Speaker Bob Dhillon

Posted by David Holden

Tim Heaton introduced Bob Dhillon.

Bob’s father was a Rotarian on 3 different continents – Japan, Liberia and India
1^st generation immigrant and proud Canadian
Business model: affordable housing for middle-class Canadians (price point at < $1,000 per month with their average at $930 per suite)
Buying and renovating Mom & Pop walk up buildings
Mainstreet is a publically traded on Toronto stock exchange
How did they improve the life of middle-class Canadians and provide 1250% to his shareholders?

Multi-family apartments are … history: during the Murv – a tax driven program where investors invested with real estate developers not because of the free market return but due the tax program. This created an oversupply in the 1970s and early 80s. with higher interest rates and other political and economic factors the apartment market crashed which meant the apartment building developments were ignored until now
Profile of the apartments in Mainstreet’s bussiness plan: 80 to 90% in Western Canada are small Mom & Pop walkups and 10 to 20% are big buildings that have attracted institutional capital
The smaller building have been, historically, neglected and falling apart
Most are 40 to 70 years old and need ongoing or renovation care (deferred maintenance)
Mainstreet targeted these buildings, bought them, fixed them up, increased the top line revenue and repeated. Has accumulated approximately 10,000 apartment units in Western Canada including the lower Mainland of BC. Mainstreet recently sold out of the Toronto market to realize profits for their shareholders
What is unique about western Canada housing market?
Age, less supply relative to the population (newer cities), Murv influence stopped westerly at Winnipeg, apartment shortages loomed in western Canada
#1 driver of business – entire sector of multi-family housing trades below replacement cost
Calgary construction is Condo market – well above their target pricepoint (range of $2,000)
Still a relatively small stock of apartment and net migration is still into Calgary even in a recession
35,000 apartment units in Calgary and 17,000 net migration annually
Total apartment building supply in Canada is 2 million apartments, increasing immigration to 350,000 annually with plans to increase to 450,000 annually
Also, purchasing a home has become more difficult due to tougher regulations
Compared to cities in the USA, Calgary has 2.5% of rental units to population. Average city in USA has 8 to 12%
Mainstreet, using their business plan, grow approximately $100 million in assets every year
Everything is internalized for highest margins on the street … social media, advertising, construction, supply chain, software, structural engineers, and marketing
Developing a proprietary software for their operating platform (firm out of India), eliminated all the middle men in our supply chain from China … laminate flooring, bathtubs, shower heads, tiles et cetera
Not trying to be the Four Seasons, we are trying to be Holiday Inn Express of apartment housing market
Renovate exteriors, balconies, window as well as kitchens, bathrooms and flooring inside
Mainstreet Equity was Green before Green was popular on everything available, like energy efficient lights to insulating building exteriors, water use initiatives to allow 40% less water use with corresponding 40% drop in water costs
Mainstreet has an 18% competitive advantage on larger multi-family apartment building because economy of scale does not work for them due to cost related to elevators, underground parking, and heat loss on the elevator shaft. Where they do lose out versus larger buildings is HR with onsite maintenance and rental people. Clustering buildings into the same neighbourhood helps minimize that disadvantage. This also helps with Mainstreet Brand development
Mainstreet goes into transitional neighbourhood strategically to be close to their target market
They went from 272 units to 10,000 units
Today: Asset base is $1.5 Billion, Revenue is $100 Million, Liquidity of $150 Million and the same 8.8 million shares outstanding. Testament to a business model that works

Ali Gursoy thanked the speaker and identified our contribution to CAWST (Centre for Affordable Water and Sanitation) in Calgary as an organization that we sponsor each year to the tune of more than $50,000. Ali also presented Bob with "Rotary in Calgary Celebrating One Hundred Years".

Bob Dhillon