* Cominar deal values Canmarc at C$838 mln
* Canmarc trustees reject Cominar's initial offer
* Deal would add to Cominar's earnings immediately
* Canmarc units rise 18 pct Toronto
* Points at bubbling M&A activity among Canadian REITs
By Pav Jordan
TORONTO, Nov 28 Cominar Real Estate Investment
Trust , aiming to create Canada's second-largest
diversified property portfolio, has offered to buy Canmarc REIT in a hostile bid that values its rival at C$838
million ($800.4 million).
Canmarc's office and retail properties would increase
Cominar's asset base by 42 percent and position it for further
growth. Cominar, already the largest commercial property owner
in the province of Quebec, would trail only H&R Real Estate
Investment Trust as Canada's biggest diversified REIT
if the deal is completed.
Canmarc on Monday rejected the offer, saying it was not
given enough time to look at the proposal carefully.
After the deal was announced, Canmarc units rose 18 percent
to C$15.63 on the Toronto Stock Exchange as the company was
effectively put into play in a market seen ripe for acquisition
"Conditions for M&A are prime in the real estate world,"
said Alex Avery, an analyst with CIBC World Markets. "You've
got abundant, cheap debt, strong property fundamentals and huge
demand for stable income, particularly as the 10-year
government of Canada bond hovers around 2 percent.
Canadian REITs benefited from market turbulence following
the global financial crisis as investors looked to them as a
high-yield haven for retirement savings and other capital.
15 PERCENT PREMIUM
Cominar will buy Canmarc units for C$15.30 in cash each, a
15 percent premium on the closing price on Friday. As an
alternative, it offered 0.7054 of a Cominar unit for each
Cominar said it had already raised its stake in Canmarc to
15.1 percent through a private agreement to buy about 3 million
units. That made it the second-largest unit holder in the REIT.
Canmarc, established 18 months ago, changed its name in
September from Homburg Canada Real Estate Investment Trust,
reflecting its broadening strategic focus.
The board of trustees of Canmarc rejected Cominar's initial
approach in part because of Cominar's demand that Canmarc
respond to the bid within two days.
"Given the REIT was not for sale and that it continues to
successfully execute on its business plan, it is unreasonable
to ask the REIT to respond to their proposal within a 48-hour
window," said Karen Prentice, chairwoman of the Canmarc board
as well as a special committee formed to evaluate the deal and
look at other options.
Under the non-cash alternative on offer, Canmarc
shareholders would see an increase in monthly cash
distributions of about 6.9 percent, Cominar said, as well as
participating in the growth of the company.
The Canmarc transaction would add immediately to Cominar's
distributable income, funds from operations and adjusted funds
from operation, the company said.
"It's very difficult seeing them being able to get
shareholders to pass on a premium in exchange for the status
quo," said the CIBC's Avery.
Cominar said that National Bank of Canada, Bank of Montreal
and Caisse Centrale Desjardins have committed to funding the
cash offer for Canmarc units.