CALGARY, Dec. 17, 2012 /CNW/ - In its fourth quarter results and annual
report, Mainstreet Equity Corp. (TSX: MEQ) is pleased to report today
that the end of fiscal year 2012 marks the eighth consecutive reporting
period with double-digit year-over-year growth in net operating income
("NOI") and funds from operations ("FFO"). This is a clear
demonstration of the recurring revenue model the Corporation has
achieved in the midst of sustained growth, without diluting any
shareholder equity. Mainstreet reached another important milestone when
the Corporation's properties achieved a market value of over a billion
dollars at the end of fiscal 2012, up from $908-million in 2011.
Bob Dhillon, Chief Executive Officer and Founder, says, "These reports
are a great way to end the year. Mainstreet has consistently delivered
results and created shareholder value. We have established a firm
foundation that is making us into a stable cash-flow machine." Mr.
Dhillon adds, "We are only just getting started. We believe we continue
to have plenty of run-way, with opportunity for substantial growth and
improvement in our most important metrics. Like always, we can do it
without diluting shareholder equity."
This press release should be read in conjunction with Mainstreet's
management's discussion and analysis (MD&A) and audited financial
statements and accompanying notes for the years ended September 30,
2012 and 2011, which provide detailed analysis of the Corporation's
financial results (www.mainst.biz).
RESULTS FROM CONTINUING OPERATIONS
In 2012, gross revenue increased 17% to $66.8-million, from
$56.9-million in 2011. Net operating income climbed to $44.9-million, a
20% increase from $37.3-million in 2011. The overall operating margin
increased to 67% as compared to 66% in 2011. Funds from operations,
before US investment fund expenses, loss on disposal and stock option
cash settlement expense, hit $15.1-million, 35% better than
$11.2-million in 2011, driven by lower vacancies, decreasing rental
incentives and higher rental rates. Same asset revenues rose 4% to
$54.8-million, up from $52.7-million. Same asset operating income
increased by 8% to $37.3-million as compared to $34.7-million in 2011.
Same asset operating margin saw a 2% gain to 68%.
The market value of Mainstreet properties at the end of the fiscal year
was $1.051-billion (including $68-million assets held for sale), up
from $908-million a year before. Mainstreet added 833 apartment units
to its portfolio in Surrey, Calgary, Edmonton and Saskatoon in 2012.
The Mainstreet portfolio continues to expand, with the acquisition of
an additional 260 units in Edmonton and Saskatoon subsequent to year
end. As of today, Mainstreet has 8,440 units with a market value of
In 2012, Mainstreet refinanced $26.1-million of mature debt into
long-term, 10-year CMHC-insured mortgages at an average interest rate
of 3.14%. Additional funds of $16-million were raised and Mainstreet
realized savings in annualized interest expense of $388,000. Mainstreet
also raised $17-million through financing certain clear title
properties after stabilization.
UPDATE ON MAINSTREET'S INITIATIVES
Mainstreet has made substantial headway in efforts to take advantage of
lower-cost, overseas services, supplies and talent. Approximately 50%
of Mainstreet renovation materials are now sourced direct from
manufacturers in China. Temporary foreign workers now account for 5% of
the Mainstreet labour force in Canada. Employing international workers
has shielded Mainstreet from some of the burdens of a tight labour
market, while at the same time boosting productivity and efficiency.
For similar reasons, Mainstreet has turned to India to re-develop its
online presence. The first phase of the project is expected to be
completed in mid-2013.
Mainstreet has liquidity in place to add roughly 2,000 more units - an
expansion of 25% over today - without diluting shareholder equity. On
NOI, Mainstreet has three important levers to pull in the year ahead.
The Corporation exited 2012 with NOI from continuing operations of
$44.9-million. Management expects that NOI can be further improved
through a continued decrease in vacancy rates, reductions in rental
incentives, increases in rental rates after stabilization, and changes
in rental market conditions. Management believes that, with continued
efforts to maximize returns and favourable market conditions, we can
achieve an optimum NOI for our existing portfolio in 2013. Finally, on
the cost of financing, Mainstreet has $173-million in debt due in 2013
and 2014. By refinancing this at mortgage rates near 60-year lows,
Mainstreet can substantially lower its debt servicing payments and
raise additional liquidity.
Mainstreet has already demonstrated major progress against each of those
challenges, with 2012 overall vacancy rates (including all
newly-acquired, unstabilized properties in the year) in particular
falling from 11.3% to 8.3%. With CMHC forecasting significant
improvement in western Canada, Mainstreet's primary market, the
Corporation expects more improvements in 2013. Mainstreet's financial
results will be further improved as further newly-acquired apartment
units are renovated to Mainstreet specifications and re-introduced into
the market at full market rents.
Because Management believes it is prudent to keep dollars in the more
active western economy, Mainstreet has disposed of 404 apartment units
in its Ontario portfolio, at a sale price of $47-million, subsequent to
fiscal year end. Mainstreet is in negotiation about disposing the
remaining 260 apartment units. The Corporation intends to reallocate
the net proceeds from the disposition for further expansion in western
Canada, where the prospects remain particularly strong. The closing
date of the disposition is on January 23, 2013.
The U.S. is another area of growing interest for Mainstreet. This is a
market on the brink of recovery, and there are still deals to be had.
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 September 30, 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.
SOURCE: Mainstreet Equity Corporation
For further information:
Bob Dhillon, President and CEO: 1-403-215-6063
www.mainst.biz and www.sedar.com