Mainstreet Equity Corp. · TSX:MEQ
Mainstreet Equity — Q4 2019 Earnings Presentation
39 slides from Mainstreet Equity's earnings presentation, 2019
Slide 1: Q4 2019 Investor Presentation
Q4 2019 Investor Presentation
Slide 2: Cautionary Statement
Cautionary Statement Forward-Looking Information 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 amoun
Slide 3: Mainstreet Equity Corp.
Mainstreet Equity Corp. Q3 Investor Pitchbook We are a Corporation not a REIT We are an add-value consolidator of mid-market multi-family apartment buildings Mid-Market Characteristics § Typically less than 100 units § Fragmented Mom & Pop ownership § Owner neglect and mismanagement § Greater deferr
Slide 4: Apartment Business Driver
Apartment Business Driver The #1 Driver in the Apartment Business Q3 Investor Pitchbook Existing rental apartments trading significantly below replacement cost. Management believes: Current market rents do not justify new construction due to high costs Increasing demand and limited supply will conti
Slide 5: Apartment Demand
Apartment Demand EDMONTON Population Growth: 22,510 (2020F) [33% of total rental universe] Rental Universe: 69,070 (2018) Calculation of Ownership Calculation of ownership Premium = Principal & Interest for Avg. Resale Home minus Premium Assumptions: [Mid-market: 54,085 (78%)] (2018) Avg. 2-bedroom
Slide 6: Our Value Creation
Our Value Creation ACQUISITIONS Identify and buy under-performing rental units at prices well below replacement costs. CAPITAL IMPROVEMENTS Increase the asset value of Mainstreet’s portfolio by renovating acquired properties. OPERATIONAL EFFICIENCIES Minimize operating costs through professional man
Slide 7: 5 Pillar Competitive Advantage
5 Pillar Competitive Advantage Q3 Investor Pitchbook © All Rights Reserved - MAINSTREET EQUITY CORP. TSX:MEQ 7
Slide 8: The Mainstreet 'Spec'
The Mainstreet ‘Spec’ © All Rights Reserved - MAINSTREET EQUITY CORP. TSX:MEQ 8
Slide 9: Mainstreet: Adding Value
Mainstreet: Adding Value Vintage Squared, Calgary Mainstreet Tower, Edmonton Sunalta 1913, Calgary Sunalta 1913, Calgary © All Rights Reserved - MAINSTREET EQUITY CORP. TSX:MEQ 9
Slide 10: Mainstreet: Adding Value
Mainstreet: Adding Value Mainstreet Place, Calgary Mainstreet Park, Edmonton Lincoln Terrace, Calgary Avenue Tower, Calgary © All Rights Reserved - MAINSTREET EQUITY CORP. TSX:MEQ 10
Slide 11: Operating Efficiencies
Operating Efficiencies EXPENSE REDUCTION 1. Mainstreet’s aggressive renovation program has resulted in significant expense reductions in key areas such as: § Electrical (install compact fluorescent bulbs: LED bulbs for emergency exit signs) § Water (‘Ultra-high efficiency’ toilets; low-flow aerators
Slide 12: Mid-Market Efficiencies
Mid-Market Efficiencies Higher operating margins versus larger concrete complexes Low rise properties have relatively less operating expenses such as: § Limited or no elevator maintenance § No repair heat or maintenance of underground parking garage § Amenities Lower realty taxes versus larger struc
Slide 13: Clustering Strategy
Clustering Strategy Abbotsford Calgary Edmonton Through clustering assets Mainstreet has maximized efficiencies and growth, transforming a single asset into a network of apartment complexes. Saskatoon Regina Surrey We achieved this through: Clustering assets within a 5 block radius Requiring fewer r
Slide 14: ICE District Strategy Properties
ICE District Strategy 101 Properties [2,913 units] © All Rights Reserved - MAINSTREET EQUITY CORP. TSX:MEQ 14
Slide 15: Market Growth Potential
Market Growth Potential Mainstreet's strategy benefits Target Markets Rental Apartment Universe from a large target market <100 Units/ Total Rental % Mid-Market building Universe with less competition. Abbotsford 3,859 4,043 95% Surrey 4,986 5,603 88% Calgary CMA 26,205 39,567 66% Edmonton CMA 54,08
Slide 16: Potential Target Market Growth
