HealthLease Properties Real Estate Investment Trust Highlights Successful First Year of Operations and Announces 2013 Second Quarter Results

TORONTO, Aug. 8, 2013 /CNW/ - HealthLease Properties Real Estate Investment Trust (HLP.UN) ("HealthLease" or "the REIT") today announced its financial results for the three months ended June 30, 2013.  HealthLease completed its initial public offering (the "IPO") on June 20, 2012, and the current three-month period represents the completion of the REIT's first full year of operation.

Q2 2013 Highlights

• Acquired 13 senior housing and care properties in North Carolina, Pennsylvania and Virginia at an aggregate purchase price of US$141.7 million
• Increased its secured revolving line of credit from US$25million to US$110million
• FFO and AFFO was $4.4 million ($0.22/unit) and $4.7 million ($0.23/unit) respectively compared to $2.9 million for both FFO and AFFO in the REIT's first quarter 2013.
• At quarter end had a payout ratio of 93.6%, debt to gross book value of 53.8%, cash balance of $1.6 million and undrawn availability on its secured revolving line of credit.
• Subsequent to quarter-end:
• Acquired a development property from Mainstreet Property Group. Wellbrooke of Westfield is a 100-bed Next Generation™ senior housing facility acquired for a total purchase price of $20.3 million.  The REIT also announced that it has the right to purchase eight additional Next Generation™ properties from Mainstreet Property Group that will be completed over the next 12 months (located in Indiana and Colorado).
• Acquired 12 senior housing and care facilities in the U.S. and Canada, and provided mezzanine financing for two others. The acquisitions were partially funded with a $69 million equity offering which closed on July 23, 2013.
• Increased secured revolving line of credit to US$120 million

"We are very pleased with what we have been able to achieve in our first full year as a public company," said Zeke Turner, Chairman and CEO.  "We have exceeded all the growth objectives we set at our IPO, almost tripled our property portfolio, while at the same time growing our AFFO by more than five times since then. With our strong development pipeline of newly-built Next Generation™ facilities, as well as the third party acquisition opportunities available to us, we expect to see this strong growth momentum continuing."

Summary of Results

000's, except per unit data		For the three months ended June 30, 2013		For the three months ended June 30, 2012^(1)
Revenue		$8,284		$1,468
Net Profit		$2,344		$1,130
Funds from Operations (FFO)^(2)		$4,431		$533
Adjusted Funds from Operations (AFFO)^(3)		$4,666		$705
Units Outstanding (diluted)		20,555		17,524
FFO per unit (diluted)		$0.22		$-
AFFO per unit (diluted)		$0.23		$-
Payout Ratio^(4)		93.6%		-

Footnotes:
(1)	The REIT closed its Initial Public Offering on June 20, 2012. The financial results represent the three months ended June 30 2012 using the continuity of interest method. The REIT paid its first distribution to unitholders on August 15, 2012.
(2)	Funds from operations, or FFO, is an earnings measure used by most publicly traded real estate entities. FFO is not defined under International Financial Reporting Standards ("IFRS").  HealthLease calculates FFO in accordance with the Real Property Association of Canada ("REALpac") White Paper on Funds from Operations issued in 2004 and revised in 2010 for the impact of IFRS.  FFO is defined as net earnings in accordance with IFRS, (i) plus or minus fair value adjustments on investment properties; (ii) plus or minus gains or losses from sales of investment properties; (iii) plus or minus other fair value adjustments; (iv) plus acquisition costs expensed as a result of the purchase of a property being accounted for as a business combination; (v) plus distributions on exchangeable units; and (vi) plus deferred income tax expense, after adjustments for equity accounted entities and joint ventures calculated to reflect FFO on the same basis as consolidated properties.
(3)	Adjusted funds from operations, or AFFO, is defined by the REIT as a measure of operating cash generated from the business.  AFFO is calculated as FFO subject to certain adjustments, including: (i) amortization of fair value mark-to-market adjustments on mortgages, amortization of deferred financing costs, and compensation expense related to deferred unit incentive plans, (ii) adjusting for any differences resulting from recognizing property rental revenues on a straight-line basis, (iii) adding an amount in respect of Mainstreet development lease payments owed or paid, and (iv) deducting a reserve for normalized maintenance capital expenditures and leasing costs, as determined by the REIT.  Other adjustments may be made to AFFO as determined by our Trustees in their sole discretion.
(4)	Payout ratio is a measure of the distributions (inclusive of distributions paid on Exchangeable Units) compared to the AFFO.

