Canderel-led investor group to buy Cominar REIT for $ 2.2 billion

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The Canderel-led transaction to purchase Cominar REIT will expand its portfolio of office towers and retail space in Quebec City, Montreal and Ottawa. The value of the deal, including the debt, is $ 5.7 billion.Christinne Muschi / The Globe and the Post

Quebec-based Canderel has partnered with real estate activist investors to acquire Cominar REIT for $ 2.2 billion

Canderel Real Estate Property Inc. leads the buyer group, 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 paying $ 11.75 for each outstanding Cominar unit. That’s a 13 percent premium to Cominar’s closing price on Friday, though it’s well below Cominar’s stronger days when it traded above $ 20 apiece a decade ago.

The value of the transaction, including the debt, is $ 5.7 billion.

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As part of the transaction, private equity firm Blackstone Group will purchase Cominar’s industrial properties and Montreal real estate company Groupe Mach will acquire a portion of the REIT’s retail properties. Their purchase prices were not disclosed. Canderel’s chairman of the board, Brett Miller, said the capital will be used to fund Cominar’s privatization.

Canderel, who operates real estate businesses in Toronto, Calgary, Montreal, Vancouver, Nova Scotia, Edmonton, and Ottawa, began taking Cominar in serious form in 2020 after the real estate fund effectively put itself for sale by publicly announcing a formal strategic review process .

This is the first big deal for Mr. Miller, who succeeded Canderel founder Jonathan Wener as CEO in 2019 with the mandate to expand Mr. Wener’s company.

The proposed acquisition will give Canderel and the other investors in his group control of 80 of Cominar’s 310 properties, including Gare Centrale, Montreal’s main train station, home to retail, industrial and office buildings.

The Cominar privatization deal is one of the largest commercial real estate deals to date this year and shows investor interest in Montreal and Ottawa – two regions where home prices have skyrocketed since the pandemic began.

Mr Miller said the development potential at Gare Centrale was considerable, adding that Canderel could build condominiums and apartments in the area.

Downtown office buildings and retail stores have suffered from the demands of the pandemic to work from home. It is not known if the vibrancy will return to the core of the city.

Overall, investor interest in Canadian commercial real estate has increased this year following the uncertainty surrounding the 2020 economic slowdown. Investments hit a record $ 14 billion in the second quarter of this year, with the highest transactions in industrial real estate, land and housing, according to commercial real estate services company CBRE.

Mr Miller said Canderel reached out to several large investors, including Canadian pension funds, in its bid to acquire Cominar. He said his company is not getting into activist investments, despite his group of investors including Sandpiper, which has successfully installed new board members at several REITs, including Artis, and FrontFour, which has installed board members at other REITs.

“I wouldn’t call us a public operator,” Miller said. He did not want to reveal the names of the other investors in his group. Canderel and Sandpiper already own some Cominar units. FrontFour has an 8.5 percent stake in the REIT.

Cominar’s independent trustees recommended the deal, according to a press release from Canderel. For the transaction to be successful, a majority of Cominar shareholders must vote in favor of the transaction. An outside public relations firm, National, said the Cominar shareholders’ vote will take place on or about December 21st.

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