Mainstreet Equity Corp. Announces FY2022 results

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CALGARY (Alberta), December 13, 2022–(BUSINESS WIRE)–In Q4, Mainstreet achieved our fourth consecutive quarter of double-digit, year-over-year growth across our most important operating metrics, with rental revenues increasing 12%, funds from operations (“FFO”) growing 11% and net operating income (“NOI”) rising 10%.

Bob Dhillon, Founder, President & CEO of Mainstreet, said, “These latest year-end results yet again point to the inherent value of Mainstreet’s core business model, wherein we have continued to generate 23-years of shareholder growth.” He said, “We are deeply committed to our position of a critical supplier for affordable living for Canadians. This is what we deliver through our highly diverse portfolio located in highly strategic areas across British Columbia, Alberta and Saskatchewan.”

We have maintained our solid corporate strategy and Mainstreet has been protected from any external changes to our operating environment. This allows us to continue to generate non-dilutive revenue.

These positive quarterly results were the culmination of a challenging, but still successful year for Mainstreet. The FY 2022 accomplishments are highlighted:

  • Boosted annual rentals revenue (13%), FFO (10%) and NOI (12%)

  • Higher vacancy rates (7.2% for 2022 compared to 8.9% for 2021). Calgary’s vacancy rate is now approximately 2%, Edmonton is less than 5%, and Vancouver/Lower Mainland is approximately 1%. (Overall, YTD vacancy is 4.7%

  • Our portfolio was expanded (acquired 815 apartment units for $91million, and an additional 548 units were acquired after year-end for $57.6million, for a total of $148 million or 1,363 unit).

  • Refinanced debt (secured $161 Million in long-term mortgages, raising $1004 million in low cost capital for future growth).

  • Acquired a condo project in disrepair for resale, resulting in a $4.2 million gain.

We believe these positive results once again prove the viability of Mainstreet’s value-add business model, which has allowed our management team to deliver real growth to shareholders no matter where in the economic cycle we happen to be operating. In the last seven years of severe volatility—including the 2015 commodity market crash and the COVID-19 pandemic—Mainstreet has continued to generate positive returns without exception.

Mainstreet’s Q4 and FY2022 results also underscore the resilience of the mid-market rental space in Western Canada. Despite major disruptions to many industries in recent years the rental market has been a vital asset for working-class Canadians. This is especially true as inflationary pressures have increased the cost of owning homes. There has been an inequal market for many years because of the lack of supply. The demand for renters is on the rise: Canadian renters have increased at three times the rate of homeowners during the past decade, according Royal Bank of Canada’s recent research. (Proof point: Is Canada becoming an island of renters?)According to this, Canada is now “a nation of renters”.

Mainstreet’s real estate position makes us well-positioned in this supply-demand gap. Mainstreet is proud of its unique portfolio which contains more than 16500 affordable rental units, all strategically located around urban centers. This makes Mainstreet a key provider of affordable housing and millennial living in Western Canada.

Management expects that there will be more market and economic turmoil as we move into fiscal 2023 (see the Challenges section). Mainstreet’s 23-year history of creating non-dilutive economic growth will be continued, however, Mainstreet is confident that it will be supported by solid market fundamentals as well as sound management.

The MEQ Intangible

These efforts are supported by our intangible assets that demonstrate Mainstreet’s inherent value. These include:

  • Residual lands and low density on existing apartment portfolio: Many of Mainstreet’s assets are ripe for further development and expansion, allowing new capacity to be added to our existing portfolio at low cost

  • Unstabilized units: 14% of Mainstreet’s portfolio is currently unstabilized, offering substantial room for same store NOI growth

  • Mark-to-market rent catch up: Rental rates in some Mainstreet buildings remain below market value—particularly in Vancouver/Lower Mainland and increasingly in Calgary— but will increase once current leases expire

  • Strong management: Mainstreet’s highly experienced team has operated through countless cycles in the market, giving them the ability to adapt as operating environments change

  • Mainstreet’s efficient operations have been enhanced over the past decade through technology adoption and building an operating platform that streamlines operational oversight

  • A pool of liquidity worth $360 million to support non-dilutive organic growing1 currently sits at Mainstreet’s disposal, allowing for future growth during counter-cyclical periods


Despite the potential for growth, inflation and rising prices continue to be a problem. Inflationary pressures cause an increase in the costs of all things, from labour to materials. This raises our operating expenses. Renovation and maintenance costs have increased as a result of persistent shortages in materials. We have managed to reduce the impact of these constraints by finding reliable suppliers in Asia. However, it is impossible to avoid higher costs associated with global bottlenecks.

