Debate around the value of Cominar

Major Cominar unitholders believe that the $ 5.7 billion bid (including debt) disclosed on Sunday does not reflect the real value of the Quebec real estate investment trust and are considering opposing the bid. transaction.

“I think the company is worth a lot more than that,” said investor George Armoyan over the phone, stressing that he had not yet decided whether he was going to support the operation. “I expected a larger amount. ”

With a 10% stake in Cominar, George Armoyan is the largest unitholder.

Cominar’s stock appreciated 12% on Monday, to $ 11.61, the day after the unveiling of an agreement whereby Cominar agreed to be bought out by a consortium headed by Montreal real estate developer Canderel at a price of 11. $ 75 per unit.

On Bay Street, the consensus surrounding Cominar’s net asset value stands at $ 12.78 per unit, Desjardins Securities said in a note released Monday.

Cominar indicated in its financial statements last summer that the value of its net assets per unit stood at $ 14.54 at the beginning of July, up from $ 15.44 a year earlier. On Sunday, however, management pointed out that on October 24, an independent Desjardins valuation carried out for Cominar established the fair value of the units in a range of $ 11.00 to $ 12.50.

“Our calculations are based on a property-by-property analysis of cash flow, property condition and market value,” Canderel CEO Brett Miller said on Monday. The value of the business was calculated by adding the very detailed value of each of the properties. “

Montreal asset manager Letko Brosseau is just as thoughtful as George Armoyan.

He specifies that Letko Brosseau owns just over 6 million shares of Cominar, the equivalent of a stake of around 3%.

The Cominar share was worth $ 25 nine years ago. The stock has since fallen as low as $ 6 during the pandemic before rebounding in recent months.

To be carried out, the transaction must extract 66.7% of the votes. The Canderel-led consortium controls 10.2% of the stake, while Mach Capital, which supports the transaction, owns 5.2%.

Armoyan “will not sabotage the operation”

George Armoyan took a nosedive in buying as the share’s value traded around $ 7 last year. “I bought at the right time and should be happier than I look. I can’t complain about the potential gain because my purchase cost is low, but I sympathize with those who invested at a higher price, ”says one who says he spoke to a few disgruntled institutional investors on Monday . “I don’t want to be an obstacle. I will not sabotage the deal if most of the unitholders are in favor of the deal. “

TD analyst Jonathan Kelcher considers the price offered by the consortium “a little disappointing”. This expert calculates that the net asset value is $ 13.20 per unit.

“It’s rare to see a Canadian real estate investment trust being bought at a discount to the equity in its assets. The average premium since 2004 has been 12%, ”he emphasizes.

Counter-current investor (contrarian) who has a reputation as an activist, George Armoyan began to accumulate shares shortly after the start of the pandemic to hold more than 20 million. His investment in Cominar is made through his holding company G2S2 Capital, whose acronym is taken from his first name as well as those of his wife and two sons (George, George jr, Simé and Sam).

Cominar owns 310 industrial, commercial and office buildings in Quebec and Ontario. An extraordinary meeting of unitholders is scheduled for December 21, while Cominar is due to publish its next quarterly results next week.

With André Dubuc, Press

“The structure was no longer adequate”, according to Fitzgibbon

The Quebec Minister of Economy and Innovation, Pierre Fitzgibbon, welcomed the offer for Cominar with resignation. “Cominar’s corporate and fiscal structure was no longer adequate for its development,” he indicated in writing. Of course, it would have been preferable for the company to remain autonomous. However, the vast majority of strategic assets, following the transaction, remain managed by Quebec companies. “

Little surprised retailers

The rumor was circulating, say many retailers who say they are not surprised by the offer of Canderel and its partners, in particular Groupe Mach, to buy Cominar, implying at the same time the acquisition of its shopping centers. Merchants affected by the transaction claim that the arrival of new donors will not bring any change at this time. They nevertheless wish that they improve the offer in order to increase attendance.

“We have more than 40 of our stores in Quebec that are [situés dans les centres commerciaux] from Cominar. It is our biggest landlord, says Louis Dessureault, vice-president of operations of Groupe Marie Claire (Claire France, Marie Claire, San Francisco, Grenier, Dans un Jardin). We expected that, ”he says, adding that his company has always had a good relationship with Cominar.

Groupe Marie Claire operates stores at Center Rockland, Mail Champlain and Center Laval, all of which are Cominar’s properties. ” [Les nouveaux propriétaires], we will welcome them. As Quebec retailers, we just want to be considered, adds Mr. Dessureault. Of course it’s impressive, it’s a very big deal, there are a lot of players involved. Groupe Marie Claire has a total of 300 stores, the majority of which are in Quebec.

Increase attendance

Andrew Lutfy, owner of Groupe Dynamite, believes “it’s a good deal for everyone”. “I think there will be investments made in the properties. The wish would be to create value, to make investments to ensure that it increases traffic in these shopping centers. ”

François Roberge, owner of La Vie en rose stores, is optimistic that Groupe Mach and Canderel will make “high-rise” investments, such as real estate projects near shopping centers, to attract a critical mass of customers. It also recalls the importance of having a variety of merchants under one roof.

“It’s not always the environment with beautiful floors that is important,” he explains. The important thing is the mix merchant and that the customer finds a good experience in the centers. They have to be transformed to have restaurants, other services, not just food. fashion, so people can spend more time there. We just hope they make good decisions. I don’t know them well enough. We have to work together because the value of a shopping center goes with the quality of its merchants. Change never hurts. ”

“We need each other”

Linda Goulet, CEO of Panda Shoes, does not seem to apprehend the arrival of Canderel and Groupe Mach either. “I have been experiencing changes for 45 years,” recalls the one whose company has 22 stores. I’ve seen all kinds of them. We deal with the new ones. ”

“We hope that this is a landlord who knows the retail business, that it is not just investments or investors. In the retail trade, we have eaten the slap. It hasn’t been easy for anyone, she says, noting that donors have also had difficult days. Everyone is in business trying to make money. We need each other. ”

As for Matelas Dauphin, we are not afraid of the arrival of a new owner at Center Laval, where one of the company’s 23 stores is renting space there. Unlike several traders interviewed, Steven Thériault, general manager of the company, was made aware of the transaction by reading the newspapers on Monday. “It won’t have any impact for us,” he believes. From the moment the lease is signed, we have to pay. It is certain that if they want to lower the prices, we will be happy! ”

According to MTY Food Group, which manages the Bâton Rouge, Tiki-Ming, Thaï Express and Mikes chains among others, only time will tell what the deal will change. “Cominar is a very important donor for MTY and our relations are very good, as they are with Canderel and Mach,” commented, by email, the CEO, Éric Lefebvre. There are some very good properties in Cominar’s portfolio. It remains to be seen what the new owners will do with it. [sur le plan des] long-term strategies and investments. “