EDMONTON, AB --(Marketwired - August 09, 2017) - Melcor Developments
Ltd. (TSX: MRD), an Alberta-based real estate development and asset management company, today
reported results for the quarter ended June 30, 2017. Revenue was $46.96 million in the quarter, up 12% over Q2-2016. Revenue for
the first half of the year was $85.52 million, up 18%.
Revenue growth was driven by a significant increase in sales in the Community Development division, with
divisional revenue up 42% compared to Q2-2016. All other operating divisions achieved stable results in both the quarter and year
to date periods.
Net income for the quarter was $3.93 million or $0.12 per share (basic), up 121% over Q2-2016. Melcor reported a
year to date net loss of $5.08 million or $0.15 per share loss (basic) compared to net loss of $5.94 million or $0.18 per share
loss (basic) in the same period of 2016. The net loss is significantly impacted by the $12.86 million non-cash fair value loss on
investment properties recorded in the period due to an increase in capitalization rates on our downtown Edmonton office
properties, compared to a gain of $1.42 million in the first six months of 2016.
Funds from operations in the quarter was $9.31 million or $0.12 per share (basic), up 11% over Q2-2016. Year to
date funds from operations (FFO) was $15.38 million or $0.46 per share in Q2-2017 compared to $12.58 million or $0.38 per share
in the same period of 2016. FFO eliminates the elements that have no cash impact on our business from net income and management
believes it better reflects the Company's true operating performance.
Darin Rayburn, Melcor's President and Chief Executive Officer, commented on the quarter: "I'm pleased to report
on solid results in each of our operating divisions for the first half of 2017.
Our Community Development and Property Development divisions have been busy through the start of the 2017
construction season. Community Development has begun development on new community phases in many of our operating regions with
much of the activity driven by builder demand as they seek to replenish inventory supply. We also acquired raw land and serviced
lots in the US and commenced development on a new community in the Greater Denver area.
Property Development has 185,000 sf in development underway for 2017 and broke ground on two new neighbourhood
shopping centres and an office building in the Edmonton region.
Our Investment Properties and REIT divisions now have a portfolio of close to 4 million square feet of high
quality commercial and residential properties and have maintained stable occupancy and steady results. The REIT has completed
over 162,000 square feet in new and renewed leases in the first half of 2017.
We remain well positioned for the future with a strong and conservatively managed balance sheet and continue to
manage through pressure in some of our markets."
The Board today declared a quarterly dividend of $0.13 per share, payable on September 29, 2017 to shareholders
of record on September 15, 2017. The dividend is an eligible dividend for Canadian tax purposes.
Second Quarter Results
We achieved stable results in each of our main operating divisions in Q2-2017 and year to date, with growth over
the comparable period driven by the 57% increase in revenue in the Community Development division over the first half of 2016.
Our focus on working with our builders to diversify our product mix with an emphasis on affordable lot options over the past year
resulted in a strong first half of the year, with inventory remaining well-positioned in many of our active communities.
We continue to conservatively manage our assets and liabilities to create a strong and stable balance sheet that
will enable us to take advantage of opportunities to grow our business via opportunistic raw land and commercial income-producing
property acquisitions.
Highlights of the second quarter include:
- Revenue increased 12% to $46.96 million in Q2-2017 and by 18% to $85.52 million year to date due to higher lot sales in the
Community Development division. Community Development revenue grew by 42% over Q2-2016 and by 57% year to date.
- The Investment Properties and REIT division combined revenue grew by 2% over the same period as a result of stable
occupancy and gross leasable area in the portfolio.
- Net income was $3.93 million in the quarter, with a net loss of $5.08 million year to date. The year to date net loss was
driven by a $12.86 million non-cash fair value loss on investment properties due to an increase in capitalization rates on our
downtown Edmonton office properties, as well as fair value losses on REIT units due to unit price appreciation. Management
believes funds from operations (FFO) is a more accurate reflection of our true operating performance. Funds from operations was
$15.38 million, up 22% over the same period last year.
- We continue to invest in land holdings for future development and made the following acquisitions during in Q2-2017:
-- 53.38 acres in Edmonton, AB for a purchase price of $6.50 million,
-- 43.06 acres in Kelowna, BC for a purchase price of $7.25 million,
-- 4.87 acres in Calgary, AB for a purchase price of $0.53 million,
-- 197.78 acres in the Greater Phoenix, Arizona area for a purchase price of $13.22 million ($US 10.19 million), and
-- 294 lots at 80% interest in the Greater Phoenix, Arizona area for a purchase price of $3.81 million ($US 2.94 million).
- The REIT completed the sale of a 67,610 sf industrial building in Lethbridge, AB for $7.76 million (including transaction
costs).
- We paid a quarterly dividend of $0.13 per share on April 5, 2017 and June 28, 2017. The REIT paid distributions of $0.05625
per trust unit in April, May and June for a quarterly payout ratio of 83%.
- On April 15, 2017 Darin Rayburn was appointed Melcor's President & Chief Executive Officer.
- On August 9, 2017 we declared a quarterly dividend of $0.13 per share, payable on September 29, 2017 to shareholders of
record on September 15, 2017. The dividend is an eligible dividend for Canadian tax purposes.
Selected Highlights
($000s except as noted) |
Three months ended |
|
Six months ended |
|
30-June-17 |
|
30-June-16 |
|
Change |
|
30-June-17 |
|
30-June-16 |
|
Change |
|
Revenue |
46,955 |
|
42,084 |
|
11.6% |
|
85,522 |
|
72,638 |
|
17.7% |
|
Gross margin (%) * |
46.8% |
|
48.4% |
|
(1.6)% |
|
47.5% |
|
49.9% |
|
(2.4)% |
|
Net income (loss) |
3,927 |
|
1,778 |
|
120.9% |
|
(5,076) |
|
(5,936) |
|
14.5% |
|
Net margin (%) * |
8.4% |
|
4.2% |
|
4.2% |
|
(5.9)% |
|
(8.2)% |
|
2.3% |
|
Funds from operations * |
9,306 |
|
8,388 |
|
10.9% |
|
15,384 |
|
12,578 |
|
22.3% |
Per Share Data ($) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) |
0.12 |
|
0.05 |
|
140.0% |
|
(0.15) |
|
(0.18) |
|
(16.7)% |
|
Diluted earnings (loss) |
0.12 |
|
0.05 |
|
140.0% |
|
(0.15) |
|
(0.18) |
|
(16.7)% |
|
Funds from operations * |
0.28 |
|
0.25 |
|
12.0% |
|
0.46 |
|
0.38 |
|
21.1% |
|
|
|
|
|
|
|
|
|
|
|
|
As at ($000s except as noted) |
|
|
|
|
|
|
30-June-17 |
|
31-Dec-16 |
|
Change |
|
Shareholders' equity |
|
|
|
|
|
|
977,312 |
|
994,721 |
|
(1.8)% |
|
Total assets |
|
|
|
|
|
|
1,865,942 |
|
1,891,988 |
|
(1.4)% |
Per Share Data ($) |
|
|
|
|
|
|
|
|
|
|
|
|
Book value * |
|
|
|
|
|
|
29.30 |
|
29.83 |
|
(1.8)% |
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 six months
ended June 30, 2017, 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 100 communities across Western
Canada and today manages 3.88 million sf in commercial real estate assets and 612 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 2017 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.