HealthLease Properties Real Estate Investment Trust Provides Q&A Update for July 2013
TORONTO, Aug. 1, 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 June 28, 2013.
Question 1: How are your mortgages structured with regard to paying down the debt? Are they interest-only, or a 25-year payoff? That is, are you paying down debt just through making the monthly mortgage payments, or is debt-repayment totally dependent on using Free Cash Flow after all costs and dividends - which you wouldn't have much of if the dividend payout ratio is near 100 percent.
With the increase in interest rates, I am wondering if the company is going to be in trouble with the debt, and may have to cut or eliminate the dividend. I am looking ahead to when interest rates suddenly jump to the normal 6 to 7 percent range.
Answer: We have an even mix of amortizing and interest-only debt. We strive to replace any principal payments with new debt to ensure that our debt to gross book value remains constant at approximately 55 percent. In terms of rising interest rates, the REIT is also protected against rising rates through its acquisition program. We have nearly tripled the portfolio since IPO and new additions to the portfolio have leases priced against the prevailing interest rate environment. Given our agreement with Mainstreet Properties Group to acquire properties developed by them, as well as the opportunities available in the U.S. and Canadian markets, we expect to continue to grow.
Question 2: I would like to confirm the names of the three independent Trustees along with the Chairman for the Investment Committee that was authorized in May 2013.
Answer: The Investment Committee membership is David Biernes, Neil Labatte and Michael Salter, with Neil Labatte serving as Chair.
Question 3: Do all Canadian Brokers participate in the DRIP service or is it a voluntary program for them if the units are held in a brokerage account?
Answer: Participation in the DRIP itself is the choice of the individual unitholder, with the authorization form processed by their broker. All Canadian brokers should be able to process the authorization forms for the dividend reinvestment plan (DRIP), as long as they are participants in CDS. Here is a link to the CDS participant list: http://www.cds.ca/cdsclearinghome.nsf/Pages/-EN-Participantlinks and the dividend reinvestment plan and authorization form can be found at http://www.hlpreit.com/files/doc_downloads/HealthLease%20REIT%20Distribution%20Reinvestment%20Plan.pdf
Question 4: In reference to the acquisition of Continuum Senior Care Portfolio, as per the press release dated 7/2/2013, it is stated that acquisition will be funded in part by the assumption of five loans. I am looking to confirm the nature of the loan (mortgage/term loan), the total commitment, the maturity date and the interest rate for each loan.
Answer: We do not disclose the details of each of the loans and only disclose the weighted averages for the five loans. Please refer to page 17 the Short Form Prospectus dated July 15, 2013; it indicates that "The acquisition of the Continuum Senior Care Portfolio will be financed in part by assuming five mortgage loans (and related interest rate swaps) in the amount of $45.2 million from the Continuum Sellers. The five mortgage loans have a weighted average maturity of 13.1 years and have a weighted average interest rate (after hedging) of 4.98 percent. The acquisition of the two development properties in the Continuum Senior Care Portfolio will be financed in part by assuming two construction loans, having a projected aggregate principal amount of $38.6 million, from the Continuum Sellers." This is also reflective of what was indicated in the Press Release dated July 2, 2013.
Question 5: We're trying to understand the Springfield tenant dispute outlined in the Short Form Prospectus dated July 15, 2013. The REIT is getting income support from Mainstreet until certificate of occupancy and tenant has taken possession, so isn't the $270K in dispute covered by the income subsidy? If the tenant is removed, what is the expectation of getting a replacement tenant and corresponding down time?
Answer: Rent in this property has commenced and the REIT is pursuing its options to resolve the tenant dispute. However, management believes it is unlikely this dispute will have a material impact on the REIT's business. As the dispute either progresses towards resolution or is resolved, management will provide more information to unitholders.
Question 6: I have a substantial part of my portfolio invested in your company with a long term perspective. You have mentioned in one of your statements: "All of the REIT‟s leases (except one) are subject to rent escalators." How will generally the rent increase in average for the next 10 years? I would be also happy with an approximate value.
Answer: All of the properties in our portfolio, but one, have built-in rent escalators. These vary and include some with annual escalators of 2 to 3 percent, others with set rate increases on the five and ten-year anniversaries of the lease and one with an escalator related to the Consumer Price Index. The specific escalators on the properties in our current portfolio are detailed in our Annual Information Form, dated March 6, 2013, and Short-Form Prospectuses, dated April 4, 2013 and July 15, 2013, available on SEDAR (http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00033101).
Management feels that the escalators provide adequate protection to the REIT against an increase in interest rates. The REIT is also protected against rising rates through its acquisition program. We have nearly tripled the portfolio since IPO and new additions to the portfolio have leases priced against the prevailing interest rate environment. In that light, it would be inaccurate to predict how rents will increase over the next ten years as that would assume a static portfolio. Given our agreement with Mainstreet Properties Group to acquire properties developed by them, as well as the opportunities available in the U.S. and Canadian markets, we expect to continue to grow.
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.
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 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 statements.
SOURCE: HealthLease Properties Real Estate Investment Trust
Scott White
Executive Vice President - Finance
HealthLease Properties REIT
(317) 420-0205
Renée Lam
Investor Relations
TMX Equicom
(416) 815-0700 ext. 258
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