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Melcor REIT (MR-UN-T) has sold the 283,000-square-foot Melcor Crossing retail power centre in Grande Prairie, Alta., and has announced the end of the “go-shop” period related to Melcor Developments’ controversial bid to take the trust private.
Melcor sold the property at 100 Avenue and 108 Street for $48 million, but did not identify the buyer.
Melcor Crossing is a multi-building open retail power centre on a 33.3-acre site. It is anchored by big box retailers including RONA, Staples and Dollarama, with a range of other stores and services including Michaels, JYSK, London Drugs and a Cineplex.
It includes 27 tenants across 17 buildings and was 88 per cent leased. It was constructed between 1995 and 2001 and also incorporates 1,264 parking spaces.
The sale price represents a per-square-foot value of approximately $170 per square foot.
Melcor expects the sale to net $16.3 million after closing costs, working capital adjustments and mortgage repayment. It intends to use these funds to pay down a backstop loan agreement and the REIT’s line of credit.
Melcor REIT’s ‘go-shop' period ends
The trust also reported the 90-day “go-shop” period to entertain other potential offers for Melcor REIT expired on Feb. 24 with no superior proposal being submitted.
Melcor Developments will now proceed with its attempt to buy all shares in the REIT which it does not already own (approximately 45 per cent of the units) for $5.50 per unit in cash. It would take the REIT private and become the owner of all its properties and assets.
The proposed take-private bid remains subject to a series of closing conditions, including shareholder approvals. The offer from Melcor Development is facing stiff opposition from a group of minority investors led by Firm Capital and Telsec.
They contend the $5.50 offer per share is inadequate, based on Melcor’s asset values. Firm Capital had called on Melcor to take the REIT private with an offer in the $7.96 range earlier in 2024.
"We believe both the independent committee of Melcor REIT’s Board of Trustees and Melcor Parent are well aware any price below $6.94 per Trust Unit, being $6.50 per Trust Unit plus payment of unpaid distributions in 2024 totaling $0.44 per Trust Unit (assuming a transaction were to close by the end of fiscal 2024), is not an adequate offer to Unitholders," Firm Capital stated in a release following Melcor Developments’ decision to increase its original offer in November.
Firm Capital did not reply to requests from RENX for additional comment on the takeover bid.
The special meeting to vote on the proposal is set for April 11.
If approved, Melcor Developments intends to close the transaction by the end of Q2.
The trust owned 37 properties comprising 3.1 million square feet of leasable space at the end of Q3, its most recent financial report states. Its asset value was $673 million at the end of the quarter, down about $27 million from year-end 2023.
In the wake of the Grande Prairie sale, it now owns interests in 34 properties comprising approximately 2.8-million square feet of space.
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