HealthLease Properties Real Estate Investment Trust announces US$141.7 million of Property Acquisitions and CDN$60.0 million Equity Financing

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

TORONTO, March 21, 2013 /CNW/ - HealthLease Properties Real Estate Investment Trust (TSX: HLP.UN) ("HealthLease") announced today that its board of trustees has approved the acquisition of 13 senior housing and care properties located in North Carolina, Pennsylvania and Virginia totaling 978 beds (the "Acquisition Properties") for an aggregate purchase price of approximately US$141.7 million (the "Acquisition").  The properties are being acquired at a weighted average going-in capitalization rate of 7.8%.

The Acquisition Properties consist of four skilled nursing facilities ("SNFs"), comprising a total of 355 beds, eight combination assisted living/Alzheimers facilities ("AL/ALZs"), comprising 563 beds, and one standalone Alzheimer facility ("ALZ"), comprising 60 beds.

The Acquisition is consistent with HealthLease's strategy of owning best-in-class facilities as the Acquisition Properties are newer generation facilities with an average age of approximately 4 years from the year built or substantially renovated.

Zeke Turner, Chairman and CEO of HealthLease, said, "The acquisition of these newly-built properties greatly enhances our scale and diversification with respect to health care product mix and geography.  It continues our strategy to build a portfolio of high-quality facilities, leased under triple-net structures to leading national operators.  In addition, this transaction is expected to be very accretive for the unitholders and, therefore, significantly reduce our payout ratio."

The Acquisition Properties are triple-net leased to tenants affiliated with leading national operators of assisted living, memory care, and skilled nursing facilities and will be managed by those operators.  Six facilities will be managed by Meridian Senior Living ("Meridian").  Meridian, headquartered in Hickory, North Carolina, is a national operator of 91 facilities across 12 states.  Management estimates that Meridian is approximately the 11^th largest assisted living operator in the U.S. Seven facilities will be managed by Saber Healthcare Group, LLC ("Saber").  Saber, headquartered in Bedford Heights, Ohio, operates 56 facilities across six states.  Management estimates that Saber is approximately the 24^th largest skilled nursing operator in the U.S. The Acquisition Properties have a weighted average lease term of 10.5 years.

The Acquisition Properties leased to Meridian consist of 372 AL/ALZ beds and 60 ALZ beds that are located throughout the state of North Carolina. The average age and weighted average lease term of the properties is 5.1 years and 9.4 years, respectively.

The Acquisition Properties leased to Saber consist of 355 SNF beds and 191 AL/ALZ beds that are located in North Carolina, Virginia and Pennsylvania.  The average age and weighted average lease term of the properties is 3.0 years and 11.2 years, respectively.

Construction of one of the Meridian properties is complete and has received a certificate of occupancy, but has not been licensed. Two of the Saber properties are nearing construction completion and are expected to be licensed in May 2013. As part of the acquisition agreement, the vendor will enter into a lease agreement with HealthLease for these three properties, which will obligate the vendor to make lease payments equal to the rental amount until such time as the certificate of occupancy and applicable licenses are received.  In addition, the vendor is required to cover all expenses necessary to satisfy the conditions of closing, which includes costs associated with obtaining a certificate of occupancy among other things.  HealthLease will pay the vendor of the assets a vendor take back, which will pay interest at 7.0% per annum, on any assets that have not met the agreed upon closing conditions.

Upon completion of the Acquisition, the REIT's portfolio will increase to 28 facilities comprised of 2,909 beds/suites geographically diversified across 5 states and 2 provinces. The addition of Meridian and Saber will enhance diversification amongst tenant operators, which will total 11 operators.  In addition, the Acquisition will result in greater diversification of need driven care services.  The REIT's portfolio will consist of 57.8% SNF/long-term care beds, 37.6% AL/ALZ beds/suites, and 4.6% independent living beds/suites.

The following table highlights information about the Acquisition Properties as at December 31, 2012:

