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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Melcor Developments Ltd | TSX:MRD | Toronto | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.21 | 1.85% | 11.59 | 11.41 | 11.49 | 11.59 | 11.49 | 11.49 | 10,587 | 20:59:49 |
Investment properties grew by 22,865 sf or 1% year-to-date as a result of properties transferred from our Property Development division. Revenue in our income-producing divisions (Investment Properties and REIT) was down 1% over Q3-2020 and up 1% year-to-date. Vacancy rates are up slightly due to challenging markets.
Year-to-date net income was impacted by non-cash fair value losses of $26.31 million on REIT units related to unit price appreciation compared to December 31, 2020 resulting in a net income of $11.54 million or $0.35 per share (basic) compared with a net income of $11.58 million or $0.35 per share (basic) in the same period of 2020.
Funds from operations (FFO) decreased 13% to $12.52 million or $0.38 per share over Q3-2020 and increased 32% to $39.02 million or $1.17 per share year-to-date. Changes to FFO are the result of significant swings in fair value adjustments on REIT units and investment properties.
Darin Rayburn, Melcor’s President and Chief Executive Officer, commented on the quarter: "We are pleased with our results through the first nine months of 2021. Year-to-date, we sold 408 single-family lots in Canada compared to 290 in 2020. In the prior year, we also sold 229 single-family lots in the USA.
While COVID-19 has had a modest impact on our business through the past year, our income-generating divisions have been the most sensitive to changes in consumer behaviour and work from home orders. We continue to work with our tenants to support them through this time. As of September 30, we had collected 99% of year-to-date rent. Revenue and occupancy have remained relatively stable in these divisions throughout the past year. Leasing activity through the period was stable and trending to positive.
Recreational Properties achieved record revenue and margin through the first three quarters as a result of early opening dates and favourable weather throughout the golf season.
Gross margin improved to 48% year-to-date compared to 43% in 2020 due to higher gross margin in most operating divisions, most notably the Community Development Division and the REIT.
Finally, a few acknowledgments in my final quote as president and CEO of Melcor. I am so incredibly proud of our entire Melcor team for their commitment, perseverance and resilience. The success of Melcor, and the REIT, is attributable to all the facets of the Melcor team coming together to achieve a common goal.
I’m grateful to the board, the Melcor team, our shareholders and all stakeholders for your guidance, support and friendship over the years. I look forward to watching Melcor continue to succeed."
CEO SUCCESSION PLAN AND EXECUTIVE CHANGES
Melcor Developments Ltd. today announced that its Board of Directors has appointed Mr. Tim Melton as Chief Executive Officer and Executive Chairman of the Board effective immediately. In addition, Naomi Stefura, Melcor’s Chief Financial Officer, has been promoted to the new role of Executive Vice President in addition to her continuing role as CFO, effective immediately. Darin Rayburn will continue to work with Melcor and assist with this transition until his retirement December 31, 2021.
Third Quarter Results
Given the longer term nature of real estate development, comparison of any three-month period may not be meaningful.
Revenue in Q3-2021 was down 23% compared to Q3-2020 due to the bulk sale of 196 single-family lots in Harmony (Aurora, CO) in the prior period and 41% fewer single-family lots sold in Canada in Q3-2021 compared to the prior year, partially offset by the sale of 293 paper lots (79 acres) for $13.84 million (USD$10.99 million). The US community development model differs from Canadian markets, resulting in the majority of revenue occurring in a single quarter. In Harmony, where Melcor is developing in much the same way as we do in our Canadian markets, production builders buy lots in bulk to build homes to sell to homeowners. Demand for additional lots in Harmony remains high and we are completing the third phase for sale to builders. In other US assets, Melcor advances land through the municipal approval process and then sells the land as paper lots, typically to a single builder, without doing any development. Paper lot sales transactions result in a quick return on equity, with transactions typically occurring within 18 to 24 months from land purchase to sale.
Revenue was up 13% year-to-date as a result of the 30% increase in Community Development revenue and record revenue for Recreational Properties division. The Community Development division sold 22.69 acres of commercial and industrial land for $4.68 million year-to-date (2020 - 0.80 acres, $0.42 million) in addition to the 293 paper lots sold in Q3-2021. We usually see the most revenue from lot sales in the third and fourth quarters as that is when plans typically register.
Investment properties gross leasable area (GLA) grew by 22,865 sf or 1% year-to-date as a result of properties transferred from our Property Development division in 2021. Revenue from our income-generating Investment Properties and REIT divisions was flat in the quarter and year-to-date. Growth in revenues from PD transferred assets, including properties awaiting lease-up which have not yet transferred, but where IP recognizes the revenue, offset a decline in US revenues where tenant turnover drove a decline in occupancy. Year-to-date we recognized $2.94 million in lease termination fees offsetting lower lease revenue. We continue to both renew tenants and lease new space.
FINANCIAL HIGHLIGHTS
DIVISIONAL OPERATING HIGHLIGHTS
RETURNING VALUE
Selected Highlights
($000s except as noted) | Three months ended | Nine months ended | ||||||||||
30-Sep-21 | 30-Sep-20 | Change | 30-Sep-21 | 30-Sep-20 | Change | |||||||
Revenue | 56,213 | 73,051 | (23.0 | )% | 165,030 | 145,871 | 13.1 | % | ||||
Gross margin (%) * | 47.9 | % | 36.4 | % | 31.6 | % | 48.2 | % | 43.3 | % | 11.3 | % |
Net income | 16,561 | 7,526 | 120.1 | % | 11,542 | 11,576 | (0.3 | )% | ||||
Net margin (%) * | 29.5 | % | 10.3 | % | 186.4 | % | 7.0 | % | 7.9 | % | (11.4 | )% |
Funds from operations (FFO) * | 12,516 | 14,315 | (12.6 | )% | 39,016 | 29,516 | 32.2 | % | ||||
Per Share Data ($) | ||||||||||||
Basic earnings | 0.50 | 0.23 | 117.4 | % | 0.35 | 0.35 | — | % | ||||
Diluted earnings | 0.50 | 0.23 | 117.4 | % | 0.35 | 0.35 | — | % | ||||
Funds from operations * | 0.38 | 0.43 | (11.6 | )% | 1.17 | 0.89 | 31.5 | % | ||||
Dividends | 0.12 | 0.08 | 50.0 | % | 0.32 | 0.26 | 23.1 | % | ||||
As at ($000s except share and per share amounts) | 30-Sep-21 | 31-Dec-20 | Change | |||||||||
Total assets | 2,054,109 | 2,001,285 | 2.6 | % | ||||||||
Shareholders' equity | 1,077,716 | 1,077,429 | — | % | ||||||||
Total shares outstanding | 32,966,423 | 33,091,061 | (0.4 | )% | ||||||||
Per Share Data ($) | ||||||||||||
Book value * | 32.69 | 32.52 | 0.5 | % |
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, 2021, 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 4.66 million sf in commercial real estate assets and 603 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 2021 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 and the additional disclosure under Business Environment and Risk in this 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 x4707 ir@melcor.ca
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