Mainstreet Health Investments Announces the Acquisition of Three Memory Care Communities and a US$45 Million Bought Deal Offering of Convertible Debentures

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

TORONTO, Nov. 28, 2016 /CNW/ - Mainstreet Health Investments Inc. (TSX: HLP-U) ("Mainstreet" or the "Company") announced today that it has entered into an agreement to acquire a portfolio of three memory care communities (collectively, the "Communities") comprising 171 units for an aggregate purchase price of US$44.3 million (the "Acquisition"). The Acquisition is subject to customary conditions.

In connection with the Acquisition, the Company also announced that it has entered into an agreement with a syndicate of underwriters led by National Bank Financial Inc., BMO Capital Markets, and CIBC Capital Markets to sell, on a bought deal basis, US$45.0 million aggregate principal amount of 5.00% convertible unsecured subordinated debentures (the "Debentures") due January 31, 2022 (the "Offering"). The Debentures will be convertible at the option of the holder into common shares of the Company at US$11.00 per common share.

Acquisition Highlights

• High Quality Portfolio: Mainstreet will acquire three newly developed, memory care communities located in Little Rock, Arkansas and New Braunfels & San Antonio, Texas for US$44.3 million. The Communities are all newly developed within the last two years by the Embree Group of Companies ("Embree"), a national developer with a specialty in health care and senior living facilities.
• Attractive Operating Partner: The Communities will be leased to Memory Care of America, LLC ("MCA"), a Nashville, Tennessee based operator of memory care communities with regional presence in the southern United States. Upon closing of the Acquisition, Mainstreet and MCA will enter into a 15-year (initial term) absolute net master lease agreement, with three five-year extension options.
• Enhanced Diversification: The Acquisition further expands Mainstreet's geographic and property-type diversification, in addition to adding MCA to its roster of high-quality operating partners. The Acquisition enhances the Company's payor mix, as 100% of revenue is expected to be derived from private pay funding sources.
• Additional Investment Opportunities: It is anticipated that Mainstreet will receive a first right to fund the next three senior housing projects developed by Embree and operated by MCA, the first of which is expected to break ground in the first half of 2017.
• Flexible Financing Structure: The transaction will be financed through a bought deal offering of convertible debentures, which have a lower than typical conversion premium, and will allow Mainstreet the flexibility to carry out its strategic growth initiatives.
• Immediately Accretive Transaction: The Acquisition is expected to be immediately accretive to the Company's Adjusted Funds from Operations ("AFFO") per share.

"The Acquisition reflects our strategy of growing our portfolio of high quality properties, leased under triple net leases to best in-class operators" said Mainstreet President and Chief Operating Officer, Scott White. "This acquisition provides us with additional tenants in the memory care market and increases our exposure to units backed by private pay revenue."

Description of the Communities

The Communities, located in Little Rock, Arkansas and New Braunfels & San Antonio, Texas, will be acquired for an aggregate purchase price of US$44.3 million, representing a year one capitalization rate of 7.85%. The Communities will be pre-leased to MCA under an absolute net master lease, with an annual rent escalator of 2.0%. MCA is based in Nashville, Tennessee and was formed in July 2012 to develop, acquire, and operate freestanding memory care assisted living units dedicated solely to residents with Alzheimer's and other forms of dementia. The Company will finance the Acquisition with the net proceeds from the Offering and existing cash resources.

The following table provides a summary description of the Communities:

Property	City	State	Year Built	Building Size (Sq. Ft.)	Total Units
Memory Care of Little Rock	Little Rock	Arkansas	2015	49,344	57
Memory Care of New Braunfels	New Braunfels	Texas	2016	48,382	57
Memory Care of Westover Hills	San Antonio	Texas	2016	48,481	57
Total				146,207	171

The Communities have design features unique for Alzheimer's/Dementia residents, with a home atmosphere that allows caregivers to interact with residents in a familiar, non-intimidating environment. Each of the Communities was developed within the past two years and is conveniently located near multiple health care facilities and local hospitals. The Communities were developed by Embree, a leading national developer of health care and related facilities with operations across the United States.

• Memory Care of Little Rock (Little Rock, Arkansas) is the newest facility in the Little Rock market area dedicated solely to memory care patients. The site is located near the entrance of a 145-acre hospital campus with easy access to multiple healthcare facilities, including the main campus of Baptist Medical Center on Aldersgate, with the University of Arkansas Medical Center and St. Vincent's Medical Center within a three mile radius of the campus.
  
  
• Memory Care of New Braunfels (New Braunfels, Texas) is the newest facility in the New Braunfels market area dedicated solely to memory care patients. The site is in the fast growing northwest area of New Braunfels, conveniently located near the Texas Hill Country. The location has easy access to multiple health care facilities, including CHRISTUS Santa Rosa Health System, McKenna Memorial Hospital, and the New Resolute Health Hospital.
  