Name of Facility	Location	Year Built^(1)	Operator	SNF Beds	AL/ ALZ Beds	Total Beds	Lease Expiration Date^(2)
Operated by Meridian
Alamance House	Burlington, NC	2012	Meridian	-	94	94	9/30/2022
Guilford Assisted Living^(3)	Greensboro, NC	Under construction	Meridian	-	60	60	3/31/2023
Haywood House	Canton, NC	1952/2012	Meridian	-	60	60	8/31/2026
Mitchell House	Spruce Pine, NC	2012	Meridian	-	80	80	3/31/2022
New Hanover Assisted Living and Memory Care Center	Wilmington, NC	2011	Meridian	-	61	61	8/31/2021
The Stratford	Chapel Hill, NC	1999	Meridian	-	77	77	12/31/2020
Operated by Saber
Azalea Health and Rehabilitation Center	Wilmington, NC	2012	Saber	80	-	80	12/31/2022
Franklin House^(4)	Youngsville, NC	Under construction	Saber	-	54	54	3/31/2023
Green Ridge Healthcare Center	Scranton, PA	2005	Saber	95	-	95	06/30/2026
Johnston House^(4)	Clayton, NC	Under construction	Saber	-	77	77	3/31/2023
Liberty Ridge	Lynchburg, VA	2013	Saber	90	-	90	1/31/2023
Meadowview Assisted Living and Special Care	Smithfield, NC	1999	Saber	-	60	60	05/31/2022
Whitestone Health Care Center	Stroudsburg, PA	2011	Saber	90	-	90	06/30/2026
Total				355	623	978

(1)	Date indicates year built and, if applicable, year(s) significantly renovated or expanded.
(2)	Excludes renewal terms.
(3)	Construction of the facility was completed in March 2013 and the certificate of occupancy was issued in March 2013.  Licensure is anticipated in April 2013.  Information presented in the table reflects expectations for completed facility as of the date hereof.
(4)	Construction of facility not completed as of the date hereof and not anticipated to be completed as of the closing of the Acquisition. Certificate of occupancy is anticipated to be received on or before May 2013 and rent is anticipated to commence on or before June 1, 2013. Information presented in the table reflects expectations for completed facility as of the date hereof.

Completion of the Acquisition is conditioned upon the receipt of all necessary consents and waivers from third parties relating to the Acquisition and the satisfaction of certain other customary conditions.

Equity Financing of the Acquisition

In connection with the Acquisition, HealthLease announced today that it has entered into an agreement to sell to a syndicate of underwriters led by Canaccord Genuity Corp., National Bank Financial Inc. and BMO Capital Markets, with Canaccord Genuity Corp. and National Bank Financial Inc. acting as joint-bookrunners (collectively, the "Underwriters"), on a bought deal basis, 5.8 million trust units ("Units") at a price of Cdn$10.35 per Unit for gross proceeds to HealthLease of approximately Cdn$60.0 million (the "Financing").  HealthLease has also granted the Underwriters an over-allotment option to purchase up to an additional 870,000 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 Financing.  The Financing is expected to close on or about April 11, 2013 and is subject to customary conditions, including regulatory approval. The Financing is not conditional upon closing of the Acquisition.

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.

Expansion of the Operating Facility

HealthLease also announced today that it is replacing its current operating line of credit with a new US$110.0 million operating line of credit, US$83.8 million of which will be drawn on at closing to partially fund the Acquisition. The facility will bear interest at LIBOR + 300bps and will have a term of three years with an option by HealthLease to extend by an additional year. HealthLease will also enter into an interest rate swap to hedge US$60.0 million of the amount drawn at an effective fixed rate of 3.87% for a period of four years. This will provide for an effective all-in blended cost of borrowing of 3.68%. Completion of these transactions will be conditional on the occurrence of certain customary conditions, including the satisfaction of due diligence, the absence of a material adverse change in respect of MPG Healthcare L.P. and its subsidiaries as a whole, and the successful syndication of the facility with additional lenders.

"We are pleased to be able to expand our operating line and add additional flexibility to our balance sheet as a part of this transaction," said Adlai Chester, CFO of HealthLease, "Doing so allows us to be even more responsive to any acquisition opportunities we see in the marketplace."

About HealthLease Properties Real Estate Investment Trust

HealthLease Properties Real Estate Investment Trust (TSX: HLP.UN) owns a best-in-class portfolio of senior housing and care facilities in the United States and Canada.  The facilities are 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.

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 Acquisition. 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 Acquisition Properties 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 the Acquisition Properties or the failure to satisfy or waive any other condition to the acquisition of the Acquisition Properties, the failure of HealthLease to realize expected benefits from the acquisition of the Acquisition Properties, the failure of HealthLease to satisfy the conditions of the Financing or otherwise close the Financing, the failure of HealthLease to satisfy the conditions required to replace its current operating line of credit or otherwise complete that transaction, the performance of the Acquisition Properties 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 Acquisition, the Financing 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. 

 

 

SOURCE: HealthLease Properties Real Estate Investment Trust

Adlai Chester
Chief Financial Officer
HealthLease Properties REIT
[phone] ext. 106

Salvador Diaz
Investor Relations
TMX Equicom
[phone] ext. 242