According to Statistics Canada, labour markets are still tight. Q2 2022 saw 1.03 million job vacancies, which is the highest level in many quarters. This has raised Mainstreet’s labour costs and made hiring more challenging. Mainstreet has a strong hiring record, particularly through foreign worker programs. We will continue to use these programs to meet worker shortages as long as they are available.

Major fixed costs like property taxes and insurance have increased. Property owners are expected to pay more in carbon taxes each year. Mainstreet pays significantly less than current spot prices because we have taken steps to reduce rising energy costs. Our insurance costs have been reduced by over 13% by improving rates and coverage.

Mainstreet debt will be our biggest expense, along with acquisitions, if interest rates rise sharply. Years ago, Mainstreet’s management team began taking steps to establish a long-term debt position as a way to minimize our exposure to increasing interest rates. We extended our debt obligations for longer periods of time (10 years) by agreeing to higher upfront borrowing costs and securing pre-matured finance. Mainstreet was able to lock down 99% of its debt with fixed-term mortgages that have an average maturity time of 6.2 years and an interest rate of 2.57% as at September 30, 2022.

We do everything we can to combat inflation and rising interest rates but higher costs will erode our operating margins, which will negatively impact our bottom line. Tenants will bear some of the financial burden through soft rent increases. We are confident that Mainstreet will continue to be the premier provider of affordable, quality housing in Western Canada because of our track record of operational efficiency, value creation, and sound management.


Our management team sees many positive trends that will support future growth as we look forward. High commodity prices and a sustained post-pandemic recovery will drive an economic rebound in Alberta, Saskatchewan, and British Columbia amid the shortages of oil, natural gases, and other essential products. Although oil prices are down from summer highs, the benchmark West Texas Intermediate crude oil price has remained above current averages at US$80 per barrel as early December.

Alberta is calling

We expect this trend to continue in 2023, as Alberta’s economy has improved. According to data from the Government of Alberta, there was a total of 34.883 people who came to Alberta in Q2 2022. This is the largest inflow to Alberta for more than ten years.

Combined with net international migration, Alberta’s overall population in Q2 2022 grew at the fastest rate since before 2015, according to Government of Alberta data, bringing the province’s total population to 4.54 million. Earlier this year, the provincial government launched an ‘Alberta is Calling’ campaign to attract more skilled workers from major Canadian urban centres like Vancouver and Toronto, underscoring what we view as a broader trend of continued migration into the prairies.

Vancouver/Lower Mainland remains robust

We expect similar positive macro trends to continue to support Mainstreet across the portfolio. Vancouver/Lower Mainland will continue its growth and performance. Vacancies are among the lowest in the nation and rental rates some of the highest. Vancouver/Lower Mainland has become central to Mainstreet’s portfolio, accounting for 43% of our net asset value (“NAV”) based on IFRS appraised fair market value. 98% of our customers are below the market rent, with an average mark-to-market gap between $513 per unit per month. Our internal estimates show that this equates to $19 million of NOI growth potential, after closing the $513 mark-to-market difference per unit per month.

How to get into Winnipeg

Given the abundance of opportunity we’ve seen across Western Canada, Mainstreet has continued to diversify our asset base. In Winnipeg, we were the first to enter the market in 2021 and currently own three properties there. Our management team is currently purchasing 287 more Winnipeg units (expectedly to close following FY2022), which brings the total number of units to 401, or 2.4%.

Canada opens its immigration taps again

We anticipate rising immigration levels to supplement inter-provincial migration and reverse the slowdown in cross-border migration that occurred during the pandemic. The federal government plans to admit around 500,000 people per year, which is more than the previous annual averages. Between 2016 and 2021, Canada saw an estimated 1.8 million immigrants. This is the highest rate of growth among the G7 countries (Statistics Canada). As more students return to classrooms, we expect that there will be more foreign students entering the country to complete their studies.

Buy low in counter-cyclical times

Mainstreet believes that macroeconomic volatility will keep inflation high in 2023. Statistics Canada reported that although the Consumer Price Index fell from its June peak, inflation was still at 6.9% in November. However, the core economic theory says that prices cannot continue to rise forever, so inflationary periods will be temporary.