Potential Target Market Growth 25,000 22,915 21,769 20,623 19,477 20,000 18,332 17,186 16,040 14,894 15,000 13,034 Units 10,000 5,000 0 11.4% 13.0% 14.0% 15.0% 16.0% 17.0% 18.0% 19.0% 20.0% Estimated Potential Rental Apartment Total Mid-Market Share * Numbers obtained from CMHC * YTD © All Rights Re
Slide 17: A 'Value Creation' Company
A ‘Value Creation’ Company SIGNIFICANT GROWTH WITH LIMITED EQUITY DILUTION (YTD) § Listed on the TSX in 2000, Mainstreet has grown its portfolio from 272 units with a market value of $17 million to 13,011 units (YTD) with a market value of $2 billion with limited equity dilution. § As of September 3
Slide 18: Value-Add Case Studies
Value-Add Case Studies Edmonton, AB § Mainstreet Park § Mainstreet Tower Lethbridge, AB § Highland Park Townhouses British Columbia § Mainstreet Estates (Surrey) § Cameron (New Westminster) Calgary, AB § Vintage Squared § Huntsville Saskatoon, SK § Portfolio © All Rights Reserved - MAINSTREET EQUITY
Slide 19: Value-Add Model: Mainstreet Park
Value-Add Model: Mainstreet Park, Edmonton, AB Mainstreet purchased the above property (178 units) in August 2016. It took approximately 12 months to complete the stabilization process and we financed the property in November 2017. Financial results for the property before and after stabilization an
Slide 20: Value-Add Model: Mainstreet Tower
Value-Add Model: Mainstreet Tower, Edmonton, AB Mainstreet purchased the above property (359 units) on May 31, 2013. It took approximately 12 months to complete the stabilization process and we financed the property in June 2014. Financial results for the property before and after stabilization and
Slide 21: Value-Add Model: Highland Park
Value-Add Model: Highland Park, Lethbridge, AB Mainstreet purchased the above property (156 units) on July 15, 2015. It took approximately 12 months to complete the stabilization process and we financed the property in July 2016. Financial results for the property before and after stabilization and
Slide 22: Value-Add Model: Mainstreet Estates
Value-Add Model: Mainstreet Estates, Surrey, BC Mainstreet purchased the above property (331 units with 5 buildings) in January 2015. It took approximately 6 months to complete the stabilization process and we financed the property in November 2016. Financial results for the property before and afte
Slide 23: Value-Add Model: Cameron
Value-Add Model: Cameron, New Westminster , BC Mainstreet purchased the above property (84 units) in July 2012. It took approximately 36 months to complete the stabilization process and we financed the property in September 2015. Financial results for the property before and after stabilization and
Slide 24: Value-Add Model: Vintage Squared
Value-Add Model: Vintage Squared, Calgary Mainstreet purchased the above property (32 units) in July 2011. It took approximately 12 months to complete the stabilization process and we financed the property in July 2014. Financial results for the property before and after stabilization and refinancin
Slide 25: Value-Add Model: Huntsville
Value-Add Model: Huntsville, Calgary, AB Mainstreet purchased the above property (52 units) in April 2012. It took approximately 29 months to complete the stabilization process and we financed the property in September 2014. Financial results for the property before and after stabilization and refin
Slide 26: Value-Add Model: Saskatoon
Value-Add Model: Saskatoon, SK Mainstreet acquired its first property in the city of Saskatoon (165 units) in November 2006. As of June 2019, Mainstreet owns 55 properties (2,003 units) for a total consideration of $167 million. 44 properties (1,158 units) have been stabilized and financed up to Jun
Slide 27: Growing The Portfolio
Growing The Portfolio ASSET GROWTH ($MM) Gross Book Value Appraised Value $2,500 $2,020 $2,040 $2,000 1,866 $1,632 $1,500 $1,386 $1,400 $1,293 $1,297 $1,259 $1,150 $1,148 $1,051 $976 $1,000 $908 $809 $885 $752 $731 $710 $679 $684 $625 $633 $520 $543 $451 $500 $309 $316 $354 $395 $250 $189 $145 $136$
