On Wednesday, the S&P 500 and Toronto wee each up 0.2%
Notable gainers included: Shopify up another 3.4%, Linamar up 4.0%, and Constellation Software up another 2.3%.
After the close, the Melcor REIT announced that its next monthly distribution will remain at 4.0 cents. The yield is now almost 13% and it seems clear the market is expecting a distribution cut or possibly even a suspension. Interest rates are the big issue as more of the operating earnings has to go toward interest payments. In addition, the rental revenue has been flat while some operating costs are rising. The REIT has some properties for sale in order to reduce debt. To the extent that the units are truly under-valued it might make sense for them to do a rights offering whereby the parent Melcor Developments as well as all existing unit holders could buy more units at a low price to shore up the balance sheet and reduce debt and any existing unit holder who fully participated would not be diluted.
The Brookfield Office Properties on out list have has a partial recovery in recent days. Yesterday, Brookfield Property Partners (which guarantees these preferred shares of its subsidiary Brookfield Office Properties – which no longer publishes financial results) issued Q3 earnings. They are losing money at this time but the situation did not seem to have deteriorated compared to Q2. This is a very complicated entity and so I would continue to treat these preferred shares as speculative. Brookfield Property partners has both office and retail properties and their Retail properties appear to be improving.