QUÉBEC CITY, March 8, 2018 /CNW
Telbec/ - Cominar Real Estate Investment Trust ("Cominar" or
the "REIT") (TSX: CUF.UN) today announced its results for the
fourth quarter and fiscal 2017, and introduced its transformational
"Cominar 2.0" strategy.
COMINAR 2.0 – HIGHLIGHTS
- Stabilization of balance sheet through agreement to sell
$1.14 billion of non-core properties
and reduction of the annual distribution from $1.14 to $0.72 to
restore financial flexibility
- Refocussing of strategy on core Québec markets where Cominar
enjoys competitive advantages, with 93.2% core markets occupancy
rate as at December 31, 2017
- Addition of respected individuals with significant real estate
experience to the Board of Trustees: Paul
Campbell, René Tremblay and
Heather Kirk to reflect the
continuously evolving real estate landscape
- Reduction of construction services relationship with Groupe
Dallaire and integration of elements of Montreal platform at no additional cost to the
REIT
"Balance sheet stabilization, refocussing on our core Québec
markets and governance are key drivers in this transformational
phase of Cominar 2.0", stated Sylvain
Cossette, President and Chief Executive Officer of
Cominar.
"Our path to recovery has also required that we take
difficult but necessary steps with respect to our distributions. At
the same time, we are also re-evaluating our capital plans. These
measures aim to restore our financial flexibility and protect our
ability to make distributions on a sustainable level, which remains
at the heart of our purpose" added Mr. Cossette.
STABILIZATION OF BALANCE SHEET AND REFOCUSSING ON QUÉBEC
MARKETS
On December 18, 2017, Cominar
announced it had entered into a definitive agreement with Slate
Acquisitions Inc. ("Slate") for the sale of its entire non-core
market property portfolio for total gross proceeds of $1.14 billion. The assets to be sold include 96
properties totalling 6.2 million square feet located in the
Atlantic Provinces, Western Canada
and the Greater Toronto Area. This
transaction is expected to close by the end of March 2018 with proceeds to be used to repay
debt, including approximately $50
million of debt incurred to fund unit buybacks under the
REIT's normal course issuer bid ("NCIB"). A no-action letter from
the Commissioner of Competition to the effect that he does not
intend to challenge the transaction under the Competition Act
(Canada) has been issued.
Cominar is also currently reviewing its portfolio for further
opportunities to sell assets, further reduce leverage and enhance
its financial flexibility. The REIT's strategy is to focus on a
smaller number of assets that are best suited to increase net
operating income ("NOI") and surface value.
At year-end, the REIT recorded write-downs totalling
$643 million, including $616 million of reductions to fair value of
investment properties (of which $288
million related to the sale of non-core properties to Slate)
and a $27 million de-recognition of
goodwill.
In order to ensure that the REIT has the required financial
flexibility, the REIT has adjusted its monthly distribution from
$0.095 ($1.14 per annum) to $0.06 ($0.72 per
annum).
BEST OF CLASS GOVERNANCE
Cominar is pleased to welcome three new board members with deep
real estate and capital markets experience, enhancing the REIT's
best in class board as it navigates a dynamic real estate
landscape.
Ghislaine Laberge, who has served
as Trustee since Cominar's initial public offering in May of 1998
has stepped down from Cominar's Board of Trustee effective today.
In addition, Paul Campbell and René
Tremblay have been appointed as
trustees of the REIT, effective today.
Paul Campbell has over 40 years
of leading real estate experience in Canada and abroad in the office and retail
segments. Mr. Campbell has held numerous board, senior leadership
and advisory positions with several large real estate
organizations, including Kingsett, 20 Vic, SITQ, Bentall, Revenue
Properties, Maron Properties, Oxford, Campeau Corporation, Trilea
and Bramalea. Mr. Campbell was
awarded the NAIOP Lifetime Achievement Award for his contributions
to the real estate industry.
René Tremblay has over 35 years
of global real estate experience, primarily in retail and strong
named executive officer (NEO) experience. Former Chairman and
President of Taubman Asia, the Asian arm of U.S. NYSE listed
Taubman Centres, a leader in the shopping centre industry, Mr.
Tremblay has been responsible for
driving Taubman's shopping center expansion in the Asia-Pacific region. Prior to Taubman, Mr.
