Our report on the Melcor Real Estate Investment Trust is updated and rated Buy at $6.71. The key factor is the 7.2% yield which seems sustainable the fact that the units are trading at under book value. This is not expected to be a high return investment but is attractive for the distribution.
There was a surprise announcement from both Melcor Developments and the Melcor REIT today, after the close of trading. Darin Rayburn the chief executive of both is retiring at the end of this year to pursue personal interest. My suspicion is that he felt constrained by the controlling family and was not being given sufficient freedom to run the company. This retirement (more like resignation?) does not seem like good news.
Coincidently, I drove through one of Melcor’s larger projects to today. Jensen Lakes in St. Albert. There were quite a few homes under construction and the existing developed lots are filling up fast. This should lead to sales of more lots as other parts of the property are developed which is currently under way. This property also has an attractive newer multi-building shopping area. There I saw that all or nearly all of the existing developed buildings are rented and occupied and more space is under construction. Overall, the impression was favorable as the project looks prosperous and yet Melcor Developments continues to trade far below book value.