CALGARY, Alberta - In Q1 2025, Mainstreet posted our 13th consecutive quarter of double-digit, year-over-year growth across all key operating metrics. Despite Q1 being a typically slower winter rental season, funds from operations (“FFO”) increased 19%, net operating income (“NOI”) rose 18% and rental revenues grew 16%. Same-asset NOI rose 11% while revenues on a same-asset basis grew 10%. Operating margins increased from 63.5% to 64.7%, and from 63.7% to 64.7% on a same-asset basis.
Bob Dhillon, Founder and Chief Executive Officer of Mainstreet, said, “As we enter a new fiscal year, we believe the current operating environment presents major opportunities for Mainstreet to aggressively expand our portfolio, thereby extending our decades-long legacy of countercyclical growth.” He added, “As ever, we remain deeply committed to Mainstreet’s role as a critical supplier of affordable living amid the current inflationary period.”
The Mainstreet Mission: We believe the current operating environment, including an ongoing trade dispute with the U.S., presents the opportunity for accelerated acquisitions in fiscal 2025, potentially paving the way for a new phase of countercyclical growth at Mainstreet. As always, we remain passionately committed to our role as a crucial provider of quality, affordable homes for Canadians, offering renovated apartments and customer services at an average mid-market rental rate of $1,200.
Key Metrics | Q1 2025 Performance Highlights
Rental Revenue
From operations | Up 16% to $67.6 million (vs. $58.3 million in Q1 2024)
From same asset properties | Up 10% to $62.9 million (vs. $57.4 million in Q1 2024)
Net Operating Income (NOI)
From operations | Up 18% to $43.7 million (vs. $37.0 million in Q1 2024)
From same asset properties | Up 11% to $40.7 million (vs. $36.6 million in Q1 2024)
Funds from operations (FFO)[1]
FFO-before current income tax | Up 23% to $25.4 million (vs. $20.7 million in Q1 2024)
FFO per basic share-before current income tax | Up 23% to $2.72 (vs. $2.22 in Q1 2024)
FFO-after current income tax | Up 19% to $23.0 million (vs. $19.3 million in Q1 2024)
FFO per basic share-after current income tax | Up 19% to $2.47 (vs. $2.07 in Q1 2024)
Operating Margin
From operations | 64.7% (vs. 63.5% in Q1 2024)
From same asset properties | 64.7% (vs. 63.7% in Q1 2024)
Unstabilization rate | 14% (providing potential for future NOI growth)
Stabilized Units | 422 properties (15,947 units, 14%) out of 480 properties (18,450 units)
Net Profit
| Net profit of $56.2 million (vs. profit of $68.5 million in Q1 2024, including change in fair value of $40.2 million in Q1 2025 vs. $56.4 million in Q1 2024)
Net profit per basic and fully diluted share | $6.03 (vs $7.36 in Q1 2024)
Total Capital Expenditures | $7.3 million (vs. $7.4 million in Q1 2024)
Total Capital Expenditure (unstablized assets) | $0.9M (vs. $1.0M in Q1 2024)
Total Capital Expenditure (stablized assets) | $6.4M (vs. $6.4M in Q1 2024)
Vacancy rate
From operations | 4.2% (vs. 3.3% in Q1 2024)
From same asset properties | 4.2% (vs. 3.3% in Q1 2024)
Vacancy rate as of February 4, 2025 | 4.3% excluding unrentable units
Total Acquisition
During Q1 2025 | $17.8 million 116 units (vs. $45.3 million 361 units in Q1 2024)
Subsequent to Q1 2025 | 1 commercial unit ($0.96 million) in Edmonton
Total YTD Acquisition 2025 | 117 units ($18.8 million)
[1] See “Non-IFRS Measures” and Note (1) in MANAGEMENT’S DISCUSSION AND ANALYSIS to the table titled “Summary of Financial Results” for additional information regarding FFO and a reconciliation of FFO to net profit, the most directly comparable IFRS measurement.
Total Units
As of December 31, 2024 | 18,503 units (vs. 18,455 units in 2024)
As of February 4, 2025 | 18,503 units3
Fair Market Value | Up 2% to $3.5 billion (vs. $3.4 billion in 2024)
A business strategy built on resilience
These financial achievements yet again demonstrate the success of Mainstreet’s value-add business model and nimble management style. Ever since we started trading on the TSX in 2000, Mainstreet has continued to expand our portfolio by consistently adding value and re-investing low-cost capital to aggressively acquire apartment units at opportunistic prices, then repeating the formula. Once acquired, we upgrade units to a consistent standard and return them to the rental market to derive additional value. Combined with an agile management team that adeptly prepares for and responds to changing market conditions, this strategy has helped fortify Mainstreet against outside volatility, allowing us to deliver compounding shareholder returns no matter where we are in the economic cycle. These efforts have provided Mainstreet with a solid foundation for future growth, based on a multitude of inherent advantages that include:
- Highly affordable rents: With an average mid-market rental rate of just $1,200, Mainstreet offers quality rental options at a time of rapid inflation, making us a crucial provider of affordable living for middle-class Canadians.
