May 28, 2021
[1 min Read]
I believe Melcor REIT is an undervalued REIT that currently holds real estate worth more than reported values compared to market value.
Melcor is trading at a severe discount to its NAV/share at $14.29 With the NAVPS being nearly double the current unit price this REIT provides a great discount. The competitive advantage that currently hold with its parent company Melcor Developments lends itself to be a great insider advantage for acquiring properties. Melcor REIT has a very attractive AFFO yield at 12.73%, this shows the company can use its properties and achieve a high NOI. Upside: 1) Alberta's economy strengthens with a rise in oil prices floating the market with cash and increasing the value of their properties. 2) They increase their portfolio through acquisitions and increasing its monthly distributions. Downside: 1) Melcor REIT cuts their distributions again and further lowering the price and either a) required to reduce their payout or b) shell out some of their retained earnings thus reducing available cash for further investments. 2) Alberta suffers further, and the portfolio's value decreases to a state which P/NAVPS is > 1. Tenant retention was 60% in 2019.