N@N

Throughout 2009, Mainstreet achieved strong results by meeting the economic recession head-on

^{Published on 2009-12-15 15:12:56 - Market Wire}
 

 Rental Revenue - Up 14% to $50.8 million (vs. $44.5 million in 2008) Rental Revenue - Same Assets - Up 8% to $47.3 million (vs. Properties $43.9 million in 2008) Net Operating Income (NOI) - Up 21% to $30.7 million (vs. $25.3 million in 2008) NOI - Same Assets Properties - Up 12% to $28.6 million (vs. $25.5 million in 2008) FFO from continuing operations - Up 68% to $5.0 million (vs. (excluding sale) $3.0 million in 2008) FFO from operations - Up 153% to $11.4 million (vs. (including sale) $4.5 million in 2008) FFO from stabilized properties - $4.7 million (excluding sale) Operating Margin - 60% (vs. 57% in 2008) Total Acquisition and Capital - $42.7 million (vs. Expenditures $38.3 million in 2008) Stabilized Units - 94 properties (4,199 units) out of 124 properties (5,844 units) Acquisitions - 413 units, representing an increase in portfolio of 6.4% Gain from Sales - $5.9 million ($0.58/share) Refinancing - $98 million refinanced to long-term CMHC-insured mortgages - average interest rate = 4.35% (from 4.85% in 2008) Floating Debt - $29 million (8% of Mainstreet's total mortgage loans) Normal and Substantial Course - 4,132,049 common shares purchased Issuer Bid and cancelled at an average price of $6.35/share - total outstanding shares reduced from 14,487,876 to 10,355,827 Total cash raised through - $65 million refinancing in 2009 Cash on balance sheet at year-end - $25 million ($2.47/share) Debt to Market Value ratio - 56% (Debt-$380 million; appraised value-$679 million) 

 - On December 4, 2009, Mainstreet closed on the purchase of 183 residential apartment units located next to another Mainstreet property in Surrey, BC. The total purchase price of $13.8 million ($75,500 per unit), of which $11.8 million was financed by a combination of first mortgage and vendor take-back mortgages at an average interest rate of 3.3% , the balance of $2 million was cash to close. - Mainstreet obtained an Alberta Treasury Branch line of credit amounting to $22 million. - On September 30, 2009, the Corporation entered into a conditional agreement to sell three properties (95 units) for approximately $13 million, which represents a pre-tax profit of approximately $7 million. 

 - Took maximum advantage of low interest rates to consolidate floating debt into long-term, lower interest, CMHC-insured mortgages 

 - Reduced its cost of debt from 5.17% in 2008 to 4.93% - Mitigated risk by consolidating floating debt into long-term CMHC- insured mortgages at an average interest rate of 4.35%. More than 92% of Mainstreet's total debt now resides in fixed-rate mortgages at an average interest rate of 4.89%. - Generated $65 million in cash. In addition to providing funds for working capital, ongoing property renovations, portfolio expansion and a significant common share buy-back, this helped add stability to Mainstreet's balance sheet, whose funds for growth as of September 30, 2009, totalled $25 million. - Repurchased undervalued shares while the capital markets floundered 

 - Issued and outstanding shares: beginning of year = 14,487,876 - end of year = 10,355,827 - Opportunistically expanded the Mainstreet portfolio of properties 

 - 133 units in Surrey (average price = $82,707) - 60 units in Abbotsford (average price = $90,000) - 207 units in Saskatoon (average price = $61,812) - 13 units in Edmonton (average price = $61,538) 

 - Increased Same Store NOI during recessionary times 

 - Significantly increased FFO during recessionary times 

 - Improved our margins from 57% to 60% by reducing costs 

 - Took advantage of a weakened labour market to rebuild the Mainstreet team 

 - Demonstrated through year-end AACI appraisals that Mainstreet stock is trading at a significant discount to NAV 

 - Stayed focused on the right asset class and the right geographic locations 

 CHALLENGES ---------- 

 - Softening in the rental market: Negative GDP and higher unemployment have precipitated higher vacancy rates, and the present economic recession was no exception. - Lower rent coupled with higher concessions: As a result of softening in the rental market, Mainstreet has been impelled to adjust its rental rents and install rental incentives in some key locations. - A more rapidly revolving door: Recessionary conditions tend to spur a higher 'churn rate' in mid-market apartment rentals; and during the past 12 months, Mainstreet experienced a higher tenant turnover rate than in past years. - More bad debts: With economic turmoil come increased unemployment and wage rollbacks; and with these come an increase in the number of tenants who default on rent payments - a challenge that negatively impacted Mainstreet's rental revenue in 2009. - Idle Cash: As of September 30, 2009, the Corporation had $25 million cash in hand, which incurs interest expensesa but generates no income. Management will endeavour to invest into revenue producing properties that generates operational income and offset expenses. 

 OUTLOOK & STRATEGY ------------------ 

 - Seizing the current market's exceptional opportunities to acquire 'add value' mid-market rental apartment buildings in its existing geographic platforms - Taking advantage of low interest rates and mitigating risk by consolidating the balance of the Corporation's floating debt with long-term, lower interest CMHC-insured mortgages - Continuing to take advantage of recessionary conditions to build a stronger, more effective team - Building reoccurring cash flow by renovating and stabilizing Mainstreet's entire portfolio of properties - Maximizing margins - Continuing a normal course issuer bid as management feels Mainstreet shares are undervalued - Reducing vacancy rates in Mainstreet apartments. (With renovations nearly complete on Mainstreet's existing portfolio, every 1% drop in the overall vacancy rate is expected to add $634,436 annually to the Corporation's NOI).