CALGARY, Jan. 26, 2015 /CNW/ - Mainstreet Equity Corporation (TSX: MEQ) ("Mainstreet" or the "Company"), announced today that it has completed the acquisition of a 331-unit, five-building rental apartment complex (the "Property") in the Greater Vancouver Area ("Vancouver"). Located in the Vancouver suburb of Surrey, British Columbia, this Property was purchased for $33.7 million which equates to what Mainstreet believes is an attractive price of $102,000 per unit and well below replacement cost. Mr. Bob Dhillon, CEO of Mainstreet comments, "We are pleased to acquire this Property for a number of important strategic and financial reasons."
With this acquisition, the Company now owns and manages over 2,700 apartment units in Vancouver/Lower Mainland B.C., which comprise approximately 30% of the Company's total portfolio. According to the 2014 Fall Rental Survey published by Canada Mortgage and Housing Corporation ("CMHC"), the Vancouver CMA is one of the strongest markets in Canada with a current vacancy rate of 1%. In addition, CMHC reports that the Surrey submarket, which is one of Canada's fastest growing cities, has a total market inventory of less than 5,500 apartment units and with this acquisition Mainstreet will own nearly 1,700 units, or over 30% of the total rental universe in the city.
Mainstreet believes that this acquisition is an ideal fit with Mainstreet's strategy of acquiring undermanaged and underperforming properties and substantially improving the quality of the apartments and common areas which enables it to improve occupancies, increase rents, and enhance the quality of the living experience for its residences. Bob Dhillon added: "The Property features many of the attributes we look for when acquiring a property including significant deferred maintenance, high vacancy rates, and below markets rents; these challenges are viewed as opportunities as we deploy the time-tested and proven "Mainstreet Value Chain" to unlock the hidden value in the Property and bring it to its full potential. The Surrey market is another example of Mainstreet's strategy of "clustering" its ownership of apartments. The Property will benefit from Mainstreet's extensive operating history in this community and provide it with further scale and operating efficiencies, both of which should help shorten the stabilization process. The Property is located close to multiple SkyTrain stations, the Trans-Canada Highway, as well as being less than 1 km to Guildford Town Centre, the largest regional shopping destination south of the Fraser River with over 1.2 million square feet of GLA. Owned by global real estate company Ivanhoé Cambridge, Guildford Town Centre is currently in the third phase of a $280 million redevelopment that will add 200,000 sq. ft. of new, unique-to-market national and international retailers."
Given the Company's strong financial position - including its portfolio of unencumbered assets valued at $107 million, its $85 million revolving credit facility, and augmented by the anticipated proceeds from mortgage refinancings which is anticipated to advance in the next few months - the Company has completed this acquisition with its available funds, which continues to be a hallmark of the Company's non-dilutive growth strategy. Upon stabilization the Company anticipates placing long-term CMHC mortgage financing on the Property. Currently 10 year CMHC mortgages are available to the Company at a fixed interest rate of approximately 2.5%. Accordingly, this Property should both be significantly accretive to its growing cash flow, and create incremental net asset value.
Forward-Looking Information
Certain statements contained herein constitute "forward-looking statements" as such term is used in applicable Canadian securities laws. These statements relate to analysis and other information based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. In particular, statements concerning estimates related to future capital expenditures, reduction of vacancy rates, increase of rental rates and rental revenue, timing and success of refinancing of debt, the Corporation's liquidity and financial capacity, improved rental conditions, and the Corporation's goals and the steps it will take to achieve them, the Corporation's anticipated funding sources to meet various operating and capital 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 of future events or performance (often, but not always, using such words or phrases 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 are not guarantees of future events or performance and by their nature involve known and unknown risks, uncertainties and other factors, including those risks described in this Annual Information Form under the heading "Risk Factors", that 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 new Property, availability of capital to fund a stabilization program, other issues associated with the real estate industry including availability of labour and costs of renovations, but without limitation, fluctuations in vacancy rates, unoccupied units during renovations, rent control, fluctuations in utility and energy costs, credit risks of tenants, fluctuations in interest rates and availability of capital, and other such business risks as discussed herein. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking statements include, among others, the rental environment compared to several years ago, relatively stable interest costs, access to equity and debt capital markets to fund ( at acceptable costs) and the availability of purchase opportunities for growth in Canada. 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, other factors may cause actions, events or results to be different than 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 herein.
Forward-looking statements are 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 if these beliefs, estimates and opinions should change except as required by applicable securities laws.
Management closely monitors factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements and will update those forward-looking statements where appropriate in its quarterly financial reports.
Certain information set out herein may be considered as "financial outlook" within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding the Corporation's reasonable expectations as to the anticipated results of its proposed business activities for the periods indicated. Readers are cautioned that the financial outlook may not be appropriate for other purposes.
SOURCE Mainstreet Equity Corporation