Tremblay was CEO of Ivanhoe Cambridge and has great familiarity with
many of Cominar's core retail centres.
Furthermore, Mary-Ann Bell has
advised that she will not be submitting her nomination at the
upcoming annual general meeting to be held in May of 2018. A new
nominee, Heather Kirk will be
seeking election as a trustee of the REIT at the upcoming annual
general meeting.
Heather Kirk, CFA, has over 20
years of capital markets experience in the Canadian REIT sector,
most recently as Managing Director at BMO from 2013 to 2018, where
as an equity analyst she covered several Canadian REITS including
Cominar. Prior to joining BMO, Mrs. Kirk was at National Bank as an
equity analyst from 2009 to 2013, and as an investment banker from
2002 to 2009, with coverage over Cominar.
"Cominar welcomes the immediate appointment of
Paul Campbell and René
Tremblay as new trustees. Their
deep real estate expertise and industry insights will definitely
contribute positively to the success of Cominar" said Alban
D'Amours, Chairman of Cominar. "Cominar wishes to thank
Michel Dallaire and Ghislaine Laberge for their valuable
contributions and commitments to the REIT over the past 20 years"
added Mr. D'Amours.
In 2017, the REIT also undertook a significant modernization of
its governance practices, including executive compensation. The
Board has further enhanced Cominar's governance by resolving to
update its contract of trust with current best-in-class practices,
including introducing rights and remedies in favour of unitholders
consistent with those available to shareholders of a corporation
pursuant to the Canada Business Corporations Act.
These changes are to be presented to unitholders for adoption at
the REIT's upcoming annual general meeting of unitholders.
GROUPE DALLAIRE - CONSTRUCTION SERVICES
Cominar has also started an important transition towards the
internalization of certain construction activities and the
diversification of its use of outside construction suppliers. As
part of this transition, the use of Groupe Dallaire for
construction services will be reduced in an orderly manner, over an
approximate 12-month transition period. As part of this transition,
Cominar expects to integrate certain dedicated elements of Groupe
Dallaire's workforce in Montreal
at no additional cost to the REIT, with a view of ensuring
continuity and best addressing the REIT's needs and those of its
clients in the most cost-effective manner.
PRESENTATION OF RESULTS
For the year ended December 31,
2017, net operating income (NOI)(1) was
$436.0 million compared to
$468.6 million for fiscal
2016.
This decrease in net operating income is primarily due to the
disposition of income properties completed in 2016 and 2017 for a
total amount of $221.4 million
and to non-recurring proceeds of $10.7 million obtained in 2016.
Net loss for fiscal 2017 amounted to $391.7 million compared to a net income of
$241.7 million for fiscal
2016.
The decrease in net income is due mainly to the write-downs
previously explained.
Cash flows provided by operating activities for fiscal
2017 reached $233.2 million,
compared to $284.1 million for
fiscal 2016.
Recurring funds from operations (FFO)(1) for
fiscal 2017 was $255.1 million,
compared to $278.6 million for
fiscal 2016. Fully diluted recurring funds from operations per
unit(1) amounted to $1.38
for fiscal 2017.
Recurring adjusted funds from operations
(AFFO)(1) for fiscal 2017 was $215.8 million compared to $241.9 million for fiscal 2016. Fully
diluted per unit, it amounted to $1.17 for fiscal 2017.
Recurring adjusted cash flows from operations
(ACFO)(1) for fiscal 2017 was $216.7 million compared to $246.0 million for fiscal 2016. Fully
diluted per unit, it amounted to $1.18 for fiscal 2017.
For fiscal 2017, recurring funds from operations as well as
recurring adjusted funds from operations decreased compared to
fiscal 2016, due to the dispositions of income properties completed
in 2016 and 2017 for a total amount of $221.4 million.
FINANCIAL SITUATION
As at December 31, 2017, Cominar's
debt ratio stood at 57.4%, compared to 52.4% as at
December 31, 2016. At the end of fiscal 2017, total assets
reached $7.8 billion and
unencumbered income properties amounted to $3.3 billion. The REIT's debt ratio was
significantly negatively impacted by 4.4% due to the fair value
adjustment of investment properties as previously explained.
