KEEP ON
GROWING
2013 Annual Report
2013 financial highlights
Message to uniholders
2013 corporate highlights
Real estate portfolio
Management’s discussion and analysis
Consolidated financial statements
Corporate information
02
04
08
10
12
63
99
Unitholder information
100
2013
FINANCIAL
HIGHLIGHTS
Our results continue to show excellent progress, which is fully in line
with our objective for orderly and disciplined growth
INCREASED
OPERATING
REVENUES BY
INCREASED
NET OPERATING
INCOME BY
INCREASED
RECURRING ADJUSTED FUNDS
FROM OPERATIONS BY
17.3% 15.9% 17.0%
INCREASED
TOTAL ASSETS BY
6.8%
(In thousands of dollars, except per unit amounts)
2013
2012
2011
Operating revenues
Net operating income (1)
Net income
Recurring distributable income (1)
Recurring funds from operations (1)
Recurring adjusted funds from operations (1)
Distributions
Total assets
PER UNIT
Net income (basic)
Recurring distributable income (basic) (1)
Recurring funds from operations (FD) (1) (2)
Recurring adjusted funds from operations (FD) (1) (2)
Distributions
(1) Non-IFRS financial measure. Refer to Management’s Discussion and Analysis.
(2) Fully diluted.
662,053
368,210
254,969
198,479
225,855
194,776
182,977
5,997,330
2.03
1.58
1.77
1.54
1.44
564,537
317,815
342,171
169,905
200,450
166,412
164,021
317,741
184,709
177,461
100,885
111,927
99,090
95,567
5,617,049
2,765,317
3.13
1.55
1.78
1.50
1.44
2.74
1.56
1.65
1.50
1.44
2
2013 ANNUAL REPORT
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2011
2011
2011
2011
2012
2012
2012
2012
2013
2013
2013
2013
2011
2011
2011
2011
2012
2012
2012
2012
2013
2013
2013
2013
2011
2011
2011
2011
2012
2012
2012
2012
2013
2013
2013
2013
2011
2011
2011
2011
2012
2012
2012
2012
2013
2013
2013
2013
OPERATING
PRODUITS
PRODUITS
PRODUITS
PRODUITS
REVENUES
D’EXPLOITATION
D’EXPLOITATION
D’EXPLOITATION
D’EXPLOITATION
NET OPERATING
BÉNÉFICE
BÉNÉFICE
BÉNÉFICE
BÉNÉFICE
INCOME
D’EXPLOITATION NET
D’EXPLOITATION NET
D’EXPLOITATION NET
D’EXPLOITATION NET
RECURRING
BÉNÉFICE
BÉNÉFICE
BÉNÉFICE
BÉNÉFICE
DISTRIBUTABLE
DISTRIBUABLE
DISTRIBUABLE
DISTRIBUABLE
DISTRIBUABLE
INCOME
DISTRIBUTIONS
DISTRIBUTIONS
DISTRIBUTIONS
DISTRIBUTIONS
DISTRIBUTIONS
OCCUPANCY RATE
93.1%
INTEREST COVERAGE
RATIO
2.70:1
PAYOUT RATIO OF RECURRING
DISTRIBUTABLE INCOME
LEASABLE AREA
GROWTH
5.8%
91.1%
DEBT RATIO
48.2%*
* excluding convertible debentures
2013 ANNUAL REPORT
3
2013 MESSAGE TO
UNITHOLDERS
After a year 2013 marked by integrating our large
After a year 2013 marked by integrating our large
acquisitions completed in 2012 and the subsequent
acquisitions completed in 2012 and the subsequent
debt reduction, we’re proud of our performance
debt reduction, we’re proud of our performance
in fiscal 2013. Our recurring adjusted funds from
in fiscal 2013. Our recurring adjusted funds from
operations grew by 2.7% per unit fully diluted. This
operations grew by 2.7% per unit fully diluted. This
growth is the result of our acquisition strategy and
growth is the result of our acquisition strategy and
the work of all of our personnel, who focus
the work of all of our personnel, who focus
on creating long-term value for our
on creating long-term value for our
unitholders.
unitholders.
4
2013 ANNUAL REPORT
MICHEL DALLAIRE, Eng.
President and Chief Executive Officer
and Trustee
Since the very beginning, we’ve
ensured that our growth is based on
solid foundations and that our overall
strategy is flexible enough to adapt to
changing real estate market condi-
tions and economic fluctuations.
We make certain that our real estate
portfolio remains judiciously diversi-
fied and we adapt our acquisition
strategy and project development
strategy according to the realities of
our various markets.
In 2013, we completed $227.5 million
worth of strategic acquisitions,
with a majority of industrial and
mixed-use properties, as well as a
shopping centre. These acquisitions,
concluded at an excellent weighted
average capitalization rate of 7.1%,
increased our real estate portfolio by
2.3 million square feet and strength-
ened our presence in the greater
Montreal area.
We also bought a vacant land stra-
tegically located in Calgary, Alberta
for $20.5 million. This land includes
a 347-space indoor parking facility
and will allow construction of over
300,000 square feet of office space
divided among four properties, which
will be developed in phases.
In 2013, we continued construction
of a 284,000 square foot office prop-
erty located in Laval and we invested
$39.3 million in the revitalization
of three major shopping centres in
the Montreal area, in Quebec—
Alexis Nihon, Centre Laval and
Pl ace Longueuil. These are
major makeovers for the three
shopping malls. The objective is
to increase total sales of the three
properties while attracting new clients.
In parallel with our operating activities,
we remained focused on our debt
management strategy, which allowed
us to decrease our weighted average
interest rate for fixed-rate debt by
21 basis points, down to 4.93%, and
to increase the weighted average
residual term of our fixed rate debt
to 5.0 years, compared to 3.9 years
last year. Cominar has a strong and
healthy financial situation, with a
debt ratio (excluding the convertible
debentures) and an interest coverage
ratio of 48.2% and 2.70:1 respectively.
Careful, responsible and effective
management of Cominar’s debt
has always been at the heart of our
business strategy.
Backed by the trust of our financial
partners and investors, since June
2012 we’ve issued $1.1 billion worth
of unsecured debentures to replace
existing debt, increasing the ratio
After a 2013 marked by integrating
our large acquisitions completed
in 2012 and the subsequent debt reduction,
we’re proud of our performance
2013 ANNUAL REPORT
5
2013
MESSAGE TO
UNITHOLDERS
of senior unsecured debt on total
debt to 32.4% as at December 31,
2013. We’ll continue to increase the
portion of our unencumbered assets
and thus get closer to our long-term
objective of a ratio of approximately
50%. By promoting this strategy to
replace secured debt with unsecured
debt, we believe that we’ll ensure
stable access to capital markets at
an effective cost, while increasing
our flexibility and maintaining our
financial strength.
Our operating performance produced
good results in 2013, with 5.9%
growth
in average net rent of
renewed leases. The success of our
operations in the past 12 months,
combined with acquisitions in recent
years, enabled us to increase our net
operating income by 15.9% and our
recurring distributable income by
16.8%. This increased our recurring
distributable income per unit to $1.58,
up 1.9%, and reduced our payout ratio
of recurring distributable income to
91.1%, an improvement of 1.8% in line
with our long-term objectives.
2013 was also marked by Cominar’s
in
move to new headquarters
Complexe Jules-Dallaire, a contem-
porary 28-storey building located
in the heart of downtown Quebec
City. After more than 20 years in our
offices on Rue du Marais in Quebec
City, Cominar’s growth called for
We completed $227.5 million worth
of strategic acquisitions of income
properties, at an excellent weighted
average capitalization rate of 7.1%
ROBERT DESPRÉS, O.C., G.O.Q.
Chairman of the Board of Trustees
6
6
6
2013 ANNUAL REPORT
2013 ANNUAL REPORT
2013 ANNUAL REPORT
By promoting this strategy to replace secured
debt with unsecured debt, we believe that we’ll
ensure stable access to capital markets at an
effective cost
an enlargement of our office space.
We therefore took a huge leap and
now proudly occupy this stimulating
workspace, named in honour of our
founder, Jules Dallaire.
We’re pleased to see that through
the quality, efficiency and excellent
services that we provide to our clients,
Cominar is a nationally recognized
company and has become an
important economic leader in the
greater Quebec City area over the
years. We take into consideration not
only the importance of our contri-
bution to the economy, but also the
importance of our role in society.
that
Through concrete actions
mobilize our employees, we build
on Cominar’s reputation by contrib-
uting to causes with significant social
impacts in the communities where
we work, in order to nurture our
philanthropic culture. In this regard,
we thank our employees, officers
and trustees for their contribution
and active involvement in 2013.
2014 is well underway, particularly
with the acquisition of a portfolio
of office properties in the greater
Toronto and Montreal areas for a total
of $228.8 million, with a capitalization
rate of 7.0%.
Following this acquisition, Cominar’s
debt ratio (excluding convertible
debentures) will stand at 50.1%, a
ratio that we are very comfortable with.
Based on the quality of our assets
maintained by sound investments,
flexible, effective operating manage-
ment and the highest respect for
client satisfaction, we’re confident of
a most promising future for Cominar,
and that our patience and strategy
will be rewarded.
In conclusion, we sincerely thank all
our unitholders and other business
partners for their continuing commit-
ment to and confidence in us. This
unwavering support took us to where
we are today and inspires us for the
future. We continue to grow in the
Canadian market with the primary
objective of profitability and creating
value for our unitholders.
President and Chief Executive Officer
and Trustee
Chairman of the Board of Trustees
Michel Dallaire, Eng.
Robert Després, O.C., G.O.Q.
2013 ANNUAL REPORT
7
DEVELOPMENT
AND INVESTMENTS
Place Laval – Phase 5
Revitalization of our main shopping centres
in the Montreal area
2013
CORPORATE
HIGHLIGHTS
ACQUISITIONS
Acquisition of a portfolio
of 19 properties for $149.8M
Acquisition of an office building
in Fredericton for $5.7M
Acquisition of an industrial
building in Montreal for $12.0M
Acquisition of a shopping centre
in Montreal for $60.0M
TOTAL ACQUISITIONS
OF $227.5M AT A WEIGHTED
AVERAGE CAPITALIZATION
RATE OF
7.1%
8
2013 ANNUAL REPORT
DEVELOPMENT
AND INVESTMENTS
Revitalization of our main shopping centres
in the Montreal area
$46M
CAPITALIZATION RATE
284,000
sq. ft.
8.1%
OCCUPANCY RATE
100%
FINANCING
Completed 4 issues of senior
unsecured debentures totalling
$550.0M
Redeemed $110M of Series C
convertible debentures bearing
interest at 5.80%
Decreased the weighted average
interest rate on fixed-rate debts:
4.93%
(5.14 % as at December 31, 2012)
Increased the residual weighted
average term of fixed-rate debts:
5.0 years
(3.9 years as at December 31, 2012)
Increased the senior unsecured
debt-to-total-debts ratio to 32.4%
(16.0% as at December 31, 2012)
CAREFUL, RESPONSIBLE
AND EFFECTIVE MANAGEMENT
OF COMINAR’S DEBT HAS
ALWAYS BEEN AT THE HEART
OF OUR BUSINESS STRATEGY
2013 ANNUAL REPORT
9
2014
REAL ES TATE
PORTFOLIO
2014
A YEAR WELL
UNDERWAY
FEBRUARY
Acquired a portfolio of 11 office
properties for $228.8M
Acquired a retail complex
of 5 properties for $28.2M
OUR
STRENGTHS
STRONG AND
EXPERIENCED TEAM
MARKET
KNOWLEDGE
COMPLEMENTARY
EXPERTISE
BBB (LOW)
CREDIT RATING
FROM DBRS
CAUTIOUS
EXPANSION
STRATEGY
AS AT FEBRUARY 27, 2014
131
OFFICE
BUILDINGS
217
INDUSTRIAL AND
MIXED-USE BUILDINGS
165
RETAIL
BUILDINGS
38.3M
LEASABLE AREA (SQ. FT.)
$6.3B
ASSETS
10
2013 ANNUAL REPORT
SOLID BASE OF
5000+ CLIENTS
513
PROPERTIES
AS AT FEBRUARY 27, 2014
INTEGRATED
MANAGEMENT
SYNERGIES
OPERATIONAL EFFICIENCY
SEGMENT AND
GEOGRAPHICAL
DIVERSIFICATION
FINANCIAL STABILITY
FURTHER STRENGTHENED
BY OUR OVERALL DEBT
MANAGEMENT STRATEGY
134
PROPERTIES
IN THE GREATER
QUEBEC CITY AREA
268
PROPERTIES
IN THE GREATER
MONTREAL AREA
36
PROPERTIES
IN ONTARIO
61
PROPERTIES
IN THE ATLANTIC PROVINCES
14
PROPERTIES
IN WESTERN CANADA
2013 ANNUAL REPORT
11
6
MANAGEMENT’S DISCUSSION
AND ANALYSIS
The following Management's Discussion and Analysis ("MD&A") is
provided to enable a reader to assess the results of operations of
Cominar Real Estate Investment Trust ("Cominar," the "Trust" or the
"REIT") for the year ended December 31, 2013, in comparison with the
year ended December 31, 2012, as well as its financial position at that
date and its outlook. Dated February 26, 2014, this MD&A reflects all
significant information available as of that date and should be read in
conjunction with
the consolidated
financial statements and
accompanying notes included in this document.
Unless otherwise indicated, all amounts are in thousands of
Canadian dollars, except for per unit and per square-foot
amounts, and are based on consolidated
financial statements
prepared
in accordance with
International Financial Reporting
Standards ("IFRS"), as
issued by
the
International Accounting
Standards Board (“IASB”).
Additional
information on
the Trust,
including
its 2013 Annual
Information Form,
is
available
on Cominar’s website
at
www.cominar.com and on the Canadian Securities Administrators’
("CSA") website at www.sedar.com.
The Board of Trustees, under the recommendation of the Audit
Committee, has approved the contents of this MD&A.
12
2013 ANNUAL REPORT
TABLE OF CONTENTS
7
SELECTED QUARTERLY INFORMATION
HIGHLIGHTS
NON-IFRS FINANCIAL MEASURES
LOOKING STATEMENTS
HIGHLIGHTS FROM FISCAL 2013
GENERAL BUSINESS OVERVIEW
14
16 SUBSEQUENT EVENTS
16 CAUTION REGARDING FORWARD-
17
18 FINANCIAL AND OPERATIONAL
19
19
20
21
22
23
30 DISTRIBUTABLE INCOME AND
34
36
38
OBJECTIVES AND STRATEGY
PERFORMANCE INDICATORS
FUNDS FROM OPERATIONS
RESULTS OF OPERATIONS
PERFORMANCE ANALYSIS
DISTRIBUTIONS
ADJUSTED FUNDS FROM OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
PROPERTY PORTFOLIO
DEVELOPMENT PROGRAM
REAL ESTATE OPERATIONS
44
44 PROPERTY ACQUISITION AND
47
50
51
51
DISCLOSURE CONTROLS AND
PROCEDURES AND INTERNAL
CONTROL OVER FINANCIAL
REPORTING
RELATED PARTY TRANSACTIONS
ISSUED AND OUTSTANDING UNITS
AND ESTIMATES
RISKS AND UNCERTAINTIES
NEW ACCOUNTING POLICIES
51 SIGNIFICANT ACCOUNTING POLICIES
55
56
63 CONSOLIDATED FINANCIAL
70 NOTES TO CONSOLIDATED
99
100
UNITHOLDER INFORMATION
CORPORATE INFORMATION
FINANCIAL STATEMENTS
STATEMENTS
2013 ANNUAL REPORT
13
DEBT RATIO
48.2%
(excluding convertible debentures)
INCREASE IN
LEASABLE AREA
5.8%
INTEREST
COVERAGE RATIO
2.70: 1
PAYOUT RATIO
OF RECURRING
DISTRIBUTABLE INCOME
91.1%
2013
HIGHLIGHTS
FROM FISCAL 2013
INCREASES
17.3%
IN OPERATING
REVENUES
15.9%
IN NET OPERATING
INCOME
16.8%
IN RECURRING DISTRIBUTABLE
INCOME
12.7%
IN RECURRING FUNDS
FROM OPERATIONS
17.0%
IN RECURRING
ADJUSTED FUNDS
FROM OPERATIONS
5.9%
OF THE AVERAGE NET RENT
OF RENEWED LEASES
6.8%
IN TOTAL ASSETS
14
2013 ANNUAL REPORT
PROPERTY PORTFOLIO
/ $249.4 MILLION WORTH OF STRATEGIC ACQUISITIONS IN 2013 – 24 NEW PROPERTIES
REPRESENTING 2.3 MILLION SQUARE FEET AND LAND FOR FUTURE DEVELOPMENT REPRESENTING
0.7 MILLION SQUARE FEET
JANUARY
Acquired a portfolio of 18 industrial properties,
1 office property and a parcel of land for $151.2 million
located primarily on Montreal’s South Shore.
MAY
Capitalization rate of 7.0%
MARCH
Acquired an industrial income property at a cost
of $12.0 million located in Pointe-Claire, Quebec.
Capitalization rate of 7.6%
Acquired 1 office income property at a cost of
$5.7 million located in Fredericton, New Brunswick.
Capitalization rate of 8,0%
DECEMBER
Acquired a land held for future development for
$20.5 million located in Calgary, Alberta
Acquired a shopping centre consisting of an indoor
shopping centre, a strip mall and two single-
tenant buildings at a cost of $60.0 million.
Capitalization rate of 7.0%
/ REVITALIZATION OF OUR MAIN SHOPPING CENTRES IN THE MONTREAL AREA
Adding future value for our current clients
Signing of new leases with high-profile clients
FINANCING
/ COMPLETED 4 FINANCING TRANSACTIONS TOTALLING $550.0 MILLION
Three issues of unsecured debentures bearing a fixed interest rate for a total of $300.0 million
One issue of unsecured debentures bearing a variable interest rate for a total of $250.0 million
/ EARLY REDEMPTION OF SERIES C CONVERTIBLE DEBENTURES FOR $110.0 MILLION
2013 ANNUAL REPORT
15
10
SUBSEQUENT EVENTS
On January 13, 2014, Cominar re-opened the Series 4 investment and issued $100.0 million in unsecured debentures bearing an
interest rate of 4,941% and maturing in July 2020. The issue price of these unsecured debentures includes a premium which results
in an effective interest rate of 4,747% for this issuance.
On January 13, 2014, Cominar completed the merger of the ownership interests in a previously co-owned investment property, as
planned. Prior to completion of this merger, the first phase of Complexe Jules-Dallaire, comprised of office and retail premises, was
owned in undivided co-ownership by Cominar as to 95% and by a company indirectly owned by the Dallaire family (“Dallaire Co”) as
to 5% and the second phase of Complexe Jules-Dallaire, comprised of office premises, was owned by DallaireCo. In addition to the
contribution of its pre-merger ownership interests in phases one and two, DallaireCo paid $20.2 million to Cominar in connection
with the merger. Under this business combination, both Cominar and DallaireCo each now own a 50% interest in Complexe Jules-
Dallaire. Under IFRS 11 – “Joint Arrangements”, this building held in partnership shall be considered a joint venture and will be
accounted for under the equity method, whereas previously, the participation in the first phase of this building was considered as a
participation in a joint operation and Cominar recorded its share of assets, liabilities, comprehensive income and cash flows.
On January 27, 2014, Cominar decided not to seek renewal of the $250.0 million tranche B portion of its operating and acquisition
credit facilities which matured on this date, allowing Cominar to add to its portfolio of unencumbered income property approximately
$424,0 million in value of income properties which are not necessary to secure the remaining $300.0 million tranche A portion which
is secured by income properties worth approximately $508.0 million.
On February 26, 2014, Cominar acquired a portfolio of 11 office properties in the Greater Toronto Area and in Montréal from
Redbourne Realty Fund, for a purchase price of $228.8 million; $127.9 million paid in cash and $100.9 million by assuming
mortgages payable. The acquired portfolio consists of 4 office properties in the Greater Toronto Area, comprising a total of
approximately 780,000 square feet in leasable area, and 7 office properties in Montréal, comprising a total of approximately
400,000 square feet in leasable area. The capitalisation rate of this transaction is 7.0%. Such acquisition has a significant impact on
Cominar’s geographic diversification, increasing the contribution of its Ontario properties to net operating income to approximately
13.3%, on a proforma basis.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
From time to time, we make written or oral forward-looking statements within the meaning of applicable Canadian securities
legislation. We may make such statements in this document and in other filings with Canadian regulators, in reports to unitholders or
in other communications. These forward-looking statements include, among other things, statements with respect to our medium-
term and 2014 objectives, and strategies to achieve our objectives, as well as statements with respect to our beliefs, outlooks,
plans, objectives, expectations, anticipations, estimates and intentions. The words "may," "could," "should," "would," "suspect,"
"outlook," "believe," "plan," "anticipate," "estimate," "expect," "intend," "forecast" and "objective" and the use of the conditional tense,
and words and expressions of similar import are intended to identify forward-looking statements.
By their very nature, forward-looking statements involve numerous factors and assumptions, and are subject to inherent risks and
uncertainties, both general and specific, which give rise to the possibility that predictions, forecasts, projections and other forward-
looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of
important factors could cause our actual results to differ materially from the expectations expressed in such forward-looking
statements. These factors include general economic conditions in Canada and elsewhere in the world; the effects of competition in
the markets where we operate; the impact of changes in laws and regulations, including tax laws; successful execution of our
strategy; our ability to complete and integrate acquisitions successfully; our ability to attract and retain key employees and
executives; the financial position of clients; our ability to refinance our debts upon maturity and to lease vacant space; our ability to
complete developments according to plans and to raise capital to finance growth; as well as changes in interest rates.
We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on our forward-
looking statements to make decisions with respect to Cominar, investors and others should carefully consider the foregoing factors,
as well as other factors and uncertainties. Unless otherwise stated, all forward-looking statements speak only as of the date of this
16
2013 ANNUAL REPORT
11
MD&A. We do not assume any obligation to update the aforementioned forward-looking statements, except as required by
applicable laws.
Additional information about these factors can be found in the “Risks and Uncertainties” section of this MD&A, as well as in the
“Risk Factors” section of Cominar’s 2013 Annual Information Form.
NON-IFRS FINANCIAL MEASURES
In this MD&A, we issue guidance on and report on certain non-IFRS measures, including "net operating income," "recurring
distributable income," "recurring funds from operations" and "recurring adjusted funds from operations," which we use to evaluate
our performance. Because non-IFRS measures do not have standardized meanings and may differ from similar measures
presented by other entities, securities regulations require that non-IFRS measures be clearly defined and qualified, reconciled with
their nearest IFRS measure and given no more prominence than the closest IFRS measure. You may find such information in the
sections dealing with each of these measures.
2013 ANNUAL REPORT
17
12
FINANCIAL AND OPERATIONAL HIGHLIGHTS
For the years ended December 31
FINANCIAL PERFORMANCE
Operating revenues
Net operating income(1)
Same property net operating income(1)
Net income
Recurring distributable income(1)
Recurring funds from operations(1)
Recurring adjusted funds from operations(1)
Distributions
Total assets
PER UNIT FINANCIAL PERFORMANCE
Net income (basic)
Recurring distributable income (basic)(1)
Recurring funds from operations (FD)(1)(2)
Recurring adjusted funds from operations (FD)(1)(2)
Distributions
Payout ratio of recurring DI
Payout ratio of recurring adjusted funds from operations
Cash payout ratio of recurring adjusted funds from operations
Weighted average number of units outstanding (basic) (in thousands of units)
Weighted average number of units outstanding (FD)(2) (in thousands of units)
FINANCING
Overall debt ratio(3)
Debt ratio (excluding convertible debentures)
Interest coverage ratio(4)
Weighted average interest rate on total debt
Weighted average interest rate on fixed-rate debts
Residual weighted average term of fixed-rate debts (years)
Senior unsecured debts-to-total-debt ratio(5)
Unencumbered assets ratio(6)
OPERATIONAL DATA
Number of investment properties
Leasable area (in thousands of sq. ft.)
Occupancy rate
Growth in the average net rent of renewed leases
ACQUISITIONS
Number of income properties
Leasable area (in thousands of sq. ft.)
Total investment (including land for future development)
Weighted average capitalization rate
DEVELOPMENT ACTIVITIES
Number of properties transferred from properties under development to income properties
Value of properties transferred from properties under development to income properties
Number of properties under development
Value of properties under development
2013
2012
%
17.3
15.9
(1.3)
(25,5)
16.8
12.7
17.0
11.6
6.8
(35.1)
1.9
(0.6)
2.7
5.8%
662,053
368,210
182,296
254,969
198,479
225,855
194,776
182,977
564,537
317,815
184,610
342,171
169,905
200,450
166,412
164,021
5,997,330
5,617,049
2.03
1.58
1.77
1.54
1.44
91.1%
92.9%
69.7%
125,370
136,016
51.2%
48.2%
2.70:1
4.76%
4.93%
5.0
32.4%
1.18:1
497
37,123
93.1%
5.9%
24
2,317
3.13
1.55
1.78
1.50
1.44
92.9%
94.7%
73.0%
109,454
124,984
50.0%
44.8%
2.65:1
4.93%
5.14%
3.9
16.0%
1.96:1
481
35,097
93.9%
4.2%
213
13,976
249,400
2,525,289
7.1%
6.8%
3
9,366
3
53,414
3
4,760
3
21,537
(1) Non-IFRS financial measure. See relevant sections for definition and reconciliation to closest IFRS measure.
(2) Fully diluted
(3) Total of cash and cash equivalents, bank borrowings, mortgages payable, the bridge loan, debentures and convertible debentures divided by the total assets less cash and
cash equivalents.
(4) Net operating income less Trust administrative expenses divided by finance charges.
(5) Senior unsecured debt divided by total debt.
(6) Fair value of unencumbered income properties divided by the unsecured debt (excluding convertible debentures).
18
2013 ANNUAL REPORT
13
SELECTED QUARTERLY INFORMATION
The following table presents, in summary form, Cominar’s financial information for the last eight quarters:
For the quarters ended
Dec. 31,
2013
Sept. 30,
2013
June 30,
2013
March 31,
2013
Dec. 31,
2012
Sept. 30,
2012
June 30,
2012
March 31,
2012
Operating revenues
Net operating income
Net income
Net income per unit (basic)
Net income per unit (diluted)
Recurring distributable income
Recurring DI per unit (basic)
Recurring funds from operations
Recurring FFO per unit (FD)
Recurring AFFO
Recurring AFFO per unit (FD)
Distributions
Distributions per unit
163,150
161,470
167,840
169,593
157,312
140,518
140,419
126,288
93,217
74,568(1)
0.59(1)
0.58(1)
50,768
0.40
58,475
0.46
49,044
0.39
46,338
0.36
93,338
58,348
0.46
0.46
91,733
62,356
0.50
0.48
89,922
59,697
0.48
0.47
90,334
231,859(1)
1.87(1)
1.73(1)
81,566
31,824
0.27
0.27
79,035
45,762
0.43
0.42
66,880
32,726
0.36
0.36
51,369
48,473
47,869
48,717
44,126
41,816
35,246
0.41
0.39
0.38
0.39
0.38
0.40
0.39
57,193
54,797
55,390
57,071
51,508
49,363
42,508
0.45
0.43
0.44
0.45
0.43
0.45
0.45
50,593
47,765
47,374
47,025
43,375
40,990
35,022
0.40
0.38
0.38
0.38
0.37
0.38
0.38
45,886
45,598
45,155
45,287
43,598
39,505
35,630
0.36
0.36
0.36
0.36
0.36
0.36
0.36
(1) Includes the change in fair value of income properties.
