Chris Blumas Mainstreet Equity Corp MEQ-T PAST TOP PICK Jun 19, 2025

Absolutely loves. Checks all the boxes on business economics, balance sheet, management team, and growth. The only miss is the rich valuation at 20x FFO. First-class compounder. Wait for a pullback to ~18-18.5x FFO.

In a sweet spot right now. Rents are going up quite a bit (12% YOY), as there's no rent control in many western Canadian provinces, yet vacancies are down substantially. Stellar results last quarter. Sold off with rest of REITs, yet it's not a REIT. 

Typically trades at a premium to NAV, but today it's at a discount. Extremely well run, haven't raised a dollar of equity in 20 years. Compounded annually at 18% for 20 years. Yield is 1%.

(Analysts’ price target is $226.00)

Future looks good. Never raises equity. Over half of the portfolio is in Alberta, with another big chunk in BC. Undervalued. Alberta is seeing record migration from elsewhere in Canada. Discount to NAV, likes the sector.

Revenue was $67.6M slightly better than estimates.  Rental revenue rose 16%. Cash flow per share rose 19% to $2.47, and ahead of estimates of $2.39. Net operating income rose 11%. We would consider it a solid quarter. Commentary was good, with the company talking about 'major opportunities' in the coming year. The dividend was raised last month. We would be comfortable at $200. 
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Top of his list of regrets, perhaps the best-performing real estate stock in NA over the past 5 years. Incredible returns to shareholders and growth. Likes the business and management, though would favour a deeper management bench. Moral supporter of the company, but not an owner (kept thinking he'd get it cheaper, but never did).

Excellent company that is founder led (lots of skin in the game). Expecting shortage of affordable housing to be very good for business. Ability o acquire new properties, and fix them up is very good. Rising population without rent control is good for profit margins. Zero equity raises since original IPO is incredible track record. 

Great little company. In certain markets, huge market share. Its markets are non-regulated, so it's easier to capture upside than in rent-controlled markets. Model is buy-fix-rent-repeat. Alberta is more affordable with higher population growth than national average.

Likes it here. Stock's gone quiet in terms of price, but operationally the company is doing extremely well. Last couple of quarters have been excellent. Founder-CEO still owns half the company, and he loves that structure. Strong growth in rents, very low vacancies. Now at a discount to NAV of ~$253. Sleep at night, steady eddy.

Key is that it retains most of cashflows to buy more buildings, rather then pay out in dividends the way most REITs do. Instituted a very small dividend only to appeal to those funds that have a dividend mandate.

MEQ has been a solid performer over the years, with a 21% five-year CAGR, and an 18% 10-year annualized return. It has a strong track record of earnings expansion and beating earnings estimates. It is fairly small ($1.8B market cap), and it is also fairly illiquid. It does have certain risks such as a high leverage profile, and it operates in a cyclical rental market, but it generates steady free cash flows, has tailwinds from demand for the urban rental market, and it has delivered strong growth with little to no share dilution. We think it has many qualities of a long-term compounder, but we would be mindful of its small size, high debt profile, and exposure to a cyclical market.
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