LEASING ACTIVITY
During fiscal 2017, our leasing efforts allowed us to renew
70.7% of the total leasable area expired during fiscal 2017,
totalling 5.7 million square feet, and to sign new leases for
2.9 million square feet, overall representing 106.5% of the
total leasable area maturing in 2017.
Occupancy rate was 92.6% as at December
31, 2017 [93.2% for the core markets portfolio], compared to
92.4% as at December 31, 2016.
RESULTS OF OPERATIONS
|
Quarter
|
|
Year
|
For the periods ended
December 31
|
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
($000)
|
($000)
|
|
($000)
|
($000)
|
|
|
|
|
|
|
|
|
Operating
revenues
|
|
|
207,418
|
210,350
|
|
835,489
|
866,982
|
Operating
expenses
|
|
|
(96,931)
|
(96,049)
|
|
(399,452)
|
(398,373)
|
Net operating
income(1)
|
|
|
110,487
|
114,301
|
|
436,037
|
468,609
|
Finance
charges
|
|
|
(42,839)
|
(42,482)
|
|
(168,752)
|
(170,645)
|
Trust administrative
expenses
|
|
|
(11,408)
|
(4,490)
|
|
(25,977)
|
(16,719)
|
Change in fair value
of investment properties
|
|
|
(616,354)
|
(46,675)
|
|
(616,354)
|
(46,675)
|
Share of joint
ventures' net income
|
|
|
108
|
5,795
|
|
5,276
|
8,006
|
Derecognition of
goodwill
|
|
|
(26,989)
|
—
|
|
(26,989)
|
—
|
Income
taxes
|
|
|
5,739
|
(108)
|
|
5,034
|
(838)
|
Net income (net
loss)
|
|
|
(581,256)
|
26,341
|
|
(391,725)
|
241,738
|
SAME PROPERTY NET OPERATING
INCOME(1)
|
Quarter
|
|
Year
|
For the periods ended
December 31
|
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
($000)
|
($000)
|
|
($000)
|
($000)
|
|
|
|
|
|
|
|
|
Operating
segment
|
|
|
|
|
|
|
|
|
Office
|
|
|
45,778
|
46,014
|
|
182,213
|
188,498
|
|
Retail
|
|
|
41,226
|
42,536
|
|
161,107
|
166,080
|
|
Industrial and
mixed-use
|
|
|
23,885
|
23,576
|
|
93,451
|
91,326
|
Same property net
operating income – Cominar's proportionate
share(1)
|
|
|
110,889
|
112,126
|
|
436,771
|
445,904
|
|
|
|
|
|
|
|
|
Distribution:
|
|
|
|
|
|
|
|
|
Core
markets
|
|
|
93,119
|
93,368
|
|
365,115
|
368,549
|
|
Other
markets
|
|
|
17,770
|
18,758
|
|
71,656
|
77,355
|
Total
|
|
|
110,889
|
112,126
|
|
436,771
|
445,904
|
(1)
|
Non-IFRS
financial measure. See the reconciliation to closest IFRS
measure.
|
NON-IFRS FINANCIAL MEASURES
Net operating income, funds from operations (FFO), adjusted
funds from operations (AFFO) and adjusted cash flows from
operations (ACFO) are not measures recognized by International
Financial Reporting Standards ("IFRS") and do not have standardized
meanings prescribed by IFRS. Such measures may differ from similar
computations as reported by similar entities and, accordingly, may
not be comparable to similar measures reported by such other
entities.
