Melcor Developments (MRD-T) and Melcor REIT (MR-UN-T) are reducing investor payouts, executive and staff salaries and laying off about 25 per cent of their employees in response to the “unprecedented economic challenges” being presented by the COVID-19 virus pandemic.
In a release issued late Wednesday, the Edmonton-based firm also blamed the “drastic drop” in oil prices caused both by the pandemic and a pricing war between two major producers, Russia and Saudi Arabia.
The extended slowdown in Alberta’s oil patch has been adversely affecting the province for several years, but developments during the past couple of weeks have caused per-barrel prices to plummet to historical lows.
Melcor and the REIT announced the following measures (some of which had already been instituted during the past two weeks):
* 47 per cent reduction to the REIT’s April distribution, announced March 20;
* 17 per cent reduction to Melcor’s dividend, announced March 11, 2020;
* board remuneration reduction for both companies;
* wage roll-back for named executive officers and management committee members;
* temporary lay-off notices to approximately 25 per cent of full-time staff;
* reduction in remuneration for all remaining staff;
* all capital spending has been deferred.
“Unprecedented times”: CEO Rayburn
“These unprecedented times call for measured and intentional action. Melcor moved quickly in our response to COVID-19, both in steps taken to stop the spread and in actions to preserve cash,” said Darin Rayburn, Melcor’s president and chief executive officer, in the release.
“These steps, although some of them have been very difficult, were necessary to position the company to weather the COVID-19 storm and resulting economic impact to our businesses and to those of our clients and stakeholders.”
Melcor also expects delayed openings at the golf courses it owns and manages, and said it will work with all its clients and stakeholders “on a case-by-case basis.”
“Our team is our work family and we significantly value each of our colleagues and so the decisions impacting our staff were the hardest to make,” Rayburn said in the release.
“We continue to monitor and respond accordingly and will keep all stakeholders informed.”
Melcor had already been impacted by the ongoing softness in the Alberta economy, with its revenue down 22 per cent to about $208 million in 2019, according to Melcor’s annual financial statements.
That was led by a 27 per cent reduction in its community development division.
More than 75 per cent of Melcor’s properties under management are located in Alberta.
The company has been moving to diversify geographically during recent years and now also operates in British Columbia, Saskatchewan and in several U.S. markets.
Melcor is a diversified real estate development and asset management company involved in all phases of the real estate development process, from raw land through to finished commercial and residential product.
Melcor develops and manages mixed-use residential communities, business and industrial parks, office buildings, retail commercial centres and golf courses.
Melcor owns a diversified portfolio of assets in Alberta, Saskatchewan, British Columbia, Arizona and Colorado.
Since 1923, the company has built over 140 communities across Western Canada and today manages over 4.5 million square feet in commercial real estate assets and over 600 residential rental units.
In addition to its Edmonton headquarters, Melcor has regional offices throughout Alberta and in British Columbia and Phoenix.
Melcor has been a publicly traded company since 1968.