The report on the Melcor REIT has been updated and rated (lower) Buy at $8.17.
On the one hand the 8.2% yield is highly attractive. And the units are trading at 73% of book value. And the REIT is doing a good job of signing on new tenants and keeping the occupancy up. On the other hand lease renewals, particularly on the Edmonton office space, are being done at rates lower than the expiring leases. And building market values have been declining somewhat. It seems likely that adjusted earnings per unit which declined, about 14% in the first half of 2018 could continue to decline somewhat in the rest of 2018. A small cut in the distribution is a possibility if the payout ratio goes above 100% of adjusted earnings. And, interest rates are rising somewhat. Overall, the units seem attractive for the yield (even considering some possibility of a modest cut) and could be rated Buy. But given the potential for a further earnings per unit decline in the last half of 2018 and even the possibility of a modest cut to the distribution, I would hesitate to rate the units too highly. I have a position in these and would be a buyer (cash permitting) of additional units under $8.00.