Health Care REIT to Acquire HealthLease Properties REIT and Partner with Mainstreet Property Group

Immediately Accretive $950 Million Acquisition of High-Quality, Seniors Housing and Post-Acute Care Portfolio; Establishes Partnership with Projected $1.4 Billion Acquisition Pipeline

TOLEDO, Ohio--()--Health Care REIT, Inc. (“HCN”) (NYSE:HCN) announced today that it has entered into a definitive agreement to acquire the outstanding units of HealthLease Properties Real Estate Investment Trust (“HealthLease”) (TSX:HLP.UN) for CAD$14.20 per unit on a fully diluted basis in an all-cash transaction valued at approximately USD$950 million, including debt assumption. The HealthLease portfolio (the “Portfolio”) includes 53 high-quality seniors housing, post-acute care and long-term care communities that are managed by well-respected operators under long-term triple-net lease agreements. The purchase price of the Portfolio represents a 7.0% initial cash yield. HCN projects the acquisition of the Portfolio to be accretive to HCN’s FFOPS and FADPS by approximately $0.04 in year one.

Additionally, HCN has entered into a partnership with Mainstreet Property Group (“Mainstreet”), the external management company of HealthLease. All existing agreements between HealthLease and Mainstreet will be terminated at closing and HCN will not absorb any employees from either company. Mainstreet is the largest developer of seniors housing and post-acute facilities in the U.S. The partnership includes an agreement to acquire 17 state-of-the-art Next Generation® communities (the “Pipeline”) that are managed by well-respected operators under long-term triple-net lease agreements. The Next Generation® communities each feature a mix of 70 post-acute beds and 30 assisted living beds, high-end common areas and amenities, private rooms and baths, and large rehabilitation therapy space. HCN will acquire the Pipeline for approximately USD$369 million representing a 7.5% initial cash yield, which is anticipated to be meaningfully accretive and close in tranches upon completion of construction beginning in 4Q14 through 1Q16.

HCN has also entered into an agreement with Mainstreet to provide mezzanine financing at attractive mid-teen interest rates and receive purchase rights at HCN’s option for an additional 45 Next Generation® development projects (“Future Pipeline”) managed by well-respected operators under long-term triple-net lease agreements. The Future Pipeline represents a $1.0 billion acquisition pipeline at a 7.7% initial cash yield, which is anticipated to be meaningfully accretive. The Future Pipeline is anticipated to close in tranches upon completion of construction beginning in 2016 through 1Q17.

In total, the transaction represents a potential USD$2.3 billion investment at a 7.4% blended initial cash yield. The transaction is projected to be immediately accretive to earnings, delivers a highly attractive and accretive growth pipeline, and further aligns HCN with leading operators and an innovative developer that are meeting the growing demand for high-quality seniors housing and post-acute care.

“This transaction again demonstrates HCN's integral role in the health care delivery continuum,” said Tom DeRosa, HCN’s Chief Executive Officer. “With Mainstreet, HCN is developing the next generation of post-acute care. Further, we are connecting leading health systems, post-acute providers and seniors housing operators to deliver integrated health care delivery platforms that will improve the quality of care, create operating efficiencies and reduce costs.”

“Our vision is to change the way that rehabilitative care is provided. We’re designing environments that meet the needs of today’s health care consumers, who are more empowered than ever,” said Zeke Turner, Mainstreet’s Chief Executive Officer. “We’re delighted to be partnering with a company like HCN, whose strategy is so well-aligned with our goals. This transaction positions Mainstreet with a capital partner that can help us execute on our vision of transforming the seniors housing and post-acute industries.”

HealthLease Portfolio Description

The Portfolio has 5,331 beds/units comprised of 46% seniors housing, 30% post-acute care, and 24% long-term care. The average remaining lease term is approximately 11 years with average annual rent increasers equal to 2.0% and corporate lease guaranties. The Portfolio is concentrated in North Carolina, Indiana, and Alberta, Canada. This is a modern portfolio of purpose-built communities, with 30 of the 53 communities built since 2010. One of the 53 assets is currently under contract and is expected to be acquired in 4Q14. The Portfolio is operated by experienced and well-respected operators in the U.S. including Trilogy Health Services, Life Care Services and Saber Healthcare, and two highly respected Canadian operators, Continuum Healthcare and AgeCare.

Pipeline Overview

The Pipeline of 17 Next Generation® communities is expected to be acquired in tranches as construction is completed beginning in 4Q14 through 1Q16 and represents an approximately $369 million pipeline of high-quality acquisitions at an initial cash yield of 7.5%. The communities are located primarily in the Denver, Kansas City and Indianapolis metropolitan areas. The annual rent increase on the Pipeline communities is typically the greater of CPI or 2.5% and the leases are guaranteed by the applicable operating company. The communities are expected to have a 100% quality mix and generate strong rent payment coverage of 2.0x before management fees and 1.7x after management fees upon stabilization. The Pipeline will be leased to leading operators including Genesis HealthCare and Trilogy, both existing HCN partners, and The Ensign Group (NASDAQ:ENSG), a new HCN partner.