The current period of monetary tightening has led to us believing that the acquisition market is now in a transition phase. Higher interest rates in the short term could lead to more distressed sellers being forced onto the market. This would increase opportunities for acquisitions as well as risk-adjusted economic growth. As always, we will continue our counter-cyclical strategy, which focuses on true value creation and only acquire assets when it is. Mainstreet will abandon its temporary interim financing arrangement and return to our longer-term debt strategy. Mainstreet will benefit from lower acquisition costs in the short term and possibly lower interest expenses (which could result in higher FFO when refinancing after stabilization).

There are also opportunities to get more value from existing assets due to current market conditions. While Mainstreet vacancy rates fell in Q4 20,22, we see plenty of opportunity to continue repositioning unit in the coming quarters to further reduce vacancies and boost operating revenue. Due to the high rate of countercyclical acquisitions in the last two years, Q4 2022 saw 2,277 units (4%) remain un-stabilized.


  1. Our 100% organic, non-dilutive, growth model: We use our strong potential liquidity position of $360 million to pursue our goal.2We believe there is significant potential to continue acquiring underperforming assets for attractive valuations.

  2. Boosting NOI: As at Q4 2022, 14% of Mainstreet’s portfolio was going through the stabilization process. Once the portfolio is stabilized, we are confident that same-asset revenues, vacancy rates, NOI, and FFO will all be significantly increased. We remain cautiously optimistic about our ability to increase cash flow in the coming quarters. We estimate that there is $19 million of upside in the BC market for NOI growth. This mainly reflects leveraging our mark to-market gaps. After stabilizing its overall unemployment rate at approximately 2% for several quarters, Calgary has significant rent-to-market room.

  3. Buyback of shares at a discount: MEQ shares trade below their true NAV. We think that the ongoing macroeconomic volatility could increase that trend.

Forward-Looking information

Certain statements in this document are “forward-looking statements”, as defined by Canadian securities laws. These statements include analysis and other information, which are based on estimates of future results and assumptions made by management. In particular, statements concerning estimates related to the effect of rising interest rates on the Corporation, the effect that inflation will have on the Corporation’s tenants and the effect on credit risk, as well as in respect of the cost of renovations and other expenses, disruptions effecting the global supply chain and energy and agricultural markets, including as a result of geopolitical turmoil including Russia’s invasion of Ukraine, future acquisitions, dispositions and capital expenditures, future vacancy rates, increase of rental rates and rental revenue, future income and profitability, timing of refinancing of debt, access to low-cost long-term Canada Mortgage and Housing Corporation (“CMHC”) insured mortgage loans, the potential changes in interest and mortgage rates, the potential changes in inflation rates, the effect of the novel strain coronavirus (“COVID-19”) pandemic and other possible future pandemics and governmental responses thereto on the Corporation and the economy, the effect of actual or potential travel restrictions and post-secondary restrictions on the Corporation’s operations and financial performance, the effect that COVID-19 has had and may have on valuations of the Corporation’s properties, completion timing and costs of renovations, benefits of renovations, funds to be expended on renovations in fiscal year 2023 and the sources thereof, increased funds from operations and cash flow, minimization of operating costs, the Corporation’s liquidity and financial capacity, improved rental conditions, potential increases in rental revenue if optimal operations achieved, the period of time required to stabilize a property, future climate change impact, the Corporation’s strategy and goals and the steps it will take to achieve them, the Corporation’s anticipated funding sources to meet various operating and capital obligations, key accounting estimates and assumptions used by the Corporation, the attraction and hiring of additional personnel, the effect of changes in legislation on the rental market, expected cyclical changes in cash flow, net operating income and operating margins, the effect of environmental regulations on financial results, the handling of any future conflicts of interests of directors or officers and other factors and events described in this document should be viewed as forward-looking statements to the extent that they involve estimates thereof. Statements that include discussions about future events and performance, including statements about expectations, beliefs, projections, objectives or assumptions (often using words and phrases like “expects”,” “doesn’t expect”, “is expected”, “anticipates” or “doesn’t anticipate”, plans, estimates, or “intends” as well as statements about the Corporation’s strategy and goals as well as key accounting estimations and assumptions, the Corporation’s anticipated funding sources to meet various operating income, cyclical changes in cash flow, cyclical changes in net operating income and operating margins, cyclical changes in cash flows, net of financial results, cyclical variations in cash flow, cyclical changes in earnings, net, operating profit, cyclical fluctuations in, cyclical effects on financial results, cyclical changes in cyclical affecting cyclical cyclical cyclical cyclical as, cyclical changes, if they are not predicting that could be made by environmental regulations that could be made.

