Key Transaction Highlights
- HealthLease unitholders to receive CDN$14.20 per unit in cash, representing an aggregate transaction value of approximately CDN$1 billion (USD$950 million)
- The purchase price represents a premium of 32% to the 20-day volume weighted average price of CDN$10.79
- HealthLease's board of trustees unanimously recommends that HealthLease unitholders vote in favour of the transaction
TORONTO, Aug. 13, 2014 /CNW/ - HealthLease Properties Real Estate Investment Trust (TSX: HLP.UN) ("HealthLease" or the "REIT") announced today that it has entered into an arrangement agreement (the "Arrangement Agreement") with Health Care REIT, Inc. (including its subsidiaries, "HCN") pursuant to which HCN will acquire the REIT and HealthLease unitholders will receive CDN$14.20 per unit in cash (the "Transaction").
Zeke Turner, Chair and CEO of HealthLease and founder and CEO of Mainstreet Property Group, LLC, commented that "we sponsored HealthLease with the goal of delivering great value to unitholders by building a portfolio of best-in-class properties. It is very gratifying to enter into this transaction, which will yield a total return to investors who have held units since the IPO of approximately 27% per annum."
Neil Labatte, Chair of HealthLease's Investment Committee of independent trustees, commented that "the Transaction offers HealthLease unitholders a significant premium. This can largely be attributed to the high quality portfolio of seniors housing and post-acute healthcare properties leased to a diversified mix of quality operating tenants that HealthLease has assembled since completing its initial public offering in June 2012."
The total cash consideration of CDN$14.20 per unit (the "Consideration") represents a premium of 31% to the previous day's closing price of C$10.83 on the Toronto Stock Exchange and a premium of 32% to the volume weighted average price for the 20 trading days ended August 12, 2014 of CDN$10.79. The aggregate transaction value is equal to approximately CDN$1 billion (USD$950 million).
The Transaction will be carried out by way of a plan of arrangement (the "Arrangement"), pursuant to which certain of HealthLease's outstanding units will be redeemed. HCN will then immediately acquire the balance of the outstanding units. The implementation of the Arrangement will be subject to the approval of at least 66 2/3% of the votes cast at a special meeting of HealthLease unitholders and special voting unitholders, and receipt of applicable orders from the Alberta Court of Queen's Bench. Given certain connected transactions involving Mainstreet Property Group, LLC and certain related parties (collectively "Mainstreet") as described below, the Transaction will also require approval of a simple majority of the votes cast at the special meeting, other than Mainstreet.
The Transaction is also subject to applicable regulatory approvals, including approval of applicable health regulatory authorities and under the Competition Act (Canada) and the Investment Canada Act, certain lender and other third party consents, and other customary conditions. The Arrangement Agreement provides for, among other things, customary board support and non-solicitation covenants from HealthLease (with "fiduciary out" provisions that allow HealthLease to accept a superior proposal in certain circumstances and a five business day "right to match period" in favour of HCN). The Arrangement Agreement also provides for the payment of a termination fee of CDN$20 million to HCN if the Transaction is terminated in certain specified circumstances.
Mainstreet has entered into a voting and support agreement pursuant to which, among other things, it has agreed to vote its HealthLease units and HealthLease special voting units in favour of the Transaction, representing approximately 8.3% of the outstanding HealthLease units and special voting units.
Holders of the 5.75% convertible unsecured subordinated debentures (the "Debentures") may convert their Debentures into units at a price of CDN$14.00 per unit in order that such units may be sold pursuant to the Arrangement. HealthLease will be required to offer to purchase the Debentures following closing of the Transaction for 101% of their principal amount plus accrued and unpaid interest. Pursuant to the Arrangement Agreement, HCN will guarantee the remaining Debentures following closing of the Transaction if they remain outstanding. HCN may also seek to amend the Debenture indenture by way of a meeting or a consent solicitation in order to enable it to redeem the Debentures on closing or it may defease the Debentures and HealthLease has agreed with HCN to cooperate in connection therewith. Important details regarding the terms of the Debentures are set out in the Debenture Indenture, which has been publicly filed by HealthLease under HealthLease's profile at www.sedar.com. Holders of Debentures are encouraged to read the full text of the Debenture indenture.