DI: Distributable income
FD: Fully diluted
FFO: Funds from operations
AFFO: Adjusted funds from operations
GENERAL BUSINESS OVERVIEW
Cominar Real Estate Investment Trust is the third-largest diversified REIT in Canada and remains the largest commercial property
owner in the Province of Quebec. As at December 31, 2013, Cominar owned and managed a high-quality portfolio of 497 properties
including 120 office buildings, 160 retail buildings and 217 industrial and mixed-use buildings located in Quebec, Ontario, the
Atlantic Provinces and Western Canada.
Since its inception in 1998, Cominar has made a series of acquisitions and completed numerous construction and property
development projects, increasing the carrying amount of its assets to $6.0 billion as at December 31, 2013.
As a self-managed and fully integrated real estate investment trust, asset and property management is entirely internalized. Except
for one property whose management currently does not match Cominar’s business model, the Trust is not bound to any third party
by management contracts or property management fees. This mode of operation enables more direct, faster and more efficient
contact with our clientele. The result is improved efficiency for Cominar.
Segment
Office
Retail
Industrial and Mixed-Use
TOTAL
PROPERTIES SUMMARY AS AT DECEMBER 31, 2013
Number of
Buildings
Leasable Space
(sq. ft.)
Occupancy Rate
(%)
120
160
217
497
13,017,500
7,901,500
16,204,000
37,123,000
93.3
94.2
92.4
93.1
2013 ANNUAL REPORT
19
14
OBJECTIVES AND STRATEGY
Cominar’s primary objectives are to provide its unitholders with growing cash distributions, sustainable over the long-term and
payable monthly, as well as to increase and maximize unit value through proactive management and the sustained growth of its
property portfolio.
To reach its objectives, Cominar continues to manage growth, operational risks and debt in a flexible and prudent manner.
In accordance with Cominar’s financial management policies on maintaining a sound and strong financial position over the long-term
and providing unitholders with consistent and stable distributions, Cominar generally aims to maintain a debt ratio of approximately
50% of the gross carrying amount, even though the Contract of Trust provides for a ratio of up to 65%. In addition, Cominar is
targeting a payout ratio that should gradually attain approximately 90% of distributable income, in order to increase reserves.
Cominar’s growth strategy consists of a two-fold approach: acquiring properties or property portfolios and carrying out development
projects.
To sustain and eventually increase the pace of its growth, Cominar is developing new markets outside the province of Quebec,
as demonstrated by certain large acquisitions realized over the last three years. Through this strategy, Cominar has enhanced its
geographical diversification. Cominar also intends to keep investing in Quebec in order to benefit from the competitive advantage it
has in this market.
Cominar will mainly grow through acquisitions and will limit the scale of development projects, executing only those that meet
demand and the needs of its clients.
20
2013 ANNUAL REPORT
15
PERFORMANCE INDICATORS
Cominar measures the success of its strategy using a number of performance indicators:
Same property net operating income, which provides an indication of the operating profitability of the existing portfolio,
i.e. Cominar’s ability to increase revenues and reduce costs, and thereby generate added value for its unitholders;
Recurring distributable income ("DI") per unit, which represents a benchmark that investors can use to judge the
stability of distributions;
Recurring funds from operations ("FFO") per unit, which represents a standard real estate benchmark used to
measure an entity’s performance;
Recurring adjusted funds from operations ("AFFO") per unit, which, by excluding the items not affecting cash flows
and the investments needed to maintain the property portfolio’s ability to generate rental income from the calculation of
funds from operations, represents a meaningful measure of Cominar’s ability to generate stable cash flows;
Payout ratio of recurring distributable income, which allows investors to assess the stability of distributions;
Debt ratio, which is used to assess the financial balance essential to the smooth running of an organization;
Interest coverage ratio, which is used to assess Cominar’s ability to pay interest on its debt from operating revenues;
Occupancy rate, which gives an indication of the economic health of the geographical regions and sectors in which
Cominar owns properties;
Annual retention rate, which helps assess client satisfaction and loyalty;
Leasable area growth, a decisive factor of Cominar’s strategy for reaching its main objectives of providing unitholders
with growing cash distributions and increasing and maximizing unit value;
Growth in the average net rent of renewed leases, which represents a measurement of organic growth and gives an
indication of our capacity to increase our rental revenues;
Segment and geographic diversification, which contributes to revenue stability by spreading real estate risk.
The following table summarizes our key performance indicators for the periods ending December 31, 2013, and 2012.
PERFORMANCE INDICATORS
Periods ended December 31
Page
2013
2012
%
2013
2012
%
Quarter
Cumulative
93,217
45,483
0.40
0.46
0.39
Net operating income
Same property net operating income
Recurring distributable income per unit (basic)
Recurring funds from operations per unit (FD)(1)
Recurring adjusted funds from operations per unit (FD)(1)
Payout ratio of recurring distributable income
Debt ratio (including convertible debentures)
Debt ratio (excluding convertible debentures)
Interest coverage ratio
Occupancy rate
Retention rate
Growth in the average net rent of renewed leases
Increase in leasable area
(1) Fully diluted.
18
18
25
29
31
25
36
36
37
41
42
42
38
15.9
(1.3)
1.9
(0.6)
2.7
90,334
3.2
46,888
(3.0)
368,210
182,296
317,815
184,610
0.39
0.45
0.38
2.6
2.2
2.6
1.58
1.77
1.54
91.1%
51.2%
48.2%
2.70:1
93.1%
68.6%
5.9%
5.8%
1.55
1.78
1.50
92.9%
50.0%
44.8%
2.65:1
93.9%
74.2%
4.2%
65.4%
The abovementioned performance indicators are not financial measures recognized by IFRS. Definitions and other relevant
information regarding these performance indicators are provided in the appropriate sections.
2013 ANNUAL REPORT
21
16
PERFORMANCE ANALYSIS
During fiscal 2013, Cominar’s growth was strengthened through property acquisitions, which were made in a disciplined and orderly
fashion, and investments on buildings that allowed the Trust to build value in the property portfolio. We achieved efficient operational
performance thanks to sound internal management. Our comprehensive debt management strategy decreased the weighted
average interest rate on total debt from 5.14% as at December 31, 2012 to 4.93% as at December 31, 2013. Furthermore, we
reduced Trust administrative expenses as a percentage of operating revenues to 1.8% compared to 2.0% in 2012.
OPERATIONAL RESULTS
The following tables summarize our main operating results for the periods ended December 31, 2013 and 2012.
CONSOLIDATED STATEMENT OF NET INCOME
For the periods ended December 31
Operating revenues
Operating expenses
Net operating income
Change in fair value of investment properties
Finance charges
Trust administrative expenses
Restructuring charges
Transaction costs – business combinations
Gain on disposal of a subsidiary
Gain on an investment in a public entity
Gains on disposal of investment properties
Other revenues
Income taxes
Net income
NON-IFRS FINANCIAL MEASURES
For the periods ended December 31
Recurring distributable income
Distributions
Recurring funds from operations
Recurring adjusted funds from operations
Quarter
2013
2012
163,150
157,312
69,933
93,217
17,150
(32,429)
(2,313)
—
—
—
—
—
—
(1,057)
74,568
66,978
90,334
177,706
(30,422)
(3,409)
(2,030)
(341)
—
—
—
544
(523)
231,859
%
3.7
4.4
3.2
(90.3)
Cumulative
2013
2012
662,053
293,843
368,210
17,150
564,537
246,722
317,815
177,706
6.6
(131,811)
(115,963)
(32.2)
(100.0)
(100.0)
—
—
—
(100.0)
102.1
(67.8)
(12,063)
(11,065)
(1,062)
(6,929)
—
(27,689)
8,010
—
3,370
4,906
(1,741)
254,969
—
6,222
—
2,964
(890)
342,171
Quarter
2013
2012
50,768
46,338
58,475
49,044
48,717
45,287
57,071
47,025
Cumulative
2013
2012
198,479
182,977
225,855
194,776
169,905
164,021
200,450
166,412
%
4.2
2.3
2.5
4.3
%
17.3
19.1
15.9
(90.3)
13.7
9.0
(84.7)
(100.0)
100.0
(100.0)
100.0
65.5
95.6
(25.5)
%
16.8
11.6
12.7
17.0
22
2013 ANNUAL REPORT
17
FINANCIAL POSITION
The following table summarizes assets and liabilities as well as unitholders’ equity as at December 31, 2013 and 2012.
As at December 31
ASSETS
Investment properties
Income properties
Properties under development and land held for future development
Goodwill
Other assets
Total
LIABILITIES
Mortgages payable
Debentures
Convertible debentures
Bank borrowings
Bridge loan
Other liabilities
Total
UNITHOLDERS’ EQUITY
Total
2013
2012
$
%
5,654,825
107,961
166,971
67,573
5,997,330
1,794,830
994,824
181,768
105,697
—
94,831
3,171,950
2,825,380
5,997,330
5,294,984
359,841
6.8
53,234
166,971
101,860
54,727
102.8
—
—
(34,287)
(33.7)
5,617,049
380,281
6.8
1,695,222
448,530
99,608
546,294
289,134
(107,366)
300,368
(194,671)
5.9
121.8
(37.1)
(64.8)
84,000
(84,000)
(100.0)
102,900
2,920,154
(8,069)
251,796
(7.8)
8.6
2,696,895
5,617,049
128,485
380,281
4.8
6.8
RESULTS OF OPERATIONS
OPERATING REVENUES
For the periods ended December 31
2013
2012
Quarter
Same property portfolio(1)
Acquisitions and developments
Total operating revenues
78,749
84,401
78,964
78,348
163,150
157,312
%
(0.3)
7.7
3.7
Cumulative
2013
2012
328,845
333,208
662,053
326,645
237,892
564,537
%
0.7
40.1
17.3
(1) The same property portfolio includes all properties owned by Cominar as at December 31, 2011, except for the property sold in 2012, but does not include the benefits of
acquisitions and developments completed and integrated in the subsequent periods.
During fiscal 2013, operating revenues rose 17.3% from the corresponding period in 2012. This increase resulted primarily from the
contribution of acquisitions completed in 2012 and 2013.
2013 ANNUAL REPORT
23
18
The chart below shows Cominar’s growth in operating revenues over the past 10 years.
(1) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
NET OPERATING INCOME
For the periods ended December 31
2013
2012
Quarter
Same property portfolio(1)
Acquisitions and developments
Total net operating income
(1) See “Operating revenues.”
45,483
47,734
93,217
46,888
43,446
90,334
%
(3.0)
9.9
3.2
Cumulative
2013
2012
182,296
185,914
368,210
184,610
133,205
317,815
%
(1.3)
39.6
15.9
Although net operating income ("NOI") is not a financial measure defined by IFRS, it is widely used in the real estate industry to
assess operating performance. We define it as operating income before fair value adjustment of investment properties, finance
charges, Trust administrative expenses, restructuring charges, transaction costs – business combinations, gains on disposal of
subsidiaries, gains from an investment in a public entity, gains from disposal of investment properties, other revenues and income
taxes. This definition may differ from that of other entities and, therefore, Cominar’s NOI may not be comparable to similar measures
presented by such other entities.
Overall NOI rose 15.9% in fiscal 2013, compared to fiscal 2012, due mainly to the acquisitions completed in 2012 and 2013.
For fiscal 2013, the NOI of the same property portfolio decreased 1.3% compared to fiscal 2012. This decrease is mostly due to a
slight reduction in the occupancy rate in the Montreal area office segment and in the Quebec City and Montreal areas industrial and
mixed-use segment. It must be specified, however, that the leasable space of Cominar’s property portfolio has doubled since the
beginning of fiscal 2012, so the same-property NOI figure is not representative of organic growth in the overall portfolio.
24
2013 ANNUAL REPORT
The chart below shows growth in Cominar’s net operating income over the past 10 years.
19
(1) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
2013 ANNUAL REPORT
25
20
SEGMENT NET OPERATING INCOME
BY OPERATING SEGMENT
For the periods ended December 31
2013
2012
%
2013
2012
%
Quarter
Cumulative
Operating segment
Office
Retail
Industrial and mixed-use
Total net operating income
48,153
23,768
21,296
93,217
46,986
23,690
19,658
90,334
2.5
0.3
8.3
3.2
190,588
157,907
91,550
86,072
88,782
71,126
368,210
317,815
20.7
3.1
21.0
15.9
For the periods ended December 31
2013
2012
Quarter
Operating segment
Office
Retail
Industrial and mixed-use
51.7%
25.5%
22.8%
52.0%
26.2%
21.8%
Cumulative
2013
2012
51.8%
24.8%
23.4%
49.7%
27.9%
22.4%
100.0%
100.0%
100.0%
100.0%
Net operating income increased in all operating segments during fiscal 2013.
BY GEOGRAPHIC MARKET
For the periods ended December 31
2013
2012
%
2013
2012
%
Quarter
Cumulative
Geographic market
Quebec City
Montreal
Other – Quebec
Ottawa(1)
Other – Ontario
Atlantic provinces
Western Canada
18,481
50,814
1,568
7,672
1,681
5,931
7,070
18,772
48,061
1,943
8,749
1,765
5,830
5,214
Total net operating income
93 217
90 334
For the periods ended December 31
2013
2012
Quarter
Geographic market
Quebec City
Montreal
Other – Quebec
Ottawa(1)
Other – Ontario
Atlantic provinces
Western Canada
19.8%
54.5%
1.7%
8.2%
1.8%
6.4%
7.6%
100.0%
20.8%
53.2%
2.2%
9.7%
2.0%
6.5%
5.6%
100.0%
(1) The Gatineau area is included in the Ottawa geographic market.
26
2013 ANNUAL REPORT
(1.6)
5.7
(19.3)
(12.3)
(4.8)
1.7
35.6
3,2
73,326
195,793
7,900
33,586
6,958
23,469
27,178
70,644
171,231
7,779
16,741
6,127
22,597
22,696
368 210
317 815
3.8
14.3
1.6
100.6
13.6
3.9
19.8
15,9
Cumulative
2013
2012
19.9%
53.2%
2.1%
9.1%
1.9%
6.4%
7.4%
100.0%
22.2%
53.9%
2.4%
5.3%
1.9%
7.1%
7.2%
100.0%
21
CHANGE IN FAIR VALUE OF INVESTMENT PROPERTIES
Cominar opted to present its investment properties in the financial statements according to the fair value model. Fair value is
determined based on evaluations performed using management’s internal estimates and by independent real estate appraisers,
plus capital expenditures made since the most recent appraisal, if applicable.
As per Cominar’s policy on valuing investment properties, at the end of 2013, management revalued the real estate portfolio and
determined that an increase of $17.2 million was necessary to adjust the carrying value of investment properties to their fair value
[increase of $177.7 million in 2012].
Internally valued investment property has been measured using the following method and key assumptions:
Capitalized net operating income method – Under this method, capitalization rates are applied to normalized net operating income in
order to comply with current valuation standards. The normalized net operating income represents adjusted net operating income for
items such as administrative expenses, occupancy rates, the recognition of leases on a straight-line basis and other non-recurring
items. The key factor is the capitalization rate for each property or property type. Cominar regularly receives publications from
national firms dealing with real estate activity and trends. Such market data reports include differences in capitalization rates by
property type and geographical area.
To the extent that the capitalization rate ranges change from one reporting period to the next, or if another rate within the provided
ranges is more appropriate than the rate previously used, the fair value of investment properties increases or decreases
accordingly.
Cominar has determined that an increase or decrease in 2013 of 0.10% in the applied capitalization rate for the entire real estate
portfolio would result in a decrease or increase of approximately $85.0 million [$67.0 million in 2012] in the fair value of its
investment properties.
2013 ANNUAL REPORT
27
22
WEIGHTED AVERAGE CAPITALIZATION RATE – DECEMBER 31, 2013
Quebec
City
Montreal
Other –
Quebec
Ottawa
Other –
Ontario
Atlantic
Provinces
Western
Canada
%
6.4
6.6
7.3
6.7
%
6.6
6.5
7.2
6.7
%
—
7.5
9.1
7.6
%
6.1
7.4
—
6.1
%
—
6.7
8.5
6.8
%
7.4
8.0
8.0
7.7
%
6.0
6.3
6.9
6.0
Weighted
Average
Rate
%
6.4
6.7
7.3
6.7
Office
Retail
Industrial and mixed-use
FINANCE CHARGES
For the periods ended December 31
2013
2012
%
2013
2012
%
Quarter
Cumulative
Interest on mortgages payable
Interest on debentures
Interest on convertible debentures
Interest on bank borrowings and bridge loan
Amortization of premium on debenture issues
Amortization of deferred financing costs and other
Amortization of fair value adjustments on assumed
indebtedness
Less: Capitalized interests(1)
Total finance charges
Percentage of operating revenues
Weighted average interest rate on total debt(2)
22,659
9,890
2,873
483
(48)
1,373
(3,062)
(1,739)
32,429
19.9%
21,447
3,270
4,466
4,507
(70)
1,388
(4,163)
(423)
30,422
19.3%
5.7
202.4
(35.7)
(89.3)
(31.4)
(1.1)
(26.4)
311.1
6.6
88,670
29,492
14,804
10,113
(183)
6,861
(13,680)
(4,266)
131,811
19.9%
4.76%
84,018
5,051
21,615
13,914
(70)
8,184
(15,193)
(1,556)
115,963
20.5%
4.93%
5.5
483.9
(31.5)
(27.3)
161.4
(16.2)
(10.0)
174.2
13.7
Includes capitalized interest on properties under development and on major revitalization projects for income properties that take place over a substantial period of time.
(1)
(2) At the end of the period
The increase in finance charges was mostly due to increased financing following the acquisition of income properties completed in
2012 and 2013.
During the fiscal year ended December 31, 2013, Cominar wrote off $1.0 million in deferred financing costs following the redemption
of convertible Series C debentures [$1.0 million in 2012 following the redemption of Series A and B convertible debentures].
During the fiscal year ended December 31, 2012, Cominar wrote off financing costs incurred to establish financing for the acquisition
of Canmarc. This financing was not used and the costs, in the amount of $2.1 million, were recognized in profit or loss in 2012.
Although finance charges for the fiscal year 2013 increased 13.7%, compared to 2012, they decreased as a percentage of operating
revenues, falling from 20.5% in 2012 to 19.9% in 2013. This decrease is primarily attributable to continued pursuit of our overall debt
management strategy, which consists in issuing debt in the form of unsecured debentures to replace existing debts and to new
mortgages negotiated during the fiscal year that helped reduce the weighted average interest rate on total debt, which was 4.76% at
the end of 2013, compared to 4.93% as at December 31, 2013.
TRUST ADMINISTRATIVE EXPENSES
During fiscal 2013, Cominar successfully reduced Trust administrative expenses to 1.8% of operating revenues [2.0 % in 2012],
which corresponds to the objective set by management.
28
2013 ANNUAL REPORT
23
RESTRUCTURING CHARGES
For the year ended December 31, 2013, Cominar incurred charges of $1.1 million [$6.9 million in 2012] related to the integration of
Canmarc’s operations, namely for changes to its corporate structure. These charges for 2012 and 2013 were mainly direct salaries
of employees retained through the transition period, severance benefits paid, as well as consulting and legal fees.
GAIN ON DISPOSAL OF A SUBSIDIARY
On May 22, 2013, Cominar sold its interest in Hardegane Investments Limited (“Hardegane”), which held 100% of the shares of
Dyne Holdings Limited (“Dyne”), to Homburg International Limited (“Homburg”), for a nominal consideration and the reimbursement
of certain Cominar advances. Dyne owned three income properties, two of which were classified as office properties and one as
retail property, as well as an unexploited hotel. This transaction allowed Cominar to remove Dyne’s liabilities from its balance sheet
and to record a gain of $8.0 million on this disposal.
GAINS ON DISPOSAL OF INVESTMENT PROPERTIES
On June 28, 2013, Cominar disposed of an office building in Levis, Quebec, for $1.5 million, following the exercise of a purchase
option included in the sole tenant’s lease. The transaction resulted in a gain of $0.5 million on disposal.
On July 11, 2013, the Tribunal administratif du Québec rendered its final decision regarding the expropriation process initiated by
the Centre hospitalier de l’Université de Montréal (“CHUM”) in June 2006 in relation to the property located at 300 Viger Avenue in
Montreal, Quebec. The Tribunal administratif du Québec set the definitive expropriation indemnity at $33.5 million. The CHUM paid
Cominar a sum of $3.5 million, which represents the difference between the amount of the provisional indemnity of $30.0 million that
was already paid to Cominar in 2007 and the total definitive indemnity. Cominar recorded a gain of $2.9 million in connection with
this event.
OTHER REVENUES
In connection with the restructuring of Homburg Invest Inc. (“HII”) under the Company’s Creditors Arrangement Act (Canada),
Cominar filed a number of proofs of claim against HII. On February 5, 2013, Cominar and HII entered into a memorandum of
understanding related to, among other things, the settlement of these proofs of claim. Under this arrangement, Cominar received a
cash payment of approximately $6.3 million in settlement of various claims. A portion of the payment was recognized against the
receivables recorded in the balance sheet, and the excess was recorded as revenue in the results for 2013.
NET INCOME
For the periods ended December 31
2013
2012
%
2013
2012
%
Quarter
Cumulative
Net income
74,568
231,859
(67.8)
254,969
342,171
(25.5)
Net income per unit (basic)(1)
Net income per unit (diluted)(1)
(1) See "Per unit calculations" in this MD&A.
0.59
0.58
1.87
1.73
(68.4)
(66.5)
2.03
1.98
3.13
2.91
(35.1)
(32.0)
Cominar reported $255.0 million in net income for fiscal 2013 compared to $342.2 million in 2012. Net income per unit stood at
$2.03, down 35.1% from fiscal 2012. This decrease is mainly due to the change in fair value of investment properties of $177.7
million in 2012.
2013 ANNUAL REPORT
29
24
DISTRIBUTABLE INCOME AND DISTRIBUTIONS
Although the concept of distributable income (DI) is not a financial measure defined under IFRS, it is a measure widely used by
investors in the field of income trusts. We consider DI an excellent tool for assessing Cominar’s performance. Given its historical
nature, DI per unit is also a useful benchmark enabling investors to evaluate the stability of distributions.
We define distributable income as net income determined under IFRS, before fair value adjustments, transaction costs incurred
upon business combinations, rental income arising from the recognition of leases on a straight-line basis, gains on disposal of
subsidiaries, gains on disposal of investment properties, the provision for leasing costs and certain other items not affecting cash, if
applicable.
30
2013 ANNUAL REPORT
25
The following table presents the calculation of distributable income as well as its reconciliation to net income calculated in
accordance with IFRS:
DISTRIBUTABLE INCOME
For the periods ended December 31
2013
2012
%
2013
2012
%
Quarter
Cumulative
Net income
- Change in fair value of investment properties
74,568
231,859
(17,150)
(177,706)
- Net amortization of premium and discount on debenture issue
(48)
(70)
- Amortization of fair value adjustments on assumed indebtedness
(3,062)
(4,163)
+ Amortization of fair value adjustments on bond investments
+ Amortization of deferred financing costs
+ Compensation expense related to long term incentive plan
+ Accretion of liability component of convertible debentures
+ Restructuring charges
+ Transaction costs – business combinations
- Gain on disposal of a subsidiary
- Gains on disposal of investment properties
+ Deferred taxes
- Provision for leasing costs
- Change in fair value of an investment in a public entity
- Change in accounts receivable – recognition of leases on a
78
1,322
(99)
51
—
—
—
—
1,057
79
1,388
522
60
2,030
341
—
—
547
(5,048)
(3,974)
—
—
(67.8)
(90.3)
(31.4)
(26.4)
(1.3)
(4.8)
(119.0)
(15.0)
(100.0)
(100.0)
—
—
93.2
27.0
—
254,969
342,171
(17,150)
(177,706)
(183)
(70)
(13,680)
(15,193)
314
6,572
2,155
289
1,062
282
8,184
1,268
232
6,929
(25.5)
(90.3)
161.4
(10.0)
11.3
(19.7)
70.0
24.6
(84.7)
—
27,689
(100.0)
(8,010)
(3,370)
1,741
—
—
877
(17,758)
(15,144)
—
—
98.5
17.3
—
(2,582)
(100.0)
straight-line basis
(901)
(2,196)
(59.0)
(4,101)
(7,032)
(41.7)
Distributable income
50,768
48,717
4.2
202,850
169,905
19.4
Unusual item – other revenues
Unusual item – Holman Grand Hotel
Recurring distributable income
—
—
—
—
50,768
48,717
—
—
4.2
(4,906)
535
—
—
—
—
198,479
169,905
16.8
DISTRIBUTIONS TO UNITHOLDERS
46,338
45,287
2.3
182,977
164,021
11.6
Distributions reinvested under the distribution reinvestment plan(1)
Cash distributions
Percentage of distributions reinvested
Per unit information:
13,372
32,966
8,978
36,309
28.9%
19.8%
48.9
(9.2)
45,312
37,717
137,665
126,304
20.1
9.0
24.8%
23.0%
Recurring distributable income (basic)
0.40
0.39
2.6
1.58
1.55
1.9
DISTRIBUTIONS PER UNIT
0.36
0.36
—
1.44
1.44
—
Payout ratio(2)
Cash payout ratio(3)
90.0%
65.0%
92.3%
74.4%
91.1%
68.4%
92.9%
71.6%
(1) This amount includes units to be issued under the plan upon payment of distributions.
(2) The payout ratio corresponds to the distribution per unit, divided by the recurring DI per unit.
(3) The cash payout ratio corresponds to the cash distribution per unit, divided by basic recurring DI per unit.
For the fiscal year ending December 31, 2013, Cominar adjusted the distributable income calculation to take into account two
unusual items. The first is the gain resulting from the settlement of claims against HII, and the second is an adjustment to exclude
the impact of the retrocession of the Holman Grand Hotel to Cominar as part of HII’s restructuring.
Recurring DI for the year ended December 31, 2013, amounted to $198.5 million, up 16.8% from 2012. This increase was primarily
due to the contribution of the acquisitions completed in 2012 and 2013. Per unit, basic, it totalled $1.58 for the year ended
December 31, 2013, up $0.03 from fiscal 2012.
2013 ANNUAL REPORT
31
26
Distributions to unitholders in fiscal 2013 totalled $183.0 million, up 11.6% from 2012. Per unit distributions were $1.44 for both 2012
and 2013.
The recurring DI payout ratio for the year ended December 31, 2013 was 91.1%, a decline from 2012. During fiscal 2013, an
average of 24.8% of distributions was reinvested as units under the distribution reinvestment plan [23.0 % in 2012]. Consequently,
the recurring DI cash payout ratio stood at 68.4%, down 3.2% from 2012.
TRACK RECORD OF RECURRING DI PER UNIT
For the years ended December 31
Recurring distributable income per unit (basic)
2013
1.58
2012
2011
2010
2009(1)
1.55
1.56
1.55
1.58
(1) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
The chart below shows Cominar’s growth in the recurring distributable income over the past 10 years.
(1) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
32
2013 ANNUAL REPORT
27
The Canadian Securities Administrators (“CSA”) requires Cominar to reconcile distributable income (a non-IFRS measure) with cash
flows provided by operating activities as shown in the financial statements.
The following table presents this reconciliation:
For the periods ended December 31
2013
2012
2013
2012
Quarter
Cumulative
Cash flows provided by operating activities
- Amortization of other assets
+ Restructuring charges
+ Transaction costs – business combinations
- Provision for leasing costs
+ Change in non-cash working capital items
Distributable income
79,322
(200)
—
—
(5,048)
(23,306)
50,768
85,304
(231)
2,030
341
(3,974)
(34,753)
48,717
202,760
(655)
1,062
—
(17,758)
17,441
202,850
146,333
(666)
6,929
27,689
(15,144)
4,764
169,905
In accordance with CSA guidelines, Cominar also provides the following table to allow readers to assess sources of cash
distributions and how they relate to net income:
For the years ended December 31
2013
2012
2011
Net income
Cash flows provided by operating activities
Distributions to unitholders
Cash distributions
Excess (deficiency) of cash flows from operating activities over cash
distributions to unitholders
Adjustments:
+ Transaction costs – business combinations
+ Restructuring charges
- Unusual item – other revenues
+ Unusual item – Holman Grand Hotel
+ Investment in a public entity
Excess of adjusted cash flows from operating activities over
cash distributions to unitholders
254,969
202,760
182,977
137,665
65,095
—
1,062
(4,906)
535
—
61,786
342,171
146,333
164,021
126,304
177,461
1,934
95,567
76,346
20,029
(74,412)
27,689
6,929
—
—
—
4,262
—
—
—
111,822
54,647
41,672
For the year ended December 31, 2013, as in previous years, adjusted cash flows from operating activities were sufficient to fund
cash distributions to unitholders.
