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Attention Business/Financial Editors
Mainstreet's Continued Focus on Key Goals Yields Positive Trends in Key Performance Metrics
CALGARY, July 26 /CNW/ - In the third quarter of 2010(1), Mainstreet
Equity Corp. maintained a tight focus on its strategic goals for 2010:
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- Bring down vacancy rates to maximize cash flow;
- Minimize the costs and risks of floating debt (especially in
anticipation of rising interest rates);
- Extract capital to grow;
- Solidify and restructure human resources for the next wave of
significant growth and
- Pursue strategic growth opportunities.
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The results of Mainstreet's focus on these core objectives are evident in
many key metrics and performance indicators during Q3 2010:
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Rental Revenue - Up 3% to $13.1 million (vs. $12.8
million in Q3 2009)
Net Operating - Continuing - Up 2% to $8.3 million (vs. $8.2 million
Income (NOI) Operations in Q3 2009)
NOI - Same Assets Properties - Down 5% to $7.6 million (vs. $7.9
million in Q3 2009)
Funds from - Continuing - Up 3% to $2.7 million (vs. $2.6 million
Operations Operations in Q3 2009)
(FFO) before
financing
cost
Operating Margin - 64% (vs. 64% in Q3 2009)
Operating - Same Assets - 63% (vs. 64% in Q3 2009)
Margin Properties
Total Acquisition and - $27 million (vs. $7 million in Q3 2009)
Capital Expenditures
Acquisitions - 195 units in Calgary (average cost:
$128,000 per unit), representing a
portfolio increase of 3%
Stabilized Units - 103 properties (4.688 units) out of 132
properties (6,366 units)
Debt Refinancing completed - $56 million (88% of Mainstreet's total
and committed prior to floating and maturing debt as at
year-end September 30, 2009)
Total debt consolidation - $393 million (98%) of $402 million
as of June 30, 2010
Clear title properties - 16 properties (567 units)
($50.2 million)
Cash on Balance Sheet - $6 million ($0.60/share)
Noteworthy Trends: Comparative Performance - Q2 to Q3 2010
Q3 2010 Q2 2010 % change
Average Vacancy Rate 15.0% 18.8% (20%)
Rental Revenue per unit per month $704 $709 (1%)
Operating Cost per unit per month (1) $260 $267 (3%)
Net Operating Income per unit per month $447 $442 1%
(1) Winter heating cost adjusted for comparison purposes
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Q3 IN REVIEW
1. Reduced vacancy rate from 19.5% to 11.4% as of July 23, 2010
Through numerous strategic measures aimed at attracting and retaining
tenants, Mainstreet has reduced its overall vacancy rate from 19.5% at the
start of the year to 11.4% nine months later. The Corporation is aiming to hit
at a single-digit vacancy rate before year-end.
The latest CMHC Rental Market Reports (Spring 2010) show vacancy rate
increases across much of BC, most of Saskatchewan and all of Alberta; and
Statistics Canada data from June 2010 shows that provincial in-migration in
Western Canada is the lowest it's been in more than a decade. In light of
these general market conditions, Mainstreet is clearly bucking the vacancy
rate trend.
2. Locked another 10% of Mainstreet's total debt ($39 million out of $402
million) into long-term commitments to pre-empt interest rate hikes
Anticipating the eventual rise in interest rates, Mainstreet has been
aggressive in its efforts to consolidate as much floating and maturing debt as
possible into long-term, lower interest, CMHC-insured mortgages. As of June
30, 2010, 98% ($393 million) of the Corporation's total debt ($402 million)
was consolidated into long-term mortgages, most of them fixed-rate and
CMHC-insured.
From its refinancing efforts in Q1 through Q3 2010, Mainstreet has
extracted $21 million for growth and other capital expenditures.
3. Pursued value-added growth in strategic Western Canadian mid-market
locations
During Q3 2010, Mainstreet acquired 195 units in Calgary - a very tight
market. For this well-located concrete mid-rise with great potential for
significantly higher rental rates, Mainstreet spent $25 million - an average
cost of just $128,000 per unit. This property aligns perfectly with the
Mainstreet business model and its "value added" approach to maximizing
top-line revenues.
As a comparison, in Q3 2010, Mainstreet sold a nearby building for
$155,000 per unit. The newly acquired building is in a more desirable location
and improved condition.
CHALLENGES
Despite several strong signs that the economic tide is beginning to turn,
Mainstreet continues to contend with the following challenges:
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1. Rental Concessions - As the rental markets in which Mainstreet
operates remain highly competitive, the Corporation continues to
extend select concessions as a means of retaining existing tenants
and attracting new ones. These concessions directly impact
Mainstreet's top-line revenues.
2. Bad Debts - Missed rental payments - a hallmark of recessionary times
- continue to impact Mainstreet's financial performance.
3. Uncertainty in the Capital Markets - Continued volatility in the
capital markets poses ongoing challenges for Mainstreet and its
shareholders.
4. Economic Uncertainty - While Canada's economy has been showing signs
of stabilization and modest growth, a climate of worldwide ongoing
uncertainty continues to impact Mainstreet's business.
5. Sluggish In-migration - According to the latest figures from
Statistics Canada (released June 28, 2010), Alberta's population
increased only 0.35% in Q1 2010 - "the smallest first-quarter
population increase in the province since 1996." Notwithstanding this
modest growth, all four western provinces had growth rates stronger
than the national average.
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OUTLOOK
As several key factors come into alignment for Mainstreet - lower vacancy
rates, higher revenues, an increasingly strong management team, the
near-complete renovation of the Corporation's existing portfolio and the
near-complete elimination of its floating debt - Mainstreet intends to
accelerate the strategic acquisition of value-add properties in key Western
Canadian locations.
The Corporation now holds clear title on 16 properties (out of 132) at a
total purchase cost of approximately $50 million. Refinancing these properties
to liberate capital for growth is an option at Mainstreet's avail.
As it enters the final quarter of its 2010 fiscal year, Mainstreet is
striving toward increased cash flow and cash for growth with a constant focus
on the right real estate segment in the right Western Canadian locations.
Trends in the Corporation's key performance metrics are very encouraging; and
management is confident Mainstreet's operations will continue to improve with
anticipated vacancy rate reductions coupled with ongoing efforts to control
operating costs.
(1) This third quarter report is for the three-month period ended June
30, 2010. Mainstreet's current fiscal year ends September 30, 2010.
About Mainstreet
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
Greater Toronto Area. Mainstreet's common shares are listed on the Toronto
Stock Exchange under the symbol MEQ. As of June 30, 2010, there were
10,379,849 common shares outstanding.
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
acquisitions, reduction of vacancy rate, future profitability, timing of
refinancing of debt, increased cash flow, the Corporation's liquidity and
financial capacity, the Corporation's funding sources to meet various
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 involve known and unknown risks, uncertainties and
other 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 existing properties, availability of capital to
fund stabilization programs, other issues associated with the real estate
industry including, but without limitation, fluctuations in vacancy rates,
unoccupied units during renovations, 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. 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.
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/For further information: Bob Dhillon, President and CEO, (403) 215-6063;
Additional information is available at www.mainst.biz and www.sedar.com/
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