Future Pipeline

HCN will have the exclusive right to acquire an additional 45 of Mainstreet’s Next Generation® developments upon completion of construction. The Future Pipeline is expected to be delivered in tranches from 2016 through 1Q17. HCN will provide mezzanine financing during construction and will receive a purchase option to acquire each of the projects upon completion for a 7.7% cap rate on year one rent. The Future Pipeline represents an acquisition pipeline of class-A assets valued at approximately $1.0 billion. The annual rent increase on the Pipeline communities is typically the greater of CPI or 2.5% and the leases are guaranteed by the applicable operating company. The communities are expected to have a 100% quality mix and generate strong rent payment coverage of 2.0x before management fees and 1.7x after management fees upon stabilization. The Future Pipeline will be operated by experienced tenants including Genesis, Trilogy and Ensign.

Timing and Financing

The transaction is subject to customary closing conditions, including certain competition and regulatory approvals as well as approval by the unitholders of HealthLease, and is expected to close in 4Q14. HCN intends to fund the transaction through its $2.5 billion unsecured credit facility and $207 million of cash available, as of June 30, 2014. HCN intends to finance the transaction over the long-term in accordance with its target capitalization of 60% equity and 40% debt.


Goldman, Sachs & Co. and RBC Capital Markets acted as financial advisors to HCN on the transaction. Sidley Austin LLP, Borden Ladner Gervais LLP, and Shumaker, Loop & Kendrick, LLP acted as HCN’s legal advisors. Arnold & Porter LLP provided tax counsel.

BMO Capital Markets acted as financial advisor to HealthLease. Goodmans LLP acted as HealthLease’s legal advisors.

Additional Information and Where to Find It

Please go to HCN’s website,, for more information about the transaction including a PowerPoint presentation discussing the transaction and a webpage featuring more information about post-acute care, a map of the HealthLease Portfolio, and pictures of the Portfolio and the Next Generation® prototype.

About Health Care REIT, Inc. 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.

About HealthLease Properties Real Estate Investment Trust HealthLease owns a modern, high-quality portfolio of seniors housing, post-acute and long-term care communities, with 53 properties in two Canadian provinces and eight U.S. states. The communities are leased to experienced tenant operators under long-term, triple-net lease structures. For more information, visit

About Mainstreet Mainstreet is an Indiana-based, innovative developer of short-stay rehabilitation and long-term care properties, known for acquiring and developing desirable, concierge-based health care properties. The company’s award-winning Next Generation® Medical ResortsTM feature multiple social destinations, restaurant-style dining, spacious private rooms and baths, and therapy/wellness. Mainstreet was named to the Inc. 500/5000 list of fastest-growing companies in 2010, 2011 and 2012. For additional information, visit

Non-GAAP Financial Measures

HCN’s accretion estimate represents the projected annualized impact of the Portfolio acquisition using the company’s current mid-point normalized 2014 FFO and FAD outlook (as defined and reconciled in its press release dated August 1, 2014). In addition to the information described above, HCN management used the following assumptions for projecting the Portfolio acquisition impact: (i) a Canadian Dollar to U.S. Dollar exchange rate of 1.087; (ii) 60% equity capitalization at $63 per share less estimated underwriting discounts; (iii) 40% debt capitalization at an average rate of 4.5%; and (iv) 20 basis points of general and administrative expenses. HCN’s estimate excludes (i) any additional 2014 investments beyond what it has announced as of August 1, 2014; (ii) any potential impact of the Pipeline or Future Pipeline discussed above; and (iii) any potential transaction costs, capital transactions, or other additional one-time items. The following is a reconciliation of the accretion estimate for net income available to common stockholders per share to normalized FFO and FAD per share:

Net income attributable to common stockholders       $0.05
Depreciation and amortization (0.01 )
Normalized FFO and FAD $0.04

Forward-Looking Statements and Risk Factors

This document may contain “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. When the company uses words such as “may”, “will”, “intend”, “should”, “believe”, “expect”, “anticipate”, “project”, “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the company’s expectations discussed in the forward-looking statements. The company’s expected results may not be achieved, and actual results may differ materially from expectations. This may be a result of various factors, including but not limited to the satisfaction of closing conditions to the transaction, including, the approval of the transaction by the unitholders of HealthLease and the receipt of regulatory approvals and lender or third-party consents; the respective parties’ performance of their obligations under the transaction agreements; the failure of closings to occur as and when anticipated; unanticipated difficulties and/or expenditures relating to the transaction; operator/tenant bankruptcies or insolvencies; negative developments in the operating results or financial condition of operators/tenants; risks related to non-compliance with government regulations and new legislation or regulatory developments; the status of capital markets, including availability and cost of capital; competition within the health care and seniors housing industries (in particular in response to the transaction in the marketplace); changes in financing terms; risks related to international operations; the movement of U.S. and foreign exchange rates; and other factors affecting the execution of the transaction and subsequent performance, including REIT laws and regulations. Additional factors are discussed in the company’s Annual Report on Form 10-K and in its other reports filed from time to time with the Securities and Exchange Commission. Finally, the company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, or to update the reasons why actual results could differ from those projected in any forward-looking statements.


Health Care REIT, Inc.
Scott Estes, 419-247-2800
Scott Brinker, 419-247-2800


Health Care REIT, Inc.
Scott Estes, 419-247-2800
Scott Brinker, 419-247-2800