Healthlease

Documents
(SEDAR filing: 13 June 2012) Final prospectus of HealthLease Properties REIT ("HealthLease REIT") (2780 K). Goodmans/Davies/Krieg DeVault (US)
Summaries
Summary Under
Tax Topics - Public Transactions - Offerings - REIT, Trust and LP Offerings - Cross-Border REITs
HealthLease Properties REIT offering
Overview of structure

A TSX-listed REIT (HealthLease REIT) will hold a portfolio of seniors care facilities in the case of the western Canadian homes and (in the case of its US properties) through an Indiana LP which will be held by a US corporation ("HealthLease US") whose shares will be held by a Canadian subsidiary of HealthLease REIT ("HealthLease Canada") and whose interest-bearing notes will be held directly by the REIT. Distributions are anticipated to be 93% of AFFO. The homes in the US will be operated by a third-party US operator. An LLC of the vendors of the US properties to the REIT will hold exchangeable Class B units of the Indiana LP along with special voting units of the REIT. Units are redeemable for the lesser of the closing market price and 90% of preceding 10-day VWAP, with monthly redemptions in excess of $50,000 satisfied with notes of the REIT.

Canadian tax

Management anticipates that HealthLease REIT will qualify as a REIT for Canadian income tax purposes. The income earned by HealthLease US from the US properties is anticipated to be foreign accrual property income, which will be included in the income of HealthLease Canada subject to a deduction for foreign accrual tax but will not be subject to further inclusion as income to HealthLease Canada when distributed as dividends to it. The REIT intends to be majority-owned by Canadian residents.

US taxation

HealthLease REIT will receive an opinion that the anti-inversion rules in s. 7874 should not apply to it. It should be eligible for benefits under the Canada-US Convention provided that its units are primarily and regularly traded on the TSX. Interest on the notes of HealthLease US held by the REIT (which should be characterized as debt rather than equity based on certain interest rate and debt feasibility studies) should be exempt from US withholding tax under the Convention. HealthLease REIT's debt-to-equity ratio will initially be under 1.5 to 1 and, accordingly, it is expected that s. 163(j) will not initially disallow the deduction of interest on these notes.