- Growth without dilution: Our adherence to 100% organic, non-dilutive growth continues to generate financial returns without sacrificing value. In the last two decades, Mainstreet stock has increased exponentially from $3.6 per share to more than $200, while the number of shares in circulation has remained largely unchanged (9.3 million shares today, compared with 8.9 million when MEQ debuted).
- Portfolio diversity: Due to the strategic nature of our acquisitions, Mainstreet now enjoys a highly diversified portfolio across Western Canada, including a newly expanded footprint in Manitoba and parts of B.C. We have expanded our portfolio to more than 18,500 units—each clustered around key urban hubs—underscoring Mainstreet’s uniquely tangible value proposition within the real estate space. Roughly 42% of our portfolio’s NAV based on IFRS value is in BC, one of the country’s most robust rental markets and a primary target for driving Mainstreet’s future NOI growth.
Positive market fundamentals continue in 2025
In addition to Mainstreet’s internal achievements, our management team also expects plenty of external tailwinds as we begin the new fiscal year. Despite the potential for political uncertainty, we believe that highly favourable macroeconomic trends will persist given the deep and structural nature of those forces, which we identify as the following:
- Systemically undersupplied housing markets: The fundamental supply-demand imbalance in Canada’s real estate market is the result of more than a decade of compounding shortages that will likely take as many years to unwind. In the last 10 years, Canada’s population has grown by 5.85 million (Statistics Canada), while the number of new purpose-built rental apartment units over the same period totaled 390,917, illustrating the extent of the supply gap. Meanwhile, inflationary construction costs, regulatory red tape, municipal building code restrictions and other factors are likely to further hinder new supply, prolonging the current imbalance for years to come. Lastly, elevated construction costs combined with relatively low rental rates have driven replacement costs higher, rendering many new builds inherently uneconomic.
- Strong population growth: Canada’s explosive population growth in recent years was largely a result of an influx of permanent residents, international students and temporary workers, the majority of whom tend to be renters. While the federal government has plans to curb immigration rates in coming years (by 21% for permanent residents and 10% for international students in 2025), overall intake levels will remain much higher than previous averages. Canada will still accept 395,000 permanent residents and 437,000 international students this year after accounting for the reductions, for example. Federal government officials have reiterated that immigration remains a cornerstone of Canada’s economic growth. Furthermore, high immigration rates will add to Canada’s residual newcomer population. As of 2023, there were 2.55 million international students and temporary workers living in Canada, according to the federal government. That alone is more than the country’s entire rental universe of 2.3 million.
[1] Include 53 units held for sale
3 Include 52 units held for sale after disposal of 1 unit subsequent to Q1 2025
- Low vacancies: High population growth, combined with limited new housing supply, should continue to put downward pressure on rental vacancies, which are at a historic low of 1.5%, according to CMHC. As a result, rental rates in Mainstreet’s core markets of Calgary, Edmonton, Vancouver/Lower Mainland, Regina and Saskatoon are projected to climb in 2025.
- Falling interest rates: The Bank of Canada has signalled possible interest rate cuts in 2025 as inflation levels return to normal. Debt remains our single-largest expense, and lower interest rates present savings opportunities. Mainstreet currently has over $500 million in clear-title assets that can be converted into lower-cost financing options should interest rates continue to fall. As ever, we maintain an agile approach to debt management that will adapt to changes in monetary policy (see Outlook section). Currently, 99% of Mainstreet debt is locked into CMHC-insured mortgages at an average interest rate of 3.01%, maturing in an average 4.8 years, to protect against future interest rate changes.
- Emerging acquisition opportunities backed by ample liquidity: The current potential for political turbulence and possible tariffs, while creating some challenges, also lends itself to Mainstreet’s countercyclical growth strategy. While we always remain conservative in our approach to potential deals, we believe 2025 could offer substantial opportunity for Mainstreet to continue pursuing its 100% organic, non-dilutive growth model, funded in part by our sizable liquidity position—currently estimated at $413 million—which provides ample dry powder for expanding our asset base.
CHALLENGES
Political uncertainties
Despite our expectations of an overall favourable operating environment in fiscal 2025, external risks like a trade dispute with the U.S. could put significant strain on Canada’s broader economy. Tit-for-tat import tariffs are generally inflationary and would raise costs on some building materials, which were already elevated following the pandemic. The spectre of import tariffs on Canadian oil exports in particular, while not currently realized, would significantly diminish Alberta’s economic output.
