Mainstreet Health Investments Inc. (Formerly Kingsway Arms Retirement Residences Inc.) Announces First Quarter 2016 Results
TORONTO, MAY 27, 2016 – Mainstreet Health Investments Inc. (TSXV: HLP.U) (the “Company”) (formerly Kingsway Arms Retirement Residences Inc.) today announced its financial results for the three months ended March 31, 2016. All dollar amounts are stated in US dollars unless otherwise noted.
Financial Highlights
| Three Months Ended March 31, | |||
| (in CAN$ 000s) | 2016 | 2015 | |
| Revenues | $- | $468 | |
| Expenses | 286 | 527 | |
| Net loss | $(286) | $(59) | |
In June 2015, the Company commenced discussions with Mainstreet Investment Company, LLC (“Mainstreet”) with the objective of pursuing and ultimately completing a transaction (the “RTO”) that would result in a reverse takeover of the Company (described in greater detail below). The Company sold its then remaining real estate asset in August 2015 and dedicated its resources to completing the RTO.
As a result of the sale of its then remaining real estate asset, the Company reported nil revenues during the quarter ended March 31, 2016, compared to revenues of CAN$468,000 for the three months ended March 31, 2015. Total expenses for the quarter ended March 31, 2016 consisted primarily of legal and audit related expenses and professional fees incurred with respect to the RTO.
“During this first quarter, management worked on re-establishing our presence in the Canadian public markets and positioning the Company for future growth,” said Scott White, president of the Company. “We’re again in the fortunate position to transform the way healthcare is delivered and we’re just getting started.”
Subsequent Events
On April 4, 2016, the Company announced the completion of the RTO with Mainstreet as previously announced on November 6, 2015. In connection with the RTO, the Company acquired all shares of Mainstreet Health Holdings Inc. (“MHI Holdco”) held by Mainstreet (which shares constituted approximately 75 percent of the issued and outstanding shares of MHI Holdco). At the time of completion of the RTO, MHI Holdco indirectly held a portfolio of ten seniors housing and care properties in the state of Illinois. The properties are leased to an experienced tenant operator under a fifteen year, triple net master lease (the “Master Lease”). Please refer to the management information circular of the Company dated February 29, 2016, available on SEDAR at www.sedar.com for further details concerning the RTO.
A summary of the financial results for MHI Holdco for the three months ended March 31, 2016, is as follows (in US$ 000s):
| Three Months Ended March 31, 2016 | |
| Revenues | $7,354 |
| Expenses | (8,760) |
| Net loss | (1,406) |
| Adjustments to calculate Funds from Operations (“FFO”) (1) | |
| – Change in value of investment properties | (2,644) |
| – Property taxes accounted for under IFRIC 21 | 3,466 |
| – Fair value adjustment of derivative instruments | 1,850 |
| FFO | 1,266 |
| Adjustments to calculate Adjusted Funds from Operations (“AFFO”) (1) | |
| – Amortization of straight line rental income | (822) |
| – Interest expense on convertible debentures | 2,722 |
| – Amortization of deferred financing costs | 155 |
| AFFO | $3,321 |
| (1) | FFO and AFFO are supplemental measures used by management to track performance of MHI Holdco. Please see “Non-IFRS Measures” below for definitions of FFO and AFFO and other information related to these measures. |
Revenues consist primarily of US$5.4 million of rental income received under the Master Lease with the tenant operator. Expenses for the quarter are comprised primarily of real estate taxes and interest expense. For more information, please refer to the MHI Holdco March 31, 2016 consolidated financial statements, which are available on the Company’s profile on SEDAR at www.sedar.com.
On April 29, 2016, the Company acquired an eleventh property located in Hanover Park, Illinois (the “Hanover Park Property”). The Hanover Park Property is operated under the Master Lease. For more information concerning the acquisition of the Hanover Park Property, please refer to the Company’s final prospectus dated May 26, 2016 available on SEDAR at www.sedar.com.
On May 26, 2016, the Company announced it had filed, and obtained a receipt for, a final prospectus for its public offering of 9,500,000 common shares (“Common Shares”) in the capital of the Company (the “Offering”). The Common Shares will be issued at a price of US$10.00 per Common Share. Gross proceeds of the Offering will be US$95,000,000 million.
About Mainstreet Health Investments
Mainstreet Health Investments Inc. indirectly owns 11 seniors housing and care properties in the state of Illinois. The properties are leased to an experienced tenant operator under a fifteen year, triple net master lease. The Company’s common shares are listed on the TSX Venture Exchange and trade under the symbol HLP.U. For more information visit www.mainstreethealthinvestments.com.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Information
This news release contains forward-looking statements which reflect the Company’s current expectations regarding future events, including with respect to the Offering. Forward-looking statements generally can be identified by words such as “outlook”, “objective”, “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans”, “project”, “budget” or “continue” or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect the Company’s current beliefs and are based on information currently available to management. Although the forward-looking statements contained in this news release are based upon what the Company believes are reasonable assumptions, including that the conditions to closing of the Offering will be satisfied or waived, there can be no assurance that actual results will be consistent with these forward-looking statements. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed under the section entitled “Risk Factors” included in the Company’s prospectus dated May 26, 2016 available on SEDAR at www.sedar.com. All forward-looking statements in this news release are qualified by these cautionary statements. These forward-looking statements are made as of today, and the Company, except as required by applicable law, assumes no obligation to update or revise them to reflect new information or the occurrence of future events or circumstances.
Non-IFRS Measures
The Company reports its financial results in accordance with International Financial Reporting Standard (“IFRS”). Included in this news release are certain non-IFRS financial measures as supplemental indicators used by management to track the Company’s performance. These non-IFRS measures are Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”). FFO, consistent with the REALpac definition, means net profit in accordance with IFRS, (i) plus or minus fair value adjustments on investment properties; (ii) plus or minus gains or losses from sales of investment properties; (iii) plus or minus certain other fair value adjustments, including changes in fair value of financial instruments which are economically effective hedges; and (iv) plus property taxes accounted for under IFRIC-21 – Levies. AFFO means FFO, subject to certain adjustments, including: (i) mark-to-market adjustments on mortgages, amortization of deferred financing costs, and compensation expense related to deferred share incentive plans, (ii) adjusting for any differences resulting from recognizing property rental revenues on a straight-line basis; (iii) adjustments related to interest expense on convertible debentures; and (iv) other adjustments as determined by the directors of the Company in their sole discretion.
The Company believes that these non-IFRS financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other real estate investment trusts or enterprises, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS.
SOURCE Mainstreet Health Investments Inc. 
For further information: Investors: Mr. Randy Henry, Director – Investor Relations, 1-317-582-6971, rhenry@maininvest.com; Media: Ms. Ashley Mattox, Communications Manager, 1-317-582-6986, amattox@maininvest.com