CALGARY, Feb. 12 /CNW/ - Mainstreet Equity Corp. ("Mainstreet" or the "Corporation") today announced its financial results for the first quarter ended December 31, 2006. "We are very pleased with our positive performance in the first quarter, which is especially significant given the costs associated with our portfolio growth and asset stabilization," says Bob Dhillon, President and CEO. Funds from operations for the first quarter of fiscal 2007 (ending September 30, 2007) were $1.5 million ($0.16 per share), an increase of 1,300% compared to $106,000 ($0.01 per share) in the first quarter of 2006. Stabilized funds from operations for Q1 2007 were $2.2 million ($0.23 per share). Forty-two per cent of Mainstreet's portfolio is still undergoing renovations as part of the stabilization program. As a result, these non-stabilized properties are not achieving optimum financial performance and had a higher average vacancy rate of 15% in Q1 2007 versus the stabilized portfolio vacancy rate of 4.6%. As well, these properties are financed under short-term, floating rate mortgages that temporarily carry higher interest charges; when stabilized, Mainstreet converts the financing to long-term, CMHC-insured mortgages at significantly lower interest rates. Mainstreet looks forward to building on this momentum in the remainder of 2007.FIRST QUARTER HIGHLIGHTS: 1. Key performance measures for Q1 2007 - Overall revenue increased by 36% to $9.6 million compared to $7 million in the same period of 2006. - Net operating income rose by 52% to $6 million for the quarter compared to $3.9 million in Q1 2006. - "Same assets" rental revenue jumped by 20% to $7.5 million compared to $6.3 million in the same period of 2006. - The Corporation's share price increased by 46% from the beginning to the end of the quarter. While Mainstreet shares are still trading at a discount to net asset value, Management is pleased with the strong performance of the share price and the ongoing support from the investment community. During Q1 the three market research analysts who cover Mainstreet increased their 12-month target prices for Mainstreet shares. - In Q1 2007, $8.1 million of short-term mortgage loans at an average 7.25% interest rate were refinanced under CMHC-insured mortgages with an average interest rate of 4.69%. Another $15 million of short-term mortgage loans at an average 7.3% interest rate were refinanced under long-term conventional mortgage loans at an average interest rate of 5.53%. The refinancing reduces annualized interest expenses by approximately $414,000 and generated $830,000 in additional capital, which will support future growth initiatives. 2. New core area established in Saskatoon - Mainstreet entered into the Saskatoon rental market with an acquisition of 165 residential apartment units at a cost of $39,000 per unit, which is substantially below the current market value and replacement cost. - This makes Saskatoon Mainstreet's fifth core market in addition to Calgary, Edmonton, Vancouver/Lower Mainland and Greater Toronto Area. - With a strong market foundation, Saskatoon has positive employment growth, strong in-migration, and low vacancy in the rental market (3.2% for 2006) (Canada Mortgage & Housing Corporation). 3. Stabilization activity continues - Mainstreet continues to aggressively stabilize its acquired properties in all core areas. The 12-18 month "stabilization" process involves renovating units to meet Mainstreet's branded standard and repositioning them in the market at higher rents and higher market value. - As of December 31, 2006, 100% of Calgary properties were stabilized, 59% in Edmonton, 34% in Vancouver/Lower Mainland (Surrey), and 18% in the Greater Toronto Area. Overall, 58% of Mainstreet's portfolio has been stabilized. Current non-stabilized properties represent significant upside potential for rental revenues. 4. Calgary rental increases appear on bottom line - Most of the planned Calgary rental increases announced in 2006 were executed in Q1 2007, increasing annualized rental revenue by 31% compared to fiscal year 2006. - Remaining planned rental increases in Calgary are expected to be complete by the end of the second quarter. - The total effect of these increases, including those planned for Q2, will translate to added annualized rental revenues of about $3.8 million - a 36% increase over fiscal year 2006. - Mainly fixed operational costs, combined with low vacancy of 3.5% in Calgary, mean the additional revenues are expected to make a noticeable impact on the bottom line and funds from operations for the fiscal year 2007. 5. Growth of overall portfolio - With the acquisitions in Edmonton and Saskatoon, as of December 31, 2006 Mainstreet's portfolio had grown to 4,515 units (91 properties), a 21% increase compared to 3,739 units (66 properties) as of December 31, 2005.Identifying and acquiring underperforming assets in all kinds of markets, and then transforming them into higher valued assets and superior revenue-earners is how Mainstreet has achieved consistent, excellent growth. The Corporation's plan going forward is simple and unchanged - to continue this strategy in the remainder of 2007 and beyond. About Mainstreet Mainstreet is a Calgary-based, growth-oriented real estate corporation focused on the acquisition, redevelopment, repositioning, 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 (Surrey), Calgary, Edmonton and Greater Toronto Area. Mainstreet's common shares are listed on the Toronto Stock Exchange under the symbol MEQ. There are currently 9,534,493 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.