Melcor REIT updated March 12, 2018

The Melcor REIT is updated and rated Buy at $8.07 to yield 8.4%.

This REIT is trading at a 30% discount to the book value of the equity or a 14% discount to the total value of debt plus equity. Presumably there is investor fear about vacancies and rental rates in Alberta. And those fears may be valid. But I like the discounted price which provides some margin of safety.

Some of the REIT’s properties are relatively new buildings that have long-term attractive tenants such as Shoppers Drug Mart, various bank branches, Tim Hortons, Star Bucks and other name-brand retail tenants. About half of the income comes from office properties and some or most of those buildings are older.

Since these units are not eligible for the dividend tax credit they are perhaps best suited for registered accounts.