Real estate has been a passion for Darin Rayburn from the moment he accepted his first job in the industry three decades ago.
“Once real estate is in your blood it stays in your blood. I don’t have any specifics to tell you at this point; I can tell you that my goal is to stay in real estate. What that looks like, we’ll wait and see,” Rayburn told RENX.
Melcor announced in August that Rayburn would be retiring at the end of 2021 from both divisions of the company.
On Wednesday, Melcor Developments announced Tim Melton is succeeding Rayburn as CEO and executive chairman of the board, effective immediately.
Naomi Stefura, Melcor’s chief financial officer, has also been promoted to the new role of executive vice-president in addition to continuing as CFO.
Rayburn will assist with the transition until his retirement Dec. 31. He also remains as CEO of Melcor REIT until year-end.
“Tim has been a big part of this company for a long, long time. Tim and I were working hand in hand and it seemed like a natural transition at this point for Melcor Developments as they figure out where the company is going and progressing,” said Rayburn.
“For him to be involved and for Naomi to get promoted really makes sense.
“It makes the transition smoother. It’s business as usual at Melcor.”
The Melton family is Melcor’s largest shareholder. Tim Melton had been serving as Melcor’s board chair.
The attraction of the real estate industry
Rayburn said two aspects of the business have kept him involved in real estate for the past 30 years, including the relationships with other industry professionals.
“That really appealed to me,” he said, quickly moving on to the second. “Honestly, too, I like the thrill of the chase. Real estate is about the thrill of the chase. It’s about creating a legacy, when you develop or buy or whatever you create, to be able to drive by it every day and see it and feel it.
“I also love the fact that it’s bricks and mortar. You can touch it, you can understand it.”
For the immediate future, he plans to take care of some personal business ventures.
“I plan to remain active in the Alberta real estate market . . . I’ve got my own holding company,” he said. “I’ve got some investments that I will be focusing more on.
“I’m excited for what’s next, but I’d be lying if I said there wasn’t that nervousness about leaving the company I’ve been such a big part of for so long and a group of people I’m so, so fond of,” he said.
“It’s been such an incredible learning journey and I leave Melcor with wonderful memories, and experiences and friends. I’m sure that’s going to carry through to my next chapter.”
Rayburn’s time at Melcor
Rayburn has spent 19 years at Melcor, holding CEO and senior board roles since 2013.
An Alberta native, he graduated from the University of Alberta with a bachelor of arts in economics and political science.
“I wanted to go to law school. I wrote my LSAT and did pretty well, but I took a year off just to work and make some money and in that year off I got my first job at Cambridge Shopping Centres and here I am 30 years later, still in my year off,” he said.
That first job? Wrapping Christmas presents.
“I became the management trainee at Cambridge Shopping Centres and I was (in) Edmonton at three different Cambridge shopping centres for a total of three years.”
He then spent nine years with Oxford Properties Group – including two years in Winnipeg – and eventually became its general manager in Edmonton.
Rayburn then joined Melcor in 2002 as vice-president of investment properties.
“One of the things I’ve learned over the years is that real estate is dynamic. It ebbs and flows. Especially coming from Western Canada and Alberta, you go through up markets, you go through down markets,” Rayburn said, “and I’ve learned there’s opportunities in every market.
“One of the things we did so great at Melcor Developments is we looked for the opportunities before they were hot. We were investing in the U.S. in 2008-2009 when other people weren’t. We expanded our commercial portfolio starting in 2002,” he continued, noting that was the reason he was initially hired by Melcor.
“And 2002 in Alberta it wasn’t that great here, let me tell you.”
Melcor established in 1923
Melcor has been in business since 1923. The company has built over 140 communities and commercial projects across Western Canada and today manages 4.66 million square feet in CRE assets and 603 residential rental units.
That represents an asset value of $2 billion – close to 90 per cent of the assets in Alberta.
Melcor has been a public company since 1968.
“You don’t survive that long by taking uncalculated risks. A big part of our culture here has always been, you know risk and reward is important, but understand what the risk is and what you’re giving up to pursue that risk,” said Rayburn.
Melcor launched the REIT in May 2013, the week before a significant change in the interest-rate climate and a year before the Alberta recession started in late 2014 with a collapse in oil prices.
“But having said that, if you look where the REIT’s come from, it’s doubled in size. Even during these tough times we still found opportunities, whether it’s from buying third-party assets or from buying Melcor Developments’ development assets. We were still able to grow,” said Rayburn.
“Without a doubt, though, where the challenge has been is when REIT unit values were depressed.
“It’s trying to find a deal that’s still accretive if you have to raise money by selling your unit value. Not just the Melcor REIT but all REITs, whether it’s Alberta or everywhere, face those types of markets. You have to find ways to get a bit more creative.
“Creativity has become an important part of any real estate transaction, whether buying or selling or developing or leasing. We’ve definitely had to be a little more creative on every deal and understand the hot buttons for buyers or sellers or tenants. That’s been important.”
As a company with a long history, there are also memories of tough times from the past. That is something that has been passed down to current management.
“Financing has been important. Melcor survived the ’80s – one of the few companies that survived the ’80s – and you sort of realized how important it was not to be over-leveraged. How important it was to have that great relationship with your bankers and your institutions,” he said.
“I don’t think that’s changed but I think that has been heightened.
“This strange time” of COVID
“Low interest rates right now is what’s keeping the real estate market moving during this strange time.”
Before moving on, Rayburn said he wanted to ensure Melcor got through the COVID-19 pandemic on strong footing.
“Challenging times for sure but also incredibly gratifying to lead our teams through the most uncertain times of my 30-year career,” he said.
“We initially cut our distributions in both Melcor REIT and Melcor (Developments) early in COVID anticipating the worst, but have since raised the distribution twice in the REIT as we move our way through the recovery.
“We took some criticism in the REIT from a vocal minority but were also applauded by many unitholders as it was the right thing to do considering the circumstances.”
Many of the initial cost-cutting measures have been reversed over the intervening 18 months.
“We defended our actions and the market accepted it, as evidenced in the increased REIT unit price from pandemic lows,” Rayburn said. “While the REIT distribution is not back to pre-pandemic levels, it is moving closer.
“Shares in Melcor Developments are above pre-pandemic levels – hit a low during the pandemic of $5.88, today at $14.40. For the REIT, the units are not yet at pre-pandemic levels but inching closer – pandemic low of $3.26, today at $6.72.
“I’m proud and encouraged by our recovery and the future outlook for both companies is strong. In fact, one might argue stronger than the pre-pandemic outlook.”