2013 ANNUAL REPORT
33
28
The chart below shows Cominar’s distributions over the past 10 years.
(1) Amount of distribution per unit.
FUNDS FROM OPERATIONS
Although the concept of funds from operations ("FFO") is not a financial measure defined under IFRS, it is widely used in the field of
real estate investment trusts. The Real Property Association of Canada ("REALpac") defines this measure as net income (calculated
in accordance with IFRS), adjusted for, among other things, fair value adjustments of investment properties, deferred taxes,
transaction costs incurred upon a business combination, gains on disposal of subsidiaries and gains on disposal of investment
properties.
FFO should not be substituted for net income or cash flows from operating activities established in accordance with IFRS when
measuring Cominar’s performance. While our method of calculating FFO complies with REALpac recommendations, it may differ
from methods applied by other entities. Therefore, it may not be useful for comparisons with other entities.
34
2013 ANNUAL REPORT
The following table presents a reconciliation of net income, as determined in accordance with IFRS, and FFO for the periods ended
December 31, 2013 and 2012:
FUNDS FROM OPERATIONS
For the periods ended December 31
2013
2012
%
2013
2012
%
Quarter
Cumulative
29
(25.5)
(90.3)
98.5
Net income
74,568
231,859
(67.8)
254,969
342,171
- Change in fair value of investment properties
(17,150)
(177,706)
(90.3)
(17,150)
(177,706)
+ Deferred income taxes
+ Transaction costs – completed business combination
- Gain on disposal of a subsidiary
- Gains on disposal of investment properties
1,057
—
—
—
547
341
—
—
93.2
1,741
877
(100.0)
—
27,689
(100.0)
—
—
(8,010)
(3,370)
—
—
—
—
Funds from operations
58,475
55,041
6.2
228,180
193,031
18.2
+ Amortization of deferred financing costs(1)
+ Restructuring charges
- Unusual item – other revenues
+ Unusual item – Holman Grand Hotel
- Change in fair value of an investment in a public entity
—
—
—
—
—
—
—
2,030
(100.0)
—
—
—
—
—
—
984
1,062
(4,906)
535
—
3,072
6,929
—
—
(68.0)
(84.7)
—
—
(2,582)
(100.0)
Recurring funds from operations
58,475
57,071
2.5
225,855
200,450
12.7
Per unit information:
Funds from operations (basic)
Recurring funds from operations (basic)
Recurring funds from operations (FD)(2)
Payout ratio(3)
Cash payout ratio(4)
0.46
0.46
0.46
0.44
0.46
0.45
4.5
—
2.2
1.82
1.80
1.77
1.76
1.83
1.78
3.4
(1.6)
(0.6)
78.3%
56.5%
78.3%
63.0%
80.0%
60.0%
78.7%
60.7%
(1) During the fiscal year ended December 31, 2012, Cominar wrote off $1.0 million in deferred financing costs following the redemption of convertible Series C debentures
[$1.0 million in 2012 following the redemption of Series A and B convertible debentures]. During the fiscal year ended December 31, 2012, Cominar wrote off financing
costs incurred for the setting up of a financing for the acquisition of Canmarc. This financing was not used and the costs, in the amount of $2.1 million, were recognized in
profit or loss in 2012.
(2) Fully diluted.
(3) The payout ratio corresponds to the distribution per unit, divided by basic recurring FFO per unit.
(4) The cash payout ratio corresponds to the cash distribution per unit, divided by basic recurring FFO per unit.
For fiscal 2013, FFO calculated according to REALpac recommendations stood at $228.2 million, up 18.2% compared to fiscal
2012.
Recurring FFO for fiscal 2013 rose 12.7% from the previous year, due mainly to the acquisitions completed in 2012 and 2013.
Recurring FFO per unit on a fully diluted basis stood at $1.77 in fiscal 2013, down 0.6% compared to 2012. This decrease results
mainly from a reduction in the recognition of leases on a straight-line basis caused by client bankruptcies in 2013.
TRACK RECORD OF RECURRING FUNDS FROM OPERATIONS PER UNIT
For the years ended December 31
2013
2012
2011
2010
2009(2)
Recurring funds from operations per unit (basic)
Recurring funds from operations per unit (FD)(1)
1.80
1.77
1.83
1.78
1.73
1.65
1.72
1.64
1.84
1.77
(1) Fully diluted.
(2) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
2013 ANNUAL REPORT
35
30
The chart below shows Cominar’s growth in recurring funds from operations over the past 5 years.
(1) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
ADJUSTED FUNDS FROM OPERATIONS
The concept of adjusted funds from operations ("AFFO") is a key financial measure in the field of real estate investment trusts.
Cominar defines this measure as FFO adjusted for certain non-cash items such as the amortization of deferred financing costs, the
amortization of fair value adjustments on assumed indebtedness, the compensation expense related to the long-term incentive plan,
rental income arising from the recognition of leases on a straight-line basis and fair value adjustments of investments, net of
investments required to maintain Cominar’s ability to generate rental income from its property portfolio. AFFO is an additional
indicator used to assess Cominar’s financial performance and its ability to maintain and increase distributions over the long term.
AFFO is not a measure defined under IFRS and should not be substituted for net income or cash flows from operating activities
established in accordance with IFRS when measuring Cominar’s performance. Cominar’s method of calculating AFFO may differ
from the methods used by other entities, and therefore might not be appropriate for comparative analysis purposes.
In calculating AFFO, the Cominar deducts a provision for leasing costs incurred on an ongoing basis in order to maintain its capacity
to generate rental income. These leasing costs include, among other things, leasehold improvements and initial direct costs, which
are added to the carrying amount of investment properties in accordance with IFRS. Cominar also deducts capital expenditures
incurred under its program to maintain its capacity to generate rental income from its property portfolio. These expenditures, which
primarily include non-recoverable major expenditures for maintenance and repairs, are typically incurred unevenly during a fiscal
year. Therefore, AFFO could vary from quarter to quarter, and such variances could be material.
36
2013 ANNUAL REPORT
The following table presents a reconciliation of FFO and AFFO for the periods ended December 31, 2013 and 2012:
ADJUSTED FUNDS FROM OPERATIONS
For the periods ended December 31
2013
2012
%
2013
2012
%
Quarter
Cumulative
31
Funds from operations
- Net amortization of premium and discount on debenture issue
+ Amortization of fair value adjustment on bond investments
+ Amortization of deferred financing costs
58,475
55,041
6.2
228,180
193,031
(48)
78
(70)
79
1,322
1,388
(31.4)
(1.3)
(4.8)
(183)
314
6,572
(70)
282
8,184
- Amortization of fair value adjustments on assumed indebtedness
(3,062)
(4,163)
(26.4)
(13,680)
(15,193)
+ Compensation expense related to long term incentive plan
(99)
522
(119.0)
2,155
1,268
- Capital expenditures – maintenance of rental income generating capacity
(1,724)
(1,692)
1.9
(3,703)
(3,493)
+ Accretion of liability component of convertible debentures
+ Restructuring charges
- Provision for leasing costs
51
—
60
(15.0)
2,030
(100.0)
289
1,062
232
6,929
(84.7)
(5,048)
(3,974)
27.0
(17,758)
(15,144)
17.3
- Change in fair value of an investment in a public entity
—
—
—
—
(2,582)
(100.0)
- Change in accounts receivable – recognition of leases on a straight-line
basis
Adjusted funds from operations
- Unusual item – other revenues
+ Unusual item – Holman Grand Hotel
(901)
(2,196)
(59.0)
(4,101)
(7,032)
(41.7)
49,044
47,025
4.3
199,147
166,412
19.7
—
—
—
—
—
—
(4,906)
535
—
—
18.2
161.4
11.3
(19.7)
(10.0)
70.0
6.0
24.6
100.0
100.0
17.0
Recurring adjusted funds from operations
49,044
47,025
4.3
194,776
166,412
Per unit information:
Adjusted funds from operations (basic)
Recurring adjusted funds from operations (basic)
Recurring adjusted funds from operations (FD)(1)
Payout ratio(2)
Cash payout ratio(3)
0.39
0.39
0.39
0.38
0.38
0.38
2.6
2.6
2.6
1.59
1.55
1.54
1.52
1.52
1.50
4.6
2.0
2.7
92.3%
66.7%
94.7%
76.3%
92.9%
69.7%
94.7%
73.0%
(1) Fully diluted.
(2) The payout ratio corresponds to the distribution per unit, divided by basic recurring AFFO per unit.
(3) The cash payout ratio corresponds to the cash distribution per unit, divided by basic recurring AFFO per unit.
Recurring AFFO attained $194.8 million for fiscal 2013, up 17.0% from 2012; this was due mostly to the acquisitions completed in
2012 and 2013.
Fully diluted recurring AFFO per unit totalled $1.54 for the year ended December 31, 2013, up 2.7% compared to 2012.
TRACK RECORD OF RECURRING ADJUSTED FUNDS FROM OPERATIONS PER UNIT
For the years ended December 31
2013
2012
2011
2010
Recurring adjusted funds from operations per unit (basic)
Recurring adjusted funds from operations per unit (FD)(1)
1.55
1.54
1.52
1.50
1.53
1.50
1.53
1.49
2009(2)
1.60
1.57
(1) Fully diluted.
(2) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
2013 ANNUAL REPORT
37
32
The chart below shows Cominar’s growth in recurring adjusted funds from operations over the past 5 years.
(1) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
LIQUIDITY AND CAPITAL RESOURCES
In 2013, Cominar generated $202.8 million in cash flows from operating activities. Of this amount, $137.7 million was used for cash
distributions to unitholders. Cominar foresees no difficulty in meeting its short-term obligations and its commitments with funds from
operations, refinancing of mortgages, debenture or unit issues, sums available on its credit facility and cash and cash equivalents.
Its additional borrowing power was $2.4 billion as at December 31, 2013 under the Contract of Trust.
On August 13, 2013, Cominar filed a short form base shelf prospectus allowing it to issue up to $1.0 billion in securities during the
25-month period that this prospectus remains valid. Since then, Cominar has issued $350 million in debentures, including the re-
opening of Series 4 on January 13, 2014, leaving an available balance of $650.0 million for future issues.
The following table presents information on unencumbered assets:
2013
2012
Number of
properties
Fair value of
properties ($)
Number of
properties
Fair value of
properties ($)
Unencumbered income properties
144
1,181,573
137
883,917
Unencumbered assets ratio(1)(2)
Senior unsecured debts-to-total-debt ratio(2)(3)
1.19:1
32.4%
1.97:1
16.0%
(1) Fair value of unencumbered income properties divided by the unsecured debt (excluding convertible debentures).
(2) These ratios are not defined by IFRS and may differ from similar measures presented by other entities.
(3) Senior unsecured debt divided by the total debt.
38
2013 ANNUAL REPORT
33
As at December 31, 2013, Cominar owned unencumbered income properties whose fair value was approximately $1.2 billion. The
ratio of unencumbered income properties to unsecured debt (excluding convertible debentures) stood at 1.19:1. Cominar intends to
increase the total value of its unencumbered assets in subsequent years by replacing, when possible and financially indicated,
mortgages payable or its operating and acquisition credit facilities with unsecured debts. The senior unsecured debt-to-total-debts
ratio was 32.4% at December 31, 2013, up 16.4% from a ratio of 16.0% at December 31, 2012. Cominar intends to gradually
increase this ratio to a long term objective of approximately 50%.
MORTGAGES PAYABLE
As at December 31, 2013, the nominal balance of mortgages payable was $1,763.9 million, up $112.7 million from $1,651.2 million
as at December 31, 2012, arising primarily from mortgage assumed through acquisitions of income properties completed in 2013 as
well as the conversion of a bridge loan into a mortgage payable. At the end of fiscal 2013, the weighted average contractual interest
rate was 5.06%, down 17 basis points from 5.23% as at December 31, 2012.
Cominar’s mortgage maturity dates are staggered over a number of years to reduce risks related to renewal. As at
December 31, 2013, the residual weighted average term of mortgages payable was 5.0 years, compared to 3.6 years as at
December 31, 2012.
The following table shows mortgage repayments for the coming fiscal years:
REPAYMENTS OF MORTGAGES PAYABLE
For the years ending December 31
Repayment of
principal
Repayment of
balances at
maturity
2014
2015
2016
2017
2018
2019 and thereafter
Total
(1) Calculated on balances at maturity of mortgages payable.
50,747
42,561
37,235
34,807
24,673
80,967
148,001
250,660
75,927
151,725
409,003
457,616
270,990
1,492,932
1,763,922
Total
198,748
293,221
113,162
186,532
433,676
538,583
Weighted average
contractual
interest rate(1)
5.91%
5.01%
4.98%
4.98%
5.17%
4.81%
5.06%
During fiscal 2014, Cominar intends to repay mortgages payable with balances at maturity of $148.0 million and whose weighted
average contractual interest rate is 5.91%.
The chart below presents the weighted average contractual interest rate of mortgages payable over the past 10 years.
2013 ANNUAL REPORT
39
34
DEBENTURES
The following table presents the features of Cominar’s unsecured debentures, as well as the balance per series, as at
December 31, 2013:
DEBENTURES
Series 1
Series 2
Series 3
Series 4
Series 5
Weighted
average
interest rate
Contractual interest rate
4.274%
4.23%
Effective interest rate
Date of issuance
Dates of interest payments
4.32%
4.37%
June 2012(1) December 2012(2)
4.00%
4.24%
4.941%
5.04%
3.325% (3)
3.51%
4.06%
4.20%
May 2013
July 2013
October 2013
June 15 and
December 15
June 4 and
December 4
May 2 and
November 2
July 27 and
January 27
January 9,
April 9,
July 9 and
October 9
Maturity date
June 2017
December 2019
November 2020
July 2020
October 2015
$
$
$
$
Total
$
Balance as at
December 31, 2013
250,000
300,000
100,000
100,000
250,000
1,000,000
(1) Re-opened in September 2012.
(2) Re-opened in February 2013.
(3) Quarterly variable interest rate fixed for the period from October 10, 2013, to January 9, 2014 (corresponding to the CDOR three-month rate plus 205 basis points).
As at December 31, 2013, the residual weighted average term of fixed rate debentures was 5.4 years.
During fiscal 2013, Cominar issued $550.0 million in senior unsecured debentures. Cominar allocated the net proceeds from the
issuance of debentures to repaying its credit facility.
These issues allowed Cominar to move closer to its long-term objective of increasing the senior unsecured portion of its total debt to
approximately 50%, from 16.0% as at December 31, 2012 to 32.4% as at December 31, 2013.
40
2013 ANNUAL REPORT
CONVERTIBLE DEBENTURES
The following table presents the features of Cominar’s unsecured subordinated convertible debentures and their balances by series,
35
as at December 31, 2013.
CONVERTIBLE DEBENTURES
Contractual interest rate
Effective interest rate
Date of issuance
Amount issued
Unit conversion price
Dates of interest payment
Date of redemption at Cominar’s option – conditional(1)(2)
Date of redemption at Cominar’s option – unconditional(2)
Maturity date
Series D
Series E
Weighted average
interest rate
6.50%
7.50%
5.75%
6.43%
6.15%
7.00%
September 2009
January 2010
$115,000
$20.50
$86,250
$25.00
March 31 &
September 30
June 30 &
December 31
September 2012
September 2014
September 2016
June 2013
June 2015
June 2017
$
$
Total
$
Balance as at December 31, 2013
99,786
86,250
186,036
(1) As of this date of redemption, the debentures may be redeemed by Cominar on prior notice, at a redemption price equal to the principal amount thereof plus accrued and
unpaid interest, provided that the volume-weighted average trading price of the units on the Toronto Stock Exchange for a certain period is not less than 125% of the
conversion price.
(2) Cominar may, at its option, elect to satisfy its obligation to pay the principal amount of the debentures that are to be redeemed or that have matured by issuing units to
debenture holders.
On July 8, 2013, Cominar redeemed all its then outstanding Series C convertible unsecured subordinated debentures, bearing an
interest rate of 5.80% and totalling $110.0 million. These debentures were replaced with unsecured debentures bearing interest at
4.941% and maturing in July 2020.
SUMMARY OF FIXED-RATE DEBTS
The following table presents a comparative summary of fixed-rate debts:
FIXED-RATE DEBTS
At December 31, 2013
Weighted
average
interest rate(1)
Residual
weighted
average term(1)
$
At December 31, 2012
Weighted
average
interest rate
Residual
weighted
average term
$
Mortgages payable
Debentures(1)
Convertible debentures
Total of fixed-rate debts
1,794,830
745,546
181,768
2,722,144
5.06%
4.31%
6.15%
4.93%
5.0 years
5.4 years
3.1 years
5.0 years
1,695,222
448,530
289,134
2,432,886
5.23%
4.25%
6.02%
5.14%
3.6 years
5.6 years
3.2 years
3.9 years
(1) Excluding Series 5 debentures bearing a variable interest rate.
For fiscal 2013, Cominar reduced the weighted average interest rate on its fixed-rate debts by 0.21%, which represents an
annualized savings of $5.7 million in interest at the current debt level. For the same period, Cominar also increased the residual
weighted average term of its fixed-rate debts from 1.1 years to 5.0 years.
2013 ANNUAL REPORT
41
36
BANK BORROWINGS
As at December 31, 2013, Cominar had operating and acquisition credit facilities of up to $550.0 million. A first tranche of
$250.0 million (secured by income properties worth approximately $424.0 million) has matured in January 2014 and was not
renewed by Cominar, and a second tranche of $300.0 million (secured by income properties worth approximately $508.0 million) will
mature in January 2015. These facilities bear interest at the prime rate plus 1.00% or at the bankers’ acceptance rate plus 2.00%.
These credit facilities are secured by movable and immovable hypothecs on specific assets. As at December 31, 2013, bank
borrowings totalled $105.7 million.
BRIDGE LOAN
During the first quarter of 2012, Cominar obtained an $84.0 million acquisition bridge loan following the Canmarc business
combination. This one-year, non-renewable credit facility was bearing interest at 4.00%. On June 18, 2013, Cominar converted this
bridge loan into a mortgage payable maturing in April 2018, at a fixed interest rate of 3.70%.
DEBT RATIO
The following table presents debt ratios as at December 31, 2013 and 2012:
DEBT RATIO
As at December 31
Cash and cash equivalents
Mortgages payable
Debentures
Convertible debentures
Bank borrowings
Bridge loan
Total debt
Total assets less cash and cash equivalents
Overall debt ratio(2)(3)
Debt ratio (excluding convertible debentures)
Additional borrowing capacity – 65% of carrying amount(4)
2013
2012
(9,742)
1,794,830
994,824
181,768
105,697
—
3,067,377
5,987,588
51.2%
48.2%
(18,642)
1,695,222
448,530
289,134
300,368
84,000
2,798,612
5,598 407
50.0%
44.8%
2,356,000
2,413,000
(1) Total of cash and cash equivalents, bank borrowings, mortgages payable, the bridge loan, debentures and convertible debentures divided by total assets less cash and
cash equivalents.
(2) This ratio is not defined by IFRS and may differ from similar measures presented by other entities.
(3) Pursuant to its Contract of Trust, Cominar’s maximum debt ratio is 60% of the carrying amount (65% if convertible debentures are outstanding).
As at December 31, 2013, the debt ratio (excluding convertible debentures) was 48.2%. The slight increase in debt ratio since
December 2012 is due to the acquisitions of income properties made during fiscal 2013. Following the acquisition realized on
February 26, 2014, our debt ratio (excluding convertible debentures) will reach 50.1%, a ratio that management is very comfortable
with.
42
2013 ANNUAL REPORT
The chart below shows how Cominar’s debt ratio (excluding convertible debentures) has evolved over the past 8 quarters.
37
INTEREST COVERAGE RATIO
Cominar calculates its interest coverage ratio by dividing net operating income less Trust administrative expenses by finance
charges. The interest coverage ratio is used to assess Cominar’s ability to pay interest on its total debt from operating revenues. As
at December 31, 2013, Cominar’s interest coverage ratio stood at 2.70:1 [2.65:1 on December 31, 2012], evidence of its capacity to
meet its interest payment obligations.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL COMMITMENTS
Cominar has no off-balance sheet arrangements that have or are likely to have an impact on its operating results or its financial
position, including its cash position and sources of financing.
On December 20, 2013, Cominar entered into an agreement for the acquisition of five retail properties representing approximately
$28.2 million in value (subject to adjustments), and approximately 120,000 square feet in total leasable area, located in the greater
Montréal area. This acquisition is subject to the satisfactory completion of due diligence by Cominar, which due diligence is in
progress, and to customary closing requirements. There can be no assurance that this acquisition will be completed.
On December 31, 2013, Cominar had contractual commitments in an amount of $13.1 million for work to be performed on a property
under development (Place Laval). This work will be financed through cash flows from operating activities.
Cominar has no significant contractual commitments other than the ones mentioned above, as well as those arising from its long-
term debt and payments due under emphyteutic leases on land held for income properties.
2013 ANNUAL REPORT
43
38
PROPERTY PORTFOLIO
The following table presents information on the property portfolio:
As at December 31
Income properties ($000)
Properties under development and land held for future development ($000)
Number of income properties
Leasable area (sq. ft.)
SUMMARY BY OPERATING SEGMENT
As at December 31
Office
Retail
Industrial and mixed-use
Total
SUMMARY BY GEOGRAPHIC MARKET
As at December 31
Quebec City
Montreal
Other – Quebec
Ottawa(1)
Other – Ontario
Atlantic provinces
Western Canada
Total
(1) The Gatineau area is included in the Ottawa geographic market.
2013
2012
5,654,825
107,961
5,294,984
53,234
%
6.8
102.8
497
481
37,123,000
35,097,000
5.8
2013
2012
Number of
properties
Leasable area
(sq. ft.)
Number of
properties
Leasable area
(sq. ft.)
120
160
217
497
13,017,500
7,901,500
16,204,000
37,123,000
121
158
202
481
13,011,000
7,758,000
14,328,000
35,097,000
2013
2012
Number of
properties
Leasable area
(sq. ft.)
Number of
properties
Leasable area
(sq. ft.)
107
256
27
19
13
61
14
7,698,500
21,976,000
814,000
2,208,000
593,000
2,720,500
1,113,000
106
234
27
19
13
62
20
7,641,000
19,723,000
814,000
2,212,000
589,000
2,907,000
1,211,000
497
37,123,000
481
35,097,000
PROPERTY ACQUISITION AND DEVELOPMENT PROGRAM
Over the years, Cominar has achieved much of its growth through the acquisition of companies and high-quality properties based on
strict selection criteria, while maintaining an appropriate allocation among its three activity segments, i.e. office buildings, retail
buildings and industrial and mixed-use properties, and geographic diversification of its property portfolio.
During fiscal 2013, Cominar focused on strategic acquisitions resulting in the addition of 24 buildings to its property portfolio and
representing a total of 2.3 million square feet. These acquisitions, combined with those realised at the end of 2012, also contributed
to a 3% increase in net operating income outside Québec and a 4% increase in net operating income in Ontario. Moreover, Cominar
disposed of 11 buildings that were not in line with its long-term objectives.
44
2013 ANNUAL REPORT
39
ACQUISITION OF INCOME PROPERTIES
On January 31, 2013, Cominar acquired a portfolio of 18 industrial properties primarily located on the South Shore of Montreal and
one office property located in Montreal, for a purchase price of $149.8 million. These properties represent a total of approximately
1.8 million square feet of leasable area, consisting of approximately 1.7 million square feet of industrial space and approximately
0.1 million square feet of office space. As part of this transaction, Cominar also acquired a vacant lot of 173,569 square feet located
in Saint-Bruno-de-Montarville, in Quebec, for $1.4 million. The average capitalization rate for this transaction is 7.0%.
On March 21, 2013, Cominar acquired an office building located in Fredericton, New Brunswick, for $5.7 million, paid in cash;
this building has a leasable area of 44,500 square feet. The capitalization rate for this transaction is 8.0%.
On May 1, 2013, Cominar acquired an industrial building located in Pointe-Claire, Quebec, for a purchase price of $12.0 million, paid
in cash; this property represents a leasable area of 199,000 square feet. The capitalization rate for this transaction is 7.6%.
On December 20, 2013, Cominar acquired a shopping centre located in Beloeil, Quebec, with a leasable area of 328,050 square
feet, consisting of an indoor shopping centre, a strip mall and two single-tenant buildings, for a purchase price of $60.0 million, paid
in cash. The capitalization rate for this transaction is 7.0%.
The following table presents detailed information on these acquisitions:
Investment Properties
City/Province
Market
Segment(1)
Closing Date
Acquisition
Price
Capitalization
Rate
600-610 Bériault(2)
2044 de la Province(2)
2060-2068 de la Province(2)
2099-2111 de la Province(2)
789-799 Jean-Paul-Vincent(2)
839-859 Jean-Paul-Vincent(2)
877 Jean-Paul-Vincent(2)
2099-2109 Fernand-Lafontaine(2)
2177 Fernand-Lafontaine(2)
2199 Fernand-Lafontaine(2)
2525 Fernand-Lafontaine(2)
730 Delage(2)
830 Delage(2)
770 Guimond(2)
2625 Jacques-Cartier(2)
1280 Nobel(2)
1201-1203 Marie-Victorin(2)(3)
3300 Trans-Canada Highway(2)
1555 Carrie-Derick(2)
432 Queen Street
3000 Trans-Canada Highway
546 Sir-Wilfrid-Laurier Boulevard(4)
560 Sir-Wilfrid-Laurier Boulevard(4)
600 Sir-Wilfrid-Laurier Boulevard(4)
Longueuil, QC
Longueuil, QC
Longueuil, QC
Longueuil, QC
Longueuil, QC
Longueuil, QC
Longueuil, QC
Longueuil, QC
Longueuil, QC
Longueuil, QC
Longueuil, QC
Longueuil, QC
Longueuil, QC
Longueuil, QC
Longueuil, QC
Boucherville, QC
Saint-Bruno, QC
Pointe-Claire, QC
Montreal, QC
Fredericton, NB
Pointe-Claire, QC
Beloeil, QC
Beloeil, QC
Beloeil, QC
Leasable
Area
sq. ft.
56,000
50,000
45,000
51,000
125,000
92,000
106,000
65,000
74,000
January 31, 2013
January 31, 2013
January 31, 2013
January 31, 2013
January 31, 2013
January 31, 2013
January 31, 2013
January 31, 2013
January 31, 2013
January 31, 2013
208,000
January 31, 2013
January 31, 2013
January 31, 2013
72,000
62,000
50,000
January 31, 2013
119,000
January 31, 2013
January 31, 2013
January 31, 2013
January 31, 2013
January 31, 2013
March 21, 2013
63,000
52,000
155,000
218,000
82,000
44,500
May 1, 2013
199,000
R December 20, 2013
R December 20, 2013
3,513
7,683
R December 20, 2013
316,854
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
O
O
I
$
151,200
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,700
12,000
60,000
—
—
%
7.0
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8.0
7.6
7.0
—
—
7.1
(1) I: Industrial; O: Office; R: Retail.
(2) These nineteen buildings were part of the same transaction.
