OTCPK:CMLEF - Post by User
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gwplanton Sep 24, 2012 8:53pm
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Post# 20409033
Scotia comments on latest PR
Scotia comments on latest PR Cominar REIT (CUF.UN-T C$23.86) Pammi Bir, CA, CFA - (416) 863-7218
(Scotia Capital Inc. - Canada)
Temporary Financing to Fund CJD Phase II
Event
¦ CUF and the Dallaire family announced that the family has arranged $74M of temporary
financing via monetization of 3M of its 9M CUF units (held by private holding company
"AM Total Investissements").
Implications
¦ Family to use proceeds to fund CJD Phase 2 project in Q. City. As a reminder, Phase 2 incl.
10 storeys of office space and ~200 condo units on 15 floors and is being developed at the
family's risk. Upon completion of the project, the office component is expected to be sold to
the REIT. Note that the family is not selling down its interest in the REIT (currently holds
7.3% equity stake), but effectively providing 3M units as collateral for the loan and
retaining all the associated ownership and voting rights. To arrange the loan, a CDN bankowned
dealer announced a bought deal secondary offering for 3M units at $24.15/unit (2%
discount to $24.65 Sept. 20 close, effectively selling units short; note monetization involves
a forward contract between the dealer and AM Total based on Sept. 20 closing price). We
also highlight a similar $21M monetization was done in Sept. 2010 for 1M units.
Recommendation
¦ Positive view and estimates intact. That said, the somewhat convoluted means of arranging
financing for the family may cause investor confusion and raise questions as to whether an
alternative arrangement could have been arranged. We note, however, that the family
remains economically aligned via its substantial unit holdings. We continue to view
valuation as attractive (15.2x 2013E AFFO/6.3% implied cap vs. 16.3x/6.6% sector).