Canderel CEO Brett Miller. (Courtesy Canderel)

Cominar REIT (CUF-UN-T) has entered an agreement to be acquired by a Canderel-led consortium in a transaction which values the trust at $5.7 billion.

The arrangement involves the sale of various parts of the Cominar portfolio to several different purchasers. It follows a 13-month strategic review by a committee of independent Cominar trustees.

The consortium includes Montreal-based Canderel, FrontFour Capital Group LLC, Artis Real Estate Investment Trust, and partnerships managed by the Sandpiper Group. In addition, Koch Real Estate Investments LLC, and Artis are providing preferred equity for the transaction.

As part of the transaction, Group Mach will acquire approximately $1.5 billion of Cominar’s retail and office properties, and Blackstone will acquire Cominar’s industrial portfolio for an undisclosed price.

The transaction will be one of the largest commercial real estate takeovers of the year.

Offer is for $11.75 per unit

“Following the extensive strategic review process, and based on the recommendation of the independent trustees of the board, we are pleased to have reached an outcome that provides immediate value to our unitholders,” said Sylvain Cossette, president and chief executive officer of Cominar, in the announcement.

“Following this rigorous review process, we are confident that Canderel, Mach and their partners are well-positioned to continue investing in key assets over the long term, while also serving our valued tenants and communities.”

The purchasers have offered $11.75 in cash per Cominar unit, a 16.3 per cent premium to the 20-day volume-weighted average price as of Oct. 22.

The price implies an equity value for Cominar of approximately $2.2 billion and an enterprise value of $5.7 billion.

“This transaction will provide significant benefits to key stakeholders, including tenants of Cominar, by leveraging the resources of the Canderel platform and a Québec-led group of investors with a long-term perspective to unlock opportunities for growth and development in the communities where Cominar operates,” said Brett Miller, CEO of Canderel, in the announcement.

The Cominar portfolio

Cominar’s portfolio included 310 properties comprising 35.7 million square feet of space as of April 6 and is focused on the Greater Montreal, Quebec City and Ottawa regions. It has a 94 per cent occupancy rate across all sectors.

The industrial portion included 190 properties with about 15.2 million square feet of space. It held 41 retail properties with 9.4 million square feet of space and 79 office properties with 11.1 million square feet of GLA.

The transaction has the unanimous support of both the Cominar board of trustees and its special committee comprised of independent trustees.

Full details of the transaction will be provided to unitholders in a management information circular prior to a special meeting of Cominar unitholders scheduled for Dec. 21.

If all necessary approvals are obtained, the transaction is expected to close in Q1 2022.

“This transaction is the result of our extensive and thorough strategic review process under which a broad set of alternatives aimed at enhancing unitholder value were evaluated by the special committee of the board of trustees,” said René Tremblay, chairman of the Cominar board, in the release.

“We believe that this transaction provides significant value, certainty and liquidity to our unitholders and we are confident that it is in the best interests of Cominar.”

Mach Capital and Cominar

Mach Capital holds approximately 5.2 per cent of the Cominar units and has committed its units in favour of the transaction. Members of the consortium hold or control approximately 10.2 per cent of the total units.

“We look forward to expanding our leading position in Québec in all real estate asset classes by incorporating the Cominar properties we will purchase into Group Mach’s vertically integrated operations with a view to preserving the long-term interests of the various stakeholders which we have proudly worked with in Québec for more than 20 years,” said Vincent Chiara, president and founder of Group Mach, in the announcement.

Artis has committed a total of up to $214 million to the transaction, including $100 million of junior preferred units and up to $114 million in common equity units.

“This transaction is an important step in implementing the next phase of our new vision and strategy,” said Samir Manji, president and CEO of Artis, in a separate announcement.

“We’re pleased to collaborate with this group of experienced real estate investors in an opportunity that aligns with our long-term objectives and that we anticipate will generate strong annual returns on our overall capital commitments.”

In recent months Artis has made a couple of significant transactions as part of its transformation under Manji (also the CEO of activist investor Sandpiper Group) and a new management group.

It announced the sale of a 28-property Toronto industrial portfolio for $750 million and has put a portfolio of six Calgary office properties up for sale.

The Canderel-led sale agreement includes clauses allowing Cominar’s special committee and board to consider and/or accept superior offers should another bidder come forward.

About Canderel and the purchasers

Canderel is one of Canada’s largest privately held real estate companies. It was founded 46 years ago by Jonathan Wener and has since grown from its base in Montreal to seven offices across Canada.

Canderel owns and manages a real estate portfolio of more than 27 million square feet in seven of Canada’s major markets – Québec City, Montreal, Ottawa, Toronto, Calgary, Edmonton and Vancouver. Its employs 650 real estate professionals who have executed more than $15 billion in acquisitions, developments and management projects.

FrontFour is a multi-strategy investment company based in Greenwich, Conn.

The firm focuses on value-oriented investments across both public and private markets with significant experience within the broader real estate sectors, including investments in the Canadian market.

Artis is a diversified Canadian REIT with a portfolio of industrial, office and retail properties in Canada and the United States.

Sandpiper is a Vancouver-based private equity firm focused on investing in real estate through direct property investments and securities.

Koch Real Estate Investments is part of Koch Industries, one of the largest privately held businesses in the United States. It specializes in capital deployment into real estate assets and operating companies.

Since 2003, Koch entities have invested nearly US$133 billion in growth and improvements. With a presence in more than 70 countries, Koch companies employ 122,000.

Groupe Mach owns and operates a portfolio of over 30 million square feet of properties and 10 million square feet of land, including over 20 properties in development in Montreal, Québec City and also in Ontario and Florida.

The firm is one of Quebec’s leading independent real estate owners and developers with office, retail, hotel, industrial, land and multiresidential assets.

Mach Capital is a private equity firm which does not have any limited partners, nor are there any exit strategies which condition its investment decisions. Mach Capital’s investment thesis is driven by working with founders and their management teams to achieve sustainable, long-term profitability.