(3) Includes a 173,569 sq. ft. vacant lot acquired for a purchase price of $1.4 million.
(4) These 3 buildings were part of the same transaction.
2,316,550
228,900
The results of operations of properties acquired are included in the consolidated financial statements from their acquisition dates.
2013 ANNUAL REPORT
45
40
ACQUISITION OF LAND HELD FOR FUTURE DEVELOPMENT
On March 15, 2013, Cominar acquired 508,780 square feet of vacant land located in Calgary, Alberta, which includes a parking
facility with 347 parking spaces. With the acquisition of this lot, which is adjacent to the Mountain View Business Campus (formerly
known as Centron Park) office buildings that Cominar already owned, Cominar became the sole owner of the Mountain View
Business Campus. Cominar paid $20.5 million in cash for this property.
DISPOSAL OF INVESTMENT PROPERTIES
On January 9, 2013, Cominar sold a commercial building in the Montreal area for $3.5 million. Cominar recorded no gain or loss on
this disposal.
On June 28, 2013, Cominar sold an office building located in Levis, Quebec, for $1.5 million. Cominar recorded a gain of $0.5 million
on this disposal.
On July 11, 2013, the Tribunal administratif du Québec rendered its final decision regarding the expropriation process initiated by
the Centre hospitalier de l’Université de Montréal (“CHUM”) in June 2006 in relation to the property located at 300 Viger Avenue in
Montreal, Quebec. The Tribunal administratif du Québec set the definitive expropriation indemnity at $33.5 million. The CHUM paid
Cominar a sum of $3.5 million, which represents the difference between the amount of the provisional indemnity of $30.0 million that
was already paid to Cominar in 2007 and the total definitive indemnity. Cominar recorded a gain of $2.9 million in connection with
this event.
On July 25, 2013, Cominar sold six industrial and mixed-use properties located in Prince George, British Columbia, for $4.0 million.
Cominar recorded no gain or loss on this disposal.
The sale of these buildings did not and will not have a significant impact on Cominar’s actual and future results.
DISPOSAL OF A SUBSIDIARY
On May 22, 2013, Cominar sold its interest in Hardegane Investments Limited (“Hardegane”), which holds 100% of the shares of
Dyne Holdings Limited (“Dyne”), to Homburg International Limited (“Homburg”), for a nominal consideration and the reimbursement
of certain Cominar advances. Dyne owned three income properties, two of which were categorized as office properties and one as a
retail property, as well as an unexploited hotel. This transaction allowed Cominar to remove Dyne’s liabilities from its balance sheet
and to record a gain of $8.0 million on this disposal.
INVESTMENTS IN INCOME PROPERTIES
Cominar continues to develop its income properties in the normal course of business. Investments made included additions,
expansions, modernizations, modifications and upgrades to existing properties with a view to increasing or maintaining their rental
income generating capacity.
During fiscal 2013, Cominar incurred $88.5 million [$30.7 million in 2012] in capital expenditures in order to increase the rental
income generating capacity of its properties or to reduce the related operating expenses. Of this amount, $39.3 million has been
invested in three major revitalization projects that are currently underway in our shopping centres, i.e., Alexis Nihon, Centre Laval
and Place Longueuil. These investments allowed Cominar to sign leases with commercial clients in these three shopping centres.
During the year, Cominar also incurred $3.7 million [$3.5 million in 2012] in capital expenditures to maintain rental income
generating capacity, consisting mainly of major expenditures for maintenance and repairs, as well as property equipment
replacements, which will garner benefits for Cominar over the coming years. These expenditures do not include current repair and
maintenance costs.
Finally, Cominar invests in leasehold improvements that increase the value of its properties through higher lease rates, as well as in
other leasing costs, mostly brokerage fees and tenant inducements. The level of investment required may vary from quarter to
quarter since it closely depends on lease renewals and the signing of new leases. It also depends on increases in rental space due
to newly acquired, expanded or upgraded properties, or rental space transferred from properties under development.
During fiscal 2013, Cominar made investments of $29.2 million in this respect [$29.4 million in 2012], of which $10.9 million
46
2013 ANNUAL REPORT
41
[$13.5 million in 2012] were in newly acquired, expanded or upgraded properties, or those recently transferred from properties under
development.
PROPERTY DEVELOPMENT PROGRAM
As at December 31, 2013, Cominar was mainly working on one office building located in Laval (Place Laval). This project, which
was initially planned at 240,000 square feet distributed over 12 floors, has now grown to 284,000 square feet distributed over 14
floors and its construction cost is estimated at $46.0 million. Adjacent to the Place Laval complex, this property will be occupied by a
Government of Quebec agency, under a long-term lease, for an area representing 100.0% of the building. This project is expected
to be completed in the second quarter of 2014. The expected capitalization rate for this project is 8.1%.
During fiscal 2013, Cominar completed the construction of three properties which it transferred from development to income
properties. The first is an industrial and mixed-use property located at 125 Fortin Street, in Quebec City. With an area of 49,000
square feet and representing a total investment of $5.6 million, the capitalization rate for this project is 8.9%. The second project
consists of a 5,500-square-foot retail property located on the land of the Promenades Beauport retail complex, in Quebec City; the
total investment for this project is valued at $1.6 million and its capitalization rate is 9.3%. The third consists of an industrial and
mixed-use property located at 190 Alison Boulevard, in Fredericton, New Brunswick. With an area of 29,000 square feet and
representing a total investment of $2.2 million, its capitalization rate is 8.9%.
REAL ESTATE OPERATIONS
OCCUPANCY RATE
As at December 31, 2013, the average occupancy rate of our properties stood at 93.1%.
OCCUPANCY RATE TRACK RECORD
December 31, 2013 December 31, 2012 December 31, 2011 December 31, 2010 December 31, 2009
Operating segment (%)
Office
Retail
Industrial and mixed-use
Portfolio total
93.3
94.2
92.4
93.1
94.3
94.6
93.1
93.9
95.2
96.9
91.8
93.6
95.2
96.1
92.3
93.8
94.1
96.3
92.5
93.5
The reduction in the occupancy rate as at December 31, 2013, was mostly due to the Montreal area office operating segment and
the industrial and mixed-use operating segment in Quebec City and Montreal areas.
2013 ANNUAL REPORT
47
42
LEASING ACTIVITY
The following table summarizes Cominar’s leasing activity in 2013:
LEASING ACTIVITY
Leases that matured in 2013
Number of tenants
Leasable area (sq. ft.)
Average net rent ($/sq. ft.)
Renewed leases
Number of tenants
Leasable area (sq. ft.)
Average net rent ($/sq. ft.)
Renewal (%)
New leases
Number of tenants
Leasable area (sq. ft.)
Average net rent ($/sq. ft.)
Office
Retail
Industrial
and mixed-use
Total
363
1,500,000
12.26
248
1,062,000
12.64
70.8
92
365,000
12.02
305
791,000
11.08
244
689,000
13.33
87.1
102
462,000
10.19
299
967
2,202,000
4,493,000
6.31
9.19
203
695
1,331,000
3,082,000
6.61
60.4
10.19
68.6
100
637,000
5.88
294
1,464,000
8.77
In the year ended December 31, 2013, leases on 12.2% of Cominar’s leasing area were set to expire. 68.6% of these leases were
renewed during the year and new leases were also signed, representing 1.5 million square feet of leasable area. Overall, leasing
activity has been satisfactory across our portfolio during fiscal 2013.
The following table presents the growth in the average net rent for leases that were renewed in 2013:
GROWTH IN THE AVERAGE NET RENT OF RENEWED LEASES
Operating segment
Office
Retail
Industrial and mixed-use
Total portfolio
2013
%
7.6
4.9
4.0
5.9
2012
%
4.9
4.8
2.7
4.2
Average net rent of renewed leases rose in all our operating segments by a growth rate of 5.9% overall: 7.6% (office), 4.9% (retail),
and 4.0% (industrial and mixed-use). Moreover, this growth rate for each of our operating segments is higher than last year’s rate.
Given the current demand for rental space across all our geographic markets, we remain confident to renew a substantial portion of
our leases maturing in the next year at a higher rate per square foot.
48
2013 ANNUAL REPORT
The chart below shows Cominar’s growth in the average net rent of renewed leases over the past 5 years.
43
The following table profiles lease maturities over the next five years:
LEASE MATURITIES
Office
Leasable area (sq. ft.)
Average net rent ($/sq. ft.)
% of portfolio – Office
Retail
Leasable area (sq. ft.)
Average net rent ($/sq. ft.)
% of portfolio – Retail
Industrial and mixed-use
Leasable area (sq. ft.)
Average net rent ($/sq. ft.)
% of portfolio – Industrial and mixed-use
Portfolio total
Leasable area (sq. ft.)
Average net rent ($/sq. ft.)
% of portfolio
2014
2015
2016
2017
2018
2,514,000
2,125,000
1,750,000
1,494,000
1,409,000
13.01
19.3
13.15
16.3
13.98
13.4
13.84
11.5
13.15
10.8
846,000
744,000
748,000
895,000
1,420,000
13.05
10.7
14.48
9.4
16.30
9.5
13.12
11.3
11.52
18.0
2,395,000
2,740,000
2,009,000
1,911,000
1,442,000
5.83
14.8
5.66
16.9
5.98
12.4
6.26
11.8
6.54
8.9
5,755,000
5,609,000
4,507,000
4,300,000
4,271,000
10.03
15.5
10.06
15.1
10.80
12.1
10.32
11.6
10.37
11.5
The following table summarizes information on leases as at December 31, 2013:
Office
Retail
Industrial and mixed-use
Portfolio average
Average remaining
lease term (years)
Average leased area
per tenant (sq. ft.)
Average net rent/
sq. ft. ($)
3.6
4.7
4.6
4.3
6,400
3,900
12,700
7,000
13.66
12.88
5.90
10.15
2013 ANNUAL REPORT
49
44
Cominar has a broad, highly diversified retail client base consisting of about 5,000 tenants occupying an average of approximately
7,000 square feet each. Our top three tenants, Public Works Canada, Canadian National Railway Company, and Société
québécoise des infrastructures account for approximately 7.1%, 4.4% and 3.6% of our net operating income, respectively, stemming
from several leases with staggered maturities. The stability and quality of our cash flows from operating activities are enhanced by
the fact that approximately 10.7% come from government agencies.
The following table presents our top ten tenants by percentage of net operating income:
Tenant
Public Works Canada
Canadian National Railway Company
Société québécoise des infrastructures
Ericsson Canada
Jean Coutu Group
Scotiabank
Target Canada
Gowling Lafleur Henderson
Co-op Atlantic
Shaw Cablesystems
Total
% of net
operating income
7.1
4.4
3.6
1.8
1.6
1.1
1.0
1.0
0.9
0.7
23.2
ISSUED AND OUTSTANDING UNITS
Years ended December 31
2013
2012
Units issued and outstanding, beginning of year
+ Public offerings
+ Exercise of options
+ Distribution reinvestment plan
+ Conversion of convertible debentures
+ Business combination
Units issued and outstanding, end of year
Additional information
Issued and outstanding units
Outstanding unit options
Prospective units – conversion of convertible debentures
Deferred and restricted units
PER UNIT CALCULATIONS
124,349,608
—
456,500
2,243,459
1,528
—
127,051,095
77,051,260
28,088,750
1,019,050
1,601,096
589,453
15,999,999
124,349,608
As at February 26, 2014
127,311,461
7,771,200
8,317,610
84,858
For the periods ended December 31
2013
2012
2013
2012
Quarter
Cumulative
Weighted average number of units outstanding, basic
126,290,475
123,926,086
125,369,581
109,453,548
Dilutive effect related to long term incentive plan
42,217
307,597
150,092
414,514
Dilutive effect of convertible debentures
8,317,610
12,675,151
10,496,193
15,116,070
Weighted average number of units, diluted and fully diluted
134,650,302
136,908,834
136,015,866
124,984,132
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The calculation of diluted and fully diluted results per unit include the elimination of $2.9 million in interest on convertible debentures
for the quarter ended December 31, 2013 [$4.5 million in 2012] and $14.8 million for fiscal 2013 [$21.6 million in 2012].
RELATED PARTY TRANSACTIONS
Michel Dallaire and Alain Dallaire, trustees and members of the Trust’s management team, exercise indirect control over the Dallaire
Group Inc. and Dalcon Inc. During fiscal 2013, Cominar recorded $148 in net rental income from Dalcon Inc. and the Dallaire Group
Inc. Cominar also incurred costs of $12.1 million for leasehold improvements performed by Dalcon Inc. on its behalf and costs of
$57.6 million for the construction and development of investment properties.
These transactions were entered into in the normal course of business and were measured at the exchange amount. By retaining
the services of related companies for property construction work and leasehold improvements, Cominar achieves significant cost
savings while providing better service to its clients.
DISCLOSURE CONTROLS AND PROCEDURES AND
INTERNAL CONTROL OVER FINANCIAL REPORTING
The President and Chief Executive Officer and the Executive Vice-President and Chief Financial Officer of Cominar are responsible
for establishing and maintaining disclosure controls and procedures ("DC&P") and internal control over financial reporting ("ICFR"),
as those terms are defined in Canadian Securities Administrators Multilateral Instrument 52-109.
Evaluations are performed regularly to assess the effectiveness of DC&P, including this MD&A and the financial statements. Based
on these evaluations, the President and Chief Executive Officer and the Executive Vice-President and Chief Financial Officer of
Cominar concluded that the DC&P were effective as at the end of the year ended December 31, 2013, and that the current controls
and procedures provide reasonable assurance that material information about the Trust, including its consolidated subsidiaries, is
made known to them during the period in which these filings are being prepared.
Evaluations are also performed to assess the effectiveness of ICFR. Based on those evaluations, the President and Chief Executive
Officer and the Executive Vice President and Chief Financial Officer of the Trust concluded that ICFR was effective as at the end of
the period ended December 31, 2013, and, more specifically, that the financial reporting is reliable and that the financial statements
have been prepared for financial reporting purposes in accordance with IFRS.
No changes were made to the Trust’s internal controls over financial reporting during fiscal 2013 that have materially affected, or are
reasonably likely to materially affect, internal controls over financial reporting.
SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
a) Basis of presentation
Cominar’s consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards ("IFRS") applicable to the preparation of financial statements. The accounting policies and application methods
thereof have been consistently applied throughout each of the years presented in these consolidated financial statements,
except for the prospective application of a new IFRS standard during the fiscal year.
b) Basis of preparation
Consolidation
These consolidated financial statements include the accounts of Cominar and its wholly-owned subsidiaries and its proportionate
share of the assets, liabilities, revenues and expenses of the property it co-owns.
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Use of estimates, assumptions and judgements
The preparation of financial statements in accordance with IFRS requires management to make estimates, judgements and
assumptions that affect the reported amounts of assets and liabilities in the financial statements. Those estimates, assumptions
and judgements also affect the disclosure of contingencies at the date of the financial statements and the reported amounts of
revenues and expenses during the year. Actual results that could differ materially from those estimates, assumptions and
judgements, are described below:
• Investment properties
Investment properties are recorded at fair value at the balance sheet date. Fair value is determined using both management’s
internal measurements and valuations from independent real estate appraisers, performed in accordance with recognized
valuation techniques. Techniques used include the capitalized net operating income method and the discounted cash flow
method, including notably estimates of capitalization rates and future net operating income as well as estimates of discount
rates and future cash flows applicable to investment properties, respectively.
Management’s fair value internal measurements rely on internal financial information and are corroborated by capitalization
rates obtained from independent experts. However, internal measurements and values obtained from independent appraisers
are both subject to significant judgments, estimates and assumptions about market conditions at the balance sheet date.
• Business combinations
Business combinations are accounted for using the acquisition method. The cost of a business combination is the value, at
the acquisition date, of the assets transferred, liabilities incurred and Unitholders’ equity instruments issued in exchange for
control of the acquired business. When the cost of a business combination exceeds the fair value of the assets acquired and
liabilities assumed, such excess is recorded as goodwill. Transaction-related costs, as well as costs related to the acquisition
of real estate assets, are expensed as incurred.
Cominar accounts for investment property acquisitions in accordance with IFRS 3, “Business Combinations” (“IFRS 3”), only
when it considers that a business has been acquired. Under IFRS 3, a business is defined as an integrated set of activities
and assets that could be conducted and managed for the purpose of providing a direct return to investors in the form of lower
costs or other economic benefits. If the acquisition does not correspond to this definition, a group of assets is deemed to have
been acquired. If goodwill is present, the acquisition is presumed to be a business. Judgment is therefore used by
management in determining if the acquisition qualifies as a business combination in accordance with IFRS 3 or as an asset
acquisition.
Generally, based on its judgement, when Cominar acquires a property or property portfolio (and not a legal entity) without
taking on the management of personnel or acquiring an operational platform, it categorizes the acquisition as an asset
acquisition.
• Impairment of goodwill
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net identifiable assets
acquired. It is not amortized but is tested for impairment on an annual basis or more frequently if events or circumstances
indicate that it is more likely than not that goodwill may be impaired. Goodwill resulting from business combinations is
allocated to each group of cash-generating units expected to benefit from the combination. To test impairment, Cominar must
determine the recoverable value of net assets of each group of cash-generating units, making assumptions about
standardized net operating income and capitalization rates. The recoverable value is the higher of fair value less the cost of
disposal and the value in use. Should the carrying value of a group of cash-generating units, including goodwill, exceed its
recoverable value, impairment is recorded and recognized in profit or loss in the period during which the impairment occurs.
• Financial instruments
Financial instruments must be initially measured at fair value. Cominar must also estimate and disclose the fair value of
certain financial instruments for information purposes in the financial statements presented for subsequent periods. When fair
value cannot be derived from active markets, it is determined using valuation techniques, namely the discounted cash flow
method. If possible, data related to these models are derived from observable markets, and if not, judgment is required to
determine fair value. Judgments take into account liquidity risk, credit risk and volatility. Any changes in assumptions related
to these factors could modify the reported fair value of financial instruments.
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• Convertible debentures
Upon initial recognition, Cominar’s management must estimate, if applicable, the fair value of the conversion option included
in the convertible debentures. Under IFRS, the remaining amount obtained after deducting, from the fair value of the
compound financial instrument considered as a whole, the established amount of the Liability component must be allocated to
the Unitholders’ equity component. Should this estimate be inappropriate, it will have an impact on the interest expense
recognized in the financial statements for the periods subsequent to their issuance.
• Unit options
The compensation expense related to unit options is measured at fair value and is amortized based on the graded vesting
method using the Black-Scholes model. This model requires management to make many estimates on various data, such as
expected life, volatility, the weighted average dividend yield of distributions, the weighted average risk-free interest rate and
the expected forfeiture rate. Any changes to certain assumptions could have an impact on the compensation expense related
to unit options recognized in the financial statements.
• Income taxes
Deferred taxes of Cominar’s subsidiaries are measured at the tax rates expected to apply in the future as temporary
differences between the reported carrying amounts and the tax bases of the assets and liabilities reverse. Changes to
deferred taxes related to changes in tax rates are recognized in income in the period during which the rate change is
substantively enacted.
Any changes in future tax rates or in the timing of the reversal of temporary differences could affect the income tax expense.
Investment properties
An investment property is an immovable property held by Cominar to earn rentals or for capital appreciation, or both, rather than
for use in the production or supply of goods and services or for administrative purposes, or for sale in the ordinary course of
business. Investment properties include income properties, properties under development and land held for future development.
Cominar presents its investment properties based on the fair value model. Fair value is the amount for which the property could
be exchanged between knowledgeable, willing parties in an arm’s length transaction. Any change in the fair value is recognized
in profit or loss in the period in which it arises. The fair value of investment properties shall reflect market conditions at the end of
the reporting period. Fair value is time-specific as of a given date. As market conditions could change, the amount presented as
fair value could be incorrect or inadequate at another date. The fair value of investment properties is based on measurements
derived from management’s estimates or valuations from independent appraisers, plus capital expenditures made since the
most recent appraisal. Management regularly reviews appraisals of its investment properties between the appraisal dates in
order to determine whether the related assumptions, such as net operating income and capitalization rates, still apply. These
assumptions are compared to market data issued by independent experts. When increases or decreases are required, Cominar
adjusts the carrying amount of its investment properties.
The fair value of Cominar’s investment properties recorded on the balance sheet in accordance with IFRS is the sum of the fair
values of each investment property considered individually and does not necessarily reflect the contribution of the following
elements that characterize Cominar: (i) the composition of the property portfolio diversified through its client base, geographic
markets and business segments; (ii) synergies among different investment properties; and (iii) a fully integrated management
approach. Therefore, the fair value of Cominar’s investment properties taken as a whole could differ from that appearing on the
consolidated balance sheet.
Properties under development in the construction phase are measured at cost until their fair value can be reliably determined,
usually when development has been completed. The fair value of land held for future development is based on recent prices
derived from comparable market transactions.
Capitalization of costs
Cominar capitalizes into investment properties the costs incurred to increase their capacity, replace certain components and
make improvements after the acquisition date. Cominar also capitalizes major maintenance and repair expenses providing
benefits that will last far beyond the end of the reporting period. For major revitalization projects of income properties that take
place over a substantial period of time, Cominar capitalizes the borrowing costs that are directly attributable to the investments
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in question. When Cominar determines that the acquisition of an investment property is an asset acquisition, it capitalizes all
costs that are directly related to the acquisition of the property, as well as all expenses incurred to carry out the transaction.
Concerning properties under development and land held for future development, Cominar capitalizes all direct costs incurred for
their acquisition, layout and construction. Such capitalized costs also include borrowing costs that are directly attributable to the
property concerned. Cominar begins capitalizing borrowing costs when it incurs expenditures for the properties in question and
when it undertakes activities that are necessary to prepare these properties for their intended use. Cominar ceases capitalizing
borrowing costs when the asset is ready for management’s intended use.
Leasing costs
Leasehold improvements, incurred directly by Cominar or through an allowance to tenants, as well as initial direct costs, mostly
brokerage fees incurred to negotiate or prepare leases, are not amortized.
Tenant inducements, mostly the payment of a monetary allowance to tenants and the granting of free occupancy periods, are
recognized in profit or loss and are subsequently amortized on a straight-line basis over the related lease term.
All these costs are added to the carrying amount of investment properties as they are incurred.
Financial instruments
Cominar groups its financial instruments into classes according to their nature and characteristics. Management determines
such classification upon initial measurement, which is usually at the date of acquisition.
Cominar has used the following classifications for its financial instruments:
− Bond investments are classified as investments held until their maturity date.
− Cash and cash equivalents and accounts receivable, including loans to certain clients, are classified as “Loans and
receivables.” They are initially measured at fair value. Subsequently, they are measured at amortized cost using the effective
interest method. For Cominar, this value generally represents cost.
− Mortgages payable, debentures, convertible debentures, the bridge loan, bank borrowings and accounts payable and accrued
liabilities are classified as “Other financial liabilities.” They are initially measured at fair value. Subsequently, they are
measured at amortized cost using the effective interest method.
Bond investments
Bond investments are measured at amortized cost using the effective interest rate method.
Cash and cash equivalents
Cash and cash equivalents consist of cash and investments that are readily convertible into a known amount of cash, that are
not subject to a significant risk of change in value and that have original maturities of three months or less. Bank borrowings are
considered to be financing arrangements.
Deferred financing costs
Issue costs incurred to obtain term loan financing, typically through mortgage loans, debentures and convertible debentures, are
applied against the borrowings and are amortized using the effective interest rate method over the term of the related debt.
Financing costs related to operating and acquisition credit facilities are recorded as assets under prepaid expenses and other
assets and are amortized on a straight-line basis over the term of the respective credit facility.
Revenue recognition
Management has determined that all leases concluded between Cominar and its tenants are operating leases. Minimum lease
payments are recognized using the straight-line method over the term of the related leases, and the excess of payments
recognized over amounts payable is recorded on Cominar’s consolidated balance sheet under investment properties. Leases
generally provide for the tenants’ payment of maintenance expenses of common elements, realty taxes and other operating
costs, such payment being recognized as operating revenues in the period when the right to payment vests. Percentage leases
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are recognized when the minimum sales level has been reached pursuant to the related leases. Lease cancellation fees are
recognized when they are due. Lastly, incidental income is recognized when services are rendered.
Long term incentive plan
Cominar has a long term incentive plan in order to attract, retain and motivate its employees to attain Cominar’s objectives. This
plan does not provide for any cash settlements.
Unit purchase options
Cominar recognizes a compensation expense on units granted, based on their fair value, which is calculated using an option
valuation model. The compensation expense is amortized using the graded vesting method.
Restricted units
Cominar recognizes a compensation expense on restricted unit options granted, based on their fair value on the date of the
grant. The fair value of restricted units is represented by the market value of Cominar units on the date of the grant. The
compensation expense is amortized on a straight-line basis over the duration of the purchase period.
Deferred units
Cominar recognizes compensation expense on deferred units granted, based on their fair value on the date of the grant. The fair
value of restricted units is represented by the market value of Cominar units on the date of the grant. The compensation
expense is amortized using the graded vesting method.
Income taxes
Cominar is considered a mutual fund trust for income tax purposes. In exercising their discretionary power regarding
distributions under the Contract of Trust, the trustees intend to distribute or designate all taxable income directly earned by
Cominar to unitholders and to deduct such distributions and designations for income tax purposes. Therefore, no provision for
income taxes is required for the Trust.
Cominar’s subsidiaries that are incorporated as business corporations are subject to tax on their taxable income under the
Income Tax Act (Canada) and the taxation acts of the provinces concerned. These subsidiaries account for their current or
recovered taxes at the current enacted tax rates and use the asset and liability method to account for deferred taxes. The net
deferred tax liability represents the cumulative amount of taxes applicable to temporary differences between the reported
carrying amounts and tax bases of the assets and liabilities.
Per unit calculations
Basic net income per unit is calculated based on the weighted average number of units outstanding for the year. The calculation
of net income per unit on a diluted basis considers the potential issuance of units in accordance with the long term incentive plan
and the potential issuance of units under convertible debentures, if dilutive.
Segment information
Segment information is presented in accordance with IFRS 8, which recommends presenting and disclosing segment
information in accordance with information that is regularly assessed by the chief operating decision makers in order to
determine the performance of each segment.
NEW ACCOUNTING POLICIES
On January 1st, 2013, Cominar adopted certain IFRS:
IFRS 11 – “Joint Arrangements”
IFRS 11 requires a joint venturer to recognize its interest in a joint arrangement as a joint venture or joint operation. Joint ventures
are accounted for using the equity method of accounting, whereas for a joint operation, the joint venturer recognizes its share of the
assets, liabilities, revenue and expenses of the joint operation. Adoption of this new standard had no impact on Cominar’s
consolidated financial statements.
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IFRS 13 – “Fair Value Measurement”
IFRS 13 is a comprehensive standard on fair value measurement and disclosure requirements for use across all IFRS standards.
The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an
orderly transaction between market participants, at the measurement date. It also establishes disclosures about fair value
measurement. This new standard had an impact on the presentation of financial information required for the consolidated financial
statements but had no impact on fair value measurements at the time of adoption
IAS 36 – “Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets”
Cominar has adopted the amendments to IAS 36, – “Impairment of Assets”, prospectively. These amendments limit the obligation to
disclose the recoverable amount of non-financial assets for which an impairment loss has been recognized or reversed during the
year. They also expand on and clarify disclosure requirements when the recoverable amount is determined based on fair value less
costs of disposal. Cominar has applied these amendments retrospectively. The changes specifically target the disclosure of
information, and their adoption had no impact on results or on the financial situation of the Trust.
RISKS AND UNCERTAINTIES
Like all real estate entities, Cominar is exposed, in the normal course of business, to various risk factors that may have an impact on
its ability to attain strategic objectives, despite all the measures implemented to counter them. Accordingly, unitholders should
consider the following risks and uncertainties when assessing the Trust’s outlook in terms of investment potential.
