TORONTO , March 31, 2014 /CNW/ - HealthLease Properties Real Estate Investment Trust (HLP.UN) ("HealthLease" or "the REIT") provides answers to questions received since our last Q&A Update on January 31, 2014 .
Question 1: Has HealthLease considered listing as a U.S. entity since the majority of facilities are U.S.-based?
Answer: We regularly consider various sources of capital for HLP including the US markets. At present, we believe that the cost of a US listing would exceed the potential benefit. We will continue to assess various ways to access the US capital markets as part of our overall capital strategy.
Question 2: Given Extendicare's interest to separate its Canadian and U.S. business, have you considered purchasing some or all of the U.S. assets?
Answer: We routinely look at portions of portfolios that are available in the US or in Canada and are aware of U.S. portfolios that might be in the market. Generally, our acquisition appetite is for recently-built, or higher-quality, assets and those in which we can partner with existing operators.
Question 3: With regards to the proposed amendment to the management agreement, what are the details and when will it be implemented? What hurdle rates and leverage covenants are being discussed? When will the threshold levels be set?
Answer: An amendment to the management agreement was approved by the Board of Trustees. The amendment provides an annual incentive fee which will be based on a 15% of AFFO per unit above a certain threshold. The threshold has not yet been set by the Board of Trustees as it is at their discretion. Likely, the threshold will be set sometime in the next quarter.
Question 4: Given that Mainstreet (and its principals) are ~11% holders of the REIT, why is the original management agreement not adequate for Mainstreet?
Answer: After a third-party analysis was conducted, the findings concluded that the current arrangement was out of line with the market. The Board of Trustees determined it would be worthwhile to amend the agreement to more closely match to that of peer companies and to do so in a way that enhances management alignment to unitholders. Prior to this adjustment, the cost to run the REIT (which would also be the cost of internalization) far exceeded the fees being paid to the external manager. As much as this cost/fee disparity might have been beneficial for the REIT in the past, it was not sustainable situation. Including the fee adjustment, it is believed HLP will remain the lowest cost REIT in the Canadian markets.
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 March 12 , 2014. The REIT's Year End and Fourth Quarter Financial Statements, and MD&A, have been filed on SEDAR. The Third 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 (HLP-UN.TO) owns one of the youngest and highest quality portfolios of seniors housing and care facilities with 12 properties located in two provinces of Canada and 33 properties located in seven states of the United States for a total of 4,635 beds. 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 premier properties 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.
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 11, 2014 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 statements.
SOURCE HealthLease Properties Real Estate Investment Trust
- Investment & Company Information