FC Private Equity Realty Management Corp. and Telsec Property Corporation: A Clash Over Melcor REIT's Future

FC Private Equity Realty Management Corp. (Firm Capital) and Telsec Property Corporation (Telsec) have been vocal opponents of the recently announced Take Under Offer by Melcor Developments Ltd. (Melcor Parent) for Melcor Real Estate Investment Trust (Melcor REIT). This article explores the key aspects of the ongoing dispute, the implications for minority unitholders, and the potential consequences for Melcor REIT's future management and governance.

The Take Under Offer, announced on September 12, 2024, represents a 45% discount to Melcor REIT's Net Asset Value (NAV) of $9.09 per Trust Unit, as reported by the REIT on July 30, 2024. The offer price of $4.95 per Trust Unit is also a significant discount to the REIT's historical trading prices and NAV. In response, Firm Capital and Telsec have launched a Tender Offer of $4.95 per Trust Unit in cash for up to 1,296,316 Trust Units, matching the Take Under Offer and providing minority unitholders with an immediate opportunity to monetize their ownership without waiting for the outcome of the Unitholder vote.


The Offerors allege that the Take Under Offer represents one of the most egregious cases of failed governance controls by a group of Canadian trustees in recent years. They believe that the loss of Unitholder value is the direct result of the neglect of trustee oversight and problematic governance. Firm Capital and Telsec are urging minority unitholders to VOTE AGAINST the Take Under Offer and support their proposed value creation plan, which involves Melcor Parent acquiring the REIT at 95% of NAV.


If the Take Under Offer succeeds, minority unitholders may face significant financial losses, as the offer price represents a substantial discount to the REIT's NAV and historical trading prices. However, if the Take Under Offer fails, Firm Capital and Telsec intend to use their expanded holdings to hold management accountable and help ensure the future success of Melcor REIT for the benefit of all Unitholders. They have identified substantial, unexplained irregularities in the events and processes leading up to the announcement of the Take Under Offer, which they intend to pursue after the defeat of the Take Under Offer.

In conclusion, the ongoing dispute between Firm Capital, Telsec, and Melcor Parent highlights the importance of proper governance and oversight in protecting the interests of minority unitholders. The outcome of the Take Under Offer will have significant implications for the future of Melcor REIT and its minority unitholders. As the Tender Offer deadline approaches, minority unitholders should carefully consider their options and vote accordingly.