ACCESS TO CAPITAL AND DEBT FINANCING, AND CURRENT GLOBAL FINANCIAL CONDITIONS
The real estate industry is capital intensive. Cominar will require access to capital to maintain its properties, as well as to fund its
growth strategy and significant capital expenditures from time to time. There can be no assurances that Cominar will have access to
sufficient capital (including debt financing) on terms favourable to Cominar for future property acquisitions and developments,
including for the financing or refinancing of properties, for funding operating expenses or for other purposes. In addition, Cominar
may not be able to borrow funds under its credit facilities due to limitations on Cominar’s ability to incur debt set forth in the Contract
of Trust. Failure by Cominar to access required capital could adversely impact Cominar’s financial position and results of operations
and reduce the amount of cash available for distributions.
Recent market events and conditions, including disruptions in international and regional credit markets and in other financial
systems and deteriorating global economic conditions, could impede Cominar’s access to capital (including debt financing) or
increase the cost such capital. Failure to raise capital in a timely matter or under favourable terms could have a material adverse
effect on Cominar’s financial position and results of operations, including on its acquisition and development program.
DEBT FINANCING
Cominar has and will continue to have substantial outstanding consolidated borrowings comprised primarily of hypothecs, property
mortgages, debentures, and borrowings under its acquisition and operating credit facilities. Cominar intends to finance its growth
strategy, including acquisitions and developments, through a combination of its working capital and liquidity resources, including
cash flows from operations, additional borrowings and public or private sales of equity or debt securities. Cominar’s activities are
therefore partially dependent upon the interest rates applied to its existing debt. Cominar may not be able to refinance its existing
debt or renegotiate the terms of repayment at favourable rates. In addition, the terms of Cominar’S indebtedness generally contain
customary provisions that, upon an event of default, result in accelerated repayment of the amounts owed and that restrict the
distributions that may be made by Cominar. Therefore, upon an event of default under such borrowings or an inability to renew
same at maturity, Cominar’s ability to make distributions will be adversely affected.
A portion of Cominar’s cash flows is dedicated to servicing its debt, and there can be no assurance that Cominar will continue to
generate sufficient cash flows from operations to meet required interest or principal payments, such that it could be required to seek
renegotiation of such payments or obtain additional financing, including equity or debt financing. The current credit facilities in the
stated amount of $550.0 million are repayable in two tranches in January 2014 and January 2015, respectively. Cominar has
decided not to renew the $250.0 million tranche B portion of its credit facility upon maturity.
Cominar is exposed to debt financing risks, including the risk that the existing hypothecary borrowings secured by its properties
cannot be refinanced or that the terms of such refinancing will not be as favourable as the terms of the existing loans. In order to
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minimize this risk, Cominar tries to appropriately structure the timing of the renewal of significant tenant leases on its respective
properties in relation to the times at which the hypothecary borrowings on such properties become due for refinancing.
OWNERSHIP OF IMMOVABLE PROPERTY
All immovable property investments are subject to risk exposures. Such investments are affected by general economic conditions,
local real estate markets, demand for leased premises, competition from other vacant premises, municipal valuations and
assessments, and various other factors.
The value of immovable property and improvements thereto may also depend on the solvency and financial stability of tenants and
the economic environment in which they operate. Cominar’s income and distributable income would be adversely affected if one or
more major tenants or a significant number of tenants were unable to meet their lease obligations or if a significant portion of vacant
space in the properties in which Cominar has an interest cannot be leased on economically favorable lease terms. In the event of
default by a tenant, delays or limitations may be experienced in enforcing Cominar’s rights as a lessor and substantial costs may be
incurred to protect Cominar’s investment. The ability to rent unleased space in the properties in which Cominar has an interest will
be affected by many factors, including the general level of economic activity and competition for tenants from other property owners.
Costs may need to be incurred to make improvements or repairs to a property as required by a new tenant. The failure to rent
unleased space or rent it on a timely basis or at all or at rents that are equivalent to or higher than current rents would likely have an
adverse effect on Cominar’s financial position and the value of its properties.
Certain significant expenditures, including property taxes, maintenance costs, hypothecary payments, insurance costs and related
charges must be made throughout the period of ownership of immovable property, regardless of whether the property is producing
any income. If Cominar is unable to meet mortgage payments on a property, a loss could be sustained as a result of the mortgage
creditor’s exercise of its hypothecary remedies.
Immovable property investments tend to be relatively illiquid, with the degree of liquidity generally fluctuating in relationship with the
demand for and the perceived desirability of such investments. Such illiquidity may tend to limit Cominar’s ability to make changes to
its portfolio promptly in response to changing economic or investment conditions. If Cominar were to be required to liquidate its
immovable property investments, the proceeds to Cominar might be significantly less than the aggregate carrying value of its
properties.
Leases for Cominar’s properties, including those of significant tenants, will mature from time to time over the short and long term.
There can be no assurance that Cominar will be able to renew any or all of the leases upon maturity or that rental rate increases will
occur or be achieved upon any such renewals. The failure to renew leases or achieve rental rate increases may adversely impact
Cominar’s financial position and results of operations and decrease the amount of cash available for distribution.
ENVIRONMENTAL MATTERS
Environmental and ecological related policies have become increasingly important in recent years. As an owner or operator of real
property, Cominar could, under various federal, provincial and municipal laws, become liable for the costs of removal or remediation
of certain hazardous or toxic substances released on or in our properties or related corrective measures. The failure to remove or
remediate such substances, or address such matters through alternative measures prescribed by the governing authority, may
adversely affect Cominar’s ability to sell such real estate or to borrow using such real estate as collateral, and could, potentially, also
result in claims against Cominar. Cominar is not currently aware of any material non-compliance, liability or other claim in
connection with any of our properties, nor is it aware of any environmental condition with respect to any properties that it believes
would involve material expenditures by Cominar.
Pursuant to Cominar’s operating policies, Cominar shall obtain or review a Phase I environmental audit of each immovable property
it acquires.
LEGAL RISKS
Cominar’s operations are subject to various laws and regulations across all of its operating jurisdictions and Cominar faces risks
associated with legal and regulatory changes and litigation.
COMPETITION
Cominar competes for suitable immovable property investments with individuals, corporations and institutions (both Canadian and
foreign) which are presently seeking or which may in the future seek immovable property investments similar to those desired by
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Cominar. Many of those investors have greater financial resources than Cominar, or operate without the investment or operating
restrictions applicable to Cominar or under more flexible conditions. An increase in the availability of investment funds and
heightened interest in immovable property investments could increase competition for immovable property investments, thereby
increasing the purchase prices of such investments and reducing their yield.
In addition, numerous property developers, managers and owners compete with Cominar in seeking tenants. The existence of
competing developers, managers and owners and competition for Cominar’s tenants could have an adverse effect on Cominar’s
ability to lease space in its properties and on the rents charged, and could adversely affect Cominar’s revenues and, consequently,
its ability to meet its debt obligations.
ACQUISITIONS
Cominar’s business plan is focused in part on growth by identifying suitable acquisition opportunities, pursuing such opportunities,
completing acquisitions and effectively operating and leasing such properties. If Cominar is unable to manage its growth effectively,
this could adversely impact Cominar’s financial position and results of operations, and decrease the amount of cash available for
distribution. There can be no assurance as to the pace of growth through property acquisitions or that Cominar will be able to
acquire assets on an accretive basis, and as such there can be no assurance that distributions to Unitholders will increase in the
future.
PROPERTY DEVELOPMENT PROGRAM
Information regarding Cominar’s development projects, development costs, capitalization rates and expected returns are subject to
change, which may be material, as assumptions regarding items such as, but not limited to, tenant rents, building sizes, leasable
areas, project completion timelines and project costs, are updated periodically based on revised site plans, Cominar’s cost tendering
process, continuing tenant negotiations, demand for leasable space in Cominar’s markets, the obtaining of required building permits,
ongoing discussions with municipalities and successful property re-zonings. There can be no assurance that any assumptions in this
regard will materialize as expected and any changes in these assumptions could have a material adverse effect on Cominar’s
development program, asset values and financial performance.
RECRUITMENT AND RETENTION OF EMPLOYEES AND EXECUTIVES
Management depends on the services of certain key personnel. Competition for qualified employees and executives is intense. If
Cominar is unable to attract and retain qualified and capable employees and executives, the conduct of its activities may be
adversely affected.
GENERAL UNINSURED LOSSES
Cominar subscribed a blanket comprehensive general liability including insurance against fire, flood, extended coverage and rental
loss insurance with policy specifications, limits and deductibles customarily carried for similar properties. There are, however, certain
types of risks (generally of a catastrophic nature such as from wars or environmental contamination) which are either uninsurable or
not insurable on an economically viable basis. Cominar also carries insurance for earthquake risks, subject to certain policy limits
and deductibles, and will continue to carry such insurance if it is economical to do so. Should an uninsured or underinsured loss
occur, Cominar could lose its investment in, and anticipated profits and cash flows from, one or more of its properties, but Cominar
would continue to be obligated to repay any hypothecary recourse or mortgage indebtedness on such properties.
Many insurance companies have eliminated coverage for acts of terrorism from their policies, and Cominar may not be able to
obtain coverage for terrorist acts at commercially reasonable rates or at any price. Damage to a property sustained as a result of an
uninsured terrorist or similar act would likely adversely impact Cominar’s financial condition and results of operations and decrease
the amount of cash available for distribution.
GOVERNMENT REGULATION
Cominar and its properties are subject to various government statutes and regulations. Any change in such statutes or regulations
that is adverse to Cominar and its properties could affect Cominar’s operating results and financial performance.
In addition, environmental and ecological legislation and policies have become increasingly important in recent decades. Under
various laws, Cominar could become liable for the costs of removal or remediation of certain hazardous or toxic substances
released on or in its properties or disposed of at other locations, or for the costs of other remedial or preventive work. The failure to
remove or remediate such substances, or to effect such remedial or preventive work, if any, may adversely affect an owner’s ability
to sell such real estate or to borrow using such real estate as collateral, and could potentially also result in claims against the owner
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by private plaintiffs or governmental agencies. Notwithstanding the above, Cominar is not aware of any material non-compliance,
liability or other claim in connection with any of its properties, nor is Cominar aware of any environmental condition with respect to
any of its properties that it believes would involve material expenditure by Cominar.
LIMIT ON ACTIVITIES
In order to maintain its status as a “mutual fund trust” under the Income Tax Act, Cominar cannot carry on most active business
activities and is limited in the types of investments it may make. The Contract of Trust contains restrictions to this effect.
RISK FACTORS RELATED TO THE OWNERSHIP OF SECURITIES
Market price
A publicly traded real estate investment trust will not necessarily trade at values determined solely by reference to the underlying
value of its real estate assets. Accordingly, the Units may trade at a premium or a discount to values implied by the initial appraisal
of the value of its properties or the value of such properties from time to time.
Although Cominar intends to make distributions of its available cash to Unitholders, these cash distributions are not assured. The
actual amount distributed will depend on numerous factors including current global financial conditions and disruptions in the
marketplace, Cominar’s financial performance, debt covenants and obligations, working capital requirements and future capital
requirements. The market price of the Units may deteriorate if Cominar is unable to meet its cash distribution targets in the future.
The after-tax return from an investment in Units to Unitholders subject to Canadian income tax will depend, in part, on the
composition for tax purposes of distributions paid by Cominar (portions of which may be fully or partially taxable or may constitute
non-taxable returns of capital). The composition for tax purposes of those distributions may change over time, thus affecting the
after-tax return to Unitholders.
Factors that may influence the market price of the Units include the annual yield on the Units, the number of Units issued and
outstanding and Cominar’s payout ratio. An increase in market interest rates may lead purchasers of Units to demand a higher
annual yield which could adversely affect the market price of the Units. In contrast to fixed-income securities, Cominar is under no
obligation to distribute to Unitholders any fixed amount and reductions in, or suspensions of, distributions may occur that would
reduce yield based on the market price of the Units. In addition, the market price for the Units may be affected by changes in
general market conditions, fluctuations in the markets for equity securities, changes in the economic environment and numerous
other factors beyond the control of Cominar.
Credit ratings
The credit rating assigned to Cominar and the unsecured debentures by DBRS is not a recommendation to buy, hold or sell
securities of Cominar. A rating is not a comment on the market price of a security nor is it an assessment of ownership rights given
various investment objectives. Prospective investors should consult with DBRS with respect to the interpretation and implications of
the rating. There is no assurance that any rating will remain in effect for any given period of time and ratings may be upgraded,
downgraded, placed under review, confirmed or withdrawn. Non-credit risks that can meaningfully impact the value of the securities
issued include market risk, trading liquidity risk and covenant risk. DBRS uses rating symbols as a simple and concise method of
expressing its opinion to the market, although DBRS usually provides broader contextual information regarding securities in rating
reports, which generally set out the full rationale for the chosen rating symbol, and in other releases.
Structural subordination of securities
In the event of a bankruptcy, liquidation or reorganization of Cominar or any of its subsidiaries, holders of certain of their
indebtedness and certain trade creditors will generally be entitled to payment of their claims from the assets of Cominar and those
subsidiaries before any assets are made available for distribution to the holders of securities. The securities will be effectively
subordinated to most of the other debt instruments and liabilities of Cominar and its subsidiaries. Neither Cominar, nor any of its
subsidiaries will be limited in their ability to incur additional secured or unsecured indebtedness.
Availability of cash flow
Distributable income may exceed the cash actually available to Cominar from time to time because of items such as principal
repayments, tenant allowances, leasing commissions and capital expenditures. Cominar may be required to use part of its debt
capacity or to reduce distributions in order to accommodate such items.
2013 ANNUAL REPORT
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54
Cominar may need to refinance its debt obligations from time to time, including upon expiration of its debt. There could be a
negative impact on distributable income if Cominar’s debt obligations are replaced with debt that has less favourable terms or if
Cominar is unable to refinance its debt. In addition, loan and credit agreements with respect to debt obligations of Cominar include,
and may include in the future, certain covenants with respect to the operations and financial position of Cominar, and distributable
income may be restricted if Cominar is unable to maintain any such covenants.
Unitholder liability
The Contract of Trust provides that no Unitholder or annuitant under a plan of which a Unitholder acts as trustee or carrier will be
held to have any personal liability as such, and that no resort shall be had to the private property of any Unitholder or annuitant for
satisfaction of any obligation or claim arising out of or in connection with any contract or obligation of Cominar or of the Trustees.
Only assets of Cominar are intended to be liable and subject to levy or execution.
The Contract of Trust further provides that certain written instruments signed by Cominar (including all immovable hypothecs and, to
the extent the trustees determine to be practicable and consistent with their obligation as trustees to act in the best interests of the
Unitholders, other written instruments creating a material obligation of Cominar) shall contain a provision or be subject to an
acknowledgment to the effect that such obligation will not be binding upon Unitholders or annuitants personally. Except in case of
bad faith or gross negligence on their part, no personal liability will attach under the laws of the Province of Québec to Unitholders or
annuitants for contract claims under any written instrument disclaiming personal liability as aforesaid.
However, in conducting its affairs, Cominar will be acquiring immovable property investments, subject to existing contractual
obligations, including obligations under hypothecs or mortgages and leases. The trustees will use all reasonable efforts to have any
such obligations, other than leases, modified so as not to have such obligations binding upon any of the Unitholders or annuitants
personally. However, Cominar may not be able to obtain such modification in all cases. If a claim is not satisfied by Cominar, there
is a risk that a Unitholder or annuitant will be held personally liable for the performance of the obligations of Cominar where the
liability is not disavowed as described above. The possibility of any personal liability attaching to Unitholders or annuitants under the
laws of the Province of Québec for contract claims where the liability is not so disavowed is remote.
Cominar uses all reasonable efforts to obtain acknowledgments from the hypothecary creditors under assumed hypothecs that
assumed hypothec obligations will not be binding personally upon the trustees or the Unitholders.
Claims against Cominar may arise other than under contracts, including claims in delict, claims for taxes and possibly certain other
statutory liabilities. The possibility of any personal liability of Unitholders for such claims is considered remote under the laws of the
Province of Québec and, as well, the nature of Cominar’s activities are such that most of its obligations arise by contract, with non-
contractual risks being largely insurable. In the event that payment of an obligation were to be made by a Unitholder, such
Unitholder would be entitled to reimbursement from the available assets of Cominar.
Article 1322 of the Civil Code of Québec effectively states that the beneficiary of a trust is liable towards third persons for the
damage caused by the fault of the trustees of such trust in carrying out their duties only up to the amount of the benefit such
beneficiary has derived from the act of such trustees and that such obligations are to be satisfied from the trust patrimony.
Accordingly, although this provision remains to be interpreted by the courts, it should provide additional protection to Unitholders
with respect to such obligations.
The trustees will cause the activities of Cominar to be conducted, with the advice of counsel, in such a way and in such jurisdictions
as to avoid, to the extent they determine to be practicable and consistent with their duty to act in the best interests of the
Unitholders, any material risk of liability on the Unitholders for claims against Cominar.
Dilution
The number of Units Cominar is authorized to issue is unlimited. The trustees have the discretion to issue additional Units in other
circumstances. Additional Units may also be issued pursuant to the DRIP, the long term incentive plan and any other incentive plan
of Cominar, upon conversion of the convertible debentures, and to the convertible debenture Indenture trustee in payment of
interest on the convertible debentures. Any issuance of Units may have a dilutive effect on Unitholders.
Restrictions on certain Unitholders and liquidity of Units
The Contract of Trust imposes restrictions on non-resident Unitholders, who are prohibited from beneficially owning more than 49%
of the Units. These restrictions may limit the rights of certain Unitholders, including non-residents of Canada, to acquire Units, to
60
2013 ANNUAL REPORT
55
exercise their rights as Unitholders and to initiate and complete take-over bids in respect of the Units. As a result, these restrictions
may limit the demand for Units from certain Unitholders and thereby adversely affect the liquidity and market value of the Units held
by the public. Unitholders who are non-residents of Canada are required to pay all withholding taxes payable in respect of
distributions by Cominar. Cominar withholds such taxes as required by the Tax Act and remits such payment to the tax authorities
on behalf of the Unitholder. The Tax Act contains measures to subject to Canadian non-resident withholding tax on certain
otherwise non-taxable distributions of Canadian mutual funds to non-resident Unitholders. This may limit the demand for Units and
thereby affect their liquidity and market value.
Cash distributions are not guaranteed
There can be no assurance regarding the amount of income to be generated by Cominar’s properties. The ability of Cominar to
make cash distributions, and the actual amounts distributed, will be entirely dependent on the operations and assets of Cominar and
its subsidiaries, and will be subject to various factors including financial performance, obligations under applicable credit facilities,
fluctuations in working capital, the sustainability of income derived from anchor tenants and capital expenditure requirements. The
market value of the Units will deteriorate if Cominar is unable to meet its distribution targets in the future, and that deterioration may
be significant. In addition, the composition of cash distributions for tax purposes may change over time and may affect the after-tax
return for investors.
Nature of investment
A holder of a Unit of Cominar does not hold a share of a body corporate. As holders of Units of Cominar, the Unitholders will not
have statutory rights normally associated with ownership of shares of a corporation including, for example, the right to bring
“oppression” or “derivative” actions. The rights of Unitholders are based primarily on the Contract of Trust. There is no statute
governing the affairs of Cominar equivalent to the CBCA, which sets out the rights, and entitlements of the shareholders of
corporation in various circumstances.
RISK FACTORS RELATED TO THE OWNERSHIP OF DEBT SECURITIES
Absence of market for securities
There is currently no trading market for any debt securities that may be offered. No assurance can be given that an active or liquid
trading market for these securities will develop or be sustained. If an active or liquid market for these securities fails to develop or be
sustained, the prices at which these securities trade may be adversely affected. Whether or not these securities will trade at lower
prices depends on many factors, including the liquidity of these securities, prevailing interest rates and the markets for similar
securities, the market price of the Units, general economic conditions and Cominar’s financial position, historic financial performance
and future prospects.
Credit risk and prior ranking indebtedness: absence of covenant protection
The likelihood that holders of convertible debentures will receive the payments owing to them under the terms of the convertible
debentures will depend on the financial health of Cominar and its creditworthiness. In addition, the convertible debentures are
unsecured obligations of Cominar and are subordinate in right of payment to all Cominar’s existing and future senior indebtedness.
Therefore, if Cominar becomes bankrupt, liquidates its assets, reorganizes or enters into certain other transactions, Cominar’s
assets will be available to pay its obligations with respect to the convertible debentures only after it has paid all of its senior and
secured indebtedness in full. There may be insufficient assets remaining following such payments to pay amounts due on any or all
of the convertible debentures then outstanding. The convertible debentures are also effectively subordinate to claims of creditors of
Cominar’s subsidiaries except to the extent that Cominar is a creditor of such subsidiaries ranking at least pari passu with such
other creditors. The convertible debenture Trust Indenture does not prohibit or limit the ability of Cominar or its subsidiaries to incur
additional debt or liabilities or to make distributions, except, in respect of distributions, where an event of default has occurred and
such default has not been cured or waived. The convertible debenture Trust Indenture does not contain any provision specifically
intended to protect holders of convertible debentures in the event of a future leveraged transaction involving Cominar.
Conversion following certain transactions
In the case of certain transactions, each convertible debenture may become convertible into the securities, cash or property
receivable by a Unitholder in the kind and amount of securities, cash or property into which the convertible debenture was
convertible immediately prior to the transaction. This change could substantially lessen or eliminate the value of the conversion
privilege associated with the convertible debentures in the future.
2013 ANNUAL REPORT
61
56
Inability to redeem convertible debentures in the event of a change of control
In the event of a change of control including the acquisition, by one or more persons acting jointly or in concert, of voting control or
direction over an aggregate of 66% or more of the outstanding Units, a holder of Series D convertible debentures and Series E
convertible debentures may require Cominar to purchase, on the date which is 30 days after the delivery of a notice of a change of
control, all or any part of such holder’s Series D convertible debentures and Series E convertible debentures, as the case may be, at
a price equal to 101% of the principal amount of such convertible debentures plus accrued and unpaid interest up to but not
including the date of the put option. Cominar does not have the funds required to make the purchases that may be required, and
there is no guarantee that it will have access to such funds.
STATUS FOR TAX PURPOSES
Income taxes
Cominar is considered a mutual fund trust for income tax purposes. Pursuant to the Contract of Trust, the trustees intend to
distribute or designate all taxable income directly earned by Cominar to unitholders and to deduct such distributions and
designations for income tax purposes.
Certain Cominar subsidiaries are subject to tax on their taxable income under the Income Tax Act and the Quebec Taxation Act.
Taxation of distributions of specified investment flow-through (SIFT) entities
A special tax regime applies to trusts and partnerships that are considered SIFT entities as well as those individuals who invest in
SIFT entities. Under this regime, SIFT entities must generally pay taxes on their income at rates that are close to those of
companies. In short, a SIFT entity is an entity (including a trust) that resides in Canada, whose investments are listed on a stock
exchange or other public market and that holds one or more non-portfolio properties.
Exception for real estate investment trusts (REITs)
For a given taxation year, Cominar is not considered a SIFT entity and is therefore not subject to SIFT rules if, during that year, it
constitutes a REIT. On October 24, 2012, Canada’s Minister of Finance tabled a notice of ways and means motion suggesting
modifications aimed at SIFT entities, which received royal assent on June 26, 2013. Generally, to qualify as a REIT, a trust must be
resident in Canada and meet the following conditions all year long: [i] at each time in the taxation year the total fair market value of
all “non-portfolio properties” that are “qualified REIT properties” held by the trust is at least 90% of the total fair market value at that
time of all the "non-portfolio assets” held by the trust, [ii] not less than 90% of its “gross REIT revenue” for the taxation year is from
one or more of the following sources: rent from “real or immovable properties,” interest, capital gains from dispositions of real or
immovable properties, dividends and royalties, and gains from dispositions of “eligible resale properties”; [iii] not less than 75% of its
“gross REIT revenue” for the taxation year is from one or more of the following sources: rent from “real or immovable properties,”
interest from mortgages, or hypothecs, on “real or immovable properties,” and capital gains from dispositions of “real or immovable
properties” that are capital properties, [iv] at each time in the taxation year, an amount that is equal to 75% or more of the equity
value of the trust at that time, is the amount that is the total fair market value of all properties held by the trust each of which is “real
or immovable property,” which is a capital property, an “eligible resale property,” an indebtedness of a Canadian corporation
represented by a banker’s acceptance, cash or, generally, an amount receivable from the Government of Canada or from certain
other public agencies; and v) the investments made therein are, at any time in the taxation year, listed or traded on a stock
exchange or other public market.
As at December 31, 2013, considering the valuation of Cominar’s assets and the results of its normal business activities,
management believes that the Trust currently meets all the criteria required to qualify for the REIT exception, as per the REIT
exception currently in effect. As a result, Cominar’s management believes that the SIFT trust tax rules do not apply to Cominar.
Cominar’s management intends to take all the necessary steps to meet these conditions on an on-going basis in the future.
Nonetheless, there is no guarantee that Cominar will continue to meet all the required conditions to be eligible for the REIT
exception for 2014 or any other subsequent year.
Were the REIT exception not applicable to Cominar at any time in a year (including the current taxation year), the SIFT regime
(under which amounts deductible will no longer be deductible in computing the income of Cominar and additional taxes will be
payable by Cominar) will, commencing in such year, impact materially the level of cash distributions which would otherwise be made
by Cominar.
62
2013 ANNUAL REPORT
57
CONSOLIDATED
FINANCIAL
STATEMENTS
COMINAR REAL ESTATE INVESTMENT TRUST
December 31, 2013
2013 ANNUAL REPORT
63
MANAGEMENT’S
RESPONSIBILITY FOR
FINANCIAL REPORTING
The accompanying consolidated financial statements of
identification and management of risks, and advising the
Cominar Real Estate Investment Trust (“Cominar”) were
trustees on auditing matters and financial reporting issues.
prepared by management, which is responsible for the
integrity and fairness of the information presented, including
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., Independent
the many amounts that must of necessity be based on
Chartered Accountants appointed by the unitholders of
estimates and judgments. These consolidated financial
Cominar upon the recommendation of the Audit Committee
statements were prepared with
International Financial
and the Board of Trustees, have performed an independent
Reporting Standards (“IFRS”). The financial reporting in our
audit of
audit of
audit of
the Consolidated Financial Statements as a
the Consolidated Financial Statements as at
the Consolidated Financial Statements as at
MD&A
is consistent with
these consolidated
financial
December 31, 2013 and their report follows. The auditors
statements.
have full and unrestricted access to the Audit Committee to
discuss their audit and related findings.
In discharging our responsibility for the integrity and fairness
of
the consolidated
financial statements and
for
the
accounting systems from which they are derived, we
maintain the necessary system of internal controls designed
to ensure that transactions are duly authorized, assets are
safeguarded and proper records are maintained.
As at December 31, 2013, the President and Chief Executive
Officer and the Executive Vice President and Chief Financial
Officer of Cominar had an evaluation carried out, under their
MICHEL DALLAIRE, Eng.
direct supervision, of the effectiveness of the controls and
President and Chief Executive Officer
procedures used for the preparation of filings as well as
internal control over financial reporting, as defined in
Multilateral Instrument 52-109 of the Canadian Securities
Administrators. Based on that evaluation, they concluded
that the disclosure controls and procedures were effective.
