CALGARY, Dec. 19 /CNW/ - Mainstreet Equity Corp. ("Mainstreet" or the
"Corporation") (TSX:MEQ) today released its financial results for its fiscal
year ended September 30, 2008. Mainstreet achieved a strong cash position as a
result of refinancing activities in 2008, and posted increases in rental
revenues, net operating income and the size of its portfolio.


    Strong cash position achieved. Subsequent to 2008 year-end, as a result
of financing activities in 2008, Mainstreet achieved a $50 million cash
position and mitigated risk by refinancing 32% of its floating rate and
matured debt (about $85 million) under fixed five-year to 10-year terms. The
last $16 million of financing was secured at an average interest rate of 3.9%
for a five-year term. The new financing is insured by Canada Mortgage and
Housing Corporation (CMHC), with a reduced average interest rate of 4.84% as
compared to 5.42% before refinancing. Despite the significant drop in real
estate valuation, Mainstreet's debt to market value ratio of only 49% for the
total portfolio provides an opportunity to leverage more of its properties
through refinancing, and extract cash to support growth.

    Market Value. The value of the Corporation's portfolio is estimated at
$625 million, as determined by five qualified appraisers (AACI - Accredited
Appraiser Canadian Institute) based on properties held by Mainstreet on
September 30, 2008.

    Growth in portfolio. Mainstreet's portfolio grew to 5,562 units in 2008,
a 6% increase compared to fiscal year-end 2007. Subsequent to year-end,
Mainstreet acquired two properties, consisting of 84 units of residential
apartments in Abbotsford, B.C. and Saskatoon, Saskatchewan for consideration
of $7.2 million.B.C. Lower Mainland
      -  Mainstreet's British Columbia portfolio grew by 16% in 2008 to 1,281
         units from 1,108 units in 2007.
      -  Two properties were acquired in Abbotsford - one with 84 units and
         one with 89 units - for an average cost per door of just over
         $100,000, which is below estimated market value and replacement
         cost; 89 of these units have condominium title.
      -  Approximately 12% of Mainstreet's B.C. properties have condominium
         title, which is very difficult to acquire, and make the properties
         more valuable.
      -  Most of these properties are condo-quality buildings, in which
         tenants are responsible for paying all utilities, including heat,
         which reduces energy price risk for Mainstreet.
      -  As Mainstreet has grown in Surrey and Abbotsford, properties have
         been clustered to achieve greater operational efficiencies.
      -  Subsequent to year-end, Mainstreet acquired 60 units residential
         apartments in Abbotsford for $5.4 million. The new properties
         acquired were clustered with existing Mainstreet properties to
         achieve better operational efficiencies.

      -  The Corporation acquired an additional 42 units in picturesque
         Cochrane, Alberta, 18 kilometres northwest of Calgary, for an
         average cost per door of $86,000 - below estimated market value and
         replacement cost.
      -  With this acquisition, the Alberta portfolio grew slightly to 3,066
         rental units, a 1% increase from 3,024 units at fiscal year-end

      -  Mainstreet acquired an additional 97 units in Saskatoon for an
         average cost per door of $44,000 - below estimated market value and
         replacement cost. This acquisition brings the Saskatchewan portfolio
         to a total of 551 rental units, a 21% increase compared to 454 at
         fiscal year-end 2007.
      -  Subsequent to the year-end date, Mainstreet acquired 24 units of
         residential apartments in Saskatoon for $1.8 million. The new
         properties acquired were clustered with existing Mainstreet
         properties to achieve better operational efficiencies.


      -  Rental revenues increased. Mainstreet's rental revenues rose by 14%
         to $46 million in 2008 from $40 million in 2007, due to growth in
         the portfolio and increased rental rates.

      -  "Same assets" rental revenue rose. This increased by 6% to
         $39.9 million in 2008 compared to $37.8 million in 2007. The
         increase was the result of newly renovated rental units being
         reintroduced into the market at higher rental rates - mainly in
         Alberta - and was offset by rental loss due to high vacancy during

      -  Net operating income was up. NOI from continuing operations rose by
         8% to $26.6 million compared to $24.7 million in 2007.

      -  "Same assets" NOI increased. This increased by 2% to $24 million in
         2008 compared to $23.6 million in 2007.Funds from operations declined. Total FFO was down 10% to $4.5 million
($31 per basic share) from $5.0 million ($0.46 per basic share) in 2007. FFO
from stabilized properties in 2008 was $5.8 million ($0.40 per basic share).
The decline in FFO is due mainly to increased one-time financing costs for
refinancing short-term and matured mortgages, to increased G&A expenses, and
to high vacancy due to stabilization in Edmonton (33% vacancy) and Saskatoon
(40% vacancy).


    Stabilization. As of mid-December 2008, Mainstreet did not achieve its
goal of 95% stabilization of Edmonton and Saskatoon properties. This was
because the Corporation did not have suites renovated in time for the peak
rental season in July and August. However, 90% of renovations in Edmonton and
85% of renovations in Saskatoon were completed by December 15, 2008. These
units are ready for the next rental season. At fiscal year-end, 36% of
Mainstreet's portfolio remained non-stabilized.

