Mainstreet Equity Corp. · TSX:MEQ
Mainstreet Equity — Investor Presentation (September 2009)
45 slides from Mainstreet Equity's investor presentation, September 2009
Slide 1: Mainstreet Equity Corp.
MAINSTREET EQUITY CORP. A Canadian Real Estate Company focused on quality and value enhancement MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement EQUITY CORP.
Slide 2: Cautionary Statement
Cautionary Statement Forward-Looking Information Certain statements contained in this presentation with respect to Mainstreet Equity Corp (the "Corporation") constitute “forward-looking statements” as such term is used in applicable Canadian securities laws. These statements relate to analysis and o
Slide 3: Introduction to Mainstreet Equity Corp.
Introduction to Mainstreet Equity Corp. Investor Presentation September 2009 MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 2 EQUITY CORP.
Slide 4: Mainstreet Equity Corp.
Mainstreet Equity Corp. Mainstreet Growth MEQ 1998 2009 Common Shares Outstanding at 10,355,827 August 31, 2009 $83.4 Stock Growth to August 31, Market Capitalization at August, 2009 $0.20 $8.05 million 2009 Ownership: Management & Directors 39% Public Float 61% Revenue Growth from fiscal $1.78 Mill
Slide 5: Mainstreet Equity Corp.
Mainstreet Equity Corp. ● Mainstreet is a Calgary based multi-family real estate corporation focused on these objectives: Prudently grow the portfolio; Diversify the portfolio in select Canadian markets; Asset and property management of “mid-market” multi-family apartment buildings; and Util
Slide 6: The Mainstreet “Value Chain”
The Mainstreet “Value Chain” The Value Creation Process ● Mainstreet has a lean, but experienced management team which has created what it believes to be a strong operating model: Identify and acquire Upgrade under-performing properties buildings with at below replacement costs. energy-efficient fix
Slide 7: Mainstreet’s Success Drivers
Mainstreet’s Success Drivers 5 Key Value Drivers 1. Buying at the right price 2. Limited to no competition from REIT’s and Pension Funds in the mid-market sector 3. Construction capabilities and knowledge 4. Operations platform and systems that can be scaled. 5. Effective marketing campaigns and bra
Slide 8: The Number One Driver In the Apartment Business
The Number One Driver In the Apartment Business • Existing rental apartments are trading significantly below replacement cost 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 •
Slide 9: Why Mid Market?
Mainstreet Equity Corp. Why Mid Market? MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 8 EQUITY CORP.
Slide 10: Asset Characteristics
Asset Characteristics Why Mid Market? Limited competition from REIT’s and Pension Funds Reasons being: ● They focus on bigger complexes with limited deferred maintenance ● They do not offer value creation opportunities Mid-Market Multi-Family Real Estate ● Safe and stable asset class ● Higher operat
Slide 11: Growth Potential in Mainstreet’s Current Markets
Growth Potential in Mainstreet’s Current Markets Canadian Rental Apartment Universe <100 Units 100+ Units Vancouver CMA 86,978 17,434 Abbotsford 3,599 114 Calgary CMA 26,387 10,365 Edmonton CMA 48,923 11,087 Saskatoon 11,998 1,100 Toronto CMA 121,030 187,360 Mississauga 8,681 18,512 Edmonton Mainstr
Slide 12: Growth Potential in Mainstreet’s Markets
Growth Potential in Mainstreet’s Markets Mainstreet’s Potential Portfolio Growth in its Target Markets * Numbers obtained from CMHC MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 11 EQUITY CORP.
Slide 13: Why “Mid-Market” Multi-family Residential
Why “Mid-Market” Multi-family Residential Higher Operating Margins vs 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 v
Slide 14: A Growing Company
A Growing Company MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 13 EQUITY CORP.
Slide 15: Mainstreet: A “Value Creation” Story
Mainstreet: A “Value Creation” Story Significant Growth With Limited Equity Dilution Established in 1998, Mainstreet has grown its portfolio from 272 units with a market value of approximately $17 million to 5,939 units currently with a market value of more than $650 million with limited equity dilu
Slide 16: Growing the Portfolio
Growing the Portfolio Asset Growth ($MM) 42% 43% Gross Book Value Appraised Value CAGR CAGR 1998 to 2008 1998 to 2008 *Appraisals were done in September 2008. MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 15 EQUITY CORP.