The Board
of Trustees
oversees management’s
responsibility
for
financial
reporting
through
its Audit
Committee, which is composed entirely of trustees who are
not members of Cominar’s management or personnel. This
Committee reviews our consolidated financial statements
and recommends them to the Board for approval. Other key
responsibilities of the Audit Committee include reviewing our
internal control procedures and
their updates,
the
MICHEL BERTHELOT, CPA, CA
Executive Vice President
and Chief Financial Officer
Quebec City, February 26, 2014
64
2013 ANNUAL REPORT
INDEPENDENT
AUDITOR’S REPORT
TO THE UNITHOLDERS OF
COMINAR REAL ESTATE INVESTMENT TRUST
We have audited the accompanying consolidated financial
evaluating the overall presentation of the consolidated
statements of Cominar Real Estate Investment Trust and its
financial statements.
subsidiaries, which comprise
the consolidated balance
sheets as at December 31, 2013 and December 31, 2012
We believe that the audit evidence we have obtained in our
and the consolidated statements of unitholders' equity,
audits is sufficient and appropriate to provide a basis for our
comprehensive income and cash flows for the years then
audit opinion.
ended, and the related notes, which comprise a summary of
significant accounting policies and other explanatory
Opinion
information.
In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of
Management’s responsibility for the consolidated
Cominar Real Estate Investment Trust and its subsidiaries
financial statements
as at December 31, 2013 and December 31, 2012 and their
Management is responsible for the preparation and fair
financial performance and their cash flows for the years then
presentation of these consolidated financial statements in
ended in accordance with International Financial Reporting
accordance with
International
Financial Reporting
Standards.
Standards, and for such internal control as management
determines is necessary to enable
the preparation of
consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility
is to express an opinion on
these
consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally
accepted auditing standards. Those standards require that
we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material
misstatement.
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
February 26, 2014
Place de la Cité, Tour Cominar
2640 Laurier Boulevard, Suite 1700
Quebec City, Quebec G1V 5C2
Canada
An audit involves performing procedures to obtain audit
evidence about
the amounts and disclosures
in
the
"PwC" refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an
Ontario limited liability partnership.
consolidated financial statements. The procedures selected
1CPA auditor, CA, public accountancy permit No. A104882
depend on the auditor’s judgment, including the assessment
of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In
making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair
presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control.
An audit also includes evaluating the appropriateness of
accounting policies used and
the
reasonableness of
accounting estimates made by management, as well as
2013 ANNUAL REPORT
65
60
CONSOLIDATED BALANCE SHEETS
[in thousands of Canadian dollars]
ASSETS
Investment properties
Income properties
Properties under development
Land held for future development
Goodwill
Prepaid expenses and other assets
Accounts receivable
Bond investments
Cash and cash equivalents
Total assets
LIABILITIES
Mortgages payable
Debentures
Convertible debentures
Bank borrowings
Bridge loan
Accounts payable and accrued liabilities
Income taxes payable
Deferred tax liability
Total liabilities
UNITHOLDERS’ EQUITY
Unitholders’ equity
Total liabilities and unitholders’ equity
See accompanying notes to the consolidated financial statements.
Approved by the Board of Trustees.
Approved by the Board of Trustees.
Note
December 31, 2013
December 31, 2012
$
$
5
6
6
7
8
9
10
11
12
13
14
15
23
5,654,825
53,414
5,294,984
21,537
54,547
31,697
5,762,786
166,971
8,203
43,230
6,398
9,742
5,348,218
166,971
11,571
49,866
21,781
18,642
5,997,330
5,617,049
1,794,830
1,695,222
994,824
181,768
105,697
—
84,285
—
10,546
448,530
289,134
300,368
84,000
94,083
12
8,805
3,171,950
2,920,154
2,825,380
5,997,330
2,696,895
5,617,049
ROBERT DESPRÉS
ROBERT DESPRÉS
Chairman of the Board of Trustees
Chairman of the Board of Trustees
MICHEL DALLAIRE
MICHEL DALLAIRE
Trustee
Trustee
66
2013 ANNUAL REPORT
61
CONSOLIDATED STATEMENTS
OF UNITHOLDERS’ EQUITY
For the years ended December 31
[in thousands of Canadian dollars]
Unitholders’
contributions
Cumulative
net income
Cumulative
distributions
Contributed
surplus
Note
Equity
component
of convertible
debentures
$
$
$
$
$
Total
$
Balance as at January 1, 2013
2,197,826
1,278,292
(783,586)
2,627
1,736
2,696,895
Net income and comprehensive
income
Distributions to unitholders
Unit issues
Unit issue expenses
Long term incentive plan
Convertible debentures
redemption
16
16
—
—
54,254
(106)
—
—
254,969
—
—
—
—
312
—
(182,977)
—
—
—
—
—
—
—
—
2,345
—
—
—
—
—
254,969
(182,977)
54,254
(106)
2,345
—
(312)
—
Balance as at December 31, 2013
2,251,974
1,533,573
(966,563)
4,972
1,424
2,825,380
Unitholders’
contributions
Cumulative
net income
Cumulative
distributions
Contributed
surplus
Note
Equity
component
of convertible
debentures
$
$
$
$
$
Total
$
Balance as at January 1, 2012
1,150,735
936,121
(619,565)
2,186
1,745
1,471,222
Net income and comprehensive
income
Distributions to unitholders
Unit issues
Unit issue expenses
Long term incentive plan
16
16
—
—
1,075,766
(28,675)
—
342,171
—
—
—
—
—
(164,021)
—
—
—
—
—
—
—
441
—
—
(9)
—
—
342,171
(164,021)
1,075,757
(28,675)
441
Balance as at December 31, 2012
2,197,826
1,278,292
(783,586)
2,627
1,736
2,696,895
See accompanying notes to the consolidated financial statements.
2013 ANNUAL REPORT
67
62
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
For the years ended December 31
[in thousands of Canadian dollars, except per unit amounts]
Operating revenues
Rental revenue from investment properties
Operating expenses
Operating costs
Realty taxes and services
Property management expenses
Net operating income
Change in fair value of investment properties
Finance charges
Trust administrative expenses
Restructuring charges
Transaction costs – business combinations
Gain on disposal of a subsidiary
Gains on an investment in a public entity
Gains on disposal of investment properties
Other revenues
Income before income taxes
Income taxes
Note
2013
$
2012
$
662,053
564,537
132,407
149,010
12,426
293,843
113,466
122,048
11,208
246,722
368,210
317,815
5
18
19
20
21
22
17,150
(131,811)
(12,063)
(1,062)
—
8,010
—
3,370
4,906
177,706
(115,963)
(11,065)
(6,929)
(27,689)
—
6,222
—
2,964
256,710
343,061
23
(1,741)
(890)
Net income and comprehensive income
254,969
342,171
Basic net income per unit
Diluted net income per unit
See accompanying notes to the consolidated financial statements.
24
24
2.03
1.98
3.13
2.91
68
2013 ANNUAL REPORT
CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the years ended December 31
[in thousands of Canadian dollars]
Note
2013
$
2012
$
63
OPERATING ACTIVITIES
Net income
Adjustments for:
Change in fair value of investment properties
Amortizations
Compensation expense related to long term incentive plan
Gain on disposal of a subsidiary
Gains on disposal of investment properties
Deferred taxes
Change in accounts receivable – recognition of leases on a straight-line basis
Change in fair value of an investment in a public entity
Change in non-cash working capital items
Cash flows provided by operating activities
INVESTING ACTIVITIES
Acquisitions of and investments in income properties
Additions to and investments in properties under development and
land held for future development
Cash consideration paid upon business combinations
Net proceeds from the sale of investment properties
Net proceeds from the disposal of an investment in a limited partnership
Acquisition deposits on income properties
Change in bond investments
Acquisition of other assets
Cash flows used in investing activities
FINANCING ACTIVITIES
Distributions to unitholders
Bank borrowings and bridge loan
Mortgages payable
Net proceeds from issue of debentures
Net proceeds from issue of units
Convertible debentures redemption
Repayments of balances at maturity of mortgages payable
Monthly repayment of mortgages payable
Cash flows provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Other information
Interest paid
Income taxes paid (recovered)
Distributions cashed
See accompanying notes to the consolidated financial statements.
20
21
25
5
6
4
16
10
254,969
342,171
(17,150)
(177,706)
(6,033)
2,155
(8,010)
(3,370)
1,741
(4,101)
—
(17,441)
202,760
(5,899)
1,268
—
—
877
(7,032)
(2,582)
(4,764)
146,333
(304,453)
(72,931)
(58,220)
(18,281)
—
(1,088,147)
10,351
—
(1,300)
15,069
(1,643)
44,519
22,444
(1,000)
(361)
(971)
(340,196)
(1,114,728)
(137,665)
(279,484)
288,809
545,572
8,418
(109,986)
(136,940)
(50,188)
128,536
(8,900)
18,642
9,742
139,799
12
—
(126,304)
182,021
15,405
448,383
651,218
(86,007)
(57,387)
(45,681)
981,648
13,253
5,389
18,642
128,072
(55)
4,293
2013 ANNUAL REPORT
69
64
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
For the years ended December 31, 2013 and 2012
[in thousands of Canadian dollars, except per unit amounts]
1) DESCRIPTION OF THE TRUST
Cominar Real Estate Investment Trust ("Cominar" or the "Trust") is an unincorporated closed-end real estate investment trust
created by a Contract of Trust on March 31, 1998, under the laws of the Province of Quebec. As at December 31, 2013, Cominar
owned and managed a real estate portfolio of 497 high-quality properties that cover a total area of 37.1 million square feet in
Quebec, Ontario, the Atlantic Provinces and Western Canada.
Cominar is listed on the Toronto Stock Exchange and its units trade under the symbol "CUF.UN." The head office is located at
Complexe Jules-Dallaire – T3, 2820 Laurier Boulevard, Suite 850, Quebec City (Quebec), Canada. Additional information about the
Trust is available on Cominar's website at www.cominar.com.
The Board of Trustees approved Cominar’s consolidated financial statements on February 26, 2014.
2) SIGNIFICANT ACCOUNTING POLICIES
a) Basis of presentation
Cominar’s consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards ("IFRS") applicable to the preparation of financial statements. The accounting policies and application methods
thereof have been consistently applied throughout each of the years presented in these consolidated financial statements,
except for the prospective application of a new IFRS standard during the fiscal year.
b) Basis of preparation
Consolidation
These consolidated financial statements include the accounts of Cominar and its wholly-owned subsidiaries and its proportionate
share of the assets, liabilities, revenues and expenses of the property it co-owns.
Use of estimates, assumptions and judgements
The preparation of financial statements in accordance with IFRS requires management to make estimates, judgements and
assumptions that affect the reported amounts of assets and liabilities in the financial statements. Those estimates, assumptions
and judgements also affect the disclosure of contingencies at the date of the financial statements and the reported amounts of
revenues and expenses during the year. Actual results that could differ materially from those estimates, assumptions and
judgements, are described below:
• Investment properties
Investment properties are recorded at fair value at the balance sheet date. Fair value is determined using both management’s
internal measurements and valuations from independent real estate appraisers, performed in accordance with recognized
valuation techniques. Techniques used include the capitalized net operating income method and the discounted cash flow
method, including notably estimates of capitalization rates and future net operating income as well as estimates of discount
rates and future cash flows applicable to investment properties, respectively.
Management’s fair value internal measurements rely on internal financial information and are corroborated by capitalization
rates obtained from independent experts. However, internal measurements and values obtained from independent appraisers
are both subject to significant judgments, estimates and assumptions about market conditions at the balance sheet date.
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• Business combinations
Business combinations are accounted for using the acquisition method. The cost of a business combination is the value, at
the acquisition date, of the assets transferred, liabilities incurred and Unitholders’ equity instruments issued in exchange for
control of the acquired business. When the cost of a business combination exceeds the fair value of the assets acquired and
liabilities assumed, such excess is recorded as goodwill. Transaction-related costs, as well as costs related to the acquisition
of real estate assets, are expensed as incurred.
Cominar accounts for investment property acquisitions in accordance with IFRS 3, “Business Combinations” (“IFRS 3”), only
when it considers that a business has been acquired. Under IFRS 3, a business is defined as an integrated set of activities
and assets that could be conducted and managed for the purpose of providing a direct return to investors in the form of lower
costs or other economic benefits. If the acquisition does not correspond to this definition, a group of assets is deemed to have
been acquired. If goodwill is present, the acquisition is presumed to be a business. Judgment is therefore used by
management in determining if the acquisition qualifies as a business combination in accordance with IFRS 3 or as an asset
acquisition.
Generally, based on its judgement, when Cominar acquires a property or property portfolio (and not a legal entity) without
taking on the management of personnel or acquiring an operational platform, it categorizes the acquisition as an asset
acquisition.
• Impairment of goodwill
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net identifiable assets
acquired. It is not amortized but is tested for impairment on an annual basis or more frequently if events or circumstances
indicate that it is more likely than not that goodwill may be impaired. Goodwill resulting from business combinations is
allocated to each group of cash-generating units expected to benefit from the combination. To test impairment, Cominar must
determine the recoverable value of net assets of each group of cash-generating units, making assumptions about
standardized net operating income and capitalization rates. The recoverable value is the higher of fair value less the cost of
disposal and the value in use. Should the carrying value of a group of cash-generating units, including goodwill, exceed its
recoverable value, impairment is recorded and recognized in profit or loss in the period during which the impairment occurs.
• Financial instruments
Financial instruments must be initially measured at fair value. Cominar must also estimate and disclose the fair value of
certain financial instruments for information purposes in the financial statements presented for subsequent periods. When fair
value cannot be derived from active markets, it is determined using valuation techniques, namely the discounted cash flow
method. If possible, data related to these models are derived from observable markets, and if not, judgment is required to
determine fair value. Judgments take into account liquidity risk, credit risk and volatility. Any changes in assumptions related
to these factors could modify the reported fair value of financial instruments.
• Convertible debentures
Upon initial recognition, Cominar’s management must estimate, if applicable, the fair value of the conversion option included
in the convertible debentures. Under IFRS, the remaining amount obtained after deducting, from the fair value of the
compound financial instrument considered as a whole, the established amount of the Liability component must be allocated to
the Unitholders’ equity component. Should this estimate be inappropriate, it will have an impact on the interest expense
recognized in the financial statements for the periods subsequent to their issuance.
• Unit options
The compensation expense related to unit options is measured at fair value and is amortized based on the graded vesting
method using the Black-Scholes model. This model requires management to make many estimates on various data, such as
expected life, volatility, the weighted average dividend yield of distributions, the weighted average risk-free interest rate and
the expected forfeiture rate. Any changes to certain assumptions could have an impact on the compensation expense related
to unit options recognized in the financial statements.
• Income taxes
Deferred taxes of Cominar’s subsidiaries are measured at the tax rates expected to apply in the future as temporary
differences between the reported carrying amounts and the tax bases of the assets and liabilities reverse. Changes to
2013 ANNUAL REPORT
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66
deferred taxes related to changes in tax rates are recognized in income in the period during which the rate change is
substantively enacted.
Any changes in future tax rates or in the timing of the reversal of temporary differences could affect the income tax expense.
Investment properties
An investment property is an immovable property held by Cominar to earn rentals or for capital appreciation, or both, rather than
for use in the production or supply of goods and services or for administrative purposes, or for sale in the ordinary course of
business. Investment properties include income properties, properties under development and land held for future development.
Cominar presents its investment properties based on the fair value model. Fair value is the amount for which the property could
be exchanged between knowledgeable, willing parties in an arm’s length transaction. Any change in the fair value is recognized
in profit or loss in the period in which it arises. The fair value of investment properties shall reflect market conditions at the end of
the reporting period. Fair value is time-specific as of a given date. As market conditions could change, the amount presented as
fair value could be incorrect or inadequate at another date. The fair value of investment properties is based on measurements
derived from management’s estimates or valuations from independent appraisers, plus capital expenditures made since the
most recent appraisal. Management regularly reviews appraisals of its investment properties between the appraisal dates in
order to determine whether the related assumptions, such as net operating income and capitalization rates, still apply. These
assumptions are compared to market data issued by independent experts. When increases or decreases are required, Cominar
adjusts the carrying amount of its investment properties.
The fair value of Cominar’s investment properties recorded on the balance sheet in accordance with IFRS is the sum of the fair
values of each investment property considered individually and does not necessarily reflect the contribution of the following
elements that characterize Cominar: (i) the composition of the property portfolio diversified through its client base, geographic
markets and business segments; (ii) synergies among different investment properties; and (iii) a fully integrated management
approach. Therefore, the fair value of Cominar’s investment properties taken as a whole could differ from that appearing on the
consolidated balance sheet.
Properties under development in the construction phase are measured at cost until their fair value can be reliably determined,
usually when development has been completed. The fair value of land held for future development is based on recent prices
derived from comparable market transactions.
Capitalization of costs
Cominar capitalizes into investment properties the costs incurred to increase their capacity, replace certain components and
make improvements after the acquisition date. Cominar also capitalizes major maintenance and repair expenses providing
benefits that will last far beyond the end of the reporting period. For major revitalization projects of income properties that take
place over a substantial period of time, Cominar capitalizes the borrowing costs that are directly attributable to the investments
in question. When Cominar determines that the acquisition of an investment property is an asset acquisition, it capitalizes all
costs that are directly related to the acquisition of the property, as well as all expenses incurred to carry out the transaction.
Concerning properties under development and land held for future development, Cominar capitalizes all direct costs incurred for
their acquisition, layout and construction. Such capitalized costs also include borrowing costs that are directly attributable to the
property concerned. Cominar begins capitalizing borrowing costs when it incurs expenditures for the properties in question and
when it undertakes activities that are necessary to prepare these properties for their intended use. Cominar ceases capitalizing
borrowing costs when the asset is ready for management’s intended use.
Leasing costs
Leasehold improvements, incurred directly by Cominar or through an allowance to tenants, as well as initial direct costs, mostly
brokerage fees incurred to negotiate or prepare leases, are not amortized.
Tenant inducements, mostly the payment of a monetary allowance to tenants and the granting of free occupancy periods, are
recognized in profit or loss and are subsequently amortized on a straight-line basis over the related lease term.
All these costs are added to the carrying amount of investment properties as they are incurred.
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67
Financial instruments
Cominar groups its financial instruments into classes according to their nature and characteristics. Management determines
such classification upon initial measurement, which is usually at the date of acquisition.
Cominar has used the following classifications for its financial instruments:
− Bond investments are classified as investments held until their maturity date.
− Cash and cash equivalents and accounts receivable, including loans to certain clients, are classified as “Loans and
receivables.” They are initially measured at fair value. Subsequently, they are measured at amortized cost using the effective
interest method. For Cominar, this value generally represents cost.
− Mortgages payable, debentures, convertible debentures, the bridge loan, bank borrowings and accounts payable and accrued
liabilities are classified as “Other financial liabilities.” They are initially measured at fair value. Subsequently, they are
measured at amortized cost using the effective interest method.
Bond investments
Bond investments are measured at amortized cost using the effective interest rate method.
Cash and cash equivalents
Cash and cash equivalents consist of cash and investments that are readily convertible into a known amount of cash, that are
not subject to a significant risk of change in value and that have original maturities of three months or less. Bank borrowings are
considered to be financing arrangements.
Deferred financing costs
Issue costs incurred to obtain term loan financing, typically through mortgage loans, debentures and convertible debentures, are
applied against the borrowings and are amortized using the effective interest rate method over the term of the related debt.
Financing costs related to operating and acquisition credit facilities are recorded as assets under prepaid expenses and other
assets and are amortized on a straight-line basis over the term of the respective credit facility.
Revenue recognition
Management has determined that all leases concluded between Cominar and its tenants are operating leases. Minimum lease
payments are recognized using the straight-line method over the term of the related leases, and the excess of payments
recognized over amounts payable is recorded on Cominar’s consolidated balance sheet under investment properties. Leases
generally provide for the tenants’ payment of maintenance expenses of common elements, realty taxes and other operating
costs, such payment being recognized as operating revenues in the period when the right to payment vests. Percentage leases
are recognized when the minimum sales level has been reached pursuant to the related leases. Lease cancellation fees are
recognized when they are due. Lastly, incidental income is recognized when services are rendered.
Long term incentive plan
Cominar has a long term incentive plan in order to attract, retain and motivate its employees to attain Cominar’s objectives. This
plan does not provide for any cash settlements.
Unit purchase options
Cominar recognizes compensation expense on units granted, based on their fair value, which is calculated using an option
valuation model. The compensation expense is amortized using the graded vesting method.
Restricted units
Cominar recognizes compensation expense on restricted unit options granted, based on their fair value on the date of the grant.
The fair value of restricted units is represented by the market value of Cominar units on the date of the grant. The compensation
expense is amortized on a straight-line basis over the duration of the purchase period.
2013 ANNUAL REPORT
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68
Deferred units
Cominar recognizes a compensation expense on deferred units granted, based on their fair value on the date of the grant. The
fair value of restricted units is represented by the market value of Cominar units on the date of the grant. The compensation
expense is amortized using the graded vesting method.
Income taxes
Cominar is considered a mutual fund trust for income tax purposes. In exercising their discretionary power regarding
distributions under the Contract of Trust, the trustees intend to distribute or designate all taxable income directly earned by
Cominar to unitholders and to deduct such distributions and designations for income tax purposes. Therefore, no provision for
income taxes is required for the Trust.
Cominar’s subsidiaries that are incorporated as business corporations are subject to tax on their taxable income under the
Income Tax Act (Canada) and the taxation acts of the provinces concerned. These subsidiaries account for their current or
recovered taxes at the current enacted tax rates and use the asset and liability method to account for deferred taxes. The net
deferred tax liability represents the cumulative amount of taxes applicable to temporary differences between the reported
carrying amounts and tax bases of the assets and liabilities.
Per unit calculations
Basic net income per unit is calculated based on the weighted average number of units outstanding for the year. The calculation
of net income per unit on a diluted basis considers the potential issuance of units in accordance with the long term incentive plan
and the potential issuance of units under convertible debentures, if dilutive.
Segment information
Segment information is presented in accordance with IFRS 8, which recommends presenting and disclosing segment
information in accordance with information that is regularly assessed by the chief operating decision makers in order to
determine the performance of each segment.
3) NEW INTERNATIONAL FINANCIAL REPORTING STANDARDS
(IFRS)
On January 1, 2013, Cominar adopted certain IFRS:
IFRS 11 – “Joint Arrangements”
IFRS 11 requires a joint venturer to recognize its interest in a joint arrangement as a joint venture or joint operation. Joint ventures
are accounted for using the equity method of accounting, whereas for a joint operation, the joint venturer recognizes its share of the
assets, liabilities, revenue and expenses of the joint operation. Adoption of this new standard had no impact on Cominar’s
consolidated financial statements.
IFRS 13 – “Fair Value Measurement”
IFRS 13 is a comprehensive standard on fair value measurement and disclosure requirements for use across all IFRS standards.
The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an
orderly transaction between market participants, at the measurement date. It also establishes disclosures about fair value
measurement. This new standard had an impact on the presentation of financial information required for the consolidated financial
statements, but had no impact on the fair value evaluations at the time of adoption
IAS 36 – “Impairment of Assets – Recoverable Amount
IAS 36 – “Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets”
IAS 36 – “Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets”
Cominar has adopted the amendments to IAS 36, Impai
mit the obligation to
rment of Assets, prospectively. These amendments limit the obligation to
Cominar has adopted the amendments to IAS 36, Impairment of Assets, prospectively. These amendments li
Cominar has adopted the amendments to IAS 36, Impairment of Assets, prospectively. These amendments limit the obligation to
disclose the recoverable amount of non-financial assets for which a loss or an increase in value was recorded during the year. They
ecorded during the year. They
disclose the recoverable amount of non-financial assets for which a loss or an increase in value was recorded during the year. They
also expand on and clarify disclosure requirements when the recoverable amount is determined based on fair value less costs of
also expand on and clarify disclosure requirements when the recoverable amount is determined based on fair value less costs of
disposal. Cominar has applied these amendments retrospectively. The changes specifically target the disclosure of information, and
disposal. Cominar has applied these amendments retr
ospectively. The changes specifically target the disclosure of information, and
disposal. Cominar has applied these amendments retrospectively. The changes specifically target the di
their adoption had no impact on results or on the financial situation of the Trust.
their adoption had no impact on results or on the f
their adoption had no impact on results or on the financial situation of the Trust.
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2013 ANNUAL REPORT
69
4) ACQUISITIONS
ACQUISITIONS OF INCOME PROPERTIES REALIZED IN 2013
On January 31, 2013, Cominar acquired a portfolio of 18 industrial properties primarily located on the South Shore of Montreal and
one office property located in Montreal, for a purchase price of $149,800. The portfolio represents a total of approximately 1.8 million
square feet of leasable area, consisting of approximately 1.7 million square feet of industrial space and approximately 0.1 million
square feet of office space. As part of this transaction, Cominar also acquired a vacant lot of 173,569 square feet located in
Saint-Bruno-de-Montarville, Quebec, for $1,400.
On March 21, 2013, Cominar acquired an office building located in Fredericton, New Brunswick, for $5,700, paid in cash;
this building represents a leasable area of 44,500 square feet.
On May 1, 2013, Cominar acquired an industrial building located in Pointe-Claire, Quebec, for a purchase price of $12,000, paid in
cash; this property has a leasable area of 199,000 square feet.
On December 20, 2013, Cominar acquired a shopping centre located in Beloeil, Quebec, with a leasable area of 328,050 square
feet, consisting of an indoor shopping centre, a strip mall and two single-tenant buildings, for a purchase price of $60,000, paid in
cash.
These transactions were accounted for using the acquisition method. The results of operations from the acquired income properties
are included in the consolidated financial statements as of their dates of acquisition.
The following table summarizes the fair value at acquisition date of acquired net assets:
Investment properties
Mortgages payable
Debt
Total cash consideration paid for these acquisitions
Fair value
$
228,900
(43,733)
(6,998)
178,169
ACQUISITION OF LAND HELD FOR FUTURE DEVELOPMENT REALIZED IN 2013
On March 15, 2013, Cominar acquired approximately 508,780 square feet of vacant land located in Calgary, Alberta, which includes
a parking facility with 347 parking spaces. Cominar paid $20,500 in cash for this property.
ACQUISITION OF INCOME PROPERTIES IN 2012
During the fiscal year, Cominar acquired three income properties from Société immobilière Investus inc. further to the exercise of a
right to initial offer.
This acquisition includes:
• One industrial and mixed-use property (31,000 square feet) located in Winnipeg, Manitoba; this property was acquired at a cost of
$4,700, of which $2,445 was an assumption of mortgage payable, $2,164 was debt, and $91 was paid in cash.
• One industrial and mixed-use property (46,000 square feet) located in Longueuil, Québec; this property was acquired at a cost of
$3,700, of which $2,362 was an assumption of mortgage payable, and $1,338 was paid in cash.
• One industrial and mixed-use property (29,000 square feet) located in Halifax, Nova Scotia; this property was acquired at a cost
$3,200, of which $2,136 was an assumption of mortgage payable, and $1,064 was paid in cash.
2013 ANNUAL REPORT
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70
• One industrial and mixed-use property (94,000 square feet) located in Brockville, Ontario; this property was acquired at a cost of
$4,400, of which $2,825 was an assumption of mortgage payable, and $1,575 was paid in cash.
These transactions were accounted for using the acquisition method. The results of operations from the acquired income properties
are included in the consolidated financial statements as of their dates of acquisition.
The following table summarizes the fair values on the dates the net assets were acquired:
Investment properties
Mortgages payable
Debt
Total cash consideration paid for these acquisitions
Fair value
$
16,000
(9,768)
(2,164)
4,068
BUSINESS COMBINATIONS THAT OCCURRED IN 2012
On March 1, 2012, Cominar completed the acquisition of Canmarc Real Estate Investment Trust. Cominar accounted for the
acquisition using the acquisition method in accordance with IFRS 3, "Business Combinations". Canmarc’s earnings were
consolidated as of January 27, 2012. The $904,554 ($16.50 per unit) fair value of all units acquired was allocated among net
identifiable assets ($647,496), goodwill ($110,791) and repayment of redeemable units held by non-controlling interests ($146,267).
