HealthLease Properties Real Estate Investment Trust (0355514D) raised C$110 million ($107.3 million) in an initial public offering, the largest Canadian IPO in more than 10 months.
The Toronto-based REIT sold 11 million units at C$10 each in the IPO, according to sale documents. The units yield 8.5 percent, the high end of the expected range. HealthLease will use the proceeds to buy seniors housing and care properties in Western Canada and the U.S. Midwest.
HealthLease joins Chartwell Seniors Housing REIT, Extendicare REIT (EXE-U) and Leisureworld Senior Care Corp. (LW) among Canadian firms anticipating rising demand for seniors housing and long-term care facilities as North America’s population ages and life expectancy increases. The senior population in Canada and the U.S. is forecast to rise at about three times the rate of the general population, HealthLease said.
“In the U.S., more than $400 billion in new construction is needed over the next 35 years to meet anticipated demand, while in Canada the required stock of long-term care and assisted living facilities is expected to nearly double over the next 20 years,” HealthLease said in an April 30 filing.
HealthLease plans to initially buy 15 seniors properties in British Columbia, Alberta and the U.S., representing 1,931 beds or suites.
HealthLease will buy nine facilities in Indiana and Illinois from Mainstreet Property Group LLC, and six Canadian properties from Northern Property Real Estate Investment Trust (NPR-U), according to the filing. Mainstreet will have an 18 percent interest in HealthLease after the close of the sale, expected June 15. Paul Ezekiel Turner, chief executive officer of HealthLease, declined to comment.
HealthLease is the largest Canadian-listed IPO since Dundee International Real Estate Investment Trust raised C$410 million in July. HealthLease is Canada’s second REIT IPO this year, after the C$82.5 million sale of Morguard North American Residential REIT. Morguard North American has risen 9.2 percent since its April 18 debut on the Toronto Stock Exchange.
Canadian real estate investment trusts have outpaced Canada’s benchmark index in the past year. The 13-company S&P/TSX Capped REIT Index (SPRTRE) has risen 13 percent in the past 12 months, compared with the 12 percent decline of Canada’s benchmark S&P/TSX Composite Index. (SPTSX)
HealthLease’s 8.5 percent dividend yield is higher than the 5.1 percent average dividend yield of the REIT index and nearly triple the 3 percent dividend yield of the Canadian benchmark index. HealthLease will trade under the ticker symbol HLP-U.
HealthLease’s indicated yield compares to the 5.78 percent indicated yield of Chartwell Seniors (CSH-U) Housing REIT and the 10.4 percent yield of Extendicare REIT, according to Bloomberg data.
HealthLease forecast C$20.8 million of annual revenue and C$9.43 million profit for the 12-month period ending June 30, 2013, according to filings.
Canaccord Genuity and National Bank Financial are leading a group of banks on the sale and have the option to buy an additional 10 percent after the deal closes.
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