Quebec’s Canderel has teamed up with activist real estate investors to take Cominar REIT private for $2.2-billion, in a deal that will expand its portfolio of office towers and retail space in Quebec City, Montreal and Ottawa.
Canderel Real Estate Property Inc. is leading the group of buyers, which includes activist funds FrontFour Capital Group LLC and Sandpiper Group, as well as Artis REIT and Koch Real Estate Investments LLC.
The group, called Iris Acquisition II LP, has proposed to pay $11.75 for every outstanding Cominar unit. That represents a 13-per-cent premium to Cominar’s closing price on Friday, though it is well below Cominar’s stronger days when it was trading above $20 apiece a decade ago.
The value of the deal, including debt, is $5.7-billon.
As part of the transaction, private-equity firm Blackstone Group will buy Cominar’s industrial properties, and Montreal real estate company Groupe Mach will purchase some of the REIT’s retail real estate. Their purchase prices were not disclosed. Canderel chief executive officer Brett Miller said that capital will be used to fund the privatization of Cominar.
Canderel, which has real estate operations in Toronto, Calgary, Montreal, Vancouver, Nova Scotia, Edmonton and Ottawa, started seriously looking at Cominar in 2020 after the real estate investment trust effectively put itself up for sale by publicly announcing a formal strategic review process.
This is the first major deal for Mr. Miller, who succeeded Canderel founder Jonathan Wener as CEO in 2019 with a mandate to expand Mr. Wener’s company.
The proposed acquisition will give Canderel and the other investors in its group control over 80 of Cominar’s 310 properties, including Gare Centrale, the main train station in Montreal with retail, industrial and office buildings.
The Cominar privatization deal is one of the largest commercial real estate deals so far this year and shows investor interest in Montreal and Ottawa – two regions where home prices have jumped since the start of the pandemic.
Mr. Miller said the development potential at Gare Centrale was significant and added Canderel could build condos and apartments in that area.
Downtown office buildings and retail have suffered under the pandemic’s work-from-home requirements. It is not known whether vibrancy will return to the city’s cores.
Over all, investor interest in Canadian commercial real estate has increased this year after the uncertainty of the economic slowdown in 2020. Investment reached a record $14-billion in the second quarter of this year, with the highest-valued deals in industrial properties, land and apartments, according to commercial real estate services firm CBRE.
Mr. Miller said Canderel had approached several large investors, including Canadian pension funds, in its bid to acquire Cominar. He said his company was not getting into activist investing even though his group of investors include Sandpiper, which successfully installed new board members at several REITs including Artis, and FrontFour, which has installed board members at other REITs.
“I would not call us a public market player,” Mr. Miller said. He would not disclose the names of the other investors in his group. Canderel and Sandpiper already own some Cominar units. FrontFour holds a 8.5-per-cent stake in the REIT.
Cominar’s independent board trustees have recommended the deal, according to a Canderel press release. In order for the deal to succeed, a majority of Cominar unitholders must vote in favour of the deal. An outside PR company, National, said Cominar’s vote of unitholders will take place on or about Dec. 21.
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