EDMONTON, Alberta, Nov. 06, 2018 (GLOBE NEWSWIRE) -- Melcor Developments Ltd. (TSX: MRD), an Alberta-based real estate development and asset management company, today reported results for the quarter ended September 30, 2018. Revenue for the quarter was $60.25 million, down 4% over Q3-2017. Year to date revenue was down 1% to $147.45 million.
Net income for the quarter was $11.47 million or $0.34 per share (basic) compared with a net income of $11.52 million or $0.34 per share (basic) in the same period of 2017. Year to date net income was $27.75 million compared to $6.44 million in 2017. Net income is impacted by non-cash fair value adjustments on investment properties and on REIT units. Funds from operations (FFO) for the quarter was $12.84 million or $0.38 per share compared with $12.79 million or $0.38 per share in the same period of 2017. Year to date FFO was $25.46 million or $0.76 per share compared with $28.17 million or $0.84 per share in 2017. The decrease compared with last year is primarily due to current taxes payable resulting from the sale of assets to Melcor REIT. FFO eliminates the elements that have no cash impact on our business from net income and management believes FFO better reflects Melcor's true operating performance.
Darin Rayburn, Melcor’s President and Chief Executive Officer, commented on the quarter: “Despite continued economic volatility, we maintained operating results consistent with last year. Our total assets grew to over $2 billion at quarter end for the first time in our history. Each of our operating divisions has active projects and has achieved results that are on par with last year. We continue to thoughtfully and creatively execute on our growth strategies, including geographic diversification. In Q3-2018, we sold 140 residential lots in the US and acquired a 130,400 square foot office building in Glendale, Arizona increasing our US commercial gross leasable area by more than 25%.”
The Board today declared a quarterly dividend of $0.13 per share, payable on December 28, 2018 to shareholders of record on December 14, 2018. The dividend is an eligible dividend for Canadian tax purposes.
Third Quarter Results
Given the longer term nature of real estate development, comparison of any three month period may not be as meaningful as year to date results. Land sales are lumpy by nature and it is difficult to predict when they will close. In addition, the late winter experienced across Alberta delayed construction starts and golf course openings. These factors were offset by the positive impact of the strategies employed to diversify our product mix in residential communities to appeal to a wider-range of buyers, as well as our strategic focus on diversifying geographically with a focus on the US over the past few years.
Highlights of the quarter and year to date periods include:
• Year to date revenue was down 1% compared to 2017 at $147.45 million. Q3-2018 revenue was down 4% as a result of decreased single-family lot sales in Canadian markets.
• Year to date FFO was down 10% to $25.46 million due to taxes owing relating to the sale to the REIT in Q1-2018. Excluding this item, FFO increased by $0.96 million or 3% over 2017. FFO in the quarter was relatively stable over Q3-2017 at $12.84 million.
• The Community Development and Property Development divisions are actively engaged in a number of projects as the 2018 construction season continues.
• The Property Development team has transferred 45,897 sf year to date Investment Properties and has a further 117,800 sf of commercial properties currently under construction.
• Melcor's income-producing divisions (Investment Properties and REIT) continue to yield stable results, with year to date revenue of $76.47 million compared with $76.23 million in 2017.
• Melcor continues to advance its value creation strategy of building commercial properties, leasing them and selling them to the REIT under a right of first offer (ROFO) agreement. In early 2018, Melcor completed the fourth sale of properties to the REIT, comprised of 172,629 sf GLA for $80.88 million.
• On September 26, 2018 Melcor purchased a 130,400 sf office property consisting of 2 buildings in Glendale, Arizona for $24.53 million (US$18.91 million) including transaction costs.
• During the quarter Melcor purchased 129.5 acres of land for $3.70 million. Year to date land purchases are 131.13 acres of land at a cost of $4.77 million.
• The REIT division also recycled capital via the sale of two properties:
- Corinthia Plaza: a 23,179 sf retail property in Leduc, Alberta which was originally developed by Melcor and owned since 1974, was sold for gross proceeds of $6.73 million on January 31, 2018.
- Miller Crossing: a 27,336 sf retail property in Edmonton, Alberta which was originally developed by Melcor in 2009, was sold for gross proceeds of $13.80 million on April 16, 2018.
• Melcor continues to return value to shareholders and unitholders:
- Melcor paid a quarterly dividend of $0.13 per share on September 29, 2018. The REIT paid distributions of $0.05625 per trust unit in July, August and September for a quarterly payout ratio of 105% and 99% year to date. The REIT's payout ratio was negatively impacted by undeployed cash due in part to the sale of two buildings earlier in the year.
- On November 6, 2018 Melcor declared a quarterly dividend of $0.13 per share, payable on December 28, 2018 to shareholders of record on December 14, 2018. The dividend is an eligible dividend for Canadian tax purposes.