FUNDS FROM OPERATIONS (FFO) AND ADJUSTED FUNDS FROM
OPERATIONS (AFFO)
The following table presents a reconciliation of net income (net
loss), as determined in accordance with IFRS, and recurring funds
from operations and recurring adjusted funds from operations:
|
Quarter
|
|
Year
|
For the periods ended
December 31
|
2017
|
2016
|
|
2017
|
2016
|
|
($000)
|
($000)
|
|
($000)
|
($000)
|
|
|
|
|
|
|
Net income (net
loss)
|
(581,256)
|
26,341
|
|
(391,725)
|
241,738
|
Deferred income
taxes
|
(5,739)
|
108
|
|
(5,034)
|
838
|
Initial and
re-leasing salary costs
|
882
|
797
|
|
3,532
|
3,095
|
Change in fair value
of investment properties – Cominar's proportionate
share(2)
|
617,418
|
41,655
|
|
615,134
|
41,655
|
Capitalizable
interest on properties under development – joint
ventures
|
198
|
522
|
|
793
|
1,968
|
Derecognition of
goodwill
|
26,989
|
—
|
|
26,989
|
—
|
Funds from
operations (1)(2)
|
58,492
|
69,423
|
|
249,689
|
289,294
|
|
|
|
|
|
|
Non-recurring
items(3)(4)
|
5,400
|
—
|
|
5,400
|
(10,724)
|
Recurring funds
from operations(1) (2)
|
63,892
|
69,423
|
|
255,089
|
278,570
|
|
|
|
|
|
|
Provision for leasing
costs
|
(6,583)
|
(6,390)
|
|
(25,820)
|
(24,090)
|
Recognition of leases
on a straight-line basis(1)
|
(1,554)
|
(806)
|
|
(4,027)
|
(4,044)
|
Capital expenditures
– maintenance of rental income generating capacity
|
(4,127)
|
(3,014)
|
|
(9,415)
|
(8,498)
|
|
|
|
|
|
|
Recurring adjusted
funds from operations(1)(2)
|
51,628
|
59,213
|
|
215,827
|
241,938
|
|
|
(1)
|
Including
Cominar's proportionate share in joint ventures.
|
(2)
|
Non-IFRS
financial measure.
|
(3)
|
In 2017, a
retirement allowance was allocated following the resignation of the
Chief Executive Officer.
|
(4)
|
In 2016, net
proceeds of $10.7 million were obtained in settlement of the claim
against Target Canada.
|
ADJUSTED CASH FLOWS FROM OPERATIONS (ACFO)
The following table presents a reconciliation between the cash
flows provided by operating activities as per the consolidated
financial statements and the recurring adjusted cash flows from
operations:
|
Quarter
|
|
Year
|
For the periods ended
December 31
|
2017
|
2016
|
|
2017
|
2016
|
|
($000)
|
($000)
|
|
($000)
|
($000)
|
|
|
|
|
|
|
Cash flows
provided by operating activities as per the consolidated
financial statements
|
81,471
|
102,031
|
|
233,225
|
284,090
|
Adjustments –
investments in joint ventures(1)
|
1,138
|
(22)
|
|
3,720
|
2,061
|
Provision for leasing
costs
|
(6,583)
|
(6,390)
|
|
(25,820)
|
(24,090)
|
Initial and
re-leasing salary costs
|
882
|
797
|
|
3,532
|
3,095
|
Changes in adjusted
non-cash working capital items
|
(27,011)
|
(34,108)
|
|
2,447
|
(5,445)
|
Capital expenditures
– maintenance of rental income generating capacity
|
(4,127)
|
(3,014)
|
|
(9,415)
|
(8,498)
|
Amortization of
deferred financing costs and others
|
(636)
|
(681)
|
|
(2,763)
|
(2,970)
|
Amortization of fair
value adjustments on assumed mortgages payable
|
1,385
|
1,468
|
|
5,577
|
6,501
|
Capitalizable
interest on properties under development – joint
ventures
|
198
|
522
|
|
793
|
1,968
|
Adjusted cash
flows from operations(1) (4)
|
46,717
|
60,603
|
|
211,296
|
256,712
|
|
|
|
|
|
|
Non-recurring
items(5)(6)
|
5,400
|
—
|
|
5,400
|
(10,724)
|
Recurring adjusted
cash flows from operations(1) (4)
|
52,117
|
60,603
|
|
216,696
|
245,988
|
|
|
|
|
|
|
Payout
ratio(2)
|
101.8%
|
111.4%
|
|
112.9%
|
102.8%
|
Cash payout
ratio(2)(3)
|
101.8%
|
88.1%
|
|
94.7%
|
95.3%
|
|
|
(1)
|
Including
Cominar's proportionate share in joint ventures.
|
(2)
|
Fully
diluted.
|
(3)
|
The cash payout
ratio corresponds to the cash distribution per unit divided by the
fully diluted recurring adjusted cash flows from operations per
unit.
|
(4)
|
Non-IFRS financial
measure.
|
(5)
|
In 2017, a
retirement allowance was allocated following the resignation of the
Chief Executive Officer.
|
(6)
|
In 2016, net
proceeds of $10.7 million were obtained in settlement of the claim
against Target Canada.
|
SUBSEQUENT EVENTS
Since the beginning of fiscal year 2018, Cominar has purchased
under the NCIB a total of 2,709,500 units at an average price
of $14.58, for a total consideration
of $39.5 million paid cash.
