As significant unitholders of the REIT, we are disappointed with the consistent disconnect between the REIT’s trading price and Net Asset Value (“NAV”). Since the spinoff and IPO of properties originally owned by the parent company in 2013, Melcor Developments Ltd. (“
On
The Melcor Q4/2023 press release on
- The Revolving Credit Facility of
$37.9 million is maturingJune 1, 2024 and is expected to be renewed is Q2/2024. Negotiations are underway; and - Mortgages of
$53.7 million are maturing in 2024. The REIT is in discussions with its lenders to refinance its mortgages at competitive market terms. Management also provided disclosure on its one unencumbered asset.
However, there was no disclosure regarding the repayment plan for the
Also in the Q4/2023 press release, Melcor announced that it was in the process of selling certain assets in
Based on our analysis, if we assume the REIT utilizes (i) cash on hand, (ii) the expected savings from the suspension of the distribution to
Furthermore, the REIT should also provide an overall plan in regard to the repayment of the Convertible Debentures.
Please see Appendix A for a copy of this letter and questions asked for Melcor to disclose to the public in a press release prior to the Q4/2023 results.
ONLY SOLUTION – MELCOR DEVELOPMENTS LTD. TAKE THE REIT PRIVATE
Melcor Developments Ltd. took the REIT public. It is obvious to Unitholders that the process has not worked out. As such, as the 55% owner and external manager, they should now take the REIT private.
- Trust Units Issued &
O/S (including Class B LP Units): 29.1 million - Trust Units not already owned by the Melcor Parent: 13.0 million
A take-out price at 95% of IFRS NAV is
To our knowledge and based on disclosed ownerships,
MINORITY UNITHOLDER SUPPORT
We are reaching out to all Melcor REIT Unitholders to support our position regarding Melcor Developments Ltd. taking the REIT private and ask all Unitholders contact Melcor to voice their concerns. Supporting Unitholders should feel welcome to reach out to show support for this position.
For further information, please contact:
President & Chief Executive Officer | Chief Operating Officer | |
(416) 635-0221 | (416) 635-0221 | |
ABOUT FC PRIVATE EQUITY REALTY MANAGEMENT CORP.
FORWARD LOOKING INFORMATION
This press release may contain forward-looking statements. In some cases, forward-looking statements can be identified by the use of words such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", and by discussions of strategies that involve risks and uncertainties. The forward-looking statements are based on certain key expectations and assumptions made by the Trust. By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Although management of
APPENDIX A
LETTER TO BOARD OF TRUSTEES OF MELCOR REIT
Issued by & reply to:
FC PRIVATE EQUITY REALTY MANAGEMENT CORP.
ATTENTION: MR.
Chairman of
Melcor Real Estate Investment Trust
900,
T5J 1Y8
Dear Mr. Young:
RE: DISTRIBUTION SUSPENSION AND STRATEGIC REVIEW RE: MELCOR REIT
We are writing this as an open letter for all Unitholder and the
As you are aware from our prior correspondence,
As significant unit and debenture holders, we read your press release issued
Regarding the
- Revolving Credit Facility (
$31.8 million): Have you had discussions with your current lender(s) around the renewal of the Revolving Credit Facility? Also, what are the terms of the renewal? If so, will there be a material change such as a paydown of principal or will the current lender(s) offer a simple extension? - 5.1% Convertible Unsecured Debenture (
$46.0 million): How do you plan on dealing with the Convertible Unsecured Debenture coming due this year? Do you plan on either: (i) refinancing with the capital markets by issuing a replacement debenture knowing that the interest rate could be materially higher; (ii) selling assets and taking net proceeds (net of existing encumbrances) and paying off the principal balance; (iii) do you have unencumbered assets that could be financed with mortgages to repay this liability; or (iv) going to debenture holders for an extension with possible revised terms? For the record, we would not be in favour of (i) because the interest rate would be higher than conventional mortgage debt and would be punitive to the REIT and (iv) given the poor precedent it would set for Melcor going forward. - Mortgages (
$56.1 million): Have you had discussions with your current lenders around the$56.0 million of Mortgages and what the terms of renewals or refinancings will look like? Given the amount coming due, we believe it’s imperative that a press release be issued to discuss: (i) the status of renewals and refinancings with lenders; (ii) colour around any unencumbered or low LTV assets you have on the balance sheet to address these maturities; (iii) selling assets, taking net proceeds and paying off partially or in full the principal balances outstanding and (iv) where will interest rates and principal balances land upon any renewals given that the weighted average interest rates on all your mortgages are 4.5% and Melcor renewed its 2023 maturities at interest rates in the 6.97% - 8.01% range.
Lastly, regarding Melcor’s 2023 maturities, were the renewals and refinancings short term in nature? Specifically, what were the terms to maturities of these mortgages? - Class C LP Units (
$2.0 million): Given that this debt is held by the parent company, Melcor Developments Ltd. (“Melcor Parent ”), we would hope that prior to any repayment or resolution of this liability, that the Revolving Credit Facility, Convertible Unsecured Debenture and Mortgages are addressed and dealt with first. Specifically, we would hopeMelcor Parent and Melcor would come to terms and convert this liability to trust units at NAV to show support for the REIT.
In summary on this matter, unit and debenture holders such as ourselves feel that a detailed and extensive press release discussing how Melcor plans on refinancing this debt would be appreciated.
Furthermore, we are concerned that given the current unit price of
On the other hand, if
To our knowledge and based on disclosed ownerships,
Please ensure that all members of your board of trustees receive a copy of this letter. May we please get a written response by
Yours truly,
FC PRIVATE EQUITY REALTY MANAGEMENT CORP.
PER:
“
_____________________________
ASO
ED/ns
Disclaimer;
If you feel your response should be in a public form for all unitholders to see, then issue a press release, as you should expect all our correspondence to be publicly released, including your replies.
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/d3253fd0-cbc8-4668-91c1-6b9dcc358da5
Issued by & reply to:
FC PRIVATE EQUITY REALTY MANAGEMENT CORP.
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