On September 14, 2012, Cominar acquired 67 income properties from GE Capital Real Estate. Cominar accounted for these
acquisitions using the acquisition method in accordance with IFRS 3, "Business Combinations". The results of these properties were
included in the consolidated financial statements since the date of acquisition. Total consideration paid for the acquisition ($662,263)
was allocated among net identifiable assets ($615,463) and goodwill ($46,800). In the second quarter of 2013, Cominar completed
the final purchase price allocation and there was no adjustment to the preliminary purchase price allocation.
5)
INCOME PROPERTIES
For the years ended December 31
Note
2013
$
2012
$
Balance, beginning of year
5,294,984
2,515,965
Business combinations
Acquisitions
Fair value adjustment(1)
Capital costs
Disposals
Transfer of properties under development
Change in initial direct costs
Change in accounts receivable – recognition of leases on a straight-line basis
Change in deposits on acquisition
Other
4
4
6
—
228,900
17,150
113,326
(28,621)
9,366
8,016
4,101
1,300
6,303
2,509,289
16,000
177,706
58,818
(4,996)
4,760
4,865
8,873
1,000
2,704
Balance, end of year
5,654,825
5,294,984
(1) The total fair value adjustment is related to income properties held on the closing date.
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2013 ANNUAL REPORT
71
Fair value adjustment
Cominar opted to present its investment properties in its financial statements according to the fair value model. Fair value is
determined based on evaluations performed using management’s internal estimates and by independent real estate appraisers,
plus capital expenditures incurred since the most recent appraisal, if applicable.
As per Cominar’s policy on valuing investment properties, at the end of 2013, management re-evaluated its real estate portfolio and
determined that an increase of $17,150 was necessary to adjust the carrying value of its investment properties to their fair value
[increase of $177,706 as at December 31, 2012].
Method and key assumptions
Internally valued investment property has been measured using the following method and key assumptions:
Capitalized net operating income method – Under this method, capitalization rates are applied to normalized net operating income in
order to comply with current valuation standards. The normalized net operating income represents adjusted net operating income for
items such as administrative expenses, occupancy rates, the recognition of leases on a straight-line basis and other non-recurring
items. The key factor is the capitalization rate for each property or property type. Cominar regularly receives publications from
national firms dealing with real estate activity and trends. Such market data reports include differences in capitalization rates by
property type and geographical area.
To the extent that the capitalization rate ranges change from one reporting period to the next, or if another rate within the provided
ranges is more appropriate than the rate previously used, the fair value of investment properties increases or decreases
accordingly. The change in the fair value of investment properties is recognized in profit or loss.
The capitalization rates used to value investment properties are as follows:
December 31, 2013
Type
Office properties
Retail properties
Industrial and mixed-use properties
Capitalization rate
Range
Weighted average
5.5%-9.0%
6.0%-10.0%
6.0%-10.0%
6.4%
6.7%
7.3%
As at December 31, 2013, the fair value of investment properties was calculated using a weighted average capitalization rate of
6.7% [6.6% as at December 31, 2012].
Generally, an increase in net operating income will result in an increase in the fair value of an investment property while an increase
in the capitalization rate will result in a decrease in the fair value. The capitalization rate magnifies the effect of a change in net
operating income, with a lower capitalization rate having a greater impact on net operating income than a higher capitalization rate.
Cominar has determined that a 0.10% increase or a decrease in the applied capitalization rate for its entire real estate portfolio
would result in a decrease or increase respectively of approximately $85,000 in the fair value of its investment properties in 2013
[$67,000 in 2012].
2013 ANNUAL REPORT
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72
OWNERSHIP INTEREST IN A CO-OWNED INVESTMENT PROPERTY
Cominar’s share (95%) of the assets, liabilities, revenues, expenses and cash flows of the co-owned investment property was as
follows:
Investment property
Assets
Liabilities
For the years ended December 31
Operating revenues
Operating expenses
Net operating income
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
December 31, 2013
December 31, 2012
$
97,850
3,565
2,583
2013
$
11,799
5,717
6,082
5,123
(3,009)
(4,490)
$
91,047
4,984
2,291
2012
$
10,427
4,943
5,484
5,300
(2,600)
591
6) PROPERTIES UNDER DEVELOPMENT AND LAND HELD FOR
FUTURE DEVELOPMENT
For the years ended December 31
Balance, beginning of year
Acquisitions
Capital costs
Capitalized interest
Transfer to income properties
Other real estate asset
Balance, end of year
Breakdown:
Properties under development
Land held for future development
7) GOODWILL
Note
4
5
20
2013
$
53,234
20,500
45,321
3,400
(9,366)
(5,128)
107,961
53,414
54,547
2012
$
37,444
1,296
12,570
1,556
(4,760)
5,128
53,234
21,537
31,697
Note
Office
properties
$
Retail
properties
Industrial and
mixed-use properties
$
$
Total
$
Balance as at January 1, 2012
5,967
1,466
1,947
9,380
Business combinations
4
92,106
49,746
15,739
157,591
Balance as at December 31, 2012 and 2013
98,073
51,212
17,686
166,971
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2013 ANNUAL REPORT
During fiscal 2013, goodwill resulting from business combinations was allocated to each group of cash-generating units, each group
consisting of investment properties. At year-end, Cominar tested its assets for impairment by determining the recoverable value of
the net assets of each cash-generating unit and comparing it to the carrying value, including goodwill. At year end, goodwill has
suffered no impairment loss.
8) ACCOUNTS RECEIVABLE
73
Trade receivables
Allowance for doubtful accounts
Accounts receivable – related parties
Interest-bearing accounts receivable(1)
Security deposits
Other receivables and accrued income
(1) Average effective interest rate
December 31, 2013
December 31, 2012
$
$
29,397
(5,111)
28,265
(3,774)
24,286
1,406
1,701
6,358
9,479
43,230
7.87%
24,491
457
2,145
8,355
14,418
49,866
7.24%
9) BOND INVESTMENTS
Cominar holds Government of Canada bonds and mortgage bonds with a weighted average interest rate of 2.95% and pledged
them as security, held in escrow, for the reimbursement of certain mortgages. The transactions do not qualify for defeasance
accounting; therefore, both the mortgages payable and the related assets pledged as security continue to be recorded in the
consolidated balance sheet. The mortgages are payable in monthly instalments and mature at various dates from 2014 to 2016.
Bond investments are sufficient to cover payments of principal and interest, including the balance at maturity. The assets pledged as
security have various maturity dates, which closely correspond to the monthly instalments and maturities of the mortgages.
The assets and liabilities related to the mortgages are measured at amortized cost using the effective interest rate method.
The carrying amount of the mortgages secured by bonds was $6,028 as at December 31, 2013 [$20,508 as at December 31, 2012].
10) MORTGAGES PAYABLE
The following table presents changes in mortgages payable for the years indicated:
For the years ended December 31
Balance, beginning of year
Net mortgages payable, contracted or assumed
Business combinations
Monthly repayments of principal
Repayment of balances at maturity
Plus:
Fair value adjustments on assumed mortgages
Less: Deferred financing costs
Balance, end of year
Weighted
Average Rate
%
5.23
4.56
—
—
5.02
5.06
2013
$
1,651,202
633,319
—
(50,188)
(470,411)
1,763,922
33,342
(2,434)
1,794,830
Weighted
Average Rate
%
5.38
3.97
5.40
—
6.42
5.23
2012
$
841,082
70,741
887,303
(45,681)
(102,243)
1,651,202
45,282
(1,262)
1,695,222
2013 ANNUAL REPORT
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74
Repayments of mortgages payable are as follows:
For the years ending December 31
2014
2015
2016
2017
2018
2019 and thereafter
Repayment of
principal
Repayment of
balances at
maturity
$
$
50,747
42,561
37,235
34,807
24,673
80,967
148,001
250,660
75,927
151,725
409,003
457,616
2013
Total
$
198,748
293,221
113,162
186,532
433,676
538,583
1,763,922
Mortgages payable are primarily secured by immovable hypothecs on investment properties with a carrying value of $3,541,017
[$3,521,667 as at December 31, 2012]. They bear annual contractual interest rates ranging from 2.77% to 7.75% [2.68% to 8.35%
as at December 31, 2012], representing a weighted average contractual rate of 5.06% as at December 31, 2013 [5.23% as at
December 31, 2012], and are renewable at various dates from January 2014 to January 2039. As at December 31, 2013, the
weighted average effective rate was 4.57% [4.16% as at December 31, 2012]. As at December 31, 2013, all mortgages payable
were at fixed rates. Some of the mortgages payable include restrictive clauses, with which Cominar was in compliance as at
December 31, 2013.
11) DEBENTURES
The following table presents characteristics of outstanding debentures as at December 31, 2013:
Series
1
2
3
4
5
Total
Date of issuance
Contractual
interest rate
Effective
interest rate
Maturity date
Nominal value as at
December 31, 2013
June 2012(1)
December 2012(2)
May 2013
July 2013
October 2013
%
4.274
4.23
4.00
4.941
3.325(3)
%
4.32
4.37
4.24
5.04
3.51
June 2017
December 2019
November 2020
July 2020
October 2015
$
250,000
300,000
100,000
100,000
250,000
1,000,000
(1) Re-opened in September 2012.
(2) Re-opened in February 2013.
(3) Variable interest rate set quarterly for the period from October 10, 2013 to January 9, 2014 (corresponding to the CDOR three-month rate plus 205 basis points).
Cominar allocated the net proceeds from the sales of the four series of debentures issued in 2013 to repaying its credit facility.
80
2013 ANNUAL REPORT
The following table presents changes in debentures for the years indicated:
For the years ended December 31
Balance, beginning of year
Issues
Less: Deferred financing costs
Plus: Net premium and discount on issuance
Balance, end of year
75
2013
Weighted
Average Rate
$
%
4.25
3.91
4.06
450,000
550,000
1,000,000
(5,578)
402
994,824
2012
Weighted
Average Rate
%
—
4.25
4.25
$
—
450,000
450,000
(2,867)
1,397
448,530
12) CONVERTIBLE DEBENTURES
The
following
table presents
features of
the subordinate unsecured convertible debentures outstanding as at
December 31, 2013:
Series
Date of
issuance
Contractual
interest rate
Effective
interest rate
Per unit
conversion
price
Date of
redemption at
Cominar’s option
- conditional
Date of
redemption at
Cominar’s option
- unconditional
Maturity date
%
%
$
D
E
September 2009
January 2010
6.50
5.75
7.50
6.43
20.50 September 2012
September 2014 September 2016
25.00
June 2013
June 2015
June 2017
Nominal
value as at
Dec. 31,
2013
$
99,786
86,250
186,036
The following table presents the changes in debentures for the years indicated:
For the years ended December 31
Balance, beginning of year
Holders’ option conversion
Redemption
Less
Deferred financing costs
Equity component
Balance, end of year
2013
2012
Weighted
Average Rate
Weighted
Average Rate
$
%
$
%
5.97
6.32
5.74
6.02
296,056
6.02
392,471
(34)
(109,986)
186,036
(3,644)
(624)
181,768
6.21
5.80
6.15
(10,408)
(86,007)
296,056
(6,010)
(912)
289,134
On July 8, 2013, Cominar called all its then outstanding Series C convertible debentures bearing interest at 5.80% and totalling
$109,986. Deferred financing costs of $984 were written off following this redemption.
2013 ANNUAL REPORT
81
76
On June 29, 2012, Cominar bought back all outstanding Series A convertible debentures for an amount of $5,521. On September
19, 2012, Cominar bought back all outstanding Series B convertible debentures for an amount of $80,486. Unamortized deferred
finance charges of $981 were written off following these redemptions.
13) BANK BORROWINGS
As at December 31, 2013, Cominar had operating and acquisition credit facilities of up to $550,000 [$550,000 as at
December 31, 2012]. A first tranche of $250,000 will mature in January 2014, and a second tranche of $300,000 will mature in
January 2015. These credit facilities bear interest at the prime rate plus 1.0% [1.0% in 2012] or at the bankers’ acceptance rate plus
2.0% [2.0% in 2012]. These credit facilities are secured by movable and immovable hypothecs on specific assets with a total
carrying value of $932,235. As at December 31, 2013, the prime rate was 3.0% [3.0% as at December 31, 2012]. These credit
facilities contain certain restrictive clauses, with which Cominar was in compliance as at December 31, 2013.
14) BRIDGE LOAN
During the first quarter of 2012, Cominar obtained an $84,000 acquisition bridge loan following the Canmarc business combination.
This one-year, non-renewable credit facility was bearing interest at the prime rate plus 1.0%, or at the bankers’ acceptance rate plus
2.5%, and it was secured by a first-rank lien on investment property. On June 18, 2013, Cominar converted this bridge loan into a
mortgage payable maturing in April 2018 bearing a fixed interest rate of 3.70%.
15) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade accounts payable
Accounts payable – related parties
Prepaid rents and tenants’ deposits
Interests and other accrued expenses
Commodity taxes and other non-financial liabilities
December 31, 2013 December 31, 2012
$
$
14,751
5,185
12,734
47,484
4,131
84,285
4,302
1,452
20,157
57,320
10,852
94,083
16) ISSUED AND OUTSTANDING UNITS
Ownership interests in Cominar are represented by a single class of units, unlimited in number. Units represent a unitholder’s
undivided and proportionate ownership interest in Cominar. Each unit confers the right to one vote at any unitholders’ meeting and
to participate equally and rateably in any Cominar distributions. All issued units are fully paid.
82
2013 ANNUAL REPORT
77
The following table presents the various sources of unit issues for the years indicated:
For the years ended December 31
2013
Units
2012
$
Units
$
Units issued and outstanding, beginning of year
124,349,608
2,197,826
77,051,260
1,150,735
Public offerings
Business combinations
Exercise of options
—
—
—
—
28,088,750
633,184
15,999,999
346,879
456,500
8,514
1,019,050
18,298
Distribution reinvestment plan
2,243,459
45,216
1,601,096
37,633
Conversion of convertible debentures
1,528
34
589,453
10,270
Reversal of contributed surplus on exercise of options
—
384
—
827
Units issued and outstanding, end of year
127,051,095
2,251,974
124,349,608
2,197,826
LONG TERM INCENTIVE PLAN
Unit options
Cominar has granted options to management and employees for the purchase of units under the long term incentive plan. As at
December 31, 2013, options to purchase 7,835,500 units were outstanding.
The following table shows characteristics of outstanding options at year-end:
Date of grant
May 15, 2007
February 6, 2008
December 19, 2008
December 21, 2009
December 21, 2010
December 15, 2011
August 24, 2012
August 31, 2012
December 19, 2012
August 5, 2013
December 17, 2013
Granted
vesting method
50%
33 1/3%
33 1/3%
33 1/3%
33 1/3%
33 1/3%
50%
50%
33 1/3%
50%
33 1/3%
As at December 31, 2013
Maturity date
May 15, 2014
—(1)
—(1)
December 21, 2014
December 21, 2015
December 15, 2016
August 24, 2017
August 31, 2017
December 19, 2017
August 5, 2018
December 17, 2018
Exercise
price $
Outstanding
options
Exercisable
options
23.59
18.68
15.14
19.48
20.93
21.80
24.55
23.93
22.70
20.09
17.55
30,000
52,500
78,000
527,400
861,700
1,151,700
150,000
300,000
1,899,300
150,000
2,634,900
7,835,500
30,000
52,500
78,000
527,400
861,700
789,200
150,000
300,000
683,100
75,000
—
3,546,900
(1)The contractual life for these options was extended in accordance with provisions in the long term incentive plan.
As at December 31, 2013, the average weighted contractual life of outstanding options was 3.7 years (excluding the options whose
contractual life was extended) [3.8 years as at December 31, 2012].
2013 ANNUAL REPORT
83
78
The following table presents changes in option balances for the years indicated:
For the years ended December 31
2013
2012
Options
Weighted average
exercise price
Options
Weighted average
exercise price
Outstanding, beginning of year
Exercised
Granted
Forfeited
Expired
Outstanding, end of year
5,979,500
(456,500)
2,784,900
(443,200)
(29 200)
7,835,500
$
21.63
18.68
17.69
22.44
21.23
20.36
4,481,850
(1,019,050)
2,691,300
(174,600)
—
5,979,500
Exercisable options, end of year
3,546,900
21.50
2,288,900
$
20.04
18.12
22.94
21.34
—
21.63
20.39
Restricted units and deferred units
The following table presents changes in restricted unit and deferred unit balances for the year ended December 31, 2013:
For the year ended December 31, 2013
Restricted units
Deferred units
Outstanding
Acquired
Outstanding
Acquired
Outstanding, beginning of year
Granted
Accrued distributions
Forfeited
Outstanding, end of year
Restricted units
—
500
30
—
530
—
—
—
—
—
—
36,308
2,251
(279)
38,280
—
6,964
—
—
6,964
Restricted units consist of allocations whose values, for the participant, rise and fall according to the value of Cominar units on the
stock market. When the vesting period is over, each restricted unit provides the right to receive one Cominar unit on the settlement
date. Vesting periods are determined by the Board of Trustees on the date of the grant. These rights are usually acquired three
years after the date of the grant. For each cash distribution on Cominar units, an additional number of restricted units is granted to
each participant. The fair value of restricted units is represented by the market value of Cominar units on the date of the grant.
Deferred units
Deferred units consist of allocations whose values, for the participant, rise and fall according to the value of Cominar units on the
stock market. Vesting periods are determined by the Board of Trustees on the date of the grant. These rights are usually acquired at
a rate of 33 1/3% per anniversary year of the grant date. Each deferred unit provides the right to receive one Cominar unit when the
holder ceases to be a Cominar trustee, member of management or employee. For each cash distribution on Cominar units, an
additional number of deferred units is granted to each participant. The fair value of deferred units is represented by the market value
of Cominar units on the date of the grant.
84
2013 ANNUAL REPORT
79
Unit-based compensation
The compensation expense related to the options granted in 2013 and 2012 was calculated using the Black-Scholes option pricing
model based on the following assumptions:
Date of grant
August 24, 2012
August 31, 2012
December 19, 2012
August 5, 2013
December 17, 2013
Volatility(1)
Exercise
price(2)
Weighted
average return
Weighted average
risk-free
interest rate
Per unit
weighted average
fair value
16.10%
16.10%
15.21%
14.98%
12.98%
$
24.55
23.93
22.70
20.09
17.55
6.03%
6.19%
6.59%
7.39%
8.45%
1.26%
1.26%
1.25%
1.53%
1.33%
$
1.17
1.10
0.86
0.62
0.28
(1) The volatility is estimated by considering Cominar’s historical per unit price volatility.
(2) The exercise price of the options corresponds to the closing price of Cominar units the day before the grant.
The compensation expense related to restricted units and deferred units granted in 2013 was calculated based on the market price
of Cominar units on the grant date, which was $22.77.
The overall compensation expense for the fiscal year was $2,155 [$1,268 in 2012].
A maximum of 10,315,583 units may be issued under the long term incentive plan.
DISTRIBUTIONS
Cominar is governed by a Contract of Trust whereby the trustees, under the discretionary power attributed to them, intend to
distribute a portion of its distributable income to unitholders. Distributable income generally means net income determined in
accordance with IFRS, before adjustments to fair value, transaction costs – business combinations, rental revenue derived from the
recognition of leases on a straight-line basis, the provision for leasing costs, gains on disposal of subsidiaries, gains on disposal of
investment properties and certain other items not affecting cash, if applicable.
For the years ended December 31
Distributions to unitholders
Distributions per unit
2013
$
182,977
1.44
2012
$
164,021
1.44
Unitholder distribution reinvestment plan
Cominar has adopted a distribution reinvestment plan under which unitholders may elect to receive all cash distributions from
Cominar automatically as additional units. The plan provides plan participants with a number of units equal to 105% of the cash
distributions. For the year ended December 31, 2013, 2,243,459 units [1,601,096 in 2012] were issued for a total net consideration
of $45,216 [$37,633 in 2012] under this plan.
2013 ANNUAL REPORT
85
80
17) OPERATING LEASE INCOME
a) The minimum lease payments receivable from tenants under operating leases are as follows:
- Not later than one year
- Later than one year and not later than five years
- Later than five years
b) Contingent rents included in revenues for the year are as follows:
For the years ended December 31
Contingent rents
18) FINANCE CHARGES
For the years ended December 31
Interest on mortgages payable
Interest on debentures
Interest on convertible debentures
Interest on bank borrowings and bridge loans
Amortization of premium on debenture issues
Amortization of deferred financing costs and others
Amortization of fair value adjustments on assumed borrowings
Less: Capitalized interest(1)
Total finance charges
As at December 31, 2013
$
333,965
938,343
899,955
2013
$
2012
$
3,431
3,230
2013
$
88,670
29,492
14,804
10,113
(183)
6,861
(13,680)
(4,266)
131,811
2012
$
84,018
5,051
21,615
13,914
(70)
8,184
(15,193)
(1,556)
115,963
(1)
Includes capitalized interest on properties under development and on major revitalization projects for income properties that take place over a substantial period of time.
During the fiscal year ended December 31, 2013, Cominar wrote off $984 in deferred financing costs following the redemption of
convertible Series C debentures [$981 in 2012 following the redemption of Series A and B convertible debentures].
During the fiscal year ended December 31, 2012, Cominar wrote off financing costs incurred to establish financing for the acquisition
of Canmarc. This financing was not used and the costs, in the amount of $2,091, were recognized in profit or loss in 2012.
19) RESTRUCTURING CHARGES
For the year ended December 31, 2013, Cominar incurred charges of $1,062 [$6,929 in 2012] related to the integration of
Canmarc’s operations, namely for changes to its corporate structure. These charges were mainly direct salaries of employees
retained through the transition period, severance benefits paid, as well as consulting and legal fees.
86
2013 ANNUAL REPORT
81
20) DISPOSAL OF A SUBSIDIARY
On May 22, 2013, Cominar sold its interest in Hardegane Investments Limited (“Hardegane”), which holds 100% of the shares of
Dyne Holdings Limited (“Dyne”), to Homburg International Limited (“Homburg”), for a nominal consideration and the reimbursement
of certain Cominar advances. Dyne owned three income properties, two of which were classified as office properties and one as a
retail property, as well as a property under development. Cominar recorded a gain of $8,010 on this disposal.
21) DISPOSAL OF INVESTMENT PROPERTIES
On January 9, 2013, Cominar sold a commercial building in the Montreal area for $3,500. Cominar recorded no gain or loss on this
disposal.
On June 28, 2013, Cominar sold an office building located in Levis, Quebec, for $1,500. Cominar recorded a gain of $507 on this
disposal.
On July 11, 2013, the Tribunal administratif du Québec rendered its final decision regarding the expropriation process initiated by
the Centre hospitalier de l’Université de Montréal (“CHUM”) in June 2006 in relation to the property located at 300 Viger Avenue in
Montreal, Quebec. The Tribunal administratif du Québec set the definitive expropriation indemnity at $33,500. The CHUM paid
Cominar a sum of $3,500, which represents the difference between the amount of the provisional indemnity of $30,000 that was
already paid to Cominar in 2007 and the total definitive indemnity. Cominar recorded a gain of $2,863 in connection with this event.
On July 25, 2013, Cominar sold six industrial and mixed-use properties located in Prince George, British Columbia for $4,000.
Cominar recorded no gain or loss on this disposal.
22) OTHER REVENUES
In connection with the restructuring of Homburg Invest Inc. (“HII”) under the Companies’ Creditors Arrangement Act (Canada),
Cominar filed a number of proofs of claim against HII. On February 5, 2013, Cominar and HII entered into a memorandum of
understanding related to, among other things, the settlement of these proofs of claim. Under this arrangement, Cominar received a
cash payment of approximately $6,260 in settlement of various claims. A portion of the payment was recognized against the
accounts receivable recorded in the balance sheet, and the excess was recorded as revenue in the results for 2013.
23) INCOME TAXES
Cominar is considered a mutual fund trust for income tax purposes. Pursuant to the Contract of Trust, the trustees intend to
distribute or designate all taxable income directly earned by Cominar to unitholders and to deduct such distributions and
designations for income tax purposes. Therefore, no provision for income taxes is required.
Taxation of distributions of specified investment flow-through (“SIFT”) trusts
Since 2007, SIFT trusts are subject to income taxes on the distributions they make. In short, a SIFT trust is a trust that resides in
Canada, whose investments are listed on a stock exchange or other public market and that holds one or more non-portfolio
properties.
Exception for real estate investment trusts (“REITs”)
The SIFT trust rules do not apply to SIFT trusts that qualify as REITs for a given taxation year. Cominar has reviewed the conditions
to qualify as a REIT. For the fiscal year ended December 31, 2013, Cominar believes that it met all of these conditions and qualified
as a REIT. As a result, the SIFT trust tax rules do not currently apply to Cominar and no deferred tax provision, be it an asset or
liability, was recorded in relation to the Trust’s activities. Cominar’s management intends on taking the necessary steps to meet
these conditions on an ongoing basis in the future.
2013 ANNUAL REPORT
87
82
Some of Cominar’s subsidiaries are subject to tax on their taxable income under the Income Tax Act (Canada) and the taxation acts
of the provinces concerned.
The income tax provision differs from the amount calculated by applying the combined federal and provincial tax rate to income
before income taxes. The following table presents the reasons for such difference:
For the years ended December 31
Income before income taxes
Canadian combined statutory tax rate
Income tax expense at the statutory tax rate
Income not subject to income tax
Other
2013
$
2012
$
256,710
343,061
26.99%
26.14%
69,272
89,676
(67,741)
(88,819)
210
1,741
33
890
The increase in the combined Canadian statutory tax rate, compared to 2012, is mainly due to a 1.0% increase in the New
Brunswick tax rate.
Deferred taxes relating to incorporated subsidiaries are shown in the following table:
December 31, 2013
December 31, 2012
$
$
Deferred tax assets to be recovered after more than 12 months
Interest expense
Mortgages payable
Tax losses
Deferred tax liabilities to be settled after more than 12 months
Income properties
Deferred taxes (net)
Changes in the deferred income tax account were as follows:
For the years ended December 31
Balance as at January 1
Income tax expense recorded in the statement of income
Deferred tax liability during the acquisition of income properties
Balance as at December 31
88
2013 ANNUAL REPORT
95
69
247
411
(10,957)
(10,546)
2013
$
8,805
1,741
—
10,546
63
82
174
319
(9,124)
(8,805)
2012
$
7,793
877
135
8,805
83
Changes in deferred income tax assets and liabilities during the year, excluding the offsetting of balances within the same tax
jurisdiction, were as follows:
Deferred tax assets
Balance as at January 1, 2012
Origination and reversal of timing differences included in profit or loss
Balance as at December 31, 2012
Origination and reversal of timing differences included in profit or loss
Balance as at December 31, 2013
Interest
expense
$
Mortgages
payable
Tax losses
$
$
89
(26)
63
32
95
149
(67)
82
(13)
69
126
48
174
73
247
Total
$
364
(45)
319
92
411
Deferred tax liabilities
Balance as at January 1, 2012
Origination and reversal of timing differences included in profit or loss
Origination and reversal of timing differences in the acquisition of income properties
Balance as at December 31, 2012
Origination and reversal of timing differences included in profit or loss
Balance as at December 31, 2013
24) PER UNIT CALCULATIONS
Income properties
$
(8,157)
(832)
(135)
(9,124)
(1,833)
(10,957)
The following table provides a reconciliation of the weighted average number of units outstanding used to calculate basic and diluted
net income per unit for the years indicated:
For the years ended December 31
2013
2012
Weighted average number of units outstanding – basic
Dilutive effect related to the long term incentive plan
Dilutive effect of convertible debentures
Weighted average number of units outstanding – diluted
125,369,581
109,453,548
150,092
10,496,193
136,015,866
414,514
15,116,070
124,984,132
The calculation of the diluted weighted average number of units outstanding does not take into account the effect of the conversion
in units of 4,698,183 outstanding options for the year ended December 31, 2013 [2,721,300 options in 2012], since the exercise
price of the options, including the unrecognized part of the related compensation expense, is higher than the average price of the
2013 ANNUAL REPORT
89
84
units. The calculation of diluted net income per unit also includes the elimination of $14,804 [$21,615 in 2012] in interest on the
convertible debentures.