Such forward-looking statements are not guarantees of future events or performance and by their nature involve known and unknown risks, uncertainties and other factors, including those risks described in the Corporation’s AIF, dated December 8, 2022 under the heading “Risk Factors”, that may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks and other factors include, among others, , the effect of inflation on consumers and tenants, the effect of rising mortgage and interest rates on the Corporation, including its financing costs, the duration and severity of future waves of the pandemic or future pandemics, public health measures, disruptions in global supply chains, labour shortages, the length and severity of the conflict in Ukraine and the occurrence of additional global turmoil and its effects on global markets and supply chains, costs and timing of the development or renovation of existing properties, availability of capital to fund stabilization programs, other issues associated with the real estate industry including availability of labour and costs of renovations, supply chain issues, fluctuations in vacancy rates, general economic conditions, competition for tenants, unoccupied units during renovations, rent control, fluctuations in utility and energy costs, carbon tax increases, environmental and other liabilities, effects of climate change, credit risks of tenants, fluctuations in interest and mortgage rates, availability of capital, changes in legislation and regulatory regime applicable to the corporation, loss of key personnel, a failure to realise the benefit of acquisitions and/or renovations, the effects of severe weather events on the Corporation’s properties, cyber-attacks, climate change, uninsured losses, fluctuations in the capital markets and the trading price of the Common Shares, conflicts of interest of the Corporation’s directors and officers, and other such business risks as discussed herein. This is not an exhaustive list of the factors that may affect Mainstreet’s forward-looking statements. Other uncertainties and risks that are not yet known by the Corporation may also cause actual results to differ materially to those stated in its forward looking statements.

Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking statements include, among others, the impact of economic conditions in Canada and globally including as a result of inflation, interest rate increases, pandemics, supply shortages and geopolitical turmoil, including the Russian invasion of Ukraine, the Corporation’s future growth potential, prospects and opportunities, the rental environment compared to several years ago, relatively stable interest and mortgage costs, access to capital markets to fund (at acceptable costs), the future growth program to enable the Corporation to refinance debts as they mature, changes in tax laws, mortgage rules and other temporary legislative changes in respect of pandemics or otherwise, and the availability of purchase opportunities for growth in Canada.

Although the forward-looking information contained in this MD&A is based upon what management believes are reasonable assumptions, there can be no assurance actual results will be consistent with these forward-looking statements and no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur at all, or if any of them do so, what benefits that Mainstreet will derive from them. Forward-looking statements should not be relied upon. Certain statements included in this MD&A may be considered “financial outlook” for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this MD&A.

Forward-looking statements are based on management’s beliefs, estimates and opinions on the date the statements are made, and the Corporation undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions should change except as required by applicable securities laws.

Management monitors all factors that could lead to actual actions, events, or results that differ materially from the statements made in forward-looking statement and will update these forward-looking remarks as appropriate in its quarterly and annual financial reports.

This MD&A includes forward-looking information about prospective results of operations, financial position or cash flows, based on assumptions about future economic conditions and courses of action and that is not presented in the format of a historical balance sheet, income statement or cash flow statement (“Financial Outlook”). Actual results may vary from the Financial Outlook summarized in this MD&A. The Financial Outlook has been approved by the Corporation’s management as of December 8, 2022. The Financial Outlook has been included in this MD&A to provide readers with disclosure regarding the Corporation’s reasonable expectations as to the anticipated results of its proposed business activities for the periods indicated. The Financial Outlook may not suit other purposes.

1In addition to $45 million cash on hand, $185 million is expected funds to come from re-financing clear titled assets and financing them after stabilization.

2 In addition to $45 million cash on hand, $185 million is expected to be raised through refinancing and financing clear titled assets following stabilization.

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For more information:
Bob Dhillon, Founder, President & CEO
D: +1 (403) 215-6063
Executive Assistant: +1 403 215 6070
100, 305 10 Avenue SE, Calgary, AB T2G 0W2 Canada TSX: MEQ

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