Review of Q2 2013 Operating and Financial Results (rounded to nearest '000)

Revenue. Revenue is rental income from single tenant operators who are under long-term triple-net leases and interest income from loans.  Revenue during the quarter was $8,284.  The increase over the previous year is due to the addition of 13 properties that generated additional revenue of $6,944.

Net Operating Income. Net operating income, which is revenue less property expenses, was $7,954.  Net operating income was 96.0% of revenue for the quarter ended June 30, 2013.  The high margin is attributable to minimal operating expenses as a result of the triple-net structure of HealthLease's leases.

Net Earnings. Net earnings, which is revenue less all expenses (including non-cash fair market value changes in investment properties and Exchangeable Units), was $5,028 for the three months ended June 30, 2013.

Distributions.  Distributions on weighted average outstanding units, including distributions on exchangeable units, totaled $4,368, or $0.21 per unit. This translates into a payout ratio of 93.6% for the quarter.  If the payout ratio was calculated on actual distributions the result would be a payout ratio of 86%.

Financial Position (rounded to nearest '000)

Cash.  At June 30, 2013, the REIT had cash-on-hand amounting to $1,635 and restricted cash of $8,350.

Operating Line of Credit.   At June 30, 2013, the REIT had a secured revolving line of credit of US$110,000, secured by 17 properties in the U.S.; US$20,486 was available on the operating line at the end of the quarter.

Debt to Gross Book Value. Debt to gross book value is calculated by dividing total indebtedness, net of loan costs, by the total assets of the REIT.  At June 30, 2013, the debt to gross book value was 53.8%.

Interest Coverage Ratio. Interest coverage ratio, a measure of credit risk, is calculated by dividing net operating income by net interest expense. For the three months ended June 30, 2013, interest coverage ratio was 3.29 times, while the weighted average cost of debt was 4.58%.

Equity and Exchangeable Units. At June 30, 2013, the REIT had 20,555,000 units outstanding, including exchangeable units.  At the closing price of $10.69 per unit on June 28, 2013, the REIT had a market capitalization of $219,733.

Acquisition of Senior Care Properties

On April 15, 2013, the REIT completed the acquisition of 13 senior housing and care properties in North Carolina, Pennsylvania, and Virginia at an aggregate purchase price of US$141.7 million.  The acquisition was funded with a combination of debt financing and proceeds from an offering of trust units.

On April 30, 2013, the REIT indirectly issued interest-only mortgage loans on two properties located in Michigan.  The loans were in aggregate US$8.4 million and carry a 10% interest rate with annual escalators over a 15-year term.  The REIT has the option to purchase the properties at the end of the loan term for an amount equal to the outstanding loan principal balance plus US$1.

Subsequent to quarter end, on July 1, 2013, the REIT indirectly acquired through the development agreement with Mainstreet Asset Management a senior housing and care property located in Westfield, Indiana, for a total purchase price of approximately US$20.3 million.  The purchase price was comprised of US $17.9 million for the acquisition of income property at its appraised value and US$2.5 million for the acquisition of certain related cash assets. The REIT assumed US$15.4 million in debt and issued 446,481 Exchangeable Units to Mainstreet Property Group, LLC, a related party, at a price of CDN$10.69 per unit for the balance of the purchase price.

On July 17, 2013, the REIT advanced a mezzanine loan in the amount of U.S. $1.3 million to MS Castleton, LLC, a related party, for the construction of a senior housing and care property.  The interest rate on this loan is 16% per annum, with 9% per annum paid monthly during the term of the loan and the remaining interest plus principal due at the earlier of sale or 30 months.

On July 26, 2013, the REIT indirectly acquired six senior housing and care facilities in North Carolina, Ohio and Virginia for a purchase price of US$77.6 million and closing costs of US$711,542.  The REIT purchased the six assets, which were unencumbered by previous debt, with net cash of US$25.6 million and gross debt of US$53.1 million with loan and third party fees of US$386,885.  The interest rate on the debt is LIBOR plus 375 basis points, and the maturity date is July 26, 2016.  The loan is interest only during the first year and switches to principal and interest payments during the second and third years.  The loan contains two renewal options to extend the loan by one year each.

