Slow times an opportunity for Mainstreet
Economic weakness caused by cratering commodity prices allowed Mainstreet Equity Corp. to save an estimated 10 per cent to 20 per cent on a massive $32-million real estate deal recently in Saskatoon, according to the company’s chief financial officer.
“A lot of people, they’re really scared of investing right now, but Mainstreet sees this as a great opportunity for us to expand our portfolio in Saskatchewan,” said Johnny Lam, who also acts as the Calgary company’s chief operating officer.
Earlier this month, Mainstreet — which specializes in refurbishing “distressed” rental properties — acquired 293 condominium units in the city, part of a larger $46-million transaction involving additional apartments in Abbotsford and Edmonton.
The Saskatoon portion of the real estate deal includes a 35-unit building at 14 Assiniboine Dr., a 192-unit complex at 906 Duchess St., and two Lawson Heights buildings — at 262 and 266 Pinehouse Place — with a combined total of 66 units.
“We believe the current environment of slower GDP growth makes this an ideal time to begin to expand our portfolio on an opportunistic basis,” Mainstreet president and CEO Bob Dhillon said in a statement released with the firm’s third-quarter results.
The publicly traded company paid an average of $109,215 for each of its new units, slightly above the average of $106,000 per unit recorded by Colliers International in 2015 but below the 2014 average of $111,000.
Lam said the purchase is part of the company’s strategy to expand its holdings in Saskatoon to between 1,500 and 1,600 units. Including the 293 new units, Mainstreet owns 1,377 units in the city.
“If more opportunities come up, we will buy them anytime,” Lam said, adding that the company is planning to invest more into renovating and refurbishing its newest acquisitions.
Triple Five Worldwide Organization LLC, which owns the West Edmonton Mall, bought the properties about eight years ago and sold them to Mainstreet because they suited the Calgary company ’s business model, according to its executive vice-president.
“(We) felt the timing was right to move on, as the market has matured and softened in other areas and there’s been a lot of new product put on the market in recent years,” Jeff Sheckter wrote in an email.
“With oil and gas prices in their current decline, potash and uranium at levels that were far below where they were when we bought, I felt the timing was right for an exit, but we’re right next door and keeping a close eye on Saskatoon,” he added.
Major real estate deals are relatively rare in Saskatoon. Mainstreet’s is likely the largest since New Summit Developments paid upwards of $50 million for seven buildings in late 2014, according to Colliers Saskatchewan’s president and managing director, Tom McClocklin.
Saskatoon’s rental market shrank dramatically towards the end of the last decade but has since rebounded to about 16,250 units. Mainstreet’s acquisition will make the company an increasingly important player in the rental business, McClocklin said.
“They wouldn’t be buying here if they didn’t have confidence in our economy,” he added. “It does show their confidence to keep investing in this market, so I think that’s a good sign.”