Mainstreet's year over year growth lays foundation for significant portfolio growth

CALGARY, May 9 /CNW/ - Mainstreet's financial results for its second
quarter ended March 31, 2005 reflect its continued strong growth over the past
three months.
During the second quarter of fiscal 2005, Mainstreet purchased three
multi-residential apartment complexes totalling 412 units in Toronto, Calgary
and Surrey, B.C. for $24.4 million ($59,000 per unit). Subsequent to the
quarter end, Mainstreet also purchased a 288-unit apartment complex in Surrey
for $17.1 million ($59,000 per unit), and has signed an agreement to purchase
an additional 30 apartment units in Calgary for $1.47 million ($49,000 per
unit). Upon the completion of these acquisitions, Mainstreet will own
3,463 rental apartment units across Canada, an increase of 27% over the same
period last year. In the year to date, Mainstreet has spent approximately
$43 million in real estate.
The book value of the Company's total assets increased by 36% to
$199 million from $146 million in the second quarter of 2004. During the
second quarter of 2005, Mainstreet continued to renovate its rental portfolio
by investing approximately $500,000 to upgrade suites to current Mainstreet
standards. At the end of the second quarter, approximately 77% of Mainstreet's
portfolio had been fully renovated, which includes the 412 units acquired
during the quarter (in which the renovation program has not yet begun).
The overall portfolio vacancy rate for the stabilized and unstabilized
(those units which are currently under renovation) units at the end of Q2 2005
was 8.5%. This is significantly lower than the vacancy rate of 13.7% reported
last year at this time, which was due primarily to the higher number of
unstabilized units. The reduction in the portfolio vacancy continues to
reflect management's commitment to improve the asset and tenant quality of the
portfolio.
Reflecting Mainstreet's current cash position of approximately
$26 million, Mainstreet has substantial acquisition capacity to pursue the
consolidation of the Canadian "midmarket" rental apartment sector. The Company
anticipates the announcement of additional acquisitions in the near term.
As a result of the $33 million convertible debenture private placement
completed in late 2004, Mainstreet's interest expense has shown substantial
increase. The debentures have a seven-year term, bear a coupon of 7.25% and
are convertible into common shares at a price of $6.25 per share. Proceeds of
this financing are being used to fund acquisitions and facilitate improvements
to newly acquired properties.
Reflecting the additional interest expense from the debenture financing,
the company reported funds from operation (FFO) of $22,000, compared with
$115,000 during the same period the previous year. Without this debenture
interest and excluding the interest and operating income generated from the
debenture proceeds, "Same Store" assets FFO would have increased to $404,000,
up 252% over the second quarter of 2004.
FFO is a generally accepted measure of operating performance of real
estate companies; however, it is a non-GAAP measurement. Although a number of
real-estate companies use this measure, readers are cautioned that
Mainstreet's calculation of FFO may be different than other companies or
REITS. Mainstreet calculates FFO as net income plus amortization and future
income tax expenses (recovery). FFO is currently referenced in Mainstreet's
statement of cash flows.
It should be noted that the FFO generated in the second quarter is not
indicative of Mainstreet's potential cash flow generation for several reasons
including the following:
    -  Mainstreet continues to apply its value added model to the
       properties that it acquired in the quarter. After renovations and
       the operational efficiencies have been implemented, the renovated
       units available are expected to generate higher revenues with
       lower operating costs. FFO will continue to grow.
    -  Mainstreet has substantial acquisition capacity which management
       expects to be invested in coming months at leveraged returns well
       above these being earned in short-term deposits.
For the second quarter, Mainstreet reported a net loss of $0.9 million,
compared with a net loss of $0.6 million in the same period last year. This
net loss was affected by the additional convertible debenture interest
expense.
In commenting on these results, Mainstreet President and CEO Bob Dhillon
said: "Last quarter we announced ambitious plans to pursue our business
strategy for growth in all our core geographic markets. This strategy is
essential as we position our company to better respond to current
opportunities in our market niche - mid-sized, mid-tiered buildings. Three
months later, I'm pleased to report that we are delivering on these plans. We
are achieving this success as market fundamentals in our rental business start
to improve."

Mainstreet is a publicly traded real estate company focused on the
acquisition, redevelopment, repositioning and management of "mid-market"  
multi-family residential rental properties across Canada.