Mainstreet Health Investments Inc. Announces Filing of a Preliminary Prospectus and Agreements to Acquire Thirteen Seniors Housing and Care Properties

/NOT FOR DISTRIBUTION TO THE U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES/

TORONTO, April 22, 2016 /CNW/ - Mainstreet Health Investments Inc. ("Mainstreet" or the "Corporation") (TSXV:HLP.U) today announced that it has filed a preliminary prospectus with the securities authorities in all provinces and territories of Canada with respect to a proposed offering (the "Offering") of its common shares (the "Common Shares"). The offering will be made on a marketed underwritten basis through a syndicate of underwriters led by BMO Capital Markets, CIBC Capital Markets and National Bank Financial Inc.

The Corporation owns approximately 75% of the issued and outstanding shares of Mainstreet Health Holdings Inc. ("MHI Holdco"), which owns a portfolio of 10 properties (the "Symphony Portfolio") located in the Chicago metropolitan area. The Corporation has agreed to acquire an eleventh property located in Hanover Park, Illinois (the "Hanover Park Property") for a purchase price of approximately US$34.1 million, excluding transaction costs, which is anticipated to be acquired prior to the closing of the Offering. On or following closing of the Offering, the Corporation intends to indirectly acquire (i) a portfolio of three seniors housing and care properties located in New York from entities owned by Hearth Management L.L.C. for a purchase price of approximately US$50.9 million, (ii) a portfolio of seven seniors housing and care properties located in Pennsylvania from Scranton-7 Holdings, LLC, a joint venture between Mainstreet Investment Company, LLC (together with Mainstreet Property Group, LLC and its other affiliates, "Mainstreet LLC") and Saber Healthcare Group, for a purchase price of approximately US$29.1 million (iii) two seniors housing and care properties located in Indiana from Mainstreet LLC for purchase prices of approximately US$23.9 million and US$15.8 million, and (iv) one seniors housing and care property that is currently under development in Kansas from Mainstreet LLC for a purchase price of approximately US$20.1 million (collectively, the "Properties"), in each case excluding transaction costs. The purchase prices for the Properties, net of any debt to be assumed, will be paid in cash and each of the Properties is, or in the case of the Kansas development property, upon completion of construction will be, leased to an experienced operator on a long-term, triple-net lease basis.

The Corporation also announced that it has entered into two commitment letters with Mainstreet LLC pursuant to which the Corporation agreed to provide mezzanine financing to Mainstreet LLC in the amounts of approximately US$2.6 million and US$2.5 million to fund certain costs in connection with the development of two seniors housing and care facilities located in Houston, Texas (the "Mezzanine Financing"). The Mezzanine Financing will bear interest at a rate of 10.5%. Additional interest, which may, at the option of Mainstreet LLC, be paid in cash or capitalized, will accrue on the principal balance of the Mezzanine Financing for each facility at the rate of (i) 4% per annum if such Mezzanine Financing is not secured by a mortgage on the facility; and (ii) 3% per annum if such Mezzanine Financing is secured by a mortgage on the facility. The Mezzanine Financing will have a term of 48 months. Pursuant to the development agreement entered into between the Corporation and Mainstreet LLC, the Corporation will have the right to purchase both facilities at fair market value upon completion in accordance with the development agreement between the Corporation and Mainstreet LLC.

The acquisition of the Properties and the Mezzanine Financing are consistent with the Corporation's goals of delivering stable and growing dividends to its shareholders while also expanding its high quality portfolio of seniors housing and care properties over time through organic growth and strategic and accretive acquisitions of existing assets, including acquisitions of pre-leased development projects (including newly built NextGen® transitional care properties) from Mainstreet LLC among others.