Slide 28: Risk Management
Risk Management Mortgage Maturity CMHC INSURED MORTGAGES 2019 as of September 30, 2019 § As of September 30, 2019, Mainstreet has $1.038 billion of mortgages, of which $946 million (91%) are CMHC insured ( fixed & floating rate) at an average interest rate of 2.96% and the balance of $92 million are
Slide 29: 2019 Drivers
2019 Drivers 2019 NOI growth after complete rent increase and stabilization Annualized Annualized NOI Annualized Additional based on Q3 2019 NOI at 95% occupancy Additional NOI Annualized without Additional NOI at Annualized Optimum § Stabilization of existing non-stabilized results rate concession
Slide 30: 2017 Acquisitions
2017 Acquisitions Q1 2017 Acquisitions City Address # of Units Purchase Price Appraised Value Price per door Edmonton 10435 156 Street NW 12 1,200,000 1,270,000 100,000 Edmonton 10625 113 Street NW 22 1,980,000 2,650,000 90,000 Edmonton 10741 108 Street NW 22 1,980,000 2,520,000 90,000 Saskatoon 404
Slide 31: 2017 Acquisitions - Continued
2017 Acquisitions - Continued Q4 2017 Acquisitions City Address # of Units Purchase Price Appraised Value Price per door Calgary 807 Royal Avenue SW 28 4,336,000 4,750,000 154,857 Saskatoon #206, 529 Ave X S 1 50,000 120,000 (not included in avg) 50,000 Saskatoon 3105 7 St. East 24 2,476,000 2,800,0
Slide 32: 2018 Acquisitions
2018 Acquisitions Q1 2018 Acquisitions City Address # of Units Purchase Price Appraised Value Price per door Saskatoon 102, 529 Avenue X South 1 50,000 120,153 50,000 Edmonton 10609, 115 Street NW 22 2,193,000 2,750,000 99,682 Saskatoon Emerald Park 8, 2309 – 17 Street S 1 50,000 120,513 50,000 Sask
Slide 33: 2018 Acquisitions - Continued
2018 Acquisitions - Continued Q4 2018 Acquisitions Calgary 2309 17 Street SW 11 1,394,000 TBD 126,727 Calgary 7107 Elbow Drive SW 51 8,288,000 TBD 162,510 Saskatoon 404 529 Ave X S 1 40,000 TBD 40,000 Saskatoon 615 Confederation Dr 102 10,194,900 TBD 99,950 Calgary 1520 12 Ave Sw 23 3,427,000 TBD 14
Slide 34: 2019 Acquisitions
2019 Acquisitions Q1 2019 Acquisitions City Address # of Units Purchase Price Appraised Value Price per door Saskatoon 4234 & 4238 DeGreer St East 64 6,688,000.00 TBD 104,500 Edmonton 10735 107 St NW 24 2,380,000.00 TBD 99,167 Calgary Vista Group 125 18,300,000.00 TBD 146,400 Regina 1424 Victoria &
Slide 35: 2019 Acquisitions
2019 Acquisitions Q2 2019 Acquisitions City Address # of Units Purchase Price Appraised Value Price per door Saskatoon 3023 and 3027 Blakiston Drive NW 24 3,515,000 TBD 146,458 Saskatoon 201, 601 Ave X S 1 32,500 TBD 32,500 Saskatoon 1311 Temperance Street 63 5,650,000 TBD 89,683 Calgary 1929 11th A
Slide 36: 2019 Acquisitions
2019 Acquisitions Q3 2019 Acquisitions City Address # of Units Purchase Price Appraised Value Price per door Calgary 1937 11 Ave SW 8 1,197,500 TBD 149,688 Saskatoon 402 Ave P South 31 1,550,000 TBD 50,000 Calgary 6347 Bowview Rd NW 74 13,000,000 TBD 175,676 Calgary 626 57 Ave SW 29 4,814,000 TBD 16
Slide 37: 2019 Acquisitions
2019 Acquisitions Q4 2019 Acquisitions City Address # of Units Purchase Price Appraised Value Price per door Saskatoon 208-529 Ave X S 1 37,000 TBD 37,000 Saskatoon 17-2309 17 St West 1 40,000 TBD 40,000 Saskatoon 204-525 Ave X S 1 35,000 TBD 35,000 TOTAL Q4 2019 3 112,000 37,333 TOTAL FY 2019 1,118
Slide 38: Residual Land Conversion Value
Residual Land Conversion Value RESIDUAL LAND § Trevella Park Townhomes - Calgary, AB (~14 acres of High Density Residential Land) § Highland Park Townhomes – Lethbridge, AB (13.1 acres of High Density Residential Land) § Dover – Calgary, AB (Residual Land) § Imperial Court - Surrey, BC (High Density
Slide 39: Condo Conversion Value
Condo Conversion Value Alberta British Columbia CONDOMINIUM CONVERSION § Trevella Park – Calgary, AB § Sunshine complex, BC The opportunity exists to convert the existing portfolio § Highland Park – Lethbridge, AB § Pinetree complex, BC in into condominiums, in particular for the following § Wedgewo