The Arrangement Agreement will be available on the SEDAR website at www.sedar.com within 10 days following the date of this press release. Copies of HealthLease's management information circular and certain related documents will be sent to unitholders and filed with Canadian securities regulators and will be available on the SEDAR website at www.sedar.com.
HealthLease Board of Trustees Recommendation
The board of trustees of HealthLease has unanimously resolved to recommend that HealthLease unitholders vote in favour of the Transaction. BMO Capital Markets, financial advisor to HealthLease, has provided a fairness opinion to the board of trustees of HealthLease that, subject to the assumptions, limitations and qualifications set out in such fairness opinion, the Consideration to be received by HealthLease unitholders pursuant to the Arrangement is fair from a financial point of view to HealthLease unitholders, other than Mainstreet.
Mainstreet Development Pipeline and Future Development Agreement
HealthLease understands that, concurrent with the execution of the Arrangement Agreement, Mainstreet and HCN have entered into a definitive agreement providing for, among other things, HCN acquiring 17 seniors housing and post-acute development properties from Mainstreet upon issuance of a certificate of occupancy and applicable licensure at a 7.5% capitalization rate on 12-month forward rent. Based on the projected rental income, this pipeline will be valued at approximately USD$369 million.
HealthLease also understands that HCN has concurrently entered into an agreement with Mainstreet to provide mezzanine financing and receive purchase rights at HCN's option for an additional 45 seniors housing and post-acute healthcare development properties. This future pipeline is anticipated to close in tranches upon completion of construction beginning in 2016. The purchase option price on this pipeline represents a 7.7% initial cash yield on the projected rental income.
Advisors and Counsel
BMO Capital Markets is acting as financial advisor to HealthLease. Goodmans LLP is acting as legal counsel to HealthLease.
Goldman, Sachs & Co. and RBC Capital Markets are acting as financial advisors to HCN. Sidley Austin LLP, Borden Ladner Gervais LLP, and Shumaker, Loop and Kendrick, LLC are acting as legal counsel to HCN. Arnold & Porter LLP are acting as tax counsel to HCN.
Blake, Cassels & Graydon LLP are acting as legal counsel to Mainstreet.
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 health care facilities with 53 properties – 14 in two Canadian provinces and 39 in eight U.S. states, for a total of 5,331 beds. One of the 53 properties is currently under contract and is expected to close in 2014. 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. For more information, visit www.hlpreit.com.
About Health Care REIT, Inc.
HCN (NYSE:HCN), an S&P 500 company with headquarters in Toledo, Ohio, is a real estate investment trust that invests across the full spectrum of seniors housing and health care real estate. The company also provides an extensive array of property management and development services. As of June 30, 2014, the company's broadly diversified portfolio consisted of 1,224 properties in 46 states, the United Kingdom, and Canada.
Forward Looking Information
Certain statements contained in this press release constitute forward-looking information within the meaning of applicable securities laws. Forward-looking information may relate to the REIT's future outlook and anticipated events or results and may include statements regarding the financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the REIT. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the REIT or the real estate industry are forward-looking statements. In some cases, forward-looking information can be identified by such terms such as "may", "might", "will", "could", "should", "would", "occur", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue", "likely", "schedule", or the negative thereof or other similar expressions concerning matters that are not historical facts. Some of the specific forward-looking statements in this press release include, but are not limited to, statements with respect to the following: the expected completion of the Transaction and the conditions and consents required with respect thereto; the treatment of holders of Debentures; and arrangements between Mainstreet and HCN.
The REIT has based these forward-looking statements on factors and assumptions about future events and financial trends that it believes may affect its financial condition, financial performance, business strategy and financial needs, including, that the Arrangement Agreement will be not be amended; and all conditions precedent to completing the Transaction will be met.
Although the forward-looking statements contained in this press release are based upon assumptions that management of the REIT believes are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond the REIT's control, that may cause the REIT's or the industry's actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, those identified in the REIT's materials filed under the REIT's profile at www.sedar.com from time to time and the risk that the conditions to the Transaction will be satisfied.
The forward-looking statements made in this press release relate only to events or information as of the date hereof. Except as required by applicable Canadian law, the REIT undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
SOURCE: HealthLease Properties Real Estate Investment Trust