The net proceeds from the Offering are expected to be used by the Corporation to fund (i) a portion of the acquisition cost of the Properties, (ii) the redemption of preferred shares in the capital of MHI Holdco to be issued to the Magnetar Funds (defined below) and the repayment of funds borrowed, in each case, in connection with the acquisition of the Hanover Park Property, (iii) the Mezzanine Financing and (iv) identified capital improvement projects.  The balance of the purchase price for the acquisition of the Properties will be funded through the assumption of existing indebtedness in respect of the Properties, borrowings under the Corporation's credit facility and/or cash on hand. The acquisitions of the Properties are subject to a number of conditions including, among others, completion of the Offering and the Corporation assuming existing financing or obtaining new financing.  For more information on the Properties and the Mezzanine Financing, including conditions to closing the acquisitions of the Properties and the funding of the Mezzanine Financing, please see the preliminary prospectus, which is available on Mainstreet's profile on SEDAR (www.sedar.com).

Immediately prior to closing of the Offering, the outstanding Common Shares and non-voting common shares of the Corporation will be consolidated on the basis of one post-consolidation Common Share for every 250 pre-consolidation Common Shares and one post-consolidation non-voting common share for every 250 pre-consolidation non-voting common shares (the "Consolidation"). The Consolidation was approved at the general and special meeting of the Shareholders held on March 30, 2016.  In addition, in connection with the Offering, all non-voting common shares will be converted by the holder, Mainstreet LLC, on a one-for-one basis into 1,230,639 post-consolidation Common Shares such that only Common Shares will be outstanding. Following the Consolidation and conversion, Mainstreet LLC will own 1,555,279 Common Shares.

In connection with the closing of the Offering, certain funds managed by Magnetar Financial LLC (the "Magnetar Funds") have agreed to exchange their interests in the Corporation's subsidiary, MHI Holdco, with the Corporation in consideration for approximately 11.64 million post-consolidation Common Shares (the "Magnetar Exchange"). The foregoing transaction is governed by an exchange agreement entered into on April 21, 2016 between the Corporation and Magnetar Financial LLC, on behalf of the Magnetar Funds. The Magnetar Exchange is conditional on, among other things, the satisfaction or waiver of all conditions precedent to the Offering and the approval of the TSX Venture Exchange and shareholders and listing approval of the Toronto Stock Exchange ("TSX"). The Magnetar Funds currently own approximately 51,809 shares of MHI Holdco, representing approximately 25% of the outstanding shares, and convertible debentures of MHI Holdco in an aggregate principal amount of approximately US$110.3 million as of March 31, 2016.  Following the Magnetar Exchange, the Magnetar Funds will collectively be a new control person of the Corporation under applicable securities laws. The Corporation has applied to the TSX to graduate and list its Common Shares (including the Common Shares purchased under the Offering) on such exchange, concurrently with the closing of the Offering. Listing on the TSX will be subject to the Corporation fulfilling all of the original listing requirements of the TSX. There is no assurance that the Corporation will meet these requirements.  

The Corporation has also filed an information circular in connection with a special meeting (the "Special Meeting") of shareholders to be held on May 25, 2016 to approve, among other things, the acquisition of the Properties, the Mezzanine Financing and the Magnetar Exchange. Mainstreet Investment Company, LLC currently owns 81,160,000 Common Shares, representing approximately 80% of the outstanding Common Shares and 307,659,850 non-voting shares representing all of the outstanding non-voting shares.  Because Mainstreet Investment Company, LLC, an affiliate of Mainstreet LLC, currently owns 95% of the outstanding shares of the Corporation and an affiliate of Mainstreet LLC is the external manager of the Corporation, Mainstreet LLC is a related party of the Corporation under applicable securities laws. As such, because Mainstreet LLC is a seller of the Properties (or party to the purchase agreement in respect of certain of the Properties), the acquisition of the Properties and the Mezzanine Financing constitute "related party transactions" pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"), and accordingly such transactions were reviewed and considered by the independent directors of the Corporation. The Corporation is not required under MI 61-101 to obtain a formal valuation in respect of the related party transactions as the Corporation is not listed on certain specified stock exchanges. The board of directors of the Corporation has unanimously approved the acquisition of the Properties, the Mezzanine Financing and the Magnetar Exchange and recommend that Shareholders vote in favour of these transactions.

