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Melcor Reports Second Quarter Results

EDMONTON, ALBERTA -- (Marketwired) -- 08/07/14 -- Melcor Developments Ltd. (TSX: MRD), an Alberta-based real estate development and asset management company, today reported results for the six months ended June 30, 2014. Revenue grew 6% to $98.07 million year-to-date compared to $92.35 million in 2013. Strong demand for single-family lots and multi-family land in Alberta and growth in gross leasable area under management were the primary contributors to this growth.

Net income increased 7% to $24.45 million or $0.79 per share (basic) in the first half of 2014, compared to $22.83 million and $0.75 per share (basic) in the same period of 2013.

Funds from operations (FFO) was $0.67 per share year-to-date compared to $0.52 per share in the same period of 2013, an increase of 31%. FFO adjusts for all non-cash earnings items included in income such as fair value adjustments on investment properties and stock-based compensation expense.

Brian Baker, Melcor's President and Chief Executive Officer, commented on the quarter: "We are pleased with our results for the first half of 2014. At the mid-way point of the 2014 construction season, all operating divisions are actively executing on our business plan. We continue to grow our asset base organically, with newly completed commercial projects, and through third-party acquisitions. We continue to see strong residential demand across Alberta. And we continue to invest in and prepare for the future through raw land acquisitions and obtaining planning approvals for future residential and commercial projects.

"We are well-positioned to continue to deliver on our strategy throughout 2014 and beyond."

Second Quarter Highlights

Revenue increased 30% compared to Q2-2013 and by 6% year-to-date. Strong single-family lot and multi-family land sales and growth in rental revenues contributed to this increase. Gross margins increased 2% compared to Q2-2013 and by 3% year-to-date, driven by improved margins on sales in the community development division. Development and asset management activity remain strong:


--  Year-to-date, we registered 7 of the 38 residential community projects
    under active development compared to 6 of 40 projects in 2013. The
    timing of plan registrations have a significant impact on the
    recognition of revenue.
--  During the quarter, we completed 9 commercial buildings (199,762 square
    feet) in 4 different Edmonton projects - West Henday Promenade, The
    Village at Blackmud Creek, Telford Industrial and Leduc Common. These
    buildings were transferred to the Investment Properties division.
--  Total GLA under management in our Investment Properties and REIT
    divisions has grown by 40% since June 30,2013.

We continued to invest in portfolio growth and raw land inventory with the following acquisitions:


--  We purchased 347.77 acres of land in Alberta at a cost of $18.01
    million.
--  We entered into a new joint arrangement with the purchase of a 50%
    ownership of 147.72 acres of land at a cost of $10.49 million in our
    Calgary Region.
--  We continued to expand our US portfolio with the purchased of two
    commercial buildings with a total of 59,220 sq. ft. on 3.05 acres in the
    Greater Phoenix area (Arizona) for $12.27 million (US$11.12 million).

Melcor REIT continues to execute its growth strategy with the following transactions:


--  On May 7, 2014 Melcor REIT successfully completed a bought deal issuance
    of 1,900,000 trust units at $10.65 for gross proceeds of $20.24 million.
    The underwriters subsequently exercised their over allotment option for
    an additional 245,000 trust units at $10.65 for gross proceeds of $2.61
    million.
--  Melcor REIT completed its first Right Of First Offer (ROFO) acquisition
    for Melcor properties, purchasing one newly developed property
    (Kingsview Market, 11,555 sq. ft.) and one redeveloped property (Market
    Mall, 42,586 sq. ft.) for $13.50 million.
--  Melcor REIT completed its fourth external property acquisition since IPO
    with the purchase of 107 Avenue Building, a 23,432 sq. ft. office
    building in Edmonton, Alberta for a purchase price of $5.61 million
    (including transaction costs).

We continued our tradition of returning capital to our investors:


--  Melcor paid its semi-annual dividend of $0.28 per share in Q2-2014.
--  Melcor REIT paid distributions of $0.05625 per trust unit in April, May
    and June.

Outlook

The majority of our assets are in Alberta, with steadily growing inventory in the US. We believe the economic indicators in these regions provide a strong business outlook for the foreseeable future.


--  Alberta fundamentals remain solid, with low unemployment rates, high net
    in-migration, weekly earnings exceeding the national average, strong
    capital investment, moderate inflation and relative stability in the
    price of oil. These fundamentals create a favorable environment for both
    residential and commercial property development.
--  The US continues its moderate economic recovery with some lingering
    uncertainty, but with an increasing sense of optimism.

Our key differentiators are our financial strength, diversified business model, proven track record and the experience and integrity of our personnel.

MD&A and Financial Statements

Information included in this press release is a summary of results. It should be read in conjunction with Melcor's consolidated financial statements and management's discussion and analysis for the six-months ended June 30, 2014, which can be found on the company's website at www.Melcor.ca or on SEDAR (www.sedar.com).

About Melcor Developments Ltd.

Melcor is a diversified real estate development and management company with a rich heritage of integrity and innovation in real estate since 1923.

Through integrated operating divisions, Melcor manages the full life cycle of real estate development: acquiring raw land, community planning, construction and development, and managing revenue-producing office, retail and residential assets. Melcor develops and manages mixed-use residential communities, business and industrial parks, office buildings, retail commercial centres and golf courses.

Melcor is committed to building communities that enrich quality of life - communities where people live, work, shop and play.

Melcor's headquarters are located in Edmonton, Alberta, with regional offices throughout Alberta and British Columbia. Company developments span western Canada and the US. Melcor has been a public company since 1968 and trades on the Toronto Stock Exchange (TSX: MRD).

Forward Looking Statements

In order to provide our investors with an understanding of our current results and future prospects, our public communications often include written or verbal forward-looking statements.

Forward-looking statements are disclosures regarding possible events, conditions, or results of operations that are based on assumptions about future economic conditions, courses of action and include future-oriented financial information.

This news release and other materials filed with the Canadian securities regulators contain statements that are forward-looking. These statements represent Melcor's intentions, plans, expectations, and beliefs and are based on our experience and our assessment of historical and future trends, and the application of key assumptions relating to future events and circumstances. Future-looking statements may involve, but are not limited to, comments with respect to our strategic initiatives for 2014 and beyond, future development plans and objectives, targets, expectations of the real estate, financing and economic environments, our financial condition or the results of or outlook of our operations.

By their nature, forward-looking statements require assumptions and involve risks and uncertainties related to the business and general economic environment, many beyond our control. There is significant risk that the predictions, forecasts, valuations, conclusions or projections we make will not prove to be accurate and that our actual results will be materially different from targets, expectations, estimates or intentions expressed in forward-looking statements. We caution readers of this document not to place undue reliance on forward-looking statements. Assumptions about the performance of the Canadian and US economies and how this performance will affect Melcor's business are material factors we consider in determining our forward-looking statements. For additional information regarding material risks and assumptions, please see the discussion under Business Environment and Risk in our annual MD&A.

Readers should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Except as may be required by law, we do not undertake to update any forward-looking statement, whether written or oral, made by the company or on its behalf.

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