Kingsway Arms Retirement Residences Inc.
TSX VENTURE : KWA

December 12, 2014 16:26 ET

Kingsway Arms Retirement Residences Inc. Provides General Update

TORONTO, ONTARIO--(Marketwired - Dec. 12, 2014) - Kingsway Arms Retirement Residences Inc. (TSX VENTURE:KWA) (the "Company" or the "Issuer") is pleased to provide the following update on its current activities.

Mortgage Financing on Aurora Retirement Property

The Company has attempted to secure lower cost financing on the existing first and second mortgages on its Aurora retirement property. These mortgages would have matured on October 16, 2014, but the Company secured a 6 month extension for each mortgage, with the result that the maturity date is now April 16, 2015. The current blended rate of interest on the total mortgage indebtedness of $3.2 million is approximately 8.6%. Management of the Company has been attempting to secure replacement mortgage financing with a number of different financial institutions over the past six months. Management's objective is to secure mortgage financing with an interest rate of approximately 6%, which would result in cash flow savings for the Company. To date, the Company has not been successful in so doing, but these efforts continue. The Company has engaged a third party group to assist in these efforts.

Interim Financial Statement Clarification

The Company's third quarter financial statements (for the period ended September 30, 2014) were filed at www.sedar.com on October 23, 2014. It has since come to the Company's attention that there is a typographical error on page 6 of these interim statements (as filed), in the Condensed Consolidated Statement of Changes in Equity. The total balance reported appears opposite a title referring to June 30, 2014, when in fact the data reported is as of September 30, 2014. The balances presented are correct as of September 30, 2014, consistent with the rest of the interim financial statements and only the date on the last line is incorrect. Management acknowledges this oversight and has reported this to the TSX Venture Exchange.

Strategic Direction of the Company

The Company has been actively looking for potential acquisitions over the past six months, following the sale of the Clarington retirement home which was completed in May, 2014. To date, no suitable opportunities have been identified on a basis that management feels would make economic sense for the Company.

Management has also had multiple meetings with third parties who have expressed a preliminary interest in pursuing a transaction that would result in a change of business or reverse takeover for the Company. To date, none of these discussions have advanced to the point where the Company is in a position to seriously consider these third party proposals, and none have yet been presented to the Board of Directors of the Company.

The Company has evaluated the potential value of its Aurora retirement residence. An appraisal of the operating business, completed in early 2014, suggests a value in excess of the mortgages outstanding on the property. The existing property has available surplus land which is available for future expansion, with this land representing incremental value. If the Board determines that it will attempt to sell these assets, it will engage the services of a professional real estate agent to assist in that process.

Management has also had inquiries from third parties who have expressed an interest in undertaking a transaction with the Company on the basis of the Company no longer holding the Aurora retirement residence. The Company therefore has investigated the prospects of transferring ownership of the retirement residence into a newly incorporated company that would be spun out to the Company's shareholders. No decision to complete either transaction has been reached, and no definitive proposals of this nature have been received by the Board of Directors.

Management of the Company intends to develop a strategic plan for the Company for 2015 and expects to report to shareholders on this plan prior to the next meeting of shareholders. Currently, it is anticipated that an Annual and Special Meeting of Shareholders would be called for the Spring of 2015 (after completion of the audit of the Company's financial statements for the year ended December 31, 2014).

Early Warning Report

The Company notes that Mr. Joseph Schillaci recently filed an early warning report with respect to his purchase of common shares of the Company. According to this report, he currently holds approximately 2.2 million common shares of the Company. The early warning report that was filed states that Mr. Schillaci "acquired the securities for investment purposes and is currently considering whether or not to acquire additional securities". The report also states that depending "upon his evaluation of the business, prospects and financial condition of the Issuer, the market for the Issuer's securities, general economic and tax conditions and other factors," Mr. Schillaci "may acquire more or sell some or all of his securities of the Issuer."

Management of the Company met with Mr. Schillaci in mid 2014. At that time, the Company and Mr. Schillaci discussed the possibility of his acquiring a controlling interest in the Company (after a disposition of the Aurora retirement residence) and/or completing a transaction whereby the Company would acquire certain real estate assets. To date, those discussions have proven inconclusive. The Company has no reason to question Mr. Schillaci's disclosure in his early warning report to the effect that he is currently evaluating whether or not to buy more, or hold his existing, shares of the Company, and would like to reassure shareholders and investors that no material non-public information regarding the Company was shared with Mr. Schillaci.

About Kingsway Arms Retirement Residences Inc.

The Company is the owner of a retirement residence located in Aurora, Ontario.

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 press release.

Safe Harbor Statement

This press release contains forward-looking statements. Such forward-looking statements are subject to a number of risks, assumptions and uncertainties that could cause the Company's actual results to differ materially from those projected in such forward-looking statements. In particular, factors that could cause actual results to differ materially from those in forward-looking statements include: our inability to obtain additional financing on acceptable terms; risk that our facilities will not gain widespread market acceptance; and the inability to compete with others who provide comparable facilities. Forward-looking statements speak only as of the date made and are not guarantees of future performance. We undertake no obligation to publicly update or revise any forward-looking statements. When used in this document, the words "believe," "expect," "anticipate," "estimate," "project," "plan," "should," "intend," "may," "will," "would," "potential," and similar expressions may be used to identify forward-looking statements.

Contact Information

  • Kingsway Arms Retirement Residences Inc.
    Mr. Dan Amadori
    Chair, Board of Directors
    416-644-4361