We do things a little differently. Sometimes, we talk a little differently, too. So we compiled a short guide to making sense of it all.
One of our key strategies is to buy new buildings within five blocks of buildings we already own. This clustering technique makes a lot of sense because of the way it helps us keep down costs through economies of scale and efficiencies that many of our competitors can't match. We see lower superintendent and maintenance costs, reduced advertising expenses, efficient head office administration and simpler marketing.
In real estate, not all places are equal. We look to those markets where we see the best growth potential. For now, our properties are concentrated in Vancouver/Lower Mainland, Calgary, Edmonton and Saskatoon.
Our brand is who we are. We maintain an unusually high standard in mid-sized rental apartments. We use attractive, quality interior finishings. We improve and maintain exteriors and common areas. We use high-tech security systems and energy-efficient technology. Our management is competent. The higher standard we hold ourselves to draws terrific tenants with strong credit.
Our goal is to be Canada's leading mid-market consolidator. We define a "mid-market" apartment according to its size, location, condition and state of management. Typically, mid-market properties have less than 100 units, making them less attractive to institutional investors.
These buildings are often owned by "moms and pops" who may not have the time, resources or expertise to manage them effectively. As a result, these properties fall into a state of disrepair. That makes them attractive candidates for our renovation process, and the value it creates.
We are serious about efficiency. When we renovate an apartment, we install a series of upgrades that also lower our costs. They include energy-efficient appliances, ultra-low flush toilets, taps, low-flow shower heads, high-efficiency lighting and heat-conserving windows.
We take the same approach to our administrative work, with an automatic rent withdrawal system and innovative information management systems. On top of that, our clustering strategy provides lots of efficiencies, with one property manager, leasing manager, groundskeeper, maintenance person and marketing manager assigned to a cluster of buildings.
We make tattered, unstable apartments into new homes and stable revenue generators. This is what we mean by stabilization, a process that typically takes 12-18 months after we buy an under-performing property. We refer to a newly-acquired property as "non-stabilized".
Stabilization involves renovating the property to meet the Mainstreet specifications, which include hardwood laminate flooring, ceramic tile, new bathroom fixtures, electrical upgrades, fresh paint, new countertops, energy efficient appliances and, often, improvements to a building's exterior and common areas. While we are stabilizing, vacancy is necessarily higher and cash flow is temporarily reduced. We consider a property stabilized once 90% of its units are renovated, Mainstreet exterior signage is installed and the renovated units are rented.
When we're nearing the end of our stabilization process, we have a building that is far better than when we began. With all of renovations and upgrades, this building no longer belongs in the distressed property market. So we reposition it into a better rental market with higher rental rates.
We often refinance our properties following stabilization, and before existing mortgages mature, in order to take advantage of lower interest rates. We use new long-term mortgages insured by the Canada Mortgage and Housing Corporation (CMHC), which gives us access to better rates. Because we create so much value in our renovation process, we can often borrow for more than our costs, allowing us to extract capital to internally fund our continued growth.
This is our business model. It is the driver of our success. We've proven it works so well that we've named it: the Mainstreet Value Chain.