Selected Highlights
| ($000s except as noted) | Three months ended | Nine months ended | ||||||||||||||||
| 30-Sept-18 | 30-Sept-17 | Change | 30-Sept-18 | 30-Sept-17 | Change | |||||||||||||
| Revenue | 60,245 | 62,795 | (4.1 | )% | 147,452 | 148,317 | (0.6 | )% | ||||||||||
| Gross margin (%) * | 46.6 | % | 44.5 | % | 2.1 | % | 48.7 | % | 46.4 | % | 2.3 | % | ||||||
| Net income (loss) | 11,469 | 11,517 | (0.4 | )% | 27,747 | 6,441 | 330.8 | % | ||||||||||
| Net margin (%) * | 19.0 | % | 18.3 | % | 0.7 | % | 18.8 | % | 4.3 | % | 14.5 | % | ||||||
| Funds from operations * | 12,841 | 12,787 | 0.4 | % | 25,456 | 28,171 | (9.6 | )% | ||||||||||
| Per Share Data ($) | ||||||||||||||||||
| Basic earnings (loss) | 0.34 | 0.34 | — | % | 0.83 | 0.19 | 336.8 | % | ||||||||||
| Diluted earnings | 0.34 | 0.34 | — | % | 0.83 | 0.19 | 336.8 | % | ||||||||||
| Funds from operations * | 0.38 | 0.38 | — | % | 0.76 | 0.84 | (9.5 | )% | ||||||||||
| As at ($000s except as noted) | 30-Sept-18 | 31-Dec-17 | Change | |||||||||||||||
| Shareholders' equity | 1,028,130 | 1,008,590 | 1.9 | % | ||||||||||||||
| Total assets | 2,016,090 | 1,990,983 | 1.3 | % | ||||||||||||||
| Per Share Data ($) | ||||||||||||||||||
| Book value * | 30.78 | 30.21 | 1.9 | % | ||||||||||||||
MD&A and Financial Statements
Information included in this press release is a summary of results. This press release should be read in conjunction with Melcor’s consolidated financial statements and management's discussion and analysis for the three and nine months ended September 30, 2018, which can be found on the company’s website at www.Melcor.ca or on SEDAR (www.sedar.com).
About Melcor Developments Ltd.
Melcor is a diversified real estate development and asset management company that transforms real estate from raw land through to high-quality finished product in both residential and commercial built form. Melcor develops and manages mixed-use residential communities, business and industrial parks, office buildings, retail commercial centres and golf courses. Melcor owns a well diversified portfolio of assets in Alberta, Saskatchewan, British Columbia, Arizona and Colorado.
Melcor has been focused on real estate since 1923. The company has built over 140 communities and commercial projects across Western Canada and today manages 4.05 million sf in commercial real estate assets and 609 residential rental units. Melcor is committed to building communities that enrich quality of life - communities where people live, work, shop and play.
Melcor’s headquarters are located in Edmonton, Alberta, with regional offices throughout Alberta and in Kelowna, British Columbia and Phoenix, Arizona. Melcor has been a public company since 1968 and trades on the Toronto Stock Exchange (TSX:MRD).
Forward Looking Statements
In order to provide our investors with an understanding of our current results and future prospects, our public communications often include written or verbal forward-looking statements.
Forward-looking statements are disclosures regarding possible events, conditions, or results of operations that are based on assumptions about future economic conditions, courses of action and include future-oriented financial information.
This news release and other materials filed with the Canadian securities regulators contain statements that are forward-looking. These statements represent Melcor’s intentions, plans, expectations, and beliefs and are based on our experience and our assessment of historical and future trends, and the application of key assumptions relating to future events and circumstances. Future-looking statements may involve, but are not limited to, comments with respect to our strategic initiatives for 2018 and beyond, future development plans and objectives, targets, expectations of the real estate, financing and economic environments, our financial condition or the results of or outlook of our operations.
By their nature, forward-looking statements require assumptions and involve risks and uncertainties related to the business and general economic environment, many beyond our control. There is significant risk that the predictions, forecasts, valuations, conclusions or projections we make will not prove to be accurate and that our actual results will be materially different from targets, expectations, estimates or intentions expressed in forward-looking statements. We caution readers of this document not to place undue reliance on forward-looking statements. Assumptions about the performance of the Canadian and US economies and how this performance will affect Melcor’s business are material factors we consider in determining our forward-looking statements. For additional information regarding material risks and assumptions, please see the discussion under Business Environment and Risk in our annual MD&A.
Readers should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Except as may be required by law, we do not undertake to update any forward-looking statement, whether written or oral, made by the company or on its behalf.
Contact Information:
Nicole Forsythe
Director, Corporate Communications
Tel: 1.855.673.6931
ir@melcor.ca