional 571,500 Subscription Receipts at the same offering price, exercisable no later than 30 days after the closing of the offering, which if exercised, would increase the gross offering size to $46,005,750.

Each Subscription Receipt represents the right to receive one common share of the Company for no additional consideration on the closing of the Acquisition. The proceeds from the offering of Subscription Receipts will be deposited in escrow pending closing of the Acquisition. If the Acquisition closes on or before May 31, 2011, the gross proceeds from the offering of Subscription Receipts will be released to the Company and used by it to pay a portion of the purchase price of the Acquisition. If the Acquisition fails to close by May 31, 2011, or the Acquisition is terminated at an earlier time, the escrow agent will return the gross proceeds and pro rata entitlement to interest thereon to holders of the Subscription Receipts.

On or before April 11, 2011, the Company will file with the securities commissions or other similar regulatory authorities in each of the provinces of Canada, a preliminary short form prospectus relating to the issuance of the Subscription Receipts. Closing of the offering is expected to occur on or about April 27, 2011, subject to TSX and other necessary regulatory approvals.

In addition to the proceeds from the Subscription Receipt offering, the Company has a binding commitment letter from a Canadian chartered bank to finance the acquisition with a $55 million, two-year bridge debt facility. After putting in place interest rate swap arrangements, the all-in cost of borrowing under the facility will be approximately 4% per annum. The Company anticipates that its ratio of debt to gross book value, following both the acquisition and related financings, will be approximately 53%.

The securities offered pursuant to the Subscription Receipt offering have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act. This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction.

Description of the Acquisition

The Royalton in Kanata (suburban Ottawa), Ontario is a five-storey, 148,500 square foot property with current occupancy of 41%. The building has 158 suites ranging from 420 to 1,184 square feet, some with full balconies. Assisted living is provided on one of the floors. The facility features spacious lounges, multiple fireplaces and intimate dining rooms. Activity areas include an indoor pool, movie theatre and greenhouse. Large bright open areas with spectacular views of the landscaped grounds complement the building.

The Royalton in Kingston, Ontario is a five-storey, 140,000 square foot property with current occupancy of 51%. The building has 136 suites ranging from 410 to 870 square feet, some with full balconies. The facility features spacious lounges, cozy fireplaces and numerous dining rooms, with on-duty nursing, limo services and multiple other personal amenities. Activity areas include an indoor pool, a wellness spa and a movie theatre. The landscaped grounds include a patio for outdoor dining, walking paths with a gazebo and a putting green.

About Leisureworld Senior Care Corporation

Leisureworld is the third largest licensed long-term care provider in Ontario. The Company owns and operates 26 LTC homes, representing approximately 4,314 beds across Ontario, Canada. The Company also owns and operates one retirement home with 29 suites and one independent living home with 53 suites. The Company's subsidiaries include: Preferred Health Care Services, an accredited provider of professional nursing and personal support services; and Ontario Long Term Care, a provider of purchasing services, dietary services, social work, and other regulated health professional services.

Forward-Looking Statements

Certain of the statements contained in this news release are forward-looking statements and are provided for the purpose of presenting information about management's current expectations and plans relating to the future. Readers are cautioned that such statements may not be appropriate for other purposes. These statements generally use forward-looking words, such as "anticipate", "continue", "could", "expect", "may", "will", "estimate", "believe" or other similar words and include, among other things, statements related to the Acquisition and financing thereof, as well as the impact of the Acquisition on the Company's financial position, results and AFFO. These statements are subject to significant known and unknown risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied by such statements and, accordingly, should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not such results will be achieved. The forward-looking statements in this news release are based on information currently available and what management currently believes are reasonable assumptions. Other material factors or assumptions that were applied in formulating the forward-looking statements contained herein include the assumptions that the Company will be able to complete the Acquisition and financing thereof, that the Company will be able to achieve stabilized occupancy at the two properties within a three year period and that the business and economic conditions affecting the Company's operations will continue substantially in their current state, including, with respect to industry conditions, general levels of economic activity and government regulations.

Although management believes that it has a reasonable basis for the expectations reflected in these forward-looking statements, actual results may differ from those suggested by the forward-looking statements for various reasons. The assumptions, risks and uncertainties described above are not exhaustive and other events and risk factors could cause actual results to differ materially from the results and events discussed in the forward-looking statements. These forward-looking statements reflect current expectations of the Company as at the date of this news release and speak only as at the date of this news release. The Company does not undertake any obligation to publicly update or revise any forward-looking statements except as may be required by applicable law.

Non-GAAP Measures

AFFO and NOI are not measures defined by Canadian generally accepted accounting principles (GAAP), do not have standardized meanings prescribed by GAAP and should not be construed as alternatives to net income/loss, cash flow from operating activities or other measures of financial performance calculated in accordance with GAAP. AFFO and NOI as computed by the Company may differ from similar measures as reported by other companies or trusts in similar or different industries.

AFFO is defined as FFO plus the principal portion of capital subsidy receivables, plus amounts received from income guarantees, less maintenance capital expenditures. FFO has the meaning ascribed thereto in the Company's IPO prospectus. AFFO is presented because management considers this non-GAAP measure to be an important performance measure to determine the sustainability of future distributions paid to the Company's shareholders. AFFO should not be interpreted as an indicator of cash generated from operating activities as it does not consider changes in working capital.

NOI has the meaning ascribed thereto in the Company's IPO prospectus. NOI is presented because management considers this non-GAAP measure to be an important measure of the Company's operating performance and uses this measure to assess the Company's property operating performance on an unlevered basis.

Contact Information

  • Leisureworld Senior Care Corporation
    Philip Koven
    Investor Relations
    (416) 447-4740 ext 235