Rental Revenue - Down 2% to $12.5 million (vs. $12.7 million in Q1 2009) Rental Revenue - Same Assets - Down 8% to $11.5 million (vs. Properties $12.6 million in Q1 2009) Net Operating Income (NOI) From continuing operations - Up 4% to $7.7 million (vs. $7.4 million in Q1 2009) Same Assets Properties - Down 5% to $6.9 million (vs. $7.3 million in Q1 2009) FFO from continuing operations Including financing cost - Up 1614% to $1.6 million (vs. $95,000 in Q1 2009) Excluding financing cost - Down 24% to $1.7 million (vs. $2.2 million in Q1 2009) Operating Margin - 61% (vs. 58% in Q1 2009) Total Acquisition and Capital - $13.8 million (vs. $7.2 million Expenditures in Q1 2009) Stabilized Units - 94 properties (4,199 units) out of 125 properties (6,027 units) Acquisitions - 183 units, representing an increase in portfolio of 3% Floating Debt - $29 million (7.5% of Mainstreet's total mortgage loans) Refinancing (subsequent to Q1 2010) - $15 million approved for refinancing on six-month CMHC- insured mortgages (expected average interest rate = 2.6% versus current interest rate of 5.35%) Normal and Substantial Course - 2,868 common shares purchased Issuer Bid and cancelled at an average price of $8.39/share - total outstanding shares reduced from 10,355,827 to 10,352,959 Cash on balance sheet - $17 million ($1.64/share) Dispositions (subsequent to Q1 2010) - The Corporation entered into a conditional agreement to sell three properties (95 units) for approximately $13 million, which represents a pre-tax profit of approximately $7 million
Q1 IN REVIEW - Sustaining Momentum with a Focus On Strategy
During fiscal 2009, Mainstreet Equity Corp. demonstrated that the agile execution of a sound strategy is the surest way to succeed in any economy. Entering into 2010, the Corporation amplified its commitment to the following points of strategic focus:
1. ACQUISITION GROWTH (3% increase in Q1 2010)
With prices soft and interest rates low, conditions are ideal for Mainstreet to build its portfolio of mid-market rental apartments through strategic acquisitions. In Q1 2010, the Corporation acquired one new building (183 units) in Surrey, BC. In keeping with Mainstreet's determination to maximize operational efficiencies and minimize costs, this building is strategically located next door to an existing Mainstreet property.
2. DEBT REFINANCING
Debt consolidation has always been a mainstay of Mainstreet's fiscal and risk management strategies. By refinancing floating debt to low-interest, long-term CMHC-insured mortgages, the Corporation significantly reduces the costs of borrowing while mitigating the risks inherent in floating debt. For 2010, the Corporation's floating and maturing debt totals
3. TEAM BUILDING
To fortify its human resources foundation, Mainstreet is capitalizing on the flux within the real estate markets to handpick seasoned professionals with exactly the blend of industry know-how and strategic foresight. During Q1 2010, the Corporation brought on board several key senior management personnel to support Mainstreet's executive and help realize the Corporation's growth-focused strategy.
4. INCREASED SAME ASSETS OPERATING MARGIN to 60% in Q1 2010 from 58% in Q1 2009
Through a stringent focus on reducing variable costs, Mainstreet has seen same assets operating margin increases over the past four quarters. Specifically, Mainstreet has been making a concerted effort to control variable operating costs such as marketing, maintenance and repair expenses. In Q1 2010, same asset operating costs were down by 14% compared to the same quarter last year.
5. THE RIGHT TIME TO RENOVATE (before the high rental season)
In Q1 2010, the Corporation spent
A clear indicator of Mainstreet's solid grounding and the soundness of its strategies is the resurgence of the Company's share price in recent months. On
While the mid-market rental apartment space has fared better than virtually every other real estate category during the ongoing economic slump, a number of challenges continue to adversely impact Mainstreet's performance:
1. An ongoing battle with high 'churn rates' - Recessionary conditions produce high supply in the rental housing markets, which in turn accelerates tenant turnover rates. 2. More bad debts - As unemployment rates increase, so do the rates of default on rental payments. 3. The costs of idle cash - In Q1 2010, the same asset mortgage interest increased by $360,000 compared to Q1 2009 without a corresponding increase in revenue through the acquisition of revenue-producing properties to offset financing costs. 4. Concessions - In a proactive effort to counteract the market-driven rise in vacancy rates, Mainstreet has extended rental concessions to existing tenants to encourage lease renewals. These one-time costs are having a negative impact on Mainstreet's revenues. 5. Vacancy rates - As economies slow, vacancy rates rise: this is a point of historical fact. However, the Corporation's strategic measures to increase occupancy are beginning to pay off. Even in what is traditionally the slowest rental period, Mainstreet realized net gain of 0.52% in January - an indication that the market may be starting to come around.
Currently, Mainstreet's profitability is in occupancy: with CapX-intensive renovations nearly complete on the Corporation's existing properties, every incremental increase in rental revenue will flow directly to the bottom line. As such, increasing occupancy by building momentum as the high rent season approaches is presently Mainstreet's top priority.
The Corporation's other primary focus through 2010 will be on growth in core Western Canadian markets:
"With ample cash to grow and a market ripe for strategic acquisitions, I am confident that Mainstreet will once again fulfil its strategic goals and deliver another year of outstanding achievements for its shareholders," says
(1) This first quarter report is for the three-month period ended December 31, 2009. Mainstreet's current fiscal year ends September 30, 2010.
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,
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