Cominar to Sell $1.14 Billion of Property to Slate
Cominar to Sell .14 Billion of Property to Slate
Quebec-based REIT to Focus on Home Province, Will Have No Properties in Western Canada, GTA or Atlantic
The proposed deal, which totals 6.2 million square feet, leaves the REIT focused on the province of Quebec with no properties in western Canada, the Greater Toronto Area or the Atlantic provinces.
The deal, expected to close in March, includes sales in all those regions outside Quebec and is spread across the office, retail and industrial mixed-use sectors.
“We are very pleased with the successful execution of the disposition plan and the sale of our entire non-core market portfolio in one transaction,” said Michel Dallaire, chairman and CEO of Cominar, in a statement about the agreement, which comes after the REIT put the properties on the market in August. “This transaction will enable Cominar to capitalize on its core markets while also strengthening its balance sheet.”
Pictured: Michel Dallaire, chairman and CEO of Cominar.
The breakdown of the properties by provinces includes 24 in the GTA with a gross leasable area of 2.466 million square feet, 59 properties in the Atlantic provinces with 2.647 million square feet of GLA and 14 in western Canada with a GLA of 1.108 million square feet of GLA.
By asset class, 37 properties are in the office sector with a GLA of 2.967 million square feet, 37 are industrial or mixed-use properties with a GLA of 1.716 million square feet and 23 are retail holdings with a GLA of 1.538 million square feet.
Cominar said the proposed non-core asset sale includes 90% income-producing properties and 10% of properties under development. The overall capitalization rate of the income-producing properties to be sold is estimated at 6.2%, including 5.3% for the Greater Toronto Area.
The REIT says the aggregate gross sales price of the GTA and the Atlantic provinces income-producing properties is in line with their aggregate book value.
“Cominar has decided to sell the entirety of its Western Canada portfolio given the continued challenges in the Calgary market, primarily the downtown Calgary office sector, allowing it to better focus on the opportunities available in its core markets. Cominar will thus be recognizing a fair value write-down of approximately $275 million related to the Western Canada assets and non-income-producing properties,” the company said in a release.
As part of the deal, Slate will be assuming about $107.1 million of mortgage debt and Cominar will be repaying $164.5 million of mortgage debt. Net proceeds from the sale of the non-core market portfolio will be used to reduce indebtedness by about $875 million, paying down the entire amount currently outstanding on the REIT’s credit facility.
Cominar said it intends to sell an additional $1.0 to $1.5 billion of properties and expects to finalize this review by the middle of the first quarter of 2018 with the intention of crystallizing the value in these properties by the end of 2018.
Slate would not comment but said in a release that Slate Acquisitions Inc., on behalf of The Slate Canadian Real Estate Opportunity Fund I, had agreed to purchase a portfolio of real estate assets from Cominar.
“The Fund is a closed-end private equity vehicle managed by Slate Asset Management L.P. with a strategy to acquire commercial real estate through complex portfolio acquisitions, cyclical investing and/or asset repositioning opportunities,” the release said.
Sylvain Cossette, who will take over as chief executive of Cominar on Jan. 1, 2018, acknowledged the moves take Cominar back to its roots of being focused on Ottawa, Montreal and Quebec City.
“We moved out of those markets to enhance our geographic diversification,” he told CoStar News. “(Moving out) allowed us to achieve an investment grade rating on our unsecured debt. We are not pursuing that strategy now, so we wish to concentrate on our core markets.”
In the province of Quebec, he noted, Cominar will remain the largest property owner in its three asset classes of office, industrial and retail.
“We enjoy a competitive position. We have a fully internalized model. When you are in our backyard we enjoy a dominant competitive position,” said Cossette. “In Calgary, we were a little bit less than we are here.”