CALGARY, Dec. 11, 2013 /CNW/ - Mainstreet Equity Corp. ("Mainstreet or "Corporation") (TSX: MEQ) is pleased to report that it has completed its 12th consecutive quarter of double-digit, year-over-year growth in funds from operations ("FFO"), rental revenue and net operating income ("NOI"). In fiscal year 2013, Mainstreet achieved substantial gains in a series of key financial benchmarks, including portfolio size and same asset revenue and vacancy.
"Our growth hasn't just yielded a lengthy streak of strong financial results. It has also enabled us to lay what we believe will be an outstanding foundation for the year ahead," says Bob Dhillon, Chief Executive Officer and Founder. "We see no fewer than four engines for growth, most notably our ability to use our property stabilization process and substantial liquidity to power further NOI increases, both organically and through acquisitions. We continue to find ways to add value to residential rental property in Western Canada, which we believe remains the country's best place to operate for a corporation with our well-proven business model."
RESULTS FROM CONTINUING OPERATIONS
In fiscal year 2013, Mainstreet's rental revenue from continuing operations rose 17% to $77 million, up from $65.9 million in fiscal year 2012. Same-asset rental revenues climbed 9% to $67.8 million, from $62.4 million in fiscal year 2012. NOI from continuing operations increased 16% to $52 million, while growing 8% to $45.5 million at same asset properties. Funds from continuing operations were up 28% to $19.1 million, an increase over $14.9 million in fiscal year 2012. The same asset vacancy rate fell to 7.3% from 8.1% in fiscal year 2012. Excluding 205 units under complete re-construction, Mainstreet's vacancy rate as of December 1, 2013 stood at 5.5%. The Corporation's stable of stabilized units has grown to 143 properties, with 6,431 units, out of a total of 193 properties or 8,218 units. The market value of the Corporation's portfolio reached $1.15 billion.
Mainstreet acquired 702 residential apartment units for approximately $70 million, representing a 9% growth in Mainstreet's portfolio. The Corporation spent approximately $11 million on capital improvement.
In 2013, Mainstreet financed five clear title properties after stabilization in British Columbia for $23.7 million, and refinanced $67.5 million in matured mortgages into 10-year long-term CMHC insured mortgage loans for $80.7 million. The new loans resulted in an annualized savings in interest expenses of approximately $390,000, while raising an additional $36.9 million for future growth.
Mainstreet has witnessed a 100-basis point interest rate increase over the past six months. Such change impacts the savings the Corporation can achieve by refinancing mortgage rates, as well as its ability to liberate additional capital through this process. Relative to norms in recent decades, however, mortgage rates remain at advantageous levels, and the CMHC expects them to "remain historically low."
Mainstreet's management believes that there are few better places in Canada to own residential rental property than British Columbia, Alberta and Saskatchewan, the places Mainstreet calls home. In 2013, Alberta experienced record in-migration, with its population growing at a faster rate even than Ontario, a much larger province. Based on CMHC marketing reports, Alberta GDP growth of 2.7% in 2012 is expected to be followed by a 2.8% economic expansion in 2013 and a further 2.3% in 2014. The growth in people and the economy are expected to push increases in rent, revenue and NOI.
At fiscal year-end 2013, only approximately 78% of Mainstreet's existing portfolio had been stabilized. The difference between the financial performance of stabilized and unstabilized properties is significant. This is the major factor underlying Mainstreet's belief that there is strong potential for future organic growth in NOI and FFO.
Mainstreet has approximately $178 million in debt maturing in 2014 and 2015, with an average current interest rate of 4.35%. Relative to the current CMHC 10-year mortgage rate of approximately 3.8%, the Corporation expects to achieve a substantial savings in interest expenses through refinancing.
The Corporation believes that its substantial liquidity positions it for continued portfolio growth. At year-end, Mainstreet owned 30 clear title properties with a combined market value of approximately $95 million, a source for substantial funds that can be raised through refinancing. Following Mainstreet's expected refinancing of $178 million in debt maturing in 2014 and 2015, Mainstreet anticipates that substantial additional funds can be raised. Mainstreet believes that its strong liquidity position will once again allow it to continue to expand without diluting shareholder equity.
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 the British Columbia 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 December 11, 2013 there were 10,465,281 common shares outstanding. >>>>>>>>
The above disclosure may contain forward-looking statements that involve substantial known and unknown risks and uncertainties. In particular statements concerning future interest rates, anticipated economic growth, increases in rents, rental revenue and NOI, interest savings, the Corporation's future liquidity, financial capacity and possible expansion in Western Canada should be viewed as forward looking statements to the extent they represent estimates thereof. These forward-looking statements involve unknown risks, uncertainties and other unknown factors, 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, costs and timing of developing existing properties, availability of capital, unoccupied units during stabilization, stock market volatility and fluctuations in rental prices, energy costs, 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. Readers should not place undue reliance on such forward looking statements contained herein.
SOURCE Mainstreet Equity Corporation