Cominar Real Estate Investment Trust (CUF-UN-T), one of Canada’s largest diversified REITs, says it has initiated a “formal strategic review process” of its operations.

In a brief release Tuesday afternoon, Cominar management said a special committee of independent trustees has been created to explore its options. The members are Luc Bachand, Paul Campbell, Mitchell Cohen, Zachary George and Karen Laflamme.

The process will “identify, review and evaluate a broad range of potential strategic alternatives available to it,” the release states. “The REIT has not established a definitive timeline to complete the strategic review process and no decisions have been reached at this time.”

The release also stated there will be no further information released “unless and until it is determined that disclosure is necessary or appropriate.”

Cominar owns 315 office, retail and industrial properties valued at about $6.6 billion in the Montreal, Quebec City and Ottawa regions. They comprise 35.9 million square feet of GLA, service 3,600 clients and are broken down into:

* Office: 80 properties, 11,1 million square feet, 93 per cent occupancy;

* Retail: 44 properties, 9.5 million square feet, 92 per cent occupancy;

* Industrial: 191 properties, 15,4 million square feet, 96 per cent occupancy.

The REIT, which was established in 1998, is the largest commercial property owner in the province of Quebec.

Extended period of change at Cominar

Cominar has undergone an extensive series of changes and repositioning during the past several years after an extended decline in its share price. Cominar traded in the $23-$25 range in 2012-’13, before falling as low as $12.03 in August 2017.

In the wake of the pandemic, the stock has traded in the low- to mid-$7 range in recent weeks.

President and CEO Sylvain Cossette was brought in in January 2018 to replace Michel Dallaire at a time when Cominar was exiting several markets and planned to divest up to $2.6 billion in assets in Western and Atlantic Canada and parts of Ontario.

Cossette has since made sweeping changes to the C-suite and extensively restructured upper management positions.

As recently as last fall at the 2019 Montreal Strategy and Leasing Conference, executive vice-president Marie-Andreé Boutin confirmed those changes were continuing, telling attendees “Cominar is in transformation right now.”

Cominar said it planned a series of developments and redevelopments at existing properties, including sites such as Gare Central in Montreal, where it planned to add up to 1,800 residential units.

In total, Cominar management identified up to 10 properties with potential for 10,000 residential units.

Cominar’s Q2 2020 financials

Cominar’s current distributions are three cents per unit on a monthly basis.

The payout was cut in half from the previous six cents per unit in August, when Cominar announced its second-quarter results and took a $320.6 million writedown on its portfolio value.

The writedown hit its retail sector hardest, losing $251.5 million in value ($165 million for its enclosed shopping centres).

Enclosed shopping centres were one of the hardest-hit sectors due to the pandemic, with most being closed from mid- or late-March into June, and traffic levels remaining low as the pandemic continues.

It also had a powerful effect on the REIT’s bottom line in Q2, with Cominar reporting a $318.1-million loss compared to a $51.5-million profit in Q2 2019.

The REIT’s debt ratio also increased from 51.4 per cent to 54.5 per cent due to the value losses.

One positive sign, however, was the REIT’s continued efforts to restructure and reposition its portfolio.

Industrial and flex properties represented just over 30 per cent of NOI during the quarter (it was 25 per cent in Q2 2019), while office contributed 46.4 per cent (40.4 per cent in Q2 2019).

Retail NOI decreased to 23.5 per cent from 34.7 per cent.

Continue to divest retail assets

Cossette alluded to the repositioning during his Q2 financial conference call with analysts and investors.

“As we look at our three asset segments going forward, we foresee emphasizing the industrial segment, which remains solid with a very favourable outlook and reducing our retail exposure over time and as rapidly as possible as there is a window,” he said, according to a transcript provided by Thomson Reuters.

“With respect to our retail segment, we are looking at all options for each of our retail assets.

“And as we have previously mentioned, there is unsurfaced value and potential densification opportunities, which raises the profile and interest for certain properties on the South Shore of Montréal and in Laval.”

Cossette suggested Cominar’s retail occupancy could drop from almost 92 per cent to the 86.5 per cent range.

He also noted rent collections for the retail portfolio were increasing from a low of 37 per cent in May to the mid-50 per cent range through the summer (not including funds from the federal government’s CECRA rent support program).