Since December 19, 2017, Cominar has
repurchased under the NCIB a total of 3,440,400 units at an
average price of $14.50, for a total
consideration of $49.9 million paid cash.
Subsequent to the end of fiscal 2017, Cominar contracted the
following loans: a $75.0 million
bridge loan bearing interest at prime rate plus 110 basis
points or at the bankers' acceptance rate plus 210 basis
points and repayable on the closing of the $1.1 billion sale of investment properties,
a 10-year $42.5 million mortgage
bearing interest at 4.484% per year and a 5-year $45.0 million mortgage bearing interest at
prime rate plus 90 basis points or 4.00% per year, whichever is
greater. The net proceeds from these loans were used to repay a
portion of the unsecured revolving operating and acquisition credit
facility.
On February 12, 2018, Alban
D'Amours was appointed as Cominar's Chairman of the Board of
Trustees following the departure of Michel
Dallaire.
On March 7, 2018, Cominar adjusted
its monthly distribution from $0.095
per unit to $0.06 per unit, beginning
with the distribution of March of 2018, payable in April of
2018.
At year-end, $592.6 million
in mortgages payable are maturing in 2018. Of this amount,
$8.7 million have already been
repaid. The loan in connection with Gare Centrale de Montréal, with
a balance of $210.6 million at
its maturity date, has been refinanced for an additional amount of
approximately $50 million. In addition, on the closing of the
Slate transaction expected to occur by the end of March 2018, mortgage financings in the amount of
$276.4 million are to be assumed
by the purchaser or repaid by Cominar.
ADDITIONAL FINANCIAL INFORMATION
Cominar's
consolidated financial statements and management's discussion and
analysis for fiscal 2017, will be filed with SEDAR at www.sedar.com
and will be available on Cominar's website at www.cominar.com.
CONFERENCE CALL ON MARCH 8,
2018
On Thursday, March 8,
2018 at 11 a.m. (ET), Cominar's management will hold a
conference call to present the results for fiscal 2017. Interested
persons may take part in this call by dialing
1 888 390-0546. A presentation regarding these
results will be available before the conference call on the REIT's
website at www.cominar.com, under the Conference Call header. In
addition, a taped rebroadcast of the conference call will be
available from Thursday, March 8,
2018 at 2 p.m. to Thursday,
March 15, 2018 at 11:59 p.m., by dialing
1 888 390-0541 followed by this
code: 377271#.
PROFILE AS AT MARCH 8,
2018
Cominar is the third largest diversified real
estate investment trust in Canada
and currently remains the largest commercial property owner in the
Province of Québec. The REIT owns a real estate portfolio of 525
properties in three different market segments, that is, office
properties, retail properties and industrial and mixed-use
properties. Cominar's portfolio totals 44.4 million square feet
spread out across Québec, Ontario,
the Atlantic Provinces and Western
Canada. Cominar's objectives are to pay sustainable cash
distributions to unitholders and to maximize unitholder value
through proactive management.
FORWARD-LOOKING STATEMENTS
This press release may
contain forward-looking statements with respect to Cominar and its
operations, strategy, financial performance and financial
condition. These statements generally can be identified by the use
of forward-looking words such as "may", "will", "expect",
"estimate", "anticipate", "intend", "believe" or "continue" or the
negative thereof or similar variations. The actual results and
performance of Cominar discussed herein could differ materially
from those expressed or implied by such statements. Such statements
are qualified in their entirety by the inherent risks and
uncertainties surrounding future expectations. Some important
factors that could cause actual results to differ materially from
expectations include, among other things, general economic and
market factors, competition, changes in government regulation and
the factors described under "Risk Factors" in Cominar's Annual
Information Form. The cautionary statements qualify all
forward-looking statements attributable to Cominar and persons
acting on its behalf. Unless otherwise stated, all forward-looking
statements speak only as of the date of this press release. Cominar
does not assume any obligation to update the aforementioned
forward-looking statements, except as required by applicable
laws.
SOURCE COMINAR REAL ESTATE INVESTMENT TRUST