CALGARY, May 10 /CNW/ - In the second quarter of 2011(1), Mainstreet
Equity Corp. continued to explore and embrace avenues for opportunistic
growth while maintaining a focus on operational efficiencies and
positioning Mainstreet for maximum future cash flow. The Corporation's
success is evident in its key performance metrics for the quarter:
Key Performance Metrics:
|Rental Revenue|||||Up 20% to $15.6 million (vs. $13.1 million in Q2 2010)|
|Rental Revenue - Same Assets Properties|||||Up 8% to $13.6 million (vs. $12.6 million in Q2 2010)|
|Net Operating Income (NOI)|
|From operations|||||Up 20% to $9.1 million (vs. $7.6 million in Q2 2010)|
|Same Assets Properties|||||Up 10% to $8.0 million (vs. $7.3 million in Q2 2010)|
|Funds from Operations|
|Excluding financing cost|||||Up 71% to $2.4 million (vs. $1.4 million in Q2 2010)|
|Including financing cost|||||Up 9% to $1.5 million (vs. $1.4 million in Q2 2010)|
|From operations|||||58% (vs. 58% in Q2 2010)|
|Same Assets Properties|||||59% (vs. 58% in Q2 2010)|
|Total Acquisition and Capital Expenditures|||||$9 million (vs. $4 million in Q2 2010)|
|Stabilized Units|||||123 properties (5,700 units) out of 144 properties (7,028 units)|
|Acquisitions|||||99 units for $7.4 million (1% increase in portfolio)|
|Acquisitions - subsequent to Q2 2011|||||278 units for $20.4 million (4% increase in portfolio)|
|Acquisitions - fiscal year to date|||||887 units for $75 million (14% increase in portfolio)|
|Refinancing (subsequent to Q2 2011)|||||$11 million|
|Vacancy rate|||||11.8% (vs. 18.8% in Q2 2010)|
|Vacancy rate (excluding unrentable units)|||||9.7%|
Q2 IN REVIEW
As they so clearly demonstrate the success of Mainstreet's strategic focus, a number of these key metrics bear repeating:
» Acquisitions (fiscal year to date): 887 units for $75 million (14% increase in portfolio)
» Same Assets Net Operating Income (NOI): up 10% to $8.0 million
» Funds from operations (FFO) excluding financing costs: up 71% to $2.4 million.
Mainstreet's ongoing efforts to maximize margins yielded an increase in its operating margin on same assets properties to 59% in Q2 2011 from 58% in Q2 2010 despite a significant spike in costs related to Western Canada's atypically harsh winter weather during the quarter.
Another of the past quarter's notable successes is reflected in Mainstreet's average vacancy rate of 11.8%. Even during the harsh Western Canadian winter (which is typically the low point of the rental cycle), and even with significant growth in the Corporation's unstabilized assets (many of which are fully vacant until renovations are complete), Mainstreet achieved a significant decrease in vacancy rate compared to the same quarter last year (Q2 2010 - 18.8%).
Further, as always, Mainstreet worked diligently through Q2 2011 to mitigate the risk of rising interest rates and minimize financing costs by refinancing as much floating and maturing debt as possible into long-term, low-interest mortgages. During Q2 2011, Mainstreet refinanced $22.6 million matured debts for $29.6 million into a long-term (10-year), CMHC-insured loan at an interest rate of 4.23%.
Until the economy shows meaningful recovery and rents and vacancy rates stabilize at more normal levels, Mainstreet will likely need to continue providing rental concessions to attract and retain tenants and keep vacancy rates low.
Managing interest risk in the face of anticipated interest rate hikes is a challenge Mainstreet contends with on an ongoing basis. To mitigate interest risk, the Corporation closely monitors market conditions and, wherever possible, refinances as much floating and maturing debt as possible into long-term mortgages.
Mainstreet will continue to focus on growth through the acquisition of add-value mid-market properties primarily in Western Canada.
There are many reasons Mainstreet has chosen the mid-market space as its strategic focus. It offers exceptional opportunities for strategic growth and value creation, and fragmentation within the space presents the Corporation with a relative lack of competition.
Similarly, Mainstreet has many strategic reasons for pursuing growth opportunities primarily in Western Canada. It has comparatively strong GDP, in-migration and employment rates (and CMHC is predicting strong in-migration numbers and healthy GDP growth in all of Mainstreet's markets throughout 2011 and 2012). Additionally, its Landlord-Tenancy Acts are favourable to Mainstreet's business.
That said, management remains open to considering other directions for growth if they dovetail with the Corporation's overall vision and promise long-term value creation for shareholders, and they are closely monitoring the depressed condition of the real estate market in the US.
Overall, Mainstreet remains very bullish on Alberta, BC and Saskatchewan's long-term prospects for growth and prosperity, and the Corporation's focus will remain on building and positioning Mainstreet as Western Canada's leading provider of mid-market rental accommodations.
(1) This second quarter report is for the three-month period ended March 31, 2011. Mainstreet's current fiscal year ends September 30, 2011.
Mainstreet Equity Corp. is pleased to announce that we have appointed Ron B. Anderson as a MEQ Board Director. Ron has over 30 years' experience in corporate and commercial banking, mergers and acquisitions, and mezzanine financing in the mid-market corporate and real estate sectors. He is currently the President of Tallinn Capital Corp.
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 Vancouver/Lower Mainland, Calgary,Edmonton, Saskatoon and Greater Toronto Area. Mainstreet's common shares are listed on the Toronto Stock Exchange under the symbol MEQ. As of March 31, 2011, there were 10,401,281 common shares outstanding.
The above disclosure may contain forward-looking statements that involve substantial known and unknown risks and uncertainties. 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, and fluctuations in rental prices, energy costs and foreign exchange or 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.