Melcor REIT added to the list, September 25, 2016

The Melcor Real Estate Invest Trust entity is added to our list and rated Buy at $8.63. Based on the 7.8% distribution yield it looks attractive. But I also wanted to understand the properties it owns and to understand its accounting. These and other factors are covered in our report. It should be a stable source of distributions. However, there is some risk associated with the Alberta economy. At the moment it appears to be an opportunity to buy into the equity of its portfolio of properties at a discount of about 27% to the book value. This discounts reflects fears about the Alberta economy and possible market value declines of its buildings (which could be driven by vacancies if vacancies increase). The current unit price ascribes essentially no value to the claimed ability of the REIT to grow in a manner that is accretive to earnings per unit. I would be comfortable buying some of these units although in my own case I already have a large exposure to Melcor and a very large exposure to Alberta and due to that exposure I may not buy any.