TORONTO, June 28, 2013 /CNW/ - HealthLease Properties Real Estate
Investment Trust (HLP.UN) ("HealthLease" or "the REIT") provides below
answers to questions received since our last Q&A Update on May 31,
Question 1: Was the recent acquisition of Wellbooke of Westfield in U.S. or
Answer: The acquisition was denominated in U.S. dollars.
Question 2: In the Condensed Consolidated Interim Financial Statements for the
three months ended March 31, 2013 and 2012 on page 24 the Company
reported the following:
"In addition, at closing, there were 3 properties that were still under
development. These properties are expected to be completed with
operator rent commencing by June 1, 2013. As part of the purchase
agreement, the sellers agreed to take back debt equal to the purchase
price of these three properties (U.S. $26,713,254). This debt will
remain in place until the properties are complete and rent has
commenced, at which time the seller financed debt will be paid off with
debt from the REIT's operating line."
Is this transaction reflected in the REIT's operating line as reported
in the financial statements?
Answer: As the transaction took place after the closing of the quarter it is
not included in the line of credit amount on March 31, 2013. Assuming
the buildings are complete and rent has commenced on June 1, the
transfer of debt from the operating line will be reflected in the
quarter ended June 30, 2013.
Question 3: I was wondering what fee structure HealthLease typically pays in terms
of development management fees (% of total project costs) and
construction management fees (% of hard costs) for new properties under
Answer: HealthLease currently is not developing any assets. All development is
being done externally through a Development Agreement with Mainstreet
and HealthLease is acquiring assets at appraised value. To the extent
that HealthLease chooses to develop internally, they will pay
Mainstreet a 5% development fee which is capitalized as part of the
cost of construction.
Question 4: Some of the IPO U.S. properties are in small markets - markets like
Brookville and Alexandria have populations in the 5,000 range. What is
the risk profile of these markets in terms of (1) depth of resident
base, (2) terminal value of the asset at end of lease term, (3)
Answer: Brookville was one of our earlier facilities and probably not
indicative of where we target for future facilities, both acquisitions
and development. On the development side in particular, we do a very
detailed and thorough analysis of the population demographics, Medicare
discharges from acute care facilities and an assessment of the current
competitive universe. The bottom line is that we make site selection
decisions very carefully after thorough analysis. These decisions are
so important not only because of the market environment today, but so
that we can carefully plan for the next 5, 10, 15 years and beyond.
Question 5: You mentioned the mix of Skilled Nursing Facilities being in the 70%
range and EBITDAR coverage at about 1.7x. Will you be disclosing that -
I noticed the U.S. REITs provide regular disclosure of EBITDAR
Answer: Thank you for this suggestion. We continue to look for ways to be more
responsive and transparent to our investors and the analyst community.
We will disclose the EBITDARM coverage for our portfolio as a whole,
inclusive of both Canada and the U.S. on a go forward basis.
Question 6: Can you provide an update on the tenant purchase options that were
described in your IPO prospectus?
Answer: The only option within the portfolio is on the Valparaiso, Indiana
property. Trilogy has the right to purchase this property on the
anniversary of the lease each year. However, in the event it is
purchased we feel confident we would be able to replace it with another
existing Trilogy property. Further, the tenant has a purchase option
in Marion and Mishawaka at the end of the lease (15 years) but we
project it to be priced very fairly at that point and it may not be of
interest to those tenants given the pricing.
Question 7: Given that the REIT does not pay for any structural-related capex, how
does the REIT protect itself from getting back a building with
significant deferred capex? Hypothetically, if a 5% of revenue reserve
is required to maintain the competitive advantage of the plant, then
that translates to roughly 25% of EBITDAR. That eats a lot of the
profit for the operator who would likely be incentivized to spend less.
Answer: Very astute observation about the importance of capex as we are long
term owners. However, please remember that our facilities are
generally quite young, in many cases brand new. They require
significantly less capex than 5%. We estimate capex requirements of
approximately $500 to $800 per bed starting in roughly year 5. That
translates into $50,000 to $80,000. Further, we track the capital
spend by each of our operators on an annual basis and have very strong
rights and remedies. But we doubt this will ever be an issue. The
operators we have been working with see the value of maintaining a very
high quality building and thus experience for the residents. We have
recent examples of our operators spending $1 million on their own to
enhance and refurbish because they were able to identify an immediate
return on this investment.
Supplemental Financial Information
This news release is not in any way a substitute for reading
HealthLease's financial statements, including notes to the financial
statements, and Management's Discussion and Analysis, dated May 8,
2013. The REIT's 2013 Fiscal First Quarter Financial Statements, and
MD&A, have been filed on SEDAR. The First Quarter Financial Statements
and MD&A can also be viewed in the Investor Information section of the
HealthLease's website at www.hlpreit.com.
About HealthLease Properties Real Estate Investment Trust
HealthLease Properties Real Estate Investment Trust (TSX: HLP.UN) owns a
portfolio of seniors housing and care facilities located in the United
States and Canada. The facilities are leased to experienced tenant
operators who have significant operational experience in the U.S. and
Canada. 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 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.
This news release contains forward-looking statements which reflect the
REIT's current expectations regarding future events. The
forward-looking statements involve risks and uncertainties, including
those set forth in the REIT's Annual Information Form dated March 6,
2013 under the section "Risk Factors," a copy of which can be obtained
at www.sedar.com. Actual results could differ materially from those projected herein.
The REIT disclaims any obligation to update these forward-looking
SOURCE: HealthLease Properties Real Estate Investment Trust
For further information:
Executive Vice-President Finance
HealthLease Properties REIT
(416) 815-0700 ext. 258