MONTRÉAL, Dec. 3, 2021 /CNW Telbec/ - Letko, Brosseau & Associates Inc., ("Letko Brosseau"), a Montreal based investment firm which exercises control over approximately 3.3% of the outstanding units of Cominar Real Estate Investment Trust ("Cominar" or the "Company") reaffirms its intention to vote AGAINST the proposed offer to purchase by Iris Acquisition II LP of $11.75 per unit.
Cominar is a leading Canadian real estate investment trust. It is the owner of prime real estate assets such as Gare Centrale, Alexis Nihon and Rockland in Montreal and Place de la Cité in Quebec City. The Company's portfolio currently comprises approximately 36 million square feet of leasable area and has significant future development potential. Cominar is also the largest industrial property owner in the Province of Quebec. Industrial assets have benefitted from exceptional market fundamentals with peak levels of occupancy, unprecedented rental growth and record asset values.
On October 24, 2021, Cominar announced an agreement to be acquired for $11.75 per unit in cash by Iris Acquisition II LP (the "Purchaser" or the "Consortium"), an entity created by a consortium led by Canderel Real Estate Property Inc. and including FrontFour Capital Group LLC, Artis Real Estate Investment Trust, with partnerships managed by the Sandpiper Group. In connection with the transaction, Group Mach will acquire approximately $1.5 billion of retail and office properties and Blackstone will acquire Cominar's industrial portfolio from the Purchaser.
After reviewing Cominar's Management Information Circular published on November 24, 2021, we note that the offer of $11.75 per unit represents a significant discount to the Company's own assessment of net asset value of $14.72 as of September 30, 2021 and the $15 level at which the shares traded just prior to the covid-19 outbreak. Our own valuation work leads us to conclude the net asset value could be higher than the Company's own assessment. In fact, Cominar's management even wrote in its 2019 Investor Day Presentation that "[Cominar's] IFRS value [is] materially below market value," which is consistent with our own assessment.
Cominar has asserted, in its circular, that the transaction is in the shareholders' interest for a variety of reasons. We believe that all the reasons given are flawed:
The timing of this proposal appears to be ill-conceived as Cominar is still in the early stages of emerging from the global covid-19 pandemic that has kept malls and offices closed over extended periods of time in 2020 and 2021. Cominar's share price saw a steep decline from pre-pandemic levels and has yet to fully recover.
Current operating conditions are very encouraging. Investment activity within the commercial real estate sector continues to build momentum with increased levels of investment and growing interest from developers looking for well-located sites. Canadian lenders continue to provide substantial liquidity for the real estate market. Industrial assets, such as those owned by Cominar are experiencing unprecedented levels of demand.
Given the continuing economic recovery, substantial development opportunities and the remarkable performance of the industrial assets, the Company is well-positioned to continue to grow revenues, optimize its portfolio, and strengthen its balance sheet. A skilled and diligent management team should be able to deliver significantly more value to shareholders than the current offer. Our preference is to see Cominar remain a strong Quebec based publicly traded entity.
1 Nareit, Q3 2021 | ||
2 Factset financial data and analytics. December 1, 2021 |
FORWARD-LOOKING STATEMENTS
Certain information contained in this press release may constitute forward-looking statements. Forward-looking statements may include estimates, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Although Letko Brosseau believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. These statements are subject to certain risks and uncertainties and may be 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 qualified in their entirety by this cautionary statement. The forward-looking statements contained in this press release are made as of the date hereof and Letko Brosseau does not assume any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless expressly required by applicable securities laws.
SOURCE Letko, Brosseau & Associates Inc.
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