CALGARY, May 8, 2012 /CNW/ - Chief Executive Officer and President Bob Dhillon of Mainstreet Equity Corp. is pleased to report the Q2 2012 results, stating that, "The Q2 results demonstrate that the Corporation's business model continues to deliver and create shareholder value." Mr. Dhillon added that, "The numbers tell the story."
Funds from operations ("FFO") were up 53% to $3.2 million (before disposition of an investment property and stock option cash settlement expense), versus $2.1 million in Q2 2011, while operating margins were at 61% versus 58% in Q2 2011.
Overall net operating income ("NOI") was up 22% to $11.1 million, while same asset NOI was up 9% versus Q2 2011. Rental revenues were up 17% year-over-year, at $17.9 million in Q2 2012 versus $15.3 million in Q2 2011. Finally, in Q2 2012, same asset revenues were up 4%.
The vacancy rate continued to trend downwards. As of May 1, 2012 the overall vacancy rate was down to 6.7% (inclusive of all unstabilized acquisitions), while the average vacancy rate for Q2 2012 was at 8.2% compared to 11.8% a year earlier.
Mainstreet continues to grow its portfolio of properties. Since the beginning of the financial year, Mainstreet has acquired an additional 607 units for a total consideration of $59 million. After the closing of all acquisitions subsequent to Q2 2012, Mainstreet's portfolio will increase to 7,969 units, which represents an 8.2% expansion in the size of the portfolio. Mainstreet is presently working to absorb these unstabilized units into the portfolio as per the Mainstreet value chain, and looking for additional opportunities to make accretive additions. Once again, this growth was achieved organically with no equity dilution (except for stock option dilution).
Mainstreet continued to capitalize on low interest rates on CMHC insured financing in Q2 2012 financing $19 million long-term, ten-year CMHC-insured mortgages at an average interest rate of 3.11%. In the process, the Corporation unlocked $17.5 million in funds that can now be deployed towards growth-oriented opportunities going forward. Subsequent to Q2 2012, Mainstreet refinanced an additional $23 million in debt into long-term, ten-year CMHC insured mortgage at an average interest rate of 3.30% unlocking a further $4.2 million in capital for growth.
The west is where Canada's economic growth is happening, and the Management believes Mainstreet is perfectly positioned to grow alongside it.
In the recent federal budget, Finance Minister Jim Flaherty stated that the majority of Canada's near-term economic growth would take place in the west in general and in Alberta in particular. The macro trends support this view, with continued positive net in-migration, strong oil prices and a political culture that's favourable to business.
The management believes Mainstreet is Canada's most concentrated real-estate play on western Canada's growing prosperity, and it will continue to press this local advantage to expand its portfolio of holdings.
But Mainstreet will not depend on macro-trends alone. It remains committed to driving costs down, and has pioneered a global supply chain of people, products and services. In addition to its proactive work in securing foreign workers, Mainstreet also continues to build out its pipeline of high-quality, low-cost materials and supplies direct from manufacturers in China. This has already yielded considerable cost savings on everything from kitchen cabinets to laminate flooring and ceramic tiles, and Mainstreet believes that these relationships will be expanded to include other necessary materials going forward.
Mainstreet is also developing a relationship with India (a global leader in low-cost IT solutions), one that was fleshed out during a recent trip to the country by the Corporation's senior executives. With its new website and database currently under development in India, Mainstreet is now looking to the development of multifaceted operations-side software, and in the future opening a backroom office, all at substantially lower costs than are available in Canada.
Over the past twelve months Mainstreet has been examining the possibility of applying its add-value business model to distressed markets in the U.S., and believes it's time to make its move. The Corporation has been assessing the risk-reward proposition associated with the U.S. market, and believes that it is a favourable one. The U.S. economy appears to be turning the corner, while valuations in the real-estate market remain intriguing. As always, Mainstreet remains committed to creating value for its shareholders, as it has since its inception 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, 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 March 31, 2012 there were 10,465,281 common shares outstanding. Mainstreet's stock was among the top ten gainers on the TSX in 2011.
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, expansion into the United States 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