  
• Memory Care of Westover Hills (San Antonio, Texas) is the newest facility in the Westover Hills market area dedicated solely to memory care patients. The site features access to multiple healthcare facilities, including CHRISTUS Santa Rosa Health System, Baptist Medical Center, the Baptist Emergency Hospital and a new Methodist Hospital facility now in the planning stages. Adjoining the property is a newly constructed medical office building, anchored by a large primary care medical practice.

The Offering

In order to finance a portion of the purchase price of the Acquisition, the Company has entered into an agreement with a syndicate of underwriters led by National Bank Financial Inc., BMO Capital Markets and CIBC Capital Markets to sell, on a bought deal basis, US$45,000,000 aggregate principal amount of 5.00% convertible unsecured subordinated debentures due January 31, 2022, at a price of US$1,000 per Debenture.

The Company has also granted the underwriters an option (the "Over-Allotment Option"), exercisable in whole or in part, at any time not later than the 30th day following closing of the Offering, to purchase up to an additional US$6,750,000 aggregate principal amount of Debentures.

The Debentures will be offered by way of a short form prospectus to be filed with the securities commissions and other similar regulatory authorities in each of the provinces and territories of Canada. The Offering is expected to close on or about December 16, 2016 and is subject to certain conditions including, but not limited to, the receipt of all regulatory approvals including the approval of the Toronto Stock Exchange and securities regulatory authorities.

The Debentures will be convertible at the option of the holder into common shares of the Company at any time prior to maturity at a conversion price equal to US$11.00 per common share (the "Conversion Price"). The Conversion Price of the Debentures represents a premium of approximately 15.8% over the last reported sale price of Mainstreet's common shares on November 28, 2016.

The Debentures will bear interest at a rate of 5.00% per annum and will be payable semi-annually on July 31 and January 31 until maturity on January 31, 2022. The first interest payment date will be July 31, 2017. The Debentures will not be redeemable by the Company prior to January 31, 2020. On or after January 31, 2020, but prior to January 31, 2021, the Debentures will be redeemable, in whole or in part, at a price equal to the principal amount plus accrued and unpaid interest, at the Company's option on a minimum of 30 days' notice, provided that the weighted average trading price of the common shares is not less than 125% of the Conversion Price. On and after January 31, 2021, the Debentures will be redeemable, in whole or in part, at a price equal to the principal amount plus accrued and unpaid interest, at the Company's option on a minimum of 30 days' notice.

The Company intends to use the net proceeds from the Offering to finance a portion of the purchase price of the Acquisition and for general corporate purposes.

The securities offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the "1933 Act") and may not be offered, sold or delivered, directly or indirectly, in the United States, or to, or for the account or benefit of, "U.S. persons" (as defined in Regulation S under the 1933 Act), except pursuant to an exemption from the registration requirements of the 1933 Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any Debentures in the United States or to, or for the account or benefit of, U.S. persons.

About Mainstreet Health Investments Inc.

Mainstreet Health Investments Inc. is a health care real estate company with a portfolio of high quality properties located in the United States and Canada. Our properties are operated by best-in-class health care providers primarily under long-term, triple net leases. Our mission is to create long-term shareholder value while providing an investment opportunity that matters. For more information visit www.mainstreethealthinvestments.com.

Non-IFRS Financial Measures

AFFO and capitalization rate (which is a function of net operating income) are not measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. Such measures are presented in this news release because management of the Company believes that such measures are relevant in interpreting the purchase price metrics and performance of acquisitions. Such measures, as computed by the Company, may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to the measures reported by such other organizations. Please see the Company's most recent management's discussion and analysis for how the Company reconciles AFFO to the nearest IFRS measure.

Forward-looking Information

This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating to the business of the Company and the environment in which it operates. Forward-looking statements are identified by words such as "believe", "anticipate", "project", "expect", "intend", "plan", "will", "may" "estimate", "pro forma" and other similar expressions. These statements are based on the Company's expectations, estimates, forecasts and projections and include, without limitation, statements regarding the completion of the Acquisitions and the financing and timing thereof, the Offering, the benefits of the Acquisition (including the extent it will be accretive to the Company's AFFO per share) and in-place cap rates.  The forward-looking statements in this news release are based on certain assumptions, including that all conditions to completion of the Acquisition and the Offering will be satisfied or waived, and that the Acquisition, as well as the Offering will be completed. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. 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 heading "Risk Factors" in the Company's annual information form available at www.sedar.com. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, the Company assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

SOURCE Mainstreet Health Investments Inc.

Investors: Mr. Randy Henry, Director - Investor Relations, 1-317-582-6971, [email protected]; Media: Ms. Ashley Mattox, Communications Manager, 1-317-582-6986, [email protected]