25) SUPPLEMENTAL CASH FLOW INFORMATION
Changes in non-cash working capital items were as follows:
For the years ended December 31
Prepaid expenses
Accounts receivable
Income taxes recoverable
Accounts payable and accrued liabilities
Income taxes payable
Other information
Additions to investment properties through assumption of mortgages payable
Unpaid additions to and investments in investment properties
Transfer from properties under development to income properties
26) RELATED PARTY TRANSACTIONS
2013
$
1,540
785
—
(19,754)
(12)
(17,441)
43,733
19,960
9,366
2012
$
8,249
2,221
56
(15,302)
12
(4,764)
11,932
3,165
4,760
During fiscal 2013 and 2012, Cominar entered into transactions with companies controlled by unitholders who are also officers of
the Trust over which they have significant influence.
These transactions were entered into in the normal course of business and are measured at the exchange amount. They are
reflected in the consolidated financial statements as follows:
For the years ended December 31
Net rental revenue from investment properties
Investment properties – Capital costs
Acquisition of investment properties
2013
$
148
69 717
—
27) KEY MANAGEMENT PERSONNEL COMPENSATION
Compensation of key management personnel is set out in the following table:
KEY MANAGEMENT PERSONNEL COMPENSATION
For the years ended December 31
Short-term benefits
Participation in the retirement savings plans
Long term incentive plan
Total
90
2013 ANNUAL REPORT
2013
$
4,067
142
949
5,158
2012
$
168
32,263
16,000
2012
$
3,691
103
376
4,170
85
Options granted to senior executives and other officers during the fiscal year may not be exercised, even if they have vested, until
the following three conditions have been met: the market price of the security must be at least ten percent (10%) higher than the
exercise price of the option; the senior executive or other officer must undertake to hold a number of units corresponding to the
multiple determined for his base salary; and when the options are exercised, if the senior executive or other officer does not hold the
required minimum number of units, he must keep at least five percent (5%) of the units purchased until he has the multiple
corresponding to his base salary.
28) CAPITAL MANAGEMENT
Cominar manages its capital to ensure that capital resources are sufficient for its operations and development, while maximizing
returns for unitholders by maintaining the debt-to-equity ratio. Cominar’s capital consists of cash and cash equivalents, long-term
debt, bank borrowings, the bridge loan and unitholders’ equity.
Cominar structures its capital based on expected business growth and changes in the economic environment. It is not subject to any
capital requirements imposed by regulatory authorities.
Cominar’s capital structure is as follows:
As at December 31
Cash and cash equivalents
Mortgages payable
Debentures
Convertible debentures
Bank borrowings
Bridge loan
Unitholders’ equity
Total capital
Overall debt ratio(1)
Debt ratio (excluding convertible debentures)
Interest coverage ratio(2)
2013
$
(9,742)
1,794,830
994,824
181,768
105,697
—
2,825,380
2012
$
(18,642)
1,695,222
448,530
289,134
300,368
84,000
2,696,895
5,892,757
5,495,507
51.2%
48.2%
2.70:1
50.0%
44.8%
2.65:1
(1) The overall debt ratio is equal to the total of cash and cash equivalents, bank borrowings, mortgages payable, the bridge loan, debentures and convertible debentures
divided by the total assets less cash and cash equivalents.
(2) The interest coverage ratio is equal to net operating income (operating revenues less operating expenses) less Trust administrative expenses divided by finance charges.
Cominar’s Contract of Trust provides that it may not incur debt if, taking into consideration the debt thus incurred or assumed, its
total debt exceeds 60% of the carrying amount of its assets (65% if convertible debentures are outstanding). As at December 31,
2013, Cominar had maintained a debt ratio (excluding convertible debentures) of 48.2%.
The interest coverage ratio is used to assess Cominar’s ability to pay interest on its debt from operating revenues. As such, as at
December 31, 2013, the interest coverage ratio was 2.70:1, reflecting the Trust’s capacity to meet its debt-related obligations.
Capital management objectives remain unchanged from the previous period.
2013 ANNUAL REPORT
91
86
29) FAIR VALUE
Cominar uses a three-level hierarchy to classify its financial instruments and its investment properties. The hierarchy reflects the
relative weight of inputs used in the valuation of financial assets and liabilities at fair value. The levels in the hierarchy are:
• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e., as prices) or indirectly (i.e., derived from prices)
• Level 3 – Inputs for the asset or liability that are not based on observable market data (i.e., unobservable inputs)
Cominar’s policy is to recognize transfers between hierarchy levels on the date of the event of changed circumstances that caused
the transfer. There was no transfer between hierarchy levels in fiscal 2013.
The fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, the bridge loan and bank
borrowings approximates the carrying amount since they are short-term in nature or bear interest at current market rates.
The fair value of bond investments, mortgages payable and debentures has been estimated based on current market rates for
financial instruments with similar terms and maturities.
The fair value of convertible debentures is based on the quoted market price at year-end.
Classification
Financial instruments and investment properties and their respective carrying amounts and fair values, when the fair values do not
approximate the carrying amounts, are classified as follows:
RECURRING VALUATIONS OF NON-FINANCIAL ASSETS
Income properties
Land held for future development
FINANCIAL ASSETS
Held until maturity
Bond investments
FINANCIAL LIABILITIES
Other financial liabilities
Mortgages payable(1)
Debentures(1)
Convertible debentures(1)
Bank borrowings
Bridge loan
December 31, 2013
Carrying
amount
Fair
value
December 31, 2012
Carrying
amount
Fair
value
Level
$
$
$
$
3
3
2
2
2
1
2
2
5,654,825
5,654,825
5,294,984
5,294,984
54,547
54,547
31 697
31,697
6,398
6,409
21,781
21,431
1,794,830
1,816,702
1,695,222
1,743,079
994,824
181,768
105,697
—
990,054
193,727
105,697
—
448,530
289,134
300,368
84,000
446,648
316,740
300,368
84,000
30) FINANCIAL INSTRUMENTS
Risk management
The main risks arising from Cominar’s financial instruments are credit risk, interest rate risk and liquidity risk. The strategy for
managing these risks is summarized below.
Credit risk
Credit risk arises from the possibility that tenants may experience financial difficulty and be unable to fulfill their lease commitments.
92
2013 ANNUAL REPORT
86
29) FAIR VALUE
Cominar uses a three-level hierarchy to classify its financial instruments and its investment properties. The hierarchy reflects the
relative weight of inputs used in the valuation of financial assets and liabilities at fair value. The levels in the hierarchy are:
• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e., as prices) or indirectly (i.e., derived from prices)
• Level 3 – Inputs for the asset or liability that are not based on observable market data (i.e., unobservable inputs)
Cominar’s policy is to recognize transfers between hierarchy levels on the date of the event of changed circumstances that caused
the transfer. There was no transfer between hierarchy levels in fiscal 2013.
The fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, the bridge loan and bank
borrowings approximates the carrying amount since they are short-term in nature or bear interest at current market rates.
The fair value of bond investments, mortgages payable and debentures has been estimated based on current market rates for
financial instruments with similar terms and maturities.
The fair value of convertible debentures is based on the quoted market price at year-end.
Classification
Financial instruments and investment properties and their respective carrying amounts and fair values, when the fair values do not
approximate the carrying amounts, are classified as follows:
RECURRING VALUATIONS OF NON-FINANCIAL ASSETS
Income properties
Land held for future development
FINANCIAL ASSETS
Held until maturity
Bond investments
FINANCIAL LIABILITIES
Other financial liabilities
Mortgages payable(1)
Debentures(1)
Convertible debentures(1)
Bank borrowings
Bridge loan
December 31, 2013
Carrying
amount
Fair
value
December 31, 2012
Carrying
amount
Fair
value
Level
$
$
$
$
3
3
2
2
2
1
2
2
5,654,825
5,654,825
5,294,984
5,294,984
54,547
54,547
31 697
31,697
6,398
6,409
21,781
21,431
1,794,830
1,816,702
1,695,222
1,743,079
994,824
181,768
105,697
—
990,054
193,727
105,697
—
448,530
289,134
300,368
84,000
446,648
316,740
300,368
84,000
30) FINANCIAL INSTRUMENTS
Risk management
The main risks arising from Cominar’s financial instruments are credit risk, interest rate risk and liquidity risk. The strategy for
managing these risks is summarized below.
Credit risk
Credit risk arises from the possibility that tenants may experience financial difficulty and be unable to fulfill their lease commitments.
2013 ANNUAL REPORT
93
86
29) FAIR VALUE
Cominar uses a three-level hierarchy to classify its financial instruments and its investment properties. The hierarchy reflects the
relative weight of inputs used in the valuation of financial assets and liabilities at fair value. The levels in the hierarchy are:
• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e., as prices) or indirectly (i.e., derived from prices)
• Level 3 – Inputs for the asset or liability that are not based on observable market data (i.e., unobservable inputs)
Cominar’s policy is to recognize transfers between hierarchy levels on the date of the event of changed circumstances that caused
the transfer. There was no transfer between hierarchy levels in fiscal 2013.
The fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, the bridge loan and bank
borrowings approximates the carrying amount since they are short-term in nature or bear interest at current market rates.
The fair value of bond investments, mortgages payable and debentures has been estimated based on current market rates for
financial instruments with similar terms and maturities.
The fair value of convertible debentures is based on the quoted market price at year-end.
Classification
Financial instruments and investment properties and their respective carrying amounts and fair values, when the fair values do not
approximate the carrying amounts, are classified as follows:
RECURRING VALUATIONS OF NON-FINANCIAL ASSETS
Income properties
Land held for future development
5,654,825
5,654,825
5,294,984
5,294,984
54,547
54,547
31 697
31,697
Level
December 31, 2013
December 31, 2012
Carrying
amount
$
Fair
value
$
Carrying
amount
$
Fair
value
$
3
3
2
2
2
1
2
2
6,398
6,409
21,781
21,431
1,794,830
1,816,702
1,695,222
1,743,079
994,824
181,768
105,697
—
990,054
193,727
105,697
—
448,530
289,134
300,368
84,000
446,648
316,740
300,368
84,000
FINANCIAL ASSETS
Held until maturity
Bond investments
FINANCIAL LIABILITIES
Other financial liabilities
Mortgages payable(1)
Debentures(1)
Convertible debentures(1)
Bank borrowings
Bridge loan
30) FINANCIAL INSTRUMENTS
Risk management
The main risks arising from Cominar’s financial instruments are credit risk, interest rate risk and liquidity risk. The strategy for
managing these risks is summarized below.
Credit risk
87
Credit risk arises from the possibility that tenants may experience financial difficulty and be unable to fulfill their lease commitments.
Cominar mitigates credit risk via segment and geographic portfolio diversification [Note 31], staggered lease maturities, and
diversification of revenue sources through a varied tenant mix as well as by avoiding dependence on any single tenant by ensuring
that no individual tenant contributes a significant portion of Cominar’s operating revenues and by conducting credit assessments on
all new tenants.
Cominar has a broad, highly diversified client base, consisting of approximately 5,000 tenants occupying an average area of
approximately 7,000 square feet each. The three largest tenants account for approximately 7.1%, 4.4% and 3.6% of operating
revenues, respectively, representing several leases with staggered maturities. The stability and quality of cash flows from operating
activities are enhanced by the fact that approximately 10.7% of operating revenues come from government agencies.
Cominar regularly assesses its accounts receivable and records a provision for doubtful accounts when there is a risk of non-
collection.
The maximum credit risk to which Cominar is exposed corresponds to the carrying amount of its accounts receivable, bond
investments and cash position.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market
interest rates. Cominar’s objective in managing this risk is to minimize the net impact on future cash flows. Cominar reduces its
exposure to interest rate risk by staggering the maturities of its loans over several years and by generally using long-term debt
bearing interest at fixed rates.
Accounts receivable, except for the receivables bearing interest mentioned in Note 8, and accounts payable and accrued liabilities
do not bear interest.
Mortgages payable, debentures, except Series 5 debentures, and convertible debentures bear interest at fixed rates.
Cominar is exposed to interest rate fluctuations mainly due to bank borrowings and Series 5 debentures, which bear interest at
variable rates.
A 25-basis-point increase or decrease in the average interest rate during the period, assuming that all other variables held constant,
would have resulted in a $661 increase or decrease in Cominar’s net income for the year ended December 31, 2013 [$943 in 2012].
Liquidity risk
Liquidity risk is the risk that Cominar will be unable to meet its financial obligations as they come due.
Cominar manages this risk by managing its capital structure, continuously monitoring current and projected cash flows and adhering
to its capital management policy [Note 28].
Undiscounted contractual cash flows (interest and principal) related to financial liabilities as at December 31, 2013 are as follows:
Mortgages payable
Debentures(1)
94
Convertible debentures
2013 ANNUAL REPORT
Bank borrowings
Accounts payable and accrued liabilities(2)
Cash flows
Under
one year
$
One to
five years
$
Over
five years
$
290,954
40,629
11,445
105,697
68,613
1,282,013
621,549
211,407
—
208
626,990
530,572
—
—
—
Note
10
11
12
13
15
(1) The rate used for the variable rate debentures is the CDOR three-month rate plus 205 basis points as of year-end.
(2) Excludes consumption taxes and other non-financial liabilities
87
Cominar mitigates credit risk via segment and geographic portfolio diversification [Note 31], staggered lease maturities, and
diversification of revenue sources through a varied tenant mix as well as by avoiding dependence on any single tenant by ensuring
that no individual tenant contributes a significant portion of Cominar’s operating revenues and by conducting credit assessments on
all new tenants.
Cominar has a broad, highly diversified client base, consisting of approximately 5,000 tenants occupying an average area of
approximately 7,000 square feet each. The three largest tenants account for approximately 7.1%, 4.4% and 3.6% of operating
revenues, respectively, representing several leases with staggered maturities. The stability and quality of cash flows from operating
activities are enhanced by the fact that approximately 10.7% of operating revenues come from government agencies.
Cominar regularly assesses its accounts receivable and records a provision for doubtful accounts when there is a risk of non-
The maximum credit risk to which Cominar is exposed corresponds to the carrying amount of its accounts receivable, bond
collection.
investments and cash position.
Interest rate risk
bearing interest at fixed rates.
do not bear interest.
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market
interest rates. Cominar’s objective in managing this risk is to minimize the net impact on future cash flows. Cominar reduces its
exposure to interest rate risk by staggering the maturities of its loans over several years and by generally using long-term debt
Accounts receivable, except for the receivables bearing interest mentioned in Note 8, and accounts payable and accrued liabilities
Mortgages payable, debentures, except Series 5 debentures, and convertible debentures bear interest at fixed rates.
Cominar is exposed to interest rate fluctuations mainly due to bank borrowings and Series 5 debentures, which bear interest at
variable rates.
A 25-basis-point increase or decrease in the average interest rate during the period, assuming that all other variables held constant,
would have resulted in a $661 increase or decrease in Cominar’s net income for the year ended December 31, 2013 [$943 in 2012].
Liquidity risk
Liquidity risk is the risk that Cominar will be unable to meet its financial obligations as they come due.
Cominar manages this risk by managing its capital structure, continuously monitoring current and projected cash flows and adhering
to its capital management policy [Note 28].
Undiscounted contractual cash flows (interest and principal) related to financial liabilities as at December 31, 2013 are as follows:
Mortgages payable
Debentures(1)
Convertible debentures
Bank borrowings
Accounts payable and accrued liabilities(2)
Cash flows
Under
one year
$
One to
five years
$
Over
five years
$
290,954
40,629
11,445
105,697
68,613
1,282,013
621,549
211,407
—
208
626,990
530,572
—
—
—
Note
10
11
12
13
15
(1) The rate used for the variable rate debentures is the CDOR three-month rate plus 205 basis points as of year-end.
(2) Excludes consumption taxes and other non-financial liabilities
2013 ANNUAL REPORT
95
88
31) SEGMENT INFORMATION
Cominar’s activities include a diversified portfolio of three property types located in several Canadian provinces. The accounting
policies followed for each property type are the same as those disclosed in the significant accounting policies. Cominar uses net
operating income as its main criterion to measure operating performance, i.e. operating revenues less operating expenses related to
its investment properties. Management of expenses, such as interest and administrative expenses, is centralized and, consequently,
these expenses have not been allocated to Cominar’s various segments.
The following table provides financial information on these three property types:
For the year ended December 31, 2013
Rental revenue from investment properties
Net operating income
Income properties
For the year ended December 31, 2012
Rental revenue from investment properties
Net operating income
Income properties
32) COMMITMENTS
Office
properties
Retail
properties
Industrial and
mixed-use
properties
$
$
$
353,076
190,588
163,901
91,550
145,076
86,072
Total
$
662,053
368,210
2,838,495
1,582,215
1,234,115
5,654,825
Office
properties
Retail
properties
Industrial and
mixed-use
properties
$
$
$
283,749
157,907
159,992
88,782
120,796
71,126
Total
$
564,537
317,815
2,883,225
1,362,246
1,049,513
5,294,984
a) The annual future payments required under emphyteutic leases expiring between 2046 and 2065, on land for three income
properties having a total net carrying value of $70,566, are as follows:
For the years ending December 31
2014
2015
2016
2017
2018
2019 and thereafter
Total
$
544
556
562
601
601
23,109
b) Cominar has undertaken to pay $13,132 in exchange for work to be performed on a property currently under development.
c) On December 20, 2013, Cominar entered into an agreement for the acquisition of five retail properties representing
approximately $28,200 in value (subject to adjustments), and approximately 120,000 square feet in total leasable area, located
in the Greater Montreal Area. This acquisition is subject to the satisfactory completion of due diligence by Cominar, which due
diligence is in progress, and to customary closing requirements. There can be no assurance that this acquisition will be
completed.
96
2013 ANNUAL REPORT
88
31) SEGMENT INFORMATION
Cominar’s activities include a diversified portfolio of three property types located in several Canadian provinces. The accounting
policies followed for each property type are the same as those disclosed in the significant accounting policies. Cominar uses net
operating income as its main criterion to measure operating performance, i.e. operating revenues less operating expenses related to
its investment properties. Management of expenses, such as interest and administrative expenses, is centralized and, consequently,
these expenses have not been allocated to Cominar’s various segments.
The following table provides financial information on these three property types:
For the year ended December 31, 2013
Office
Retail
properties
properties
Industrial and
mixed-use
properties
$
$
$
Rental revenue from investment properties
Net operating income
Income properties
353,076
190,588
163,901
91,550
145,076
86,072
2,838,495
1,582,215
1,234,115
5,654,825
Total
$
662,053
368,210
Total
$
564,537
317,815
Office
Retail
properties
properties
Industrial and
mixed-use
properties
$
$
$
283,749
157,907
159,992
88,782
120,796
71,126
2,883,225
1,362,246
1,049,513
5,294,984
For the year ended December 31, 2012
Rental revenue from investment properties
Net operating income
Income properties
32) COMMITMENTS
a) The annual future payments required under emphyteutic leases expiring between 2046 and 2065, on land for three income
properties having a total net carrying value of $70,566, are as follows:
For the years ending December 31
2014
2015
2016
2017
2018
2019 and thereafter
Total
$
544
556
562
601
601
23,109
b) Cominar has undertaken to pay $13,132 in exchange for work to be performed on a property currently under development.
c) On December 20, 2013, Cominar entered into an agreement for the acquisition of five retail properties representing
approximately $28,200 in value (subject to adjustments), and approximately 120,000 square feet in total leasable area, located
in the Greater Montreal Area. This acquisition is subject to the satisfactory completion of due diligence by Cominar, which due
diligence is in progress, and to customary closing requirements. There can be no assurance that this acquisition will be
89
completed.
Cominar does not have any other major contractual commitments other than those related to its long-term debt and payments
required under emphyteutic leases for land reserved for income properties.
33) SUBSEQUENT EVENTS
On January 13, 2014, Cominar re-opened the Series 4 investment and issued $100,000 in unsecured debentures bearing an
interest rate of 4.941% and maturing in July 2020.
On January 13, 2014, Cominar completed the merger of the ownership interests in a previously co-owned investment property, as
planned. Prior to completion of this merger, the first phase of Complexe Jules-Dallaire, comprised of office and retail premises, was
owned in undivided co-ownership by Cominar as to 95% and by a company indirectly owned by the Dallaire family (“Dallaire Co”) as
to 5% and the second phase of Complexe Jules-Dallaire, comprised of office premises, was owned by DallaireCo. In addition to the
contribution of its pre-merger ownership interests in phases one and two, DallaireCo paid $20,150 to Cominar in connection with the
merger. Under this business combination, both Cominar and DallaireCo each now own a 50% interest in Complexe Jules-Dallaire.
Under IFRS 11 – “Joint Arrangements”, this building held in partnership shall be considered as a joint venture and will be accounted
for under the equity method, whereas previously, the participation in the first phase of this building was considered as a participation
in a joint operation and Cominar recorded its share of assets, liabilities, comprehensive income and cash flows.
On January 27, 2014, Cominar decided not to seek renewal of the $250,000 tranche B portion of its operating and acquisition credit
facilities, which matured on this date, allowing Cominar to add to its portfolio of unencumbered income property approximately
$424,000 in value of income properties which are not necessary to secure the remaining $300,000 tranche A portion of its credit
facility.
On February 26, 2014, Cominar acquired a portfolio of 11 office properties in the Greater Toronto Area and in Montréal from
Redbourne Realty Fund, for a purchase price of $228,824; $127,887 paid in cash and $100,937 by assuming mortgages payable.
The acquired portfolio consists of 4 office properties in the Greater Toronto Area, comprising a total of approximately
780,000 square feet in leasable area, and 7 office properties in Montréal, comprising a total of approximately 400,000 square feet in
leasable area.
2013 ANNUAL REPORT
97
89
Cominar does not have any other major contractual commitments other than those related to its long-term debt and payments
required under emphyteutic leases for land reserved for income properties.
33) SUBSEQUENT EVENTS
On January 13, 2014, Cominar re-opened the Series 4 investment and issued $100,000 in unsecured debentures bearing an
interest rate of 4.941% and maturing in July 2020.
On January 13, 2014, Cominar completed the merger of the ownership interests in a previously co-owned investment property, as
planned. Prior to completion of this merger, the first phase of Complexe Jules-Dallaire, comprised of office and retail premises, was
owned in undivided co-ownership by Cominar as to 95% and by a company indirectly owned by the Dallaire family (“Dallaire Co”) as
to 5% and the second phase of Complexe Jules-Dallaire, comprised of office premises, was owned by DallaireCo. In addition to the
contribution of its pre-merger ownership interests in phases one and two, DallaireCo paid $20,150 to Cominar in connection with the
merger. Under this business combination, both Cominar and DallaireCo each now own a 50% interest in Complexe Jules-Dallaire.
Under IFRS 11 – “Joint Arrangements”, this building held in partnership shall be considered as a joint venture and will be accounted
for under the equity method, whereas previously, the participation in the first phase of this building was considered as a participation
in a joint operation and Cominar recorded its share of assets, liabilities, comprehensive income and cash flows.
On January 27, 2014, Cominar decided not to seek renewal of the $250,000 tranche B portion of its operating and acquisition credit
facilities, which matured on this date, allowing Cominar to add to its portfolio of unencumbered income property approximately
$424,000 in value of income properties which are not necessary to secure the remaining $300,000 tranche A portion of its credit
facility.
On February 26, 2014, Cominar acquired a portfolio of 11 office properties in the Greater Toronto Area and in Montréal from
Redbourne Realty Fund, for a purchase price of $228,824; $127,887 paid in cash and $100,937 by assuming mortgages payable.
The acquired portfolio consists of 4 office properties in the Greater Toronto Area, comprising a total of approximately
780,000 square feet in leasable area, and 7 office properties in Montréal, comprising a total of approximately 400,000 square feet in
leasable area.
98
2013 ANNUAL REPORT
90
CORPORATE INFORMATION
BOARD OF TRUSTEES
Robert Després, O.C., G.O.Q. (1)(3)
Chairman of the Board of Trustees
Cominar Real Estate Investment Trust
Corporate Director
Michel Dallaire, Eng.
President and Chief Executive Officer
Cominar Real Estate Investment Trust
Mary-Ann Bell, Eng., M.Sc., ASC (1)(2)
Senior Vice-President, Quebec and Ontario
Bell Aliant Regional Communications.
Me Gérard Coulombe, c.r. (2)(3)
Senior Partner
Lavery, de Billy
Alain Dallaire
Executive Vice-President, Operations Office and Industrial
Cominar Real Estate Investment Trust
OFFICERS
Michel Dallaire, Eng.
President and Chief Executive Officer
Sylvain Cossette, B.C.L.
Executive Vice-President and Chief Operating Officer
Michel Berthelot, CPA, CA
Executive Vice-President and Chief Financial Officer
Gilles Hamel, CPA, CA
Vice-President, Corporate Finance and Administration
Me Michel Paquet, LL .L.
Senior Executive Vice-President and Secretary
Guy Charron, CPA, CA
Executive Vice-President, Operations – Retail
Alain Dallaire
Executive Vice-President, Operations Office and Industrial
Todd Bechard, CMA, CFA
Executive Vice-President, Atlantic Provinces
Alban D’Amours M.C., G.O.Q., FA Dma (1)(4)
Corporate Director
Pierre Gingras (4)
President, Placements Moras Inc.
Ghislaine Laberge (2)(4)
Corporate Director
Johanne M. Lépine (1)(3)
President and Chief Executive Officer
Aon Parizeau Inc.
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Governance and Nominating Committee
(4) Member of the Investments Committee
2013 ANNUAL REPORT
99
UNITHOLDER INFORMATION
91
ANNUAL MEETING OF
UNITHOLDERS
May 13, 2014
11:00 a.m. (EDT)
Hôtel Château Laurier Québec
Salle des Plaines A
1220 George-V Place
Quebec City, QC
UNITHOLDER DISTRIBUTION
REINVESTMENT PLAN
Cominar Real Estate Investment Trust offers unitholders
the opportunity to participate in its Unitholder Distribution
Reinvestment Plan (the “DRIP”). The DRIP allows
participants to receive their monthly distributions as
additional units of Cominar. In addition, participants will
be entitled to receive an additional distribution equal to
5% of each cash distribution reinvested pursuant to the
DRIP, which will be reinvested in additional units.
For further information about the DRIP, please refer to the
DRIP section of our website at www.cominar.com or
contact us by email at info@cominar.com or contact the
Transfer agent.
COMINAR REAL ESTATE
INVESTMENT TRUST
Complexe Jules-Dallaire – T3
2820 Laurier Boulevard, Suite 850
Quebec City, Quebec, Canada G1V 0C1
Tel.: 418 681-8151
Fax: 418 681-2946
Toll-free: 1 866 COMINAR
Email: info@cominar.com
LISTING
The units and convertible debentures of
Cominar Real Estate Investment Trust are listed
on the Toronto Stock Exchange under the
trading symbols CUF.UN, CUF.DB.D and
CUF.DB.E.
TRANSFER AGENT
Computershare Trust Company of Canada
1500 University St., Suite 700
Montreal, Quebec, Canada H3A 3S8
Tel.: 514 982-7555
Fax: 514 982-7580
Toll-free: 1 800 564-6253
Email: service@computershare.com
TAXABILITY OF
DISTRIBUTIONS
In 2013, 74.5% of the distributions made by
Cominar to unitholders were tax deferred.
LEGAL COUNSEL
Davies Ward Phillips & Vineberg LLP
AUDITORS
PricewaterhouseCoopers LLP
100 2013 ANNUAL REPORT
cominar.com