CALGARY, July 17, 2014 /CNW/ - Mainstreet Equity Corp. ("Mainstreet" or
"Corporation") (TSX: MEQ) is pleased to announce that the third fiscal
quarter of 2014 marks our 15thth consecutive quarter of year-over-year double-digit increases in funds
from operations ("FFO") and net operating income ("NOI"). Vacancy
rates are declining, revenue is rising, and Mainstreet maintains
significant room for future growth, through revenue increases at
existing properties and acquisitions in cities with strong markets for
mid-sized apartment buildings.
"We expected a solid spring season, and were pleased to see a strong
quarter. As the economy recovers, Mainstreet is well-positioned with
plenty of growth run-way and the operational expertise to back it up,"
says Bob Dhillon, Chief Executive Officer and founder of Mainstreet.
"And, like always, we are convinced our apartments are in the best
places in Canada. People are moving west to where the jobs are,
creating lots of demand and a healthy property market, all of which is
good for the Mainstreet business model."
In Q3 2014, Mainstreet's revenue from continuing operations rose 16% to
$23.0 million, up from $19.8 million in Q3 2013. Same asset rental
revenues climbed 8% to $20.4 million, from $18.8 million in Q3 2013.
NOI from continuing operations increased 15% to $15.3 million. Funds
from continuing operations were up 26% to $6.6 million, an increase
over $5.3 million in Q3 2013. Funds from continuing operations per
basic share increased by 26% to $0.63 from $0.50 in Q3, 2013. The same
asset vacancy rate fell to 6.6% from 8.7% in Q3 2013.
In Q3 2014, Mainstreet acquired 298 residential apartment units for
$27.2 million. During the quarter, we refinanced $38 million in matured
mortgage to long-term 10-year, CMHC-insured mortgages at an average
interest rate of 3.21%. On a year-to-date basis, we have refinanced $95
million in mortgages to long-term 10-year, CMHC-insured mortgages and
have achieved annualized interest expense savings of $835,000. Through
this process, we have liberated an additional $16.7 million in funds.
Mainstreet continues to face rising cost pressures, particularly in
property tax and utility prices. The renovation and repositioning of
properties - the process of stabilizing buildings -- also temporarily
raises the overall vacancy rate and lowers stabilized NOI. Mainstreet's
unstabilized portfolio conversely constitutes one of its greatest
sources of opportunity.
Recent changes in immigration laws make recruitment of foreign workers
more difficult and expensive. We expect this to exacerbate worker
shortages in western markets while driving up labour costs.
Outlook: NOI growth from new assets
In the past 16 years, the value of Mainstreet's portfolio has grown at
an average 31% compound annual rate of growth, and is now valued at
$1.2 billion. Our confidence in our business model's future success is
rooted in a firm belief that this growth will continue, and that we
retain a lengthy run-way for NOI and FFO expansion. This is also why
Mainstreet has avoided a dividend strategy. We continue to see
significant opportunities to deploy capital and add value to investors
that can generate substantial returns.
Growth from same-asset robust operating environment
May unemployment in British Columbia was 6.1%, with Alberta at 4.6% and
Saskatchewan at 3.7%, all well below the 7% national average.
In-migration is bringing large numbers of new arrivals, as Alberta
added 81,800 jobs in the past year. Several recent measures introduced
by the Canada Mortgage and Housing Corp. have restricted buyers and
restricted new housing supply.
These developments have set the stage for future rental housing supply
constraints, reductions in vacancies and increases in rental rates.
Mainstreet expects 2014 to bring rental rate escalation across our
portfolio, which will serve as an important driver of continued growth.
Low-cost debt mitigates interest risk and provides low cost of capital
for future growth
In this fiscal year, we have refinanced $65 million of mortgage debt, in
addition to a $30 million mortgage maturing in FY 2015, into long-term
10-year, CMHC-insured mortgages at an average interest rate of 3.37%.
The refinancing has created annualized interest expense savings of
$835,000 and liberated an additional $16.7 million in funds.
Growth from new assets
Mainstreet holds an $85 million line of credit, which is linked to our
clear title assets, and continues to liberate significant volumes of
cash through refinancing. Since the beginning of the financial year
2014, Mainstreet has acquired 553 units for $54.9 million, representing
6.7% growth of the portfolio. There is room to grow in the western
Canadian mid-sized apartment space.
Some of Mainstreet's potential value doesn't appear in our financial
Mainstreet has also accumulated a number of assets that can underpin
future growth but are not currently represented in financial
statements. They include a parcel of development land in Abbotsford,
B.C.; residual land that can be used for additional residential units;
the potential to convert unutilized commercial space to residential
suites; and 1,107 condo-titled units in our portfolio that can be
converted into condo-units for re-sale, 200 of them in the B.C. Lower
Certain statements contained herein constitute "forward-looking
statements" as such term is used in applicable Canadian securities
laws. 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 rates, increase of rental
rates and rental revenue, future income and profitability, timing and
interest rates associated with refinancing of debt and completion,
timing and cost 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, and other factors and events described in this
document should be viewed as forward-looking statements to the extent
that they involve estimates thereof. Any statements that express or
involve discussions with respect to predictions, expectations, beliefs,
plans, projections, objectives, assumptions of future events or
performance (often, but not always, using such words or phrases as
"expects" or "does not expect", "is expected", "anticipates" or "does
not anticipate", "plans", "estimates" or "intends", or stating that
certain actions, events or results "may", "could", "would", "might" or
"will" be taken, occur or be achieved) are not statements of historical
fact and should be viewed as forward-looking statements. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results,
performance or achievements of the Corporation to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such risks and
other factors include, among others, costs and timing of the
development of existing properties, availability of capital to fund
stabilization programs, other issues associated with the real estate
industry including, but without limitation, fluctuations in vacancy
rates, unoccupied units during renovations, fluctuations in utility and
energy costs, credit risks of tenants, fluctuations in interest rates
and availability of capital, availability of labour and costs of
renovation and other such business risks as discussed herein. Although
the Corporation has attempted to identify important factors that could
cause actual actions, events or results to differ materially from those
described in forward-looking statements, other factors may cause
actions, events or results to be different than anticipated, estimated
or intended. There can be no assurance that such statements will prove
to be accurate as actual results and future events could vary or differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking statements
Forward-looking statements are based on management's beliefs, estimates
and opinions on the date the statements are made, and the Corporation
undertakes no obligation to update forward-looking statements if these
beliefs, estimates and opinions should change except as required by
applicable securities laws.
Management closely monitors factors that could cause actual actions,
events or results to differ materially from those described in
forward-looking statements and will update those forward-looking
statements where appropriate in its quarterly financial reports.
SOURCE Mainstreet Equity Corporation