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says. "Because of the demand for yield and recognition that these are players who have consistently made money for people, they're willing to go into ventures that they may not have done a few years ago. According to Pincus, the huge investor " demand for REIT products made it inevi- table that Canadian REITs would begin looking beyond our borders. "There' a limited amount of income producing Canadian real estate, and therefore REITs have to look to the U.S. and elsewhere in the world to acquire, s only REITs raising capital in Canada, but with assets south of the border. In June, Pincus acted for HealthLease Properties REIT, an owner of seniors care homes in the American Midwest and Western Canada, in its IPO on the TSX. Pincus says such cross-border deals Pincus has acted for a number of " he says. can be extremely complex. "Creativity is important because you're designing structures for regulatory requirements in more than one jurisdiction, and you tend to have a lot of moving parts," he says, adding that they bring with them unique risks. Although the Canadian dollar has been fairly steady recently, around par- ity with its U.S. counterpart, Pincus says swings are still likely and hedging should be considered to combat currency risk. This may be more of an issue for those with investments in Europe, where the economy and currency remain volatile. Pincus says Canadian REITs taking their first steps into a particular sector or geographical region may need help establishing local management. "But you find that if people have been successful here, and have got a business model that works in a certain asset class, they can often apply that same model to other areas," he says. REITs operating in certain regulation- really matters. When it Appeals Opinions and Risk Management Mergers & Acquisitions Claims against Professionals and Fiduciaries Directors' and Officers' Duties and Liabilities Class Actions is Canadian tax rules designed to clamp down on income trusts do not apply to trust income generated outside the country. "As the financial crisis contin- ues in Europe, owners of asset portfolios will have a hard time accessing capital. Canada has got a very strong financial sector, so it'll be a natural place to come, Pincus says. "Canadian investors have to be wary of economic shifts." "The key thing for REITs to do is " to build an underlying asset base so that it's as strong as possible to weather any shifts in interest rates, and to have a good capital structure so they're not over-leveraged. Canadian REITs tend to be conservatively leveraged anyway, Pincus good tenants, good management, and high quality assets that are well main- tained. All those things will keep REITS resistant to economic changes." IH says. "It's important to have " heavy areas, such as health care, may also face unique difficulties ensuring they've met all the requirements expected of them in a particular jurisdiction. Pincus says Canada will remain an attractive place to go public because the market here is more receptive to IPOs in the $100-$300 million range occupied by many REITs, often considered too small for U.S. investors. An added advantage Toronto: 416 867 3076 London: 519 672 4510 www.lerners.ca Lerners-1/2_IH_Aug_11.indd 1CANADIANLAWYERMAG.COM/INHOUSE OCTOBER/NOVEMBER 2012 • 8/16/11 8:42:12 AM 33

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