Melcor REIT updated May 12, 2022

The report on the Melcor REIT is updated and rated Buy at $6.76 to yield 7.1%.

With the improving Alberta economy, this REIT should continue to improve slowly. There is some risk of higher vacancies over time but the vacancy rate could also improve. There is a definite risk of market value losses on the buildings as interest rate rise although that does not impact cashflows. Higher interest rates are also a headwind though in terms of income and cashflows as mortgages mature and are replaced with higher interest debt. The current payout ratio is about 71% and I believe that provides an ample cushion to support the distribution and likely would allow for an increase which could occur in the next few months (hopefully). 

The REIT owns a variety of properties. Some are newer and desirable but some are older office buildings and some less desirable old strip malls. Check out pictures of all their buildings here.

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