Slide 17: Growing the Business
Growing the Business Portfolio Geographic Composition By Rental Units, By Net Operating Income, 3 months ended June, 2009 3 months ended June, 2009 Saskatoon Saskatoon 8% 10% Toronto Toronto 11% Edmonton 10% 29% Edmonto n 32% Surry / Abbotsford 25% Surry / Calgary Calgary Abbotsford 22% 30% 24% MAIN
Slide 18: Recent Acquisitions & Dispositions
Recent Acquisitions & Dispositions October 1, 2006 to August 31, 2009 City Acquisition Date Purchase Price ($000's) Units Per Unit Abbotsford, BC & Saskatoon, SK, Brooks, AB Q4 2007 $12,300 292 $42,300 Saskatoon, SK Q1 2008 $241 11 $22,000 Abbotsford, BC & Saskatoon, SK Q2 2008 $9,929 106 $94,000 Co
Slide 19: Financial Performance
Financial Performance MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 18 EQUITY CORP.
Slide 20: Operating Results – Most Recent Financial Quarter End
Operating Results – Most Recent Financial Quarter End Overall (5,816 units) Same Assets Properties (5,250 units) 3 months ended June 2009 / 2008 3 months ended June 2009 / 2008 In $000’s In $000’s External Growth in Q3 2009 Organic Growth ● Completed $11.9 million of property acquisitions in Q3 2009
Slide 21: Direct Correlation with NOI and Capital Expenditures
Direct Correlation with NOI and Capital Expenditures Net Operating Income ($MM) Capital Improvement Expenditure ($MM) 33% $46.3M spent on the portfolio(1) CAGR 1999 – 2008 ● There has been a direct correlation between capital expenditures and increased revenues. (1) Including capital expenditure spe
Slide 22: Continuing Strong Performance
Continuing Strong Performance Stabilized Properties *Due to changes in new accounting policies ,starting from 2007, the Corporation has elected to account for all transaction costs of refinance in net income. For comparison purpose, financing costs per share are adjusted from the Funds From Operatio
Slide 23: Mainstreet Equity Corp. A “Value Creation” Story
Mainstreet Equity Corp. A “Value Creation” Story MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 22 EQUITY CORP.
Slide 24: The Value Chain At Work - Branding
The Value Chain At Work - Branding Before After 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; Achieving high
Slide 25: The Value Chain At Work - Branding
The Value Chain At Work - Branding Before After Internal Growth: Adding Value To The Portfolio ● Reducing costs through efficiencies and economies of scale. ● On-going property investments: Branding of properties, Install new security systems, Replace/update appliances, Hydro – energy effici
Slide 26: Maximizing Efficiencies Through Clustering
Maximizing Efficiencies Through Clustering ● Mainstreet believes it has been able to maximize efficiencies and achieve economies of scale through the clustering of assets. ● Transforms properties from 40+ unit single assets into a larger, more efficient apartment complex. Cluster assets within a 5
Slide 27: Operating Efficiencies
Operating Efficiencies Expense Reduction ● Mainstreet’s aggressive renovation program has resulted in significant expense reductions in key areas such as: Electrical Water Windows / Exterior ● Over 90% of the existing units have been upgraded with energy efficient devices. ● Ability to achieve
Slide 28: Market Overview
Market Overview MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 27 EQUITY CORP.
Slide 29: Canada versus U.S. Multi-Family Market
Canada versus U.S. Multi-Family Market ● Canada’s multi-family sector exhibits strong fundamentals. ● Home-ownership rates are similar in both countries. ● Rental apartment construction is much lower per capita in Canada - nearly 10 times higher on a per capita basis in the U.S. ● Canadian market be
Slide 30: Summary
Summary MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 29 EQUITY CORP.
