Mainstreet Equity Corp. · TSX:MEQ
Mainstreet Equity — Investor Presentation (2004)
35 slides from Mainstreet Equity's investor presentation, 2004
Slide 1: LoL
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Slide 2: Mainstreet Equity Corp.
Mainstreet Equity Corp. A Calgary based multi-family real estate corporation focused on the: Acquisition, Redevelopment, Repositioning, and Asset and property management of “mid-market” apartment buildings. Niche market focus of owning multiple properties each with less than 100 rental u
Slide 3: Mainstreet Equity Corp.
Mainstreet Equity Corp. Mainstreet is managed by an entrepreneurial management team with a proven track-record of creating value. Strong, prominent independent board providing superior corporate governance. The Company’s strategic objectives are to: Grow the portfolio to 5,000 units over the
Slide 4: Growing the Business
Growing the Business Portfolio Geographic Composition Portfolio Geographic Composition (By Rental Units – 2,734 units) (By Net Operating Income) Calgary Calgary Toronto Toronto 39% 47% 12% 12% Surrey Surrey 8% 7% Red Deer Red Deer 3% 1% Edmonton Edmonton 38% 33% 4
Slide 5: Multi-Family Residential: A Preferred Asset Class
Multi-Family Residential A Preferred Asset Class 5
Slide 6: Why "Mid-Market" Multi-family Residential
Why “Mid-Market” Multi-family Residential Growth Potential In Mainstreet’s Current Markets Edmonton Red Deer Calgary Surrey Greater Toronto Mainstreet’s strategy benefits from a large target market with less competition. There is even less competition for assets consisting of 40 to 70 units 6
Slide 7: Multi-Family Residential: A Preferred Asset Class
Multi-Family Residential: A Preferred Asset Class Stable cash flow from a diverse tenant group. Fragmented ownership in target markets provides consolidation opportunities. Most liquid real estate asset class. Accessible and low cost, CMHC guaranteed financing available. Average vacancy ra
Slide 8: Growth Track Record
Growth Track Record 8
Slide 9: Growth In Rental Units
Growth In Rental Units Significant Growth Without Equity Dilution 3,000 2,734 47% 2,606 Compound 2,500 2,280 Annual Growth 2,000 1,667 Units 1,370 1,500 904 1,000 500 272 0 nt 98 99 00 01 02 03 re p- p- p- p- p- p- ur e e e e e e C -S -S -S -S -S -S 30 30 30 30 30 Properties 10 31 34 42 48 30 53 55
Slide 10: Entrepreneurial Senior Management / Strong Corporate Governance
Entrepreneurial Senior Management Strong Corporate Governance 10
Slide 11: Entrepreneurial Senior Management
Entrepreneurial Senior Management Bob Dhillon, MBA – President and Chief Executive Officer Founder and major shareholder of Mainstreet Equity Corp. Over 20 years of experience in the acquisition, repositioning and divestiture of multi-family, retail, office, land and industrial properties. Exp
Slide 12: Entrepreneurial Senior Management
Entrepreneurial Senior Management Mr. Johnny Lam – Chief Financial Officer Mr. Johnny Lam has over 20 years experience in senior financial management in Asia, Europe and North America. Former VP of Finance and Administration at HB Media Holding Pte. Ltd. in Singapore. Former Head of Finance at
Slide 13: Strong Corporate Governance
Strong Corporate Governance Rowland Fleming – Chairman Mr. Fleming is a seasoned business executive with more than 30 years experience in the financial services industry. Former President and CEO of the Toronto Stock Exchange (1994 - 1999). Former President and CEO of National Trust Company an
Slide 14: Strong Corporate Governance
Strong Corporate Governance Frank Boyd - Director President and CEO of Apex Land Corp. a former publicly-traded land development company listed on the Toronto Stock Exchange. Mr. Boyd provides a wealth of practical knowledge about development and the condominium industry, as Apex was one of the
Slide 15: Growth Strategy: Mainstreet's Value Chain
Growth Strategy: Mainstreet’s Value Chain 15
Slide 16: Internal Growth Strategy
Internal Growth Strategy The Value Creation Process Mainstreet has a lean, but experienced management team which has created a strong operating model: Target mid-market properties, and take advantage of lesser competition for buildings with less than 100 units. Identify and acquire under-perform
Slide 17: The Mainstreet Value Chain
The Mainstreet Value Chain Internal Growth: Adding Value To The Portfolio Post acquisition, value creation is achieved in several ways: Improving the functionality and appearance of the properties; Utilize obsolete space to derive additional rental income; Before Achieving higher margins by
Slide 18: The Mainstreet Value Chain
The Mainstreet Value Chain Internal Growth: Adding Value To The Portfolio Reducing costs through efficiencies and Before After economies of scale. On-going property investments: Branding of properties, Install new security systems, Replace/update appliances, Hydro – energy efficient devi
Slide 19: The Mainstreet Value Chain
The Mainstreet Value Chain Internal Growth: Actively Managed Portfolio In 2002, Mainstreet stabilized 264 suites (12% of portfolio) in nine properties acquired between November 2000 and September 2001. Completed at a cost of $2.5 million. Interior upgrades, new appliances, carpet and paint.
