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Another real estate investment trust is set to go public in Canada.

Last week, Morguard North American Residential Real Estate Investment Trust successfully completed a $75-million IPO.

This week, an owner of seniors homes is trying its luck in the Canadian initial public offering market. HealthLease Properties Real Estate Investment Trust filed a preliminary prospectus Tuesday. It's looking to go public in a deal that will create a company with a market value of about $140-million.

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HealthLease is looking to sell units at a valuation that will lead to a yield in the 8.5 per cent range.

The plan is to use the money raised to buy two portfolios of seniors housing, one in Canada and one in the U.S., from developers led by U.S. businessman Ezekiel Turner. The developers will then turn around and use the money to keep developing new care homes, which can then be sold to the HealthLease.

To minimize risks, the plan is to have the REIT stay out of the business of actually operating the seniors homes, and instead just to own the real estate. It's a model that's worked in hotels, where operating companies run the hotels, worrying about the food and linens and taking the risk of losing money on empty rooms. The actual buildings, though, are owned by real estate investors who just collect rent.

HealthLease's pitch is that the current crop of care homes is old and people with money will choose newer options if available. HealthLease wants to be the one to build those newer, nicer facilities.

REITs have been popular with investors for the income they throw off, so that's one factor in favour of the deal even in a generally tough market for IPOs. What's more, some recent merger and acquisition activity in the REIT space has given portfolio managers some money they need to put back to work.

The flipside is that the last deal in the seniors-care REIT space didn't fly, so the bankers are going to have to work overtime explaining how this one is different.

Renaissance Lifestyle Communities filed to go public last fall, seeking to raise money to buy seniors care homes. That deal was set to launch into rough market conditions, and regulators also had questions about the transaction, so it was shelved. (Read a prior post on that here.)

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The irony is that when both deals were floating around last fall, the Renaissance transaction was viewed as the choice one by some bankers, as it was going to be bigger and didn't have a complicated cross-border component. BMO Nesbitt Burns and CIBC World Markets ended up as lead underwriters on Renaissance.

Canaccord Genuity and National Bank Financial are the leads on HealthLease, with BMO and CIBC playing backup roles.

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