Slide 31: CMHC Insured Mortgages 2009
CMHC Insured Mortgages 2009 As of June 30th, 2009, Mainstreet has $368 million of mortgages, of which $296 million are CMHC insured at an average interest rate of 4.81% and the balance of $72 million are fixed and floating with an average interest rate of 4.75%. It is expected that the $32 million
Slide 32: Drivers of 2009
Drivers of 2009 ● Stabilization of existing non-stabilized portfolio which equates to 27% of the total Portfolio. ● To achieve Optimum Potential Net Operating Income (thousands of dollars) Annualized NOI Annualized Additional NOI at based on Q3 full market rent and 95% Annualized Optimum 2009 result
Slide 33: Additional Incremental Value
Additional Incremental Value Residual Land ● 1175 Dundas - Mississauga, Ontario Commercial Land ● Trevella Park - Calgary, Alberta Approximately 14 acres of High Density Residential Land ● Imperial Court - Surrey, BC High Density Residential Land ● Avenue Towers – Calgary, Alberta Mid-High D
Slide 34: A Growing Company
A Growing Company… Sept 1998 Sept 2008 Current Portfolio Size 272 units 5,562 units 5,939units Portfolio Gross Book Value $11.0 $354 $368 Portfolio Appraised Value $17.3 $625 $650 (In Millions, Except Units) MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 33 EQUITY
Slide 35: Investment Rationale Summary
Investment Rationale Summary Safe and Stable Asset Class Unique Value Creation Strategy Strong Performance Track Record Focused Growth Strategy Entrepreneurial Senior Management Stewarded by Strong Corporate Governance MAINSTREET A Canadian Real Estate Company focused on quality and value enhancemen
Slide 36: Creating Value
Value-Add Strategy to a Stable Business 4 Creating Value Through Refinancing or Sale 3 Creating Value 2 Actively managed portfolio 1 Focused Growth Strategy MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 35 EQUITY CORP.
Slide 37: Appendix A: Management and Governance
Appendix A Entrepreneurial Senior Management Strong Corporate Governance MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 36 EQUITY CORP.
Slide 38: 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 39: Entrepreneurial Senior Management
Entrepreneurial Senior Management Mr. Don Murray – Vice President, Operations ● Mr. Don Murray is the Operations Manager for Mainstreet Equity Corp. and is responsible for overseeing the day to day operational issues for the company. ● Mr. Murray has over 10 years of experience in the multi-family r
Slide 40: Strong Corporate Governance
Strong Corporate Governance Lawrence Tapp – Chairman ● In 1985, Mr. Tapp initiated one of the largest leveraged buy-out outside of the US in a $552 million transaction that created Lawson Mardon Group Ltd. ● As CEO, he took Lawson Mardon public in one of the largest internationally listed share offe
Slide 41: Strong Corporate Governance
Strong Corporate Governance Rich Grimaldi – Director ● Seasoned real estate executive with over 25 years of experience in the real estate finance and investment industry. ● Held various senior positions in the Commercial Real Estate Division at GE Capital including: Managing Director of Institutiona
Slide 42: Appendix B: Mainstreet Rental Markets
Appendix B Mainstreet Rental Markets MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 41 EQUITY CORP.
Slide 43: Comparables
Comparables Comparable Equity Valuation Metrics REIT DATA Northern Boardwalk CAP Lanesborough Properties InterRent Overall Total / Average REIT REIT REIT REIT REIT REIT Unit Price (1) 37.00 13.48 0.40 20.01 1.75 Market Cap 1,956 922 7 501 32 Current Yield 4.9% 8.0% 0.0% 7.4% 6.9% Pice/2008E AFFO (2)
Slide 44: Overview of Mainstreet’s Markets
Overview of Mainstreet’s Markets Surrey Abbotsford Edmonton Calgary Saskatoon Toronto Population 462,516 164,500 1,124,200 1,251,600 241,400 5,509,900 Population > 65 50,726 99,150 85,790 22,535 528,695 21,045 Average Age 37.8 36.8 36.4 35.7 34.4 37.5 Unemployment 6.6% 7.0% 6.9% 4.7% 9.6% Rate 7.5%
Slide 45: Rental Universe Per Capita
Rental Universe Per Capita ● Among CMAs, Abbotsford and Calgary have the smallest universe per capita. Source: CMHC, Statistics Canada MAINSTREET A Canadian Real Estate Company focused on quality and value enhancement 44 EQUITY CORP.
Mainstreet Equity — Investor Presentation (September 2009) on 6ix