Having just updated the Melcor REIT and RioCan REIT it seems appropriate to compare the two.
Looking at yield, the Melcor REIT is at 9.1% and RioCan at 9.3%. On that basis (in isolation of other facts) RioCan would be the clear choice. However, the Melcor REIT reduced its distribution by 47% in response to the pandemic while RioCan maintained its distribution. It seems quite possible, even probable, that the Melcor REIT will be able to at partially reverse that 47% cut before too long. That is a point in favor of Melcor.
Looking at price to book value, RioCan is at 64% and Melcor REIT is at 43%. So Melcor looks cheaper on that basis. But then again RioCan has better assets. The Melcor REIT includes some older office buildings with significant vacancies.
Looking at debt leverage, the Melcor REIT has debt of 167% of its book equity level while RioCan has only 86%. In effect the Melcor REIT is much more dependent on the kindness of bankers and has relatively less capacity to borrow additional money. This is a point strongly in favor of RioCan.
In the Melcor REIT’s Q2 report I was a rather shocked to learn that they asked for debt and interest deferrals on mortgages including even on some private vendor take back mortgages. If any company owed me money and then came along asking to defer payments, I would get rather worried. In contrast while RioCan indicates that it did defer some property taxes under government programs, I saw no mention of deferrals on debt or interest payments. RioCan appears to be in a much better position regarding liquidity.
Overall, while I am attracted to buying the Melcor REIT units at a 57% discount to book value, the safer alternative is RioCan with its 36% discount to book value but with superior assets and much better geographic diversification and with its much better liquidity position.
I own both and did add a little to my Melcor REIT position but I added more to my RioCan position.