May 4, 2012
By Tim Kiladze, The Globe & Mail
The deal team that worked feverishly on Chartwell Seniors Housing REIT’s $930-million cross-border joint venture finally has time to breathe. After a five-month sprint, the deal has closed – on time.
Over the course of the transaction, which saw Chartwell team up with U.S.-based Health Care REIT to buy more than 8,000 Canadian seniors housing suites, the deal team amassed more than 5,000 closing documents, enough to fill four large boardrooms, and they had to create two new entities for every single property purchased.
The intricacy stems from marrying U.S. real estate investment trust rules, which govern Health Care REIT, and Canada’s mutual fund trust regulations, which apply to Chartwell. The key problem: under U.S. rules, Health Care can’t manage the properties; its income must be passive (i.e., rental income.)
There also haven’t been many cross-border joint ventures between REITs, other than a few one-off type deals. That means there weren’t many precedent transactions to examine.
“You can imagine the complexity in this,” said Chris Murray, a partner at Osler, Hoskin & Harcourt LLP, who was Chartwell’s legal advisor. (RBC Dominion Securities advised on financial matters.)