Artis Real Estate Investment Pref Shs Series E T.AX.PR.E

RE:RE:RE:RE:RE:RE:RE:RE:RE:Keep selling assets Artis!

[Reece1986b]

Thank you for everything you have shared with us disentangling this Frankie. Like babybunny, I haven't been able to figure things out. What is readily apparent to me however is that no effort is actually being made to even repay the interest on the 18% Cominar junior preferreds. Cominar has the option of paying Artis its 18% interest in cash or in additional preferred units. Cominar has been electing to pay Artis its interest in additional preferred units even when this was probably never actually necessary given the 18% interest on ~$125 million in preferred units amounts to only ~ $5.5 million every 3 months (compared against all the asset sales Cominar is doing). The 18% interest obviously snowballs quite rapidly and will turn the ~$125 million into ~$175 million in two years time so one would think it would be a very high priority to repay this debt or at least the interest on this debt. 

"Acquisition of Cominar by Plan of Arrangement

On March 1, 2022, Cominar announced the closing of a transaction pursuant to which all of Cominar’s then issued and outstanding units were acquired under a plan of arrangement for $11.75 per unit in cash by a consortium, Iris Acquisition II LP ("IRIS"), composed of an affiliate of Canderel Management Inc., certain affiliates of FrontFour Capital Group LLC, Artis Real Estate Investment Trust ("Artis"), partnerships managed by Sandpiper Group, and Koch Real Estate Investments, LLC ("KREI"), with KREI and Artis also providing preferred equity (the "Arrangement").” (quoted from page 6 of Cominar Q1 2023 MD&A)

Frankie10 wrote:

Happy to be of assistance. Part of the excerise will be comparing the balance sheet as well to isolate Iris' assets and liabilities, the way you did income and expenses - a reverse consolidation, if you will. I wanted to isolate the pref debt to a) explain how much of the amount you are confused about relates to this b) understand how much of the prefs Artis owns as a % of the prefs. 

b) is very important because the yield is so high. If we own less than a third - that would be horrible and explain the miserable performance. If we owned more than a third which I doubt, that would be good.

there is also management fees paid to another corporation which Artis also owns a part of.

after that I would dig into the notes and see what other details I could strip out.

I've been really busy lately and regardless of what my analysis would yield, I wouldn't buy or sell here, so it's really not worth the time until Q2 comes out - given the significant dispositions in Cominar. Once I do my analysis I will of course share my findings as I always do. H&R is simply too attractive from a valuation standpoint for me to allocate any capital here. Nor would I sell here given I already think this deal is an absolute disaster. In my valuation, I have prefs worth par and equity worth NIL.

have a good weekend.