Melcor US - Aurora Permits & Housing StartsIt has been interesting to see the Building Permits tick up in the Denver-Aurora-Lakewood region. In January there were 777 permits and this has now ticked up to 987 units by the end of April.
You can check it out here >>>
https://fred.stlouisfed.org/series/DENV708BP1FH I wasn't able to find the corresponding housing starts for the same region but based on the high demand, I would expect that the correlation between permits and starts would be quite high.
Every once in a while I will wander over to the Richmond American Homes for Aurora and see what their inventory looks like. Right now it shows as zero units that are "available now", 64 units that are "ready soon", and 77 units that are "ready to build". What is a bit confusing is that I think the 77 units that are ready to be built includes the 64 units that are ready soon.
You might be wondering why I keep posting as much about the Aurora development? It's because I think that the property is worth a ton of money and there would be many potential buyers if Melcor decided to outright list the property and convert it to cash. The entire US division (which includes the Aurora property) is carried at $246 million as of Q1 2024. Aurora consists of 42 acres of commercial/industrial and 1,040 acres of residential. Houston and Phoenix have 92 and 242 acres respectively. If you valued Aurora at $350,000 USD per acre this property would be worth over $520 million $CDN or roughly $17 per share (based on the Q1 shares o/s of 30.58 million). I am not sure how much debt is against this property but it wouldn't be enough to stop a major distribution.
Melcor Development's entire general debt is $276 million Canadian (note 12 on the Q1 statements). The current Melcor Development market capitalization is $362 million of which the Melton's own 51.3% and other insiders I am guessing own another 10%. This means that the conceptual free float is not more than 39%.
Conceptually, if they converted the entire Aurora development to cash they could return a ton of cash to shareholder through a dividend; or, privatize the company by taking out the remaining minority shareholders. At a privatization offer of $24 per share they would only need $284 million to do it and at $28 per share the would need $331 million.
The Denver-Aurora-Lakewood region is extremely attractive and there would be no shortage of potential bidders for this (unlike the Canadian Assets).
Please let me know if you think I am missing something or have outright just lost my mind!
LR