To be effective, the resolution approving the acquisition of the Properties and the Mezzanine Financing must be approved by a majority of the votes cast by the shareholders of the Corporation, other than Mainstreet LLC and any related parties or joint actors of Mainstreet LLC, present in person or by proxy at the Special Meeting and the Magnetar Exchange must be approved by a majority of the votes cast by Shareholders present in person by proxy at the Special Meeting. Details of the items of business to be conducted at the Special Meeting, including all information required by MI 61-101, are contained in the Management Information Circular and Proxy Material dated April 21, 2016, which is available on Mainstreet's profile on SEDAR (www.sedar.com) and will be mailed to shareholders.

Shareholders holding approximately 45% of the outstanding Common Shares (excluding Common Shares held by Mainstreet LLC and its related parties and joint actors and without giving effect to the closing of the Offering or the Magnetar Exchange) have entered into Voting and Support Agreements in favour of Mainstreet LLC pursuant to which such Shareholders have agreed to vote their Common Shares in favour of the acquisition of the Properties and the Magnetar Exchange at the Special Meeting.

The securities offered pursuant to the Offering have not and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any U.S. State securities laws and may not be offered or sold, directly or indirectly, within the United States or its territories or possessions or to or for the account of any U.S. person (as defined in Regulation S under the U.S. Securities Act) other than pursuant to an available exemption from the registration requirements of the U.S. Securities Act and in compliance with U.S. State securities laws. This press release does not constitute an offer to sell or a solicitation of an offer to buy any such securities within the United States, or its territories or possessions, or to or for the account of any U.S. person.

About Mainstreet

Mainstreet Health Investments Inc. owns 10 seniors housing and care properties in the state of Illinois and has entered into an agreement to acquire one additional property. The properties are leased to an experienced tenant operator under a fifteen year, triple net master lease. Mainstreet's common shares are listed on the TSX Venture Exchange and trade under the symbol HLP.U. For more information visit www.mainstreethealthinvestments.com.

About Magnetar

Magnetar Financial LLC is an alternative asset manager that was founded in 2005 and is headquartered in Evanston, Illinois. The Magnetar group also has offices in New York and London and employs approximately 250 employees worldwide.  As at February 29, 2016, the Magnetar group had total assets under management of approximately US$13.1 billion.  Magnetar Financial LLC is registered with the U.S. Securities and Exchange Commission as an investment adviser, and its affiliate Magnetar Financial (UK) LLP is authorized and regulated by the United Kingdom's Financial Conduct Authority in the conduct of regulated investment business.

Caution Regarding Forward Looking Information

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "goal" and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this news release contains forward looking statements and information concerning the proposed offering of shares, the completion of the acquisition of the Properties, the Mezzanine Financing and the Magnetar Exchange and the proposed closing of the Offering. The forward-looking statements and information are based on certain key expectations and assumptions made by Mainstreet, including that the conditions to closing of each of the acquisition of the Properties, the Mezzanine Financing, the Magnetar Exchange and the Offering will be satisfied or waived. Although Mainstreet believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward looking statements and information because Mainstreet can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. These risks and uncertainties include, but are not limited to, Mainstreet not obtaining regulatory approval for one or more of the transactions, Mainstreet not being able to assume the financing for the acquisition of the Properties and the conditions to the acquisition of the Properties, the Mezzanine Financing, the Magnetar Exchange and the Offering not being satisfied or waived. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date hereof, and to not use such forward looking information for anything other than its intended purpose. Mainstreet undertake no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

Neither the TSX-V nor any securities regulatory authority has in any way passed upon the merits of the Reverse Takeover described in this press release.

Neither the TSX-V nor its Regulation Services Provider (as that term is defined in the policies of the TSX-V) accepts responsibility for the adequacy or accuracy of this news release.

SOURCE Mainstreet Health Investments Inc.

For further information: Mr. Randy Henry, Director - Investor Relations, 1-317-582-6971, rhenry@maininvest.com


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