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Press release from CNW Group

Mainstreet Equity Corp. announces proposed investment in United States focused real estate fund

Monday, June 18, 2012

Mainstreet Equity Corp. announces proposed investment in United States focused real estate fund16:49 EDT Monday, June 18, 2012/NOT FOR DISSEMINATION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES/CALGARY, June 18, 2012 /CNW/ - Mainstreet Equity Corp. ("MEQ") (TSX:MEQ) announces that in connection with the proposed offering of up to $75,000,000 of trust units ("Offering") of Mainstreet US Multi-Family Residential Fund (the "Trust"), an unincorporated private investment trust formed under the laws of the Province of Alberta, MEQ intends as a condition of the Offering to subscribe for 10% of the Trust units issued under the Offering which, assuming completion of the target offering would be a contribution to the Trust of $7,500,000.The Trust (indirectly through an income tax effective limited partnership structure involving a Canadian limited partnership and various US limited partnerships which will require no U.S. tax filings for Canadian investors) intends to acquire, renovate, upgrade and re-position real estate properties in the United States, using MEQ's "Value Chain" business model in order to generate income and the possibility of capital appreciation for Trust unitholders.  The Trust intends to focus primarily on the acquisition of multi-family residential properties and the associated residential real estate markets in the United States, with an initial emphasis on the re-covering sunbelt regions of Arizona, Florida, Georgia, Texas and Nevada, although the Trust may indirectly invest in other United States residential real estate assets, such as single-family houses.  The Offering is a blind pool as the specific properties and assets in which the Trust intends to invest (through its subsidiary entities) have not yet been identified.It is intended that a wholly-owned subsidiary of MEQ will act as the general partner of a master Canadian limited partnership to indirectly hold the underlying US real estate assets.  As the general partner, the MEQ subsidiary will share in the profits of the underlying assets, after certain hurdle rates are met in respect of distributions to Trust unitholders.  In particular, after the payment of an annual preferred return of 8% to Trust unitholders (including MEQ) (which accrues if unpaid) and repayment of an amount equal to their initial investment (including MEQ), the MEQ subsidiary will share in 20% of the remaining profits, which will increase to 35% if an additional hurdle rate of a 100% return to Trust unitholders is met.  There is no assurance that any such cash distributions from the Trust (or its subsidiary entities) to Trust unitholders or to MEQ's subsidiary will occur.The trustees of the Trust are the same as the members of MEQ's board of directors.  In addition, Navjeet (Bob) N. Dhillon and Johnny C.S. Lam, the Chief Executive Officer and Chief Financial Officer of MEQ, respectively, will act as Chief Executive Officer and Chief Financial Officer of the Trust.  In connection, with the Offering, MEQ and a subsidiary of the Trust will enter into a services agreement whereunder MEQ will provide advice and certain administrative services to the Trust's subsidiary entities in connection with the execution of the Trust's business plan, in consideration of an annual fee of 2% of the aggregate Trust unit subscription amounts raised under the Offering less any amount related to redemption of Trust units.Bob Dhillon, President of MEQ stated that "our research shows that the US economy is showing signs of recovering from its severe 2008-2009 recession, with housing prices stabilizing and the multi-family market showing improved transactional activity.  We believe that the Trust, and MEQ's investment in the Trust, provides an excellent opportunity to acquire distressed properties and non-performing debt in circumstances where liquidity is improving, with increased lending participation by banks and CMBS and a positive trend for net absorption and vacancy rate decrease and thereby allowing us through the Trust to capitalize on the tremendous potential value existing today in the added-value apartment space in certain key areas in the United States."The Trust is a separate legal entity from MEQ and will not acquire Canadian real estate assets, and consequently, it is not intended that the Trust will compete with MEQ in the Canadian real estate market.  In addition, the Trust and its subsidiary entities will enter into an indemnity agreement with MEQ, effective as at the date of settlement of the Trust, whereby the Trust and its subsidiary entities will fully indemnify MEQ from any and all liabilities related to the Trust, the business of its subsidiary entities, the offering and any statements and any memorandum or other documentation provided to potential investors by the Trust.Pennant Capital Partners Inc. ("Pennant") and such other agents as may be appointed by the Trust from time to time, will offer the Trust units for sale on a "best efforts" basis in certain jurisdictions under exemptions from the prospectus requirements under applicable securities laws.  Trust units are not listed or quoted on any exchange or market and there will not be any active market for the Trust units.  The Trust is not a reporting issuer or equivalent in any jurisdiction and currently has no intention of becoming a reporting issuer or equivalent and does not file documents electronically via SEDAR.About MEQMEQ is a Calgary-based, growth-oriented real estate corporation focused on the acquisition, redevelopment, repositioning, and asset and property management of mid-market apartment buildings in Canada.  MEQ currently owns and operates residential rental units, including apartments and townhouses, in Vancouver/Lower Mainland, Calgary, Edmonton, Saskatoon and the Greater Toronto Area. MEQ's common shares are listed on the Toronto Stock Exchange under the symbol MEQ. As of March 31, 2012 there were 10,465,281 common shares outstanding. MEQ's stock was among the top ten gainers on the TSX in 2011.About PennantPennant is a Calgary, Alberta based Exempt Market Dealer ("EMD").  Pennant is focused on providing unique investment alternatives to clients outside of traditional public equities and bonds.  Pennant is a nationally focused EMD operating in all major jurisdictions within Canada and is an affiliate of Invico Capital Corporation, an alternative investment fund manager.  For more information visit www.pennantcap.com.Cautionary Statement Regarding Forward-Looking StatementsThis news release contains forward-looking statements including those regarding the intentions of MEQ and  the Trust, the size of the Offering, cash distributions to Trust Unitholders, the payment of any profits to Trust unitholders and MEQ's subsidiary and the payment of any fees to MEQ.  These forward-looking statements involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond MEQ's control, including: the impact of general economic conditions in Canada and the United States, industry conditions, increased competition, the lack of available qualified personnel or management, equipment failures, stock market volatility, expansion into the United States and fluctuations in rental prices, energy costs and foreign exchange or interest rates. Actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or, if any of them do so, what benefits MEQ will derive from them. In particular, there is no assurance that the Offering will be completed or that any cash distributions from the Trust (or its subsidiary entities) to Trust unitholders or to MEQ's subsidiary will occur or that MEQ will receive any fees.  In addition, the Trust has not acquired any properties and specific properties in which the Trust (through its subsidiary entities) intends to invest have not been identified.For further information: For more information regarding Mainstreet Equity Corp., please contact: Bob Dhillon Chief Executive Officer (403) 215-6063 Additional information is available at: www.mainst.biz www.sedar.com For more information regarding the Trust, please contact: Pennant Capital Partners Inc. Jason Brooks (403) 538-4771 Craig J. Shannon (416) 414-1648