Firm Capital is calling for Melcor Developments to take its REIT private.

Edmonton-based Melcor Developments controls Melcor REIT, holding 55% of its outstanding units. Firm Capital ranks among the REIT’s largest minority shareholders.

The REIT is struggling financially and recently announced that it would focus its investments on Alberta. In addition, the REIT is undergoing a strategic review in a bid to strengthen its balance sheet and increase unit value.

First Capital sent a letter to the development company urging it to take the REIT private. Toronto-based Firm Capital said it is disappointed with “the consistent disconnect” between the REIT’s trading price and net asset value.

“Melcor Developments Ltd. took the REIT public,” wrote Firm Capital in the letter, which the company issued publicly. “It is obvious to unitholders that the process has not worked out. As such, as the 55% owner and external manager, they should now take the REIT private.

Firm Capital said the REIT’s board is obligated to find a way to maximize value for all unitholders, and failure to do so is an “oppressive action” toward them. The company is calling for Melcor Developments to repurchase the 45% minority interest in the REIT and regain full ownership.

The REIT is trading in the $2 to $3 range following an IPO priced at $10 per unit.

Firm Capital express displeasure with the way that the REIT has managed its debt.

Pictured: Melcor retail property in northwest Calgary

Photo: Melcor REIT