RE:Strategic Review - 5 months inA couple of thoughts from me...
1) FC Capital: The have prospectus offerings before as it is a key source of capital for them to fund mortgages which is their primary business. I think that their experience with their investment with Melcor has not been very fruitful so I would be surprised to see them want to do more business in either equity or convertible debt going forward. Maybe I am wrong.
2) Strategic Review: Other than selling properties or a major refinancing, the only other viable alternative is to fold the REIT into Melcor in exchange for shares. The problem for Melcor is that you can't pay any kind of premium for the REIT shares without diluting Melcor which is also extremely undervalued. The only thing that could be done is to have a Fairness Opinion issued stating that both companies are undervalued and so a share exchange at market prices is fair for both parties. Melcor REIT is not viable as a stand alone entity and this is very clear. What is also interesting is that in order for Melcor Development to pursue a Substantial Issuer Bid in the abscence of significant share volume, a Fairness Opinion is required. Perhaps this is the right time to do exactly that.
3) Refinancing: Rates are coming down so perhaps there is a path to refinancing the debt and convertible debenture is possible but it won't solve the overarching problem.
In my opinion, Melcor Development is experiencing a once in a generation boom in Alberta and needs to capitalize on as much of it as possible by selling down their land and making some great deals in the properties division. The possibility of a double or more in the share price if they execute well is a very real possibility; however, if they squander this opportunity and don't convert assets valued at 0.3x book value to cash then they will have done a tremendous disservice to all shareholders. Capital allocation is key and they are still not being fully transparent with shareholders on this matter.
LR