Slide 20: Trevella Park: 1300 – 40th St. SE, Calgary, AB
Trevella Park: 1300 – 40th St. SE, Calgary, AB Internal Growth: Adding Value To The Portfolio Mainstreet implemented and executed its value add strategy at Trevella to increase property cash flow and value. Suite renovation: Replace and update all appliances, Installed energy efficient devic
Slide 21: Trevella Park: Further Development Opportunity
Trevella Park: 1300 – 40th St. SE, Calgary, AB Further Development Opportunity Opportunity exists to redevelop or sell 13 acres at rear of property for high density residential development. Single family detached High rise residential Favorable Calgary legislation allows for strata title of
Slide 22: Value Creation Through Operating Efficiencies
Value Creation Through Operating Efficiencies 22
Slide 23: Operating Efficiencies: Expense Reduction
Operating Efficiencies: Expense Reduction Mainstreet’s aggressive renovation program has resulted in significant expense reductions in key areas such as: “This is a fixed Electrical cost business - every increase in Water revenue or Windows / Exterior reduction in expense goes to Over 90%
Slide 24: Financial Performance
Financial Performance 24
Slide 25: Growing The Portfolio
Growing The Portfolio Asset Growth ($MM) Book Value Appraised Value $178 $170 $145 $142 48% $136 Appraised Value $105 $111 CAGR $90 $78 53% $66 $50 Book Value $37 CAGR $11 $17 1998 1999 2000 2001 2002 2003 9 Months 2004 Year End - September 30 25
Slide 26: Acquisition Track Record
Acquisition Track Record Gross Revenue With and Excluding Dispositions ($MM) $34.0 62% Gross Revenue excluding Disposition Without Disposition Gross Revenue with Disposition CAGR $20.0 $20.0 $17.2 $15.2 $15.2 $12.8 $10.4 $11.1 $7.8 $6.3 $3.0 $1.8 $1.8 1998 1999 2000 2001 2002 2003 2004E Year End - S
Slide 27: Capital Improvements
Capital Improvements Capital Improvement Expenditure ($MM) $15.2MM spent $4.1 on the portfolio to date (1) $3.4 $3.0 $3.0 $1.6 $0.4 1999 2000 2001 2002 2003 2004E Year End - September 30 (1) Including capital expenditure spent on disposed assets. There has been a a direct correlation between capit
Slide 28: Continuing Strong Performance
Continuing Strong Performance Net Operating Income ($MM) $11.8 41% $11.1 $10.8 CAGR 1999 – 2004E $7.9 $5.7 $2.1 1999 2000 2001 2002 2003 2004E Year End - September 30 28
Slide 29: Continuing Strong Performance
Continuing Strong Performance Funds From Operations Per Share Gain on Sale $0.60 39% FFO Before Gain on Sale CAGR $0.34 $0.33 $0.25 $0.22 $0.02 $0.18 $0.05 $0.33 $0.26 $0.11 $0.23 $0.17 $0.07 1999 2000 2001 2002 2003 Year End - September 30 29
Slide 30: Third Quarter Highlights
Third Quarter Highlights “Same Store” Assets Comparison Rental Revenue ($MM) Net Operating Income ($MM) $11.4 $7.3 $11.0 +3% $6.9 +6% 2003 2004 2003 2004 All data is for the 9 months period ended June 30 30
Slide 31: Debt to Appraised Value
Debt to Appraised Value Debt to Appraised Value Ratio 76% 72% 70% 70% 68% 1999 2000 2001 2002 2003 Year End - September 30 Values are based on Accredited Appraiser Canadian Institute appraisals. 31
Slide 32: Interest Coverage
Interest Coverage Interest Expense Coverage Ratio 2.7x After Gain on Sale Prior to Gain on Sale 1.8x 1.6x 1.5x 1.5x 1.5x 1.5x 1.4x 1.4x 1.4x 1.3x (1) 1999 2000 2001 2002 2003 2004E Year End - September 30 (1) Mainstreet does not capitalize any interest related to redevelopment projects. 32
Slide 33: CMHC Insured Mortgages
CMHC Insured Mortgages Mortgages Debt ($MM) Mortgage Maturity $135.3 $129.6 40% Term to Maturity: 5.7 years $103.7 Weighted Avg. Rate: 5.61% $71.6 24% $63.1 16% $35.1 12% $10.2 5% 3% 1998 1999 2000 2001 2002 2003 9 Months 2004 2004 2005 2006 2007 2008 Subsequent Year End - September 30 Year End - Se
Slide 34: A Growing Company…
A Growing Company… (In Millions, Except Units) September 1998 Current Portfolio Size 272 units 2,734 units Portfolio Book Value $11.0 $141.6 Portfolio Appraised Value $17.3 $178.2 34
Slide 35: Creating Value
Value-Add Strategy to a Stable Business 4 Surfacing Value Through Refinancing or Sale 3 Creating Value 2 Actively managed portfolio 1 Focused Growth Strategy 35