A major transaction shakes up the commercial real estate community. The Montreal-based Canderel and its partners announce their offer to buy and then privatize the real estate investment fund (FPI) Cominar, the leading real estate company in Quebec with buildings worth a total of 5.7 billion.
At the end of the transaction, Groupe Mach and the American company Blackstone will respectively recover approximately 25% and 35% of Cominar’s portfolio.
The buyers propose to pay $ 11.75 in cash per outstanding unit for a total consideration of $ 2.2 billion, while taking over the bonds and mortgages on the portfolio.
It would be one of the largest real estate transactions in Quebec history, if not the most important. If it happens, the buyout will have the effect of reshuffling the cards of commercial real estate in the province.
At this price, the offer represents a premium of approximately 16.3% over the weighted average price of the last 20 days on the Toronto Stock Exchange (TSX), for the period ending October 22, 2021. Friday, the share ended the session at $ 10.36.
An independent valuation of Desjardins Capital Markets carried out on behalf of the special committee of the Board of Trustees of Cominar establishes the fair value of the units as at October 24 between $ 11 and $ 12.50. Desjardins also expressed the opinion that Canderel’s offer is fair from a financial point of view. Two other independent impartiality opinions prepared by BMO and National Bank Financial reach the same conclusion.
Cominar’s board of trustees unanimously recommends approval of the sale to Canderel, a statement released late Sunday said. The trustees will vote in a special meeting on December 21. The transaction, subject to regulatory approvals and trustee assent, is expected to close in the first quarter of 2022.
In September 2020, the Quebec REIT launched “a structured strategic review process of its potential strategic options,” jargon meaning that the fund was going up for sale.
Cominar owns 310 industrial, commercial and office buildings for a total of 3.3 million square meters.
The purchaser is a consortium. In addition to Canderel, it includes FrontFour Capital Group, the Canadian Artis REIT, the privately held Vancouver Sandpiper and the US-based Koch. FrontFour, of Connecticut, was co-founded by Zach George, Cominar’s second largest shareholder with more than 15 million shares. Mr. George has played a significant role in the transformations that the Quebec REIT has undergone over the past three years.
Apart from Mr. George, the main shareholders of Cominar are G2S2 Capital, of George Armoyan, with more than 18 million shares, CIBC, with 11.3 million shares, and the Caisse de depot et placement, with 8 , 5 million, as of December 31. As of October 24, 2021, Groupe Mach claims to hold 5.2% of the shares, or approximately 9.5 million.
“The proposed transaction is positive for all parties, including shareholders, tenants and employees,” said Brett Miller, CEO of Canderel, in an interview with Press. He says he has been working on the offer to purchase for a year.
Canderel is a Quebec company, and we have succeeded in attracting outside capital to operate, renovate and enhance buildings such as Central Station, Center Rockland and Mail Champlain. It is a good thing for Montreal and for the province.
Brett Miller, CEO of Canderel
The City of Quebec will nevertheless lose the head office of a company listed on the Stock Exchange.
Cominar’s assets separated into three parts
In a second step, the consortium will resell some 190 industrial buildings to the American Blackstone. Cominar’s industrial portfolio, with a critical mass in the Quebec City region, is considered the jewel of the REIT.
“The industrial category is particularly popular with investors like Blackstone. His participation facilitated the transaction, ”says Brett Miller, without saying anything about the price that the American will pay. One of the world leaders in real estate, Blackstone owns buildings valued at US $ 400 billion as of June 30.
For its part, Groupe Mach, chaired by Vincent Chiara, will acquire some forty assets worth 1.5 billion, including Place de la Cité and Complexe Jules-Dallaire, on Boulevard Laurier in Quebec. Mach was already a major landlord in the offices of the Old Capital. Mach also collects regional shopping centers that have long belonged to the Caisse de dépôt before their transfer to Cominar. We are talking about the Les Rivières center in Trois-Rivières, the Carrefour Frontenac in Thetford Mines and others. Mach also obtains the office buildings at 2001 McGill College Avenue and 1080 Beaver Hall in downtown Montreal.
Canderel will keep the most valuable assets
After its two resales, the Canderel consortium will keep 81 office and shopping center buildings, for a total of 1.2 million square meters. Most of the first-rate buildings belong to him: Place Alexis-Nihon, Gare Centrale, Mail Champlain, Center Rockland, Center Laval and Centropolis, also in Laval.
“The Canderel consortium will retain the most valuable portion of Cominar’s portfolio,” says Miller
Founded by Jonathan Wiener in 1975, Canderel would thus conclude the largest transaction in its history. Its workforce and the size of its portfolio under management would increase by 50%. The area under management would be 4 million square meters.