    Labour availability. The human resource shortage faced by the Corporation
in the past two years is easing, due to the slowdown of the economy and
increase in unemployment rate. In addition, Mainstreet has brought in 18
foreign contract laborers, and has begun their training program. The
Corporation also plans to take advantage of the economic downturn and add more
senior-level resources to our management team in preparation for future


    With renovations substantially complete now for non-stabilized properties
in Saskatoon and Edmonton, in 2009 Mainstreet will focus on marketing and
leasing the suites. Once stabilization of these properties is achieved, a
significant increase in revenues is expected in 2009. The Corporation also
expects increased revenues from its B.C. properties after they have been
stabilized, which is expected within the next 6-24 months. Because it is a
fixed-cost business, all additional income resulting from each percentage
point drop in vacancy rate is expected to flow through to the bottom line.

    Cash. With a current debt to market value ratio of only 54% in B.C. (as
determined by Colliers International Realty Advisors Inc.), Mainstreet
believes it has the ability to raise more cash in 2009 by refinancing its B.C.
portfolio, which is believed to be currently under-leveraged. Refinancing of
these properties in 2009 under long-term, fixed mortgages at reduced interest
rates is expected to reduce financing costs and generate more capital to
expand. As well, Mainstreet's overall portfolio includes ten clear-title
assets, which can be leveraged to raise cash for continued expansion. The
Corporation will also continue working to mitigate risk and reduce the cost of
debt through refinancing. Management's goal is to convert all floating rate
debt in the existing portfolio to fixed rate, long-term CMHC debt. At
year-end, Mainstreet's floating rate debt stood at $53 million. Subsequent to
year-end, $11.3 million or 21% of that has been refinanced at an average
interest rate of 3.9% under long-term, CMHC-insured debt. As of the
publication date of this report, our remaining floating rate debt was $41.7

    Fundamentals. Mainstreet will continue to pursue accretive acquisitions
in this opportunistic environment, focusing on distressed, mid-market,
multi-family buildings that the Corporation believes it can add value to
through its Value Chain process. The Corporation believes the fundamentals of
the business remain strong, with apartment rentals, historically, in the
greatest demand during tough economic times. As well, 88% of Mainstreet's
portfolio is situated in Western Canada, which is expected to weather the
recession better than other provinces (International Monetary Fund). As well,
strong immigration to Canada continues, with Alberta reporting the highest
provincial growth rate so far in 2008 (Statistics Canada). Saskatchewan -
where Mainstreet has an established market position - is expected to lead the
country in economic growth in 2009 (International Monetary Fund).

    Opportunity. Mainstreet's primary competitors for property acquisition
over the past three years - condo converters and speculative investors - seem
to be disappearing in some markets due to the tight debt market and economic
downturn. As well, CMHC forecasts a decline in new construction of affordable
housing. In these turbulent times, Management expects Mainstreet will have
opportunities to acquire real estate at reduced prices. At the same time,
Management believes the Corporation's stock is extremely undervalued, and has
bought back 700,000 shares during August and November, 2008 through a normal
course issuer bid at an average price of $7.18 per share. Mainstreet has also
made a substantial issuer bid to purchase four million Mainstreet shares at
$6.25 per share by a closing date of January 20, 2009.
    In addition to the Corporation's solid cash position and strong market
fundamentals, Mainstreet has a successful 10-year record of acquiring
distressed properties and adding value. The Corporation also has the systems
and people in place to operate its business efficiently and keep costs down.
2009 will be a turbulent year for the global economy, and yet Management
believes it will be a year of opportunity for Mainstreet.

    About Mainstreet

    Established in 1997, 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 (Abbotsford and
Surrey), Calgary, Edmonton, Saskatoon and the Greater Toronto Area.
Mainstreet's common shares are listed on the Toronto Stock Exchange under the
symbol "MEQ". As of December 12, 2008, there were 13,873,473 common shares

    Forward-Looking Information

    Certain statements contained in this news release constitute
"forward-looking statements" as such term is used in applicable Canadian
securities laws. These statements relate to analysis and other information
that are based on forecasts of future results, estimates of amounts not yet
determinable and assumptions of management. In particular, statements
concerning plans to add senior management, increasing marketing efforts and
estimates related to future revenues and profitability, timing of re-financing
of debt, the Corporation's funding sources to meet various obligations 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
or future events or performance (often, but not always, using words or phrases
such 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 which 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 marketing and stabilization
programs, other issues associated with the real estate industry including, but
without limitation, fluctuations in vacancy rates, unoccupation of units
during renovations, fluctuations in utility and energy costs, credit risks of
tenants, fluctuations in interest rates, availability of capital, the effects
of a recessionary economy and such other business risks as discussed herein
and other publicly filed disclosure documents. 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 there may be other factors that cause actions events or results not
to be 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 contained in this news release.
    Forward-looking statements are made 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 and if these
beliefs, estimates and opinions or other circumstances should change, except
as required by applicable law.
    This news release contains forward-looking statements based on
assumptions, uncertainties and management's best estimates of future events.
When used herein, words such as "intended" and similar expressions are
intended to identify forward-looking statements. Forward-looking statements
are based on assumptions by and information available to the Corporation.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties. Actual results may differ materially from those currently
anticipated. The forward-looking statements contained herein are expressed
qualified by this cautionary statement.The Toronto Stock Exchange does not accept responsibility for the
    adequacy or accuracy of this release.Members of Mainstreet's Board of Directors have reviewed this news
release prior to distribution.