CALGARY, May 15 /CNW/ - Mainstreet Equity Corp. ("Mainstreet" or the
"Corporation") today announced its financial results for the second quarter
ended March 31, 2006. Highlights for the quarter include:
- Growth in portfolio to 3,891 units (72 properties), a 24% increase
compared to 3,145 units (59 properties) held at the end of the second
quarter 2005.
- Significant growth in the Edmonton mid-market with the acquisition of
152 units in the second quarter; subsequent to the second quarter, an
additional 260 units (10 properties) were acquired in Edmonton,
increasing the Corporation's portfolio in this strong market by 42%
since fiscal year-end 2005.
- Attractive acquisition costs averaging $47,000 per unit acquired in
the second quarter, well below average per-unit acquisition costs of
approximately $86,000 for this market, reported by InSite Research.
- Stabilization of 167 units in the second quarter; as of March 31,
2006, 71% of the Corporation's residential units (2,750 units out of
a total 3,891) were renovated; Mainstreet has implemented rental
increases in its Alberta portfolio and anticipates stabilization of
the remaining non-stabilized units over the next 12 to 18 months; a
property is regarded as stabilized when 90% of its units have been
renovated and repositioned in the market at market rents.
- Drop in vacancy rate for the stabilized portfolio to 3.25% in the
second quarter 2006 compared to 5.5% in the first quarter 2006, while
the overall vacancy rate in Calgary decreased substantially to 1.51%
in the second quarter 2006 compared to 3.6% in the first quarter
2006; as of March 31, 2006, 91% of units in Mainstreet's total
portfolio were rented, 7% were being renovated and the remainder were
vacant because of market conditions.
- Canada Mortgage and Housing Corporation approval in the second
quarter to refinance mortgages totaling $10 million at 5.22% interest
rate, maturing in February 2007, to a lower interest rate of 4.66%
for 10 years; expected to be completed in May 2006, the refinancing
will allow Mainstreet to realize additional funds of approximately
$2.4 million, which will be used to fund growth initiatives; and
- Disposition of a non-strategic, stand-alone asset totaling 66
multi-family residential units located in Red Deer for $3.12 million
- for a net gain of about $600,000; the purpose of this disposition
was to improve operating and management efficiency by focusing
Mainstreet's operations in its four core markets - Vancouver/Lower
Mainland (Surrey), Calgary, Edmonton and Greater Toronto Area.
Funds from operations (FFO), which is a generally accepted measure of
operating performance of real estate companies, and which Mainstreet
calculates by adding non-cash items including amortization and deferred taxes
to net income, was $511,000 compared to $41,000 in the same period last year.
Excluding FFO from discontinued operations, FFO from continuing operations was
negative $50,000 in the second quarter compared to $41,000 in the same period
of 2005. This reflected several factors:
- During the period when acquired properties are stabilized through
renovations and repositioning in the market, Mainstreet's results are
affected by lower rental income, higher vacancy rates and operating
costs. Excluding the adverse financial impacts during the
stabilization process, FFO from stabilized properties for the three
and six months periods ended March 31, 2006 was $1,180,000 (13 cents
per basic share) and $2,193,000 (24 cents per basic share),
respectively.
- Increased operating expenses reflected higher natural gas prices.
Mainstreet is taking steps to help mitigate the impact of natural gas
prices through additional rent increases planned in 2006 and
commitment to long-term supply contracts when prices stabilize.
- The current shortage of skilled labour and materials across Canada,
but particularly in the booming Alberta economy, resulted in
increased maintenance and renovation costs, and delays in the overall
stabilization process. To help address this problem, Mainstreet is
offering relocation incentives in the form of paid transportation and
accommodation for workers from other regions of Canada.
- A high cash balance throughout the second quarter was invested in low
risk short term deposits that generate low returns. When acquisition
opportunities are identified, these funds will be re-invested in
residential rental properties with much higher yields.
"We are pleased with the continued momentum in our growth during the
second quarter of 2006," says Bob Dhillon, President and CEO of Mainstreet.
"With 64% of our portfolio now situated in Alberta (as of the date of this
news release), these assets will benefit from strong market conditions that
will help attract higher rents, maintain high occupancy, and in turn create
greater value for our shareholders."
Dhillon also points out that the elimination of the Federal Capital Tax
effective January 1, 2006, and reduction of the Goods and Services Tax (GST)
rate to 6% effective July 1, 2006, will have favourable financial impacts on
the Corporation's future cash flows. Mainstreet estimates annualized future
cash flow will be increased by approximately $350,000 as a result of these tax
savings.
About Mainstreet
Mainstreet is a Calgary-based, growth-oriented real estate corporation
focused on the acquisition, redevelopment, repositioning, 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 (Surrey), Calgary, Edmonton and Greater Toronto Area.
Mainstreet's common shares are listed on the Toronto Stock Exchange under
the symbol MEQ. There are currently 9,238,333 common shares outstanding.
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, 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.
Additional information is available at:
www.mainst.biz
www.sedar.com