On July 31, 2013, the REIT acquired six senior housing and care facilities in Alberta for a purchase price of $69.7 million and closing costs of approximately $757,226.  The REIT purchased the six assets with net cash of approximately $14.9 million, issuing Canadian partnership units in a newly formed Canadian partnership (HealthLease Canada, L.P.) to the sellers of $10.3 million and assuming debt of $45.6 million with loan and third party fees of approximately $246,659.  In addition, the REIT made a mezzanine investment, to the seller, on two properties currently under development.  The REIT has committed to buying the two properties for $53.3 million upon completion (estimated to be May 2014).

On August 1, 2013, the REIT advanced a mezzanine loan in the amount of US$1.5 million to MS South Bend, LLC, a related party, for the construction of a senior housing and care property.  The interest rate on this loan is 16% per annum, with 9% per annum paid monthly during the term of the loan and the remaining interest plus principal due at the earlier of sale or 30 months.

HealthLease Owned Properties

Location		Number of Facilities		SNF/LTC Beds		AL/ALZ/ILF Beds		Total Beds
Alberta		11		347		792		1,422
British Columbia		1		57		159		216
Illinois		1		75		-		75
Indiana		9		749		205		954
Michigan*		2		271				271
North Carolina		11		170		623		793
Ohio		1		80				80
Pennsylvania		2		185		-		185
Virginia		5		415		-		415
Total		43		2,349		1,779		4,128

*The REIT has non-amortizing mortgages on its two properties in Michigan and
can buy them at maturity of the loans for the balance outstanding plus US$1.00.

On a pro forma basis that assumes that the acquisition and financings were completed at the beginning of the first quarter, subsequent to the equity financing and additional debt incurred to finance the acquisition, the REIT's debt to gross book value is approximately 54%.

Additionally, on a pro forma basis, quarterly AFFO per unit would have been $0.24 and payout ratio would have been 88% for the quarter. Please see the "Pro Forma Condensed Consolidated Financial Statements" in the Short Form Prospectus of HealthLease Properties REIT filed on SEDAR, July 15, 2013.

The REIT currently has 29.25 million units outstanding, including exchangeable units.  At the closing price of $10.31 per unit on July 31, 2013, the REIT had a market capitalization of approximately $302 million.

Conference Call

HealthLease will host a conference call tomorrow, August 9, 2013, at 9:00am ET to discuss its second quarter financial results.  To access the conference call, please dial 647-427-7450 or 1-888-231-8191.  Please connect approximately 10 minutes prior to the beginning of the call to ensure participation.  The conference call will be archived for replay by telephone until Friday, August 16, 2013 at midnight.  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 22210077.

With the goal of communicating fairly by providing equal access to all stakeholders, management will answer questions in written form instead of entertaining live questions during the call.  All interested parties—including securities analysts, current and potential unitholders, and others—are encouraged to submit questions in writing to [email protected] by 11:30 am ET on August 9.  The REIT will then issue and file on SEDAR a press release before the end of the same day that lists the questions received and the REIT's answers.  Related questions will be combined and provided a single answer.

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.  The REIT's Fiscal Second Quarter Financial Statements have been filed on SEDAR and can also be viewed in the Investor Information section of 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.

Forward-Looking Information
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 AIF 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 statements.

Non-IFRS Measures
The REIT reports its financial results in accordance with IFRS.  Included in this news release are certain non-IFRS financial measures as supplemental indicators used by management to track the REIT's performance. These non-IFRS measures are Net operating income (NOI), Funds from operations (FFO), Adjusted funds from operations (AFFO), payout ratio, weighted average cost of capital and debt to gross book value (Debt to GBV). See the sections entitled "Summary of the Key Performance Indicators for the Three and Six Months ended June 30, 2013" in Management's Discussion & Analysis of Results of Operations and Financial Condition for the quarter ended June 30, 2013 for the definitions of these non-IFRS measures.

The REIT believes that these non-IFRS financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the REIT. These measures do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other real estate investment trusts or enterprises, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS.

SOURCE: HealthLease Properties Real Estate Investment Trust

Scott White
Executive Vice President - Finance
HealthLease Properties REIT
[phone]

Renée Lam
Investor Relations
TMX Equicom
[phone] ext. 258