Mainstreet Equity Corp. · TSX:MEQ

Mainstreet Equity — Investor Presentation (December 2015)

35 slides from Mainstreet Equity's investor presentation, December 2015

  1. Slide 1: Consecutive Years of Double-Digit Growth in FFO & NOI

    5 Consecutive Years of Double-Digit Growth in FFO & NOI YE 2015 Published: December 2015

  2. Slide 2: Forward-Looking Information

    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 amounts not yet determinab

  3. Slide 3: We are a Corporation not a REIT

     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 deferred maintenance • Owners have limited acc

  4. Slide 4: Existing rental apartments trading below replacement cost

    Existing rental apartments are 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 continue to create favourable rental market conditions Mainstreet’s Market Replacement

  5. Slide 5: Rental market data by city

    EDMONTON Net Migration: 16,000 (2016f) [26% of total rental universe] Rental Universe: 62,356 (2015) Calculation of ownership Premium = Principal & Interest for Avg. [Mid-market: 50,186 (80%)] (2015) Resale Home minus Avg. 2-bedroom Apt. Rent: $723 (YTD/Nov ‘15) Vacancy Rate: 4.2% (@ Oct. 2015) CALG

  6. Slide 6: The Mainstreet 'Value Chain'

    The Mainstreet ACQUISITIONS Identify and buy under-performing rental units at ‘VALUE CHAIN’ 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 profes

  7. Slide 7: 5 Pillars of MEQ

    5 PILLARS OF MEQ 1. Acquire underperforming assets at attractive prices 2. Limited to no competition from REITs and Pension Funds in the mid-market sector 3. Internalized construction capabilities 4. Internalized operations platform / systems are scalable 5. Internalized marketing / effective brandi

  8. Slide 8: China, India and international sourcing

    High quality renovation materials sourced and shipped direct from manufacturers in China at significant discounts compared to locally supplied materials • kitchen appliances, cabinets & granite counter tops; wood laminate & tile flooring; windows; bathroom fixtures; more… • 80% savings realized on r

  9. Slide 9: Direct from China manufacturers

    * Direct from China manufacturers MICRO FUNDAMENTAL © 2015 Mainstreet Equity Corp. All rights reserved. MAINSTREET EQUITY CORP. | TSX: MEQ 9

  10. Slide 10: Before and After renovation

    Before After MICRO FUNDAMENTAL © 2015 Mainstreet Equity Corp. All rights reserved. MAINSTREET EQUITY CORP. | TSX: MEQ 10

  11. Slide 11: Expense Reduction

    EXPENSE REDUCTION  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 installed on showers an

  12. Slide 12: Higher margins of low-rise properties

     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 structures  Lowe

  13. Slide 13: Maximizing efficiencies through clustering of assets

    Mainstreet believes it has been able to maximize efficiencies and achieve economies of scale through the clustering of assets.  Transforms properties from single assets into a larger, more efficient apartment complex. – Cluster assets within a 5 block radius. – Reduce HR costs by requiring fewer su

  14. Slide 14: Edmonton: Central + NAIT Properties

    Edmonton: Central + NAIT 89 Properties [2,424 units] Completion YE 2015 New Projects Announced Q1 Cineplex Premium Casino dev. Q2 Casino ‘Edmonton Arena District’ renamed to ‘Ice District’ (Q3) Ice District investment: $6.5 B Cineplex Premium Theatre development announced, even after the fall in oil

  15. Slide 15: Large target market with less competition

    Mainstreet's strategy benefits from a large target market with less competition. Target Markets Rental Apartment Universe 79% of the rental <100 Units/ Total Rental universe in building Universe % Mid-Market MEQ’s platforms Abbotsford 3,400 3,612 94% is Mid-Market Surrey 4,905 5,584 88% Calgary CMA

  16. Slide 16: Potential rental apartment market share

    Doubling its property portfolio would give Mainstreet 20% share of the mid-market universe in its platforms, leaving significant opportunity for continued growth. (YE 2015 units: 9,319) 20,000 18,366 18,000 17,448 16,530 16,000 15,611 14,693 13,775 14,000 12,856 11,938 12,000 9,319 Units 10,000 8,00

  17. Slide 17: Significant growth with limited equity dilution

    SIGNIFICANT GROWTH WITH LIMITED EQUITY DILUTION Established in 1998 (TSX listed in 2000), Mainstreet has grown its portfolio from 272 units with a market value of $17 million to 9,319 units (YTD) with a market value of $1.4 billion with limited equity dilution. (Number of common shares have increase

  18. Slide 18: Property examples by region

    BC SASK  Mainstreet Estates, Surrey, BC  Saskatoon portfolio  Cameron, New Westminster , BC  Cedartree Village, Surrey, BC Edmonton Calgary  Mateo, Edmonton, AB  Vintage, Calgary, AB  Mainstreet Tower, Edmonton, AB  Huntsville, Calgary, AB  Haddon, Calgary, AB © 2015 Mainstreet Equity Corp.

