CALGARY, Feb. 11, 2013 /CNW/ - Mainstreet Equity Corp. (TSX: MEQ) is
pleased to report that the first quarter in its 2013 fiscal year marks
the ninth consecutive reporting period with double-digit year-over-year
growth in net operating income ("NOI") and funds from operations
("FFO"). Mainstreet continues to pursue growth in western Canada and
while making improvements in vacancy rates and rental revenues across
its same-asset operations.
"Mainstreet has now entered its third year in a streak of posting better
numbers in all the places that matter," says Bob Dhillon, Chief
Executive Officer and Founder. "We are growing in Canada's best
property markets, and we're doing it without diluting shareholders'
equity. At the same time, our rigorous attention to costs is showing
real results, with solid improvements in operating performance --
although we still see plenty of run-way for shareholders to realize
even better results from our existing rental portfolio. We believe we
will accomplish this through improvement in occupancy rates, reductions
in rental incentives and increases in rental rates following
stabilization or renovation of newly acquired properties. Mainstreet is
also positioned to further capitalize on the great opportunities we see
in the western provinces with over $100 million investable resources
available for further growth without any dilution in shareholders'
equity. We also believe wise past investments are also poised for major
gains: in Edmonton, for example, the decision to construct a new arena
complex will create major new redevelopment in a neighbourhood where
Mainstreet already owns 75 properties with 1,850 units. All of these
factors, we believe stand to bring further improvement to NOI."
This press release should be read in conjunction with Mainstreet's
management's discussion and analysis (MD&A) and unaudited financial
statements and accompanying notes for the quarters ended December 31,
2012 and 2011, which provide detailed analysis of the Corporation's
financial results (www.mainst.biz).
RESULTS FROM CONTINUING OPERATIONS
In Q1 2013, rental revenue increased 18% to $18.1 million, from $15.3
million in Q1 2012. Net operating income increased 19%, climbing to
$12.2 million from $10.3 million a year ago. Funds from operations
improved by 22%, hitting $3.9 million, before U.S. investment fund
expenses and a stock option cash settlement expense. This compares to
$3.2 million in Q1 2012, an improvement driven by decreasing rental
incentives and higher rental rates. Same-asset revenues rose 10% to
$16.4 million, up from $14.9 million. Same-asset operating income
increased by 11%, while same-asset vacancy fell to 7.5% from 9.5%.
Mainstreet achieved these results while acquiring 608 unstabilized, or
non-renovated, units since Q1 2012. Despite a rise in utility prices,
property tax and unstabilized properties, Mainstreet maintained its net
operating margin at 66%.
GROWTH
Mainstreet's overall portfolio grew by 3% to 8,390 units (including 664
units held for sale) as compared to 8,180 units as of September 30,
2012. Subsequent to Q1 2013, Mainstreet acquired an additional 50 units
in Saskatoon. As of today, Mainstreet has 8,036 units (including 260
units held for sale) with a market value of over $1 billion. Mainstreet
has, subsequent to the Q1 end, completed the sale of three properties
(404 units) in Ontario for $47-million in gross proceeds.
CHALLENGES
Mainstreet continues to face above-market vacancy rates, below-market
rental rates, substantial churn and bad renter debt, particularly
during the stabilization process on those newly acquired unstabilized
properties. These factors have long accompanied Mainstreet's unique
"Add Value Business Model." At the same time, Mainstreet faces rising
property taxes and energy costs across its portfolio.
OUTLOOK
Mainstreet has built a broad portfolio of properties that provide a
stable foundation for cash generation. But Mainstreet believes there
remains plenty of room for improvement that will continue to enhance
corporate performance. As of the quarter end date, the Corporation has
1,750 unstabilized units. Progress in renovating these units will grow
the rental pool and improve key operating metrics. Broader market
dynamics provide reason for further optimism. Mainstreet believes
western Canada is entering a dynamic rental cycle that should bring
further improvements in vacancy rates, rental rates and rental
concessions.
Although sale of properties in Ontario will reduce the Mainstreet's
portfolio by 664 units and will have a near-term impact on NOI and FFO,
the sale is expected to generate a substantial amount of cash which
will enable Mainstreet to press its advantage in Western Canada, which
continues to provide strong employment, compelling growth and
opportunities for acquiring mid-market properties that fit in the
Mainstreet add value business model. At the same time, Mainstreet
believes the time has come to enter the U.S. property market to
capitalize on the tremendous potential there. Mainstreet has
substantial resources to capitalize on these opportunities, with cash,
available credit and clear-title properties, which can be financed to
liberate capital, providing an investable resource of over $100
million.
Mainstreet is also improving its existing financial obligations, and has
obtained approval from the CMHC to refinance approximately $43 million
(66%) of the mortgages maturing in 2013. This refinancing raised
approximately $8 million in additional funds while saving annualized
interest expenses of $550,000 and cash flow of $430,000 respectively.
At the same time, Mainstreet continues its concerted effort to save
costs and has begun the purchase of high-value items, such as windows,
from China.
About Mainstreet
Mainstreet is a Calgary-based, growth-oriented real estate corporation
focused on the acquisition, redevelopment, repositioning and asset and
property management of mid-market apartment buildings. The Corporation
currently owns and operates residential rental units, including
apartments and townhouses, in the B.C. Lower Mainland, Calgary,
Edmonton and Saskatoon. Mainstreet's common shares are listed on the
Toronto Stock Exchange under the symbol MEQ. As of December 31, 2012
there were 10,465,281 common shares outstanding.
The above disclosure may contain forward-looking statements that involve
substantial known and unknown risks and uncertainties.These statements
relate to analysis and other information based on forecasts of future
results, estimates of amounts not yet determinable and assumptions of
management. In particular, statements concerning estimates related to
future acquisitions, dispositions and capital expenditures, reduction
of vacancy rate, increase of rental rates, future profitability, timing
of refinancing of debt and completion of renovations, increased cash
flow, the Corporation's liquidity and financial capacity, the
Corporation's anticipated funding sources to meet various operating and
capital obligations, expansion into the United States. These
forward-looking statements are subject to numerous risks and
uncertainties, some of which are beyond the Corporation's control,
including: the impact of general economic conditions in Canada,
industry conditions, increased competition, the lack of available
qualified personnel or management, equipment failures, stock market
volatility, availability of capital for stabilization programs,
unoccupied units during renovations, credit risks of tenants, expansion
into the United States and fluctuations in rental prices, energy costs
,foreign exchange and interest rates. The Corporation's actual results,
performance or achievements could differ materially from those
expressed in, or implied by, these forward-looking statements and,
accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or occur,
or, if any of them do so, what benefits the Corporation will derive
from them.
SOURCE: Mainstreet Equity Corporation
