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Melcor Developments Ltd., (TSX:MRD) Second Quarter Results On Par With 2008

^{Published on 2009-07-30 13:37:55, Last Modified on 2009-07-30 13:38:16 - Market Wire}
 

 EDMONTON, July 30 /CNW/ - Melcor Developments Ltd., an Alberta-based real estate development Company reported net earnings of $3,929,000 or $0.13 per share (basic) on revenue of $43,362,000 for the six months ended June 30, 2009 compared to net earnings of $8,075,000 or $0.26 per share (basic) on revenue of $40,711,000 for the same period in 2008. Earnings for the three months ending June 30, 2009 were $3,746,000 or $0.12 per share (basic) on revenue of $27,279,000 compared to earnings of $3,702,000 or $0.12 per share (basic) on revenue of $19,779,000 during the same period in 2008. Earnings are down year to date compared to 2008; however, the three months earnings for both years are comparable. The main reason for the decrease in the year to date earnings is due to a lower margin percentage in the Community Development Division. In order to reduce inventory levels, the division offered discounts and/or interest relief to builders. Some of these promotions are still available in those communities where sales are below expectations. For the three months ended June 30, the margin percentage for 2009 is significantly below the level in comparison to the same period in the prior year. This will continue until the current inventory has cycled through the system. Future margins are expected to move closer to the historical average as the reduced selling prices are expected to be offset by lower development costs. The division also generated less interest income on its agreements receivable due to some one time concessions made to builders in communities where housing sales were slow in order to achieve competitive pricing. In the first quarter the division also incurred some one time write downs of agreements receivable and forfeited a deposit on an option. No write downs were required in the current quarter. Going forward, the division is beginning to see an increase in lot sales due to an increase in the demand for housing in general, particularly in the affordable housing (first time buyer) market, and expects to see increased sales in those communities which have been lagging in demand. Future development plans are contingent upon achieving strict presale requirements, expected demand for single family lots and managing the current level of inventory which is considered to be on the high side. Early in July 2009, the Company sold 122 acres of land held in a joint venture in Lacombe which was originally purchased in 2007, the year that land prices in Alberta peaked, for a small gain. In June, the Property Development Division transferred a 67,000 sq. ft. retail and office building in south Edmonton, Alberta, and two retail buildings in Chestermere, Alberta, comprising 18,600 sq. ft., to the Investment Property Division, and recorded an inter-divisional transfer of $31,210,000. The division continues to see strong leasing interest in its inventory of commercial and office development sites. The Company's retail commercial and office portfolio continues to grow in size and profitability as occupancy rates hold, rents are renewed at higher rates and new assets are added. In late June, the Investment Property Division purchased 50 condominium units for rental income in Phoenix, Arizona at a value of just over $4 million or about one third of the value that these units were selling for in 2007. These units are generating residential rental income for the Division. The Black Mountain golf course in Kelowna was officially opened to the public in June 2009. The opening of the course was a success and is now generating significant traffic into the Community. This will help to stimulate single family sales. Securing adequate financing of its real estates assets continues to remain a priority for the Company. While real estate financing is experiencing a tightening of credit terms, the Company does not perceive any major issues related to new mortgage financing/refinancing or as it relates to its main credit facility which is currently undergoing some revisions to reflect the current business environment. The Company believes that the economies in those regions where it operates are gaining strength and that a moderate recovery is taking place. The real estate markets are rebalancing as expected aided by low interest rates and a moderate return of confidence in the markets and the economy. The Company remains confident that it has the appropriate assets, capital resources and experienced management team to manage operations through the remainder of the current real estate market adjustment. 

For further information: Business Contact: Ralph B. Young, President & CEO, [ info@melcor.ca ], Tel: (780) 423-6931; Investor Relations: Michael D. Shabada, C.A., V.P. Finance & CFO, [ info@melcor.ca ], Tel: (780) 945-2819