Letko Brosseau Reasserts Its Intention to Vote AGAINST $11.75 Offer for Cominar Real Estate Investment Trust Units

MONTRÉAL, December 3, 2021 / CNW Telbec / – Letko, Brosseau & Associates Inc., (“Letko Brosseau”), a Montreal Resident investment firm that has control of approximately 3.3% of the outstanding shares of Cominar Real Estate Investment Trust (“Cominar” or the “Company”) confirms its intention to AGAINST the proposed offer to purchase by Iris Acquisition II LP of . agree $ 11.75 per unit.

Cominar is a leading Canadian real estate fund. It owns first class properties such as Gare Centrale, Alexis Nihon and Rockland in Montreal and Place de la Cité in Quebec. The company’s portfolio currently comprises approximately 36 million square feet of lettable space and has significant future development potential. Cominar is also the largest commercial property owner in the province Quebec. Industrial assets have benefited from exceptional market fundamentals with peak occupancy, unprecedented rental growth and record asset values.

on October 24, 2021, Cominar announced an agreement to acquire for $ 11.75 per unit in cash from Iris Acquisition II LP (the “Buyer” or the “Consortium”), an entity formed by a consortium led by Canderel Real Estate Property Inc. and including FrontFour Capital Group LLC, Artis Real Estate Investment trust, managed with partnerships by the Sandpiper Group. In connection with the transaction, Group Mach is acquiring approx. $ 1.5 billion of retail and office real estate and Blackstone will acquire Cominar’s industrial portfolio from the buyer.

After reviewing Cominar’s management information circular published on November 24, 2021, we take note that the offer from $ 11.75 per unit a considerable discount compared to one’s own assessment of the net asset value of $ 14.72 away September 30, 2021 and the $ 15 Level at which stocks were trading just before the Covid-19 outbreak. Our own valuation work leads us to conclude that the net asset value may be higher than the company’s own assessment. In fact, in its Investor Day 2019 presentation, Cominar’s management even wrote that “[Cominar’s] IFRS value [is] well below the market value “, which corresponds to our own assessment.

Cominar stated in its circular that the transaction is in the interests of shareholders for various reasons. We believe all of the reasons given are flawed:

  1. The circular claims that the structure of the public real estate investment trust (REIT) is not optimal for Cominar.
  • We disagree and believe that REITs allow investors to get exposure to the real estate sector through a liquid and tax efficient structure. 40 countries have enacted REIT laws, 528 listed real estate companies are included in the FTSE EPRA / Nareit Global Real Estate Index, consisting of $ 2 trillion total market capitalization.1 The Canadian S&P / TSX Composite Index has 22 public REITs among its components with a total market capitalization of $ 67 billion.2
  • The circular claims that diversified REITS trade at a discount on public markets.
    • Since the current proposal intends to take Cominar private and dispose of the assets, such a discount should not be reflected in the offer price.
  • The circular claims that Cominar has a capital structure that uses high leverage and limited liquidity.
    • Cominar’s leverage of 55% and debt / EBITDA ratio of 10.5x are in the range of comparable competitors.
    • Liquidity is sufficient with an interest coverage ratio of 2.5x, $ 341 million available in cash and unused lines of credit and $ 1.7 billion in unencumbered assets.
  • The circular claims significant investment requirements to sustain the growth of the office and retail segments.
    • Cominar has identified intensification opportunities, including a potential of nearly 10,000 residential units on its existing properties. The value can be derived from a combination of sales of air rights, partnerships or independent development.
    • Approximately a third of Cominar’s properties are near new public transport projects such as REM and Tramway. The company benefits directly from these large infrastructure projects.
  • Independent evaluation and fairness opinions
    • The independent valuation and fairness opinion prepared by Desjardins Securities Inc. contains inappropriate assumptions, including penalty capitalization rates, “comparable” transactions made in 2006 and applies a discount to Cominar’s reported net asset value in the range of 20% to 30% while ‘comparable’ transactions are carried out with an average premium of 18%.
  • Treating other stakeholders fairly
    • During the 13 month strategic review process, there was little to no communication with shareholders on the progress of this review. The following proposal lacks important information for shareholders to fully evaluate the offer.
    • Despite inquiries from shareholders and analysts, the company has not disclosed the price Blackstone will pay for Cominar’s industrial assets, nor the price the buying consortium will pay for their stake in the assets.
    • The Cominar CEO is received $ 11.6 millionincluding one $ 5.2 million Termination fee should go through the proposal.
    • Suspending the distribution for the remainder of 2021 is not in the best interests of shareholders and will have a negative impact on value.

    The timing of this proposal seems ill-considered as Cominar is still in the early stages of overcoming the global Covid-19 pandemic, which kept shopping malls and offices closed for extended periods in 2020 and 2021, a steep decline from pre-pandemic levels and has yet to fully recover.

    The current operating conditions are very encouraging. Investment activity in the commercial real estate sector continues to pick up momentum as investment rises and interest from developers looking for well-located locations. Canadian lenders continue to provide significant liquidity to the real estate market. Industrial assets such as those owned by Cominar are experiencing unprecedented demand.

    With the ongoing economic recovery, significant development opportunities and remarkable industrial plant performance, the company is well positioned to continue growing sales, optimizing its portfolio and strengthening its balance sheet. A qualified and diligent management team should be able to offer shareholders significantly more value than the current offering. We want Cominar to stay strong Quebec Listed company with headquarters.

    1 Nareit, 3rd quarter 2021

    2 facts about financial data and analysis. December 1, 2021


    Certain information in this press release may constitute forward-looking statements. Forward-looking statements may include estimates, expectations, opinions, forecasts, projections, guidelines or other statements that are not statements of fact. While Letko Brosseau believes that the expectations reflected in such forward-looking statements are reasonable, there can be no guarantee that these expectations will prove to be correct. These statements are subject to certain risks and uncertainties and are based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. Letko Brosseau’s forward-looking statements are expressly restricted in their entirety by this cautionary statement. The forward-looking statements contained in this press release speak as of the date of this press release and Letko Brosseau undertakes no obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, except as expressly required by applicable securities laws.

    SOURCE Letko, Brosseau & Associates Inc.

    For more information: Peter Letko, Senior Vice President, (514) 499-1200, [email protected]; Daniel Brosseau, President, (514) 499-1200, [email protected]