Inflationary pressures
Inflation increases major operating expenses like labour, utilities and materials. Mainstreet works constantly and on multiple fronts to counteract rising expenses. By securing longer-term natural gas contracts, we substantially reduced energy costs across a large portion of Mainstreet buildings. We managed to reduce our insurance costs, a significant Mainstreet expense, by more than 20% for fiscal 2025 by obtaining improved premium rates and coverage. Despite our best efforts to control costs where possible, inflationary pressures nonetheless introduce added financial burdens that will, in some cases, be passed onto tenants through soft rent increases over an extended period of time.
Taxes
Carbon taxes, which ultimately raise costs on landlords, increased to $80 per tonne this year, and are scheduled to rise to $95 per tonne in April 2025. Property taxes in Vancouver/Lower Mainland, Calgary, Edmonton, Regina and Saskatoon are all set to rise in coming years in line with municipal spending plans. Lastly, Mainstreet is now liable for corporate taxes for one of the first times in our history due to our sustained growth and solid financial performance in recent years. We view our performance as an unmitigated success, and do not expect corporate taxes to have a material impact on Mainstreet’s overall growth and performance going forward.
OUTLOOK
Putting the S in ESG
We believe that the ongoing housing shortage emphasizes Mainstreet’s position as an important provider of affordable housing in Canada. Due to our commitment to corporate social responsibility, Mainstreet is proud to offer a crucial service at a time when high costs have priced many middle-class Canadians out of the market.
Strong performance across Western Canada
British Columbia, due to government-imposed rental rate caps in the province, offers an especially large mark-to-market gap in BC, which can drive improvements in NOI (see Runway section below). Nearly half (48%) of our acquisitions last year were in BC, and we will continue to analyze further buying options in order to capitalize on the province’s especially low vacancy rates.
Alberta leads the country in terms of population growth, economic output and employment. The province added 204,000 residents between mid-2023 and mid-2024 alone, and ATB Financial forecasts that international net migration into Alberta will reach 46,000 this year and 42,000 the next, well higher than the previous 2013 peak. The country contributed 46% of Canada’s new jobs generated in Q4 2024, according to Statistics Canada, despite accounting for only 12% of the nation’s population. The provincial government is forecasting 2.7% GDP growth this year, the highest in the country, underpinned by rising output in Alberta’s oil and gas, tourism, and tech sectors.
Saskatchewan’s economic growth of 2.3% in 2023, the latest available period, was the second-fastest among provinces, and its net migration has remained solid at around 6,000 newcomers per quarter through 2024. Manitoba’s net migration hit 4,500 in Q3 2024, as we expect growing populations and moderate economic growth in both provinces to keep downward pressure on vacancy rates.
Turning intangibles to tangibles
We expect that the housing crunch will continue driving municipal re-zoning efforts, as evidenced by the City of Calgary’s recent proposal to extend building height limits to encourage density. Such moves align with Mainstreet’s ongoing plans to leverage our portfolio of more than 900 low-density buildings—including buildings with subdividable residual lands—in order to extract added value out of existing assets and additional lands at little cost. Management has developed a three-point plan comprised of the following:
- Turning unused or residual space within existing buildings into new units
- Exploring zoning and density relaxations to potentially build new capacity within existing land footprints
- Subdividing residual lands for future developments.
We view this strategy as a major potential driver of growth longer-term, and further evidence of Mainstreet’s intangible value. Management is currently drafting a list of Mainstreet’s clear title assets to determine the scope of these intangibles.
Hedging our debts
As part of our adaptive approach to mortgage positions, Mainstreet has favoured shorter-term debt maturities in recent years to control costs and maximize savings. As always, we are monitoring the Bank of Canada’s monetary policy closely, and will revert back to longer-term mortgages when interest rates justify such a shift.
Raising Mainstreet’s nominal dividend
Mainstreet started offering a nominal dividend ($0.11 per share annually) beginning Q1 2024. Given the apparent success of the nominal dividend based on early-stage performance, our management team now plans to raise the dividend by 45% (to $0.16 per share annually) beginning Q1 2025. Due to Mainstreet’s solid free cash flow, we determined we were well placed to establish a nominal dividend to help widen our shareholder base (including bigger exposure to retail investors), increase trading volume and elevate our market capitalization without negatively impacting liquidity for future non-dilutive growth.
RUNWAY ON EXISTING PORTFOLIO
- Expanding our portfolio: Using our liquidity position, estimated at $413 million, we believe there is significant opportunity