  19. Slide 19: Surrey 331-unit repositioning case study

    Mainstreet purchased the above property (331 units with 5 buildings) in January 2015. It took approximately 6 months to reposition the building. As of FY2015, the improvement in revenue and NOI for the property before and after repositioning are summarized as follows: ($000s) Purchase price 33,650 C

  20. Slide 20: 84-unit stabilization case study

    Mainstreet purchased the above property (84 units) in July 2012. It took approximately 36 months to complete the stabilization process and refinance the property in September 2015. Financial results for the property before and after stabilization and refinancing are summarized as follows: ($000s) Pu

  21. Slide 21: 228-unit stabilization case study

    Mainstreet purchased the above property (228 units) in November 2010. It took approximately 16 months to complete the stabilization process and refinance the property in March of 2012. Value creation was achieved even during recessionary times and in a region where the Tenancy Landlord Act favours t

  22. Slide 22: 32-unit stabilization case study

    Mainstreet purchased the above property (32 units) in July 2011. It took approximately 12 months to complete the stabilization process and refinance the property in July 2014. Financial results for the property before and after stabilization and refinancing are summarized as follows: ($000s) Purchas

  23. Slide 23: 52-unit stabilization case study

    Mainstreet purchased the above property (52 units) in April 2012. It took approximately 29 months to complete the stabilization process and refinance the property in September 2014. Financial results for the property before and after stabilization and refinancing are summarized as follows: ($000s) P

  24. Slide 24: 69-unit stabilization case study

    Mainstreet purchased the above property (69 units) in December 2011. It took approximately 26 months to complete the stabilization process and refinance the property in February 2014. Financial results for the property before and after stabilization and refinancing are summarized as follows: ($000s)

  25. Slide 25: Saskatoon portfolio case study

    Mainstreet acquired its first property in the city of Saskatoon (165 units) in Nov. 2006. As of March. 31, 2014, Mainstreet owns 34 properties (917 units) for a total consideration of $43.3 million. 32 properties (867 units) have been stabilized and refinanced up to Dec. 31, 2013. Financial results

  26. Slide 26: 24-unit stabilization case study

    Mainstreet purchased the above property (24 units) in September 2013. It took approximately 12 months to complete the stabilization process and refinance the property in January 2015. Financial results for the property before and after stabilization and refinancing are summarized as follows: ($000s)

  27. Slide 27: 359-unit stabilization case study

    Mainstreet purchased the above property (359 units) on May 31, 2013. It took approximately 12 months to complete the stabilization process and refinance the property in June 2014. Financial results for the property before and after stabilization and refinancing are summarized as follows: ($000s) Pur

  28. Slide 28: Asset Growth ($MM)

    ASSET GROWTH ($MM) Gross Book Value $1,386 Gross Book Value Appraised Value Appraised Value $1,259 $1,150 $1,051 $908 $809 $752 $731 $710 $679 $684 $625 $633 $543 $520 $451 $354 $395 $316 $309 $250 $189 $170 $178 $145 $136 $142 $90 $105 $111 $66 $78 $50 $11 $17 $37 1998 1999 2000 2001 2002 2003 2004

  29. Slide 29: Mortgage Maturity as at Sep. 30, 2015

    CMHC INSURED MORTGAGES 2015  As of Sep. 30, 2015, Mainstreet has $628 million of mortgages, of which $593 million (95%) are CMHC insured at an average interest rate of 3.7% and the balance of $34 million are fixed mortgages with an average interest rate of 4.87%. LONG-TERM FIXED INTEREST MORTGAGES

  30. Slide 30: Every 1% drop in vacancy rate equals $1.1M in NOI

     Stabilization of existing non-stabilized portfolio which equates to 12% of the total portfolio.  Achieve Optimum Potential Net Operating Income  $160M liquidity Annualized Annualized NOI Annualized Additional Additional NOI Annualized Annualized based on 2015 NOI at 95% without Additional NOI at

  31. Slide 31: 2013 Acquisitions

    Q1 2013 Acquisitions City Address # of Units Purchase Price (000s) Appraised Value (000s) Price per door (000s) Edmonton 10619 - 104 Street 12 778 1,000 65 Edmonton 11065 - 149 Street 33 4,027 5,000 122 Edmonton 11118/11124 - 124 St. 20 1,570 2,250 79 Edmonton 10630 - 107 Street 21 2,148 2,490 102 E

  32. Slide 32: 2014 Acquisitions

    Q1 2014 Acquisitions Address # of units Purchase price Appraised value Price per door Calgary 1335/1339 – 10 Ave SE 29 3,000 4,900 103 Edmonton 10626 – 104 Street 16 1,628 1,780 101 Abbotsford 32120 Peardonville Rd 42 4,400 5,450 105 Sub-TOTAL 87 9,028 12,130 104 Q2 2014 Acquisitions Calgary 318 - 1

  33. Slide 33: 2015 Acquisitions

    Q1 Acquisition City Address # of Units Purchase Price (000s) Appraised value (000s) Price per door (000s) Saskatoon 1901 7th Street E 12 1,140 1,750 95 Saskatoon 937 Znorthumberland Avenue 36 3,416 4,525 95 Total 48 4,556 6,275 - Q2 Acquisition City Address # of Units Purchase Price (000s) Appraised

  34. Slide 34: Residual Land and Condominium Conversion

    (Not Reflected in IFRS valuation or on Balance Sheet) 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 - S

  35. Slide 35: FY 1998 vs FY 2015 growth comparison

    MEQ FY 1998 FY 2015 MEQ FY 1998 FY 2015 Share price $0.20 $31.36 Revenue growth from Asset growth 272 units 9,319 units $1.78 M $100.4 M continuing operation Market value growth $17 M $1,386 M (Appraised value) NOI growth $1.1 M $67.3 M Common shares 8,983,333 10,271,251 outstanding FFO growth $0.2

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