CONTINUING
GROWTH
2014 annual report
COMINAR ReAl esTATe INvesTMeNT TRUsT
Fiscal year ended December 31, 2014
real estate
portfolio
Message to
unitholders
ManageMent’s
discussion and
analysis
consolidated
financial
stateMents
corporate
inforMation
unitholders
inforMation
03
04
08
63
99
100
table of contents Rockland
1
Montréal Qc
2014 annual report 55 UniVeRSit Y aVenUe
toronto on
2001 mcGill colleGe
Montréal Qc
Scotia centRe
2
calgary aB
complexe JUleS -dallaiRe
QuéBec city Q c
2014 annual report
Real estate
PoRtfolio
As at December 31, 2014
563
pRopeRtieS
$8.1B
aSSetS
45.3m Sq ft
leaSaBle aRea
pRopeRtieS
133
301
GReateR
qUéBec citY aRea
GReateR
montRéal aRea
60
55
14
atlantic
pRoVinceS
ontaRio
weSteRn
canada
pRopeRtieS
136
196
231
office
Retail
indUStRial
and mixed-USe
2014 annual RePoR t
3
3
2014 annual report MessaGe to
unitHolDeRs
it is with a great sense of pride, achievement and recognition that is
driving the whole group, that we are taking stock of a busy year.
in 2014, we conducted important strategic acquisitions worth over
two billion dollars, which enhanced our segment diversification
while pursuing our geographic diversification.
at the end of fiscal 2014, it is gratifying to see that the efforts of
our leasing teams favoured organic growth in each of our markets.
these efforts resulted in surpassing our objective of 90.0% distribution
payout ratio that reached 87.5%, allowing us to increase, as of
august 2014, the monthly distribution by 2.1%, to $ 0.1225 per unit.
We are proud of the excellent reputation that cominar has earned
over the years on the canadian real estate investment market.
More than ever this year, our financial partners acknowledged
cominar as a visionary, solid and value creating organization. their
trust is very stimulating and allows us to pursue our business plan
with enthusiasm.
4
4
2014 annual RePoR t
MICHEL DALLAIrE , Eng.
President and Chief Executive Officer
and Trustee
2014 annual report
MessaGe to
unitHolDeRs
Market leader in our three
operating segMents in QuéBec
The acquisition of a unique portfolio
of leading commercial properties
from Ivanhoé Cambridge definitely
marks a turning point as it enabled
us to strengthen our competitive
position as the largest retail space
provider in Québec while further
diversifying the distribution of our
assets by operating segment.
Thus, in addition to achieving a
better balance of our portfolio by
asset class, we are now market
leaders in our three operating
segments in Québec. We believe in
this diversification strategy which
is at the core of our careful and
dynamic risk management.
Consumer habits and the world of
shopping centers are constantly
changing. Although this market
is currently experiencing some
turbulence, we are confident that
our centers, which benefit from
prime location in their respective
communities and the expertise of
our management teams, will remain
stimulating and attractive environ-
ment for our customers and our
customers’ customers.
a sixth Market added:
toronto
feet,
Always guided by our risk diver-
sification strategy, we have made
in 2014 more than $639.0 million
in acquisitions at attr active
capitalization rates in the province
of Ontario. These have enabled us
to increase our leasable area by
2.9 million square feet to 5.8 million
square
including a first
office property in the heart of
Toronto’s business centre. Ontario
now represents 17.1% of our net
operating income, of which more
than half comes from our real
estate activities in Greater Toronto.
The Toronto market development
is part of the geographical diver-
sification objectives that we had
set for 2014.
2014 annual RePoR t
5
5
2014 annual report our developMent projects
During fiscal 2014, we completed
the construction Place Laval 5,
an office building with an area of
310,000 square feet, part of the
Place Laval complex, located in
Laval, Québec. This real estate
project was carried out with an
excellent capitalization rate of 8.1%
and is 100% occupied by a Quebec
Government agency.
In Laval, we also acquired as part
of the acquisition of the property
portfolio from Ivanhoé Cambridge,
an office building under development
with a leasable area of approximately
118,000 square feet, part of the
Centropolis complex. The occupancy
of this building began in late 2014
and will continue in 2015.
We have also initiated Phase 1 of a
real estate development that will be
deployed in several phases on land
located along Highway 40, a major
thoroughfare in Québec City. We
envision that this project, which is
held in joint venture, will mainly be
composed of commercial spaces,
with the first phase consisting of
an office building of approximately
76,000 square feet on six floors.
our results are aligned
With the oBjectives
that We had set
Our results for fiscal 2014 reflect
the dynamism and enthusiasm of
our various teams to meet and
exceed their objectives. Our recurring
funds from operations per unit on
a fully diluted basis increased from
$1.77 to $1.86, up 5.1% compared
to 2013, while our recurring distri-
butable income increased by 13.4%.
6
We are also pleased to present,
for the third consecutive quarter
in 2014, a positive organic growth
of our net operating income for
the same property portfolio, which
reached 1.8% in the fourth quarter
of the year.
We are the second largest issuer
of unsecured deBentures
in the canadian real estate sector
In 2014, building on
investors’
confidence, we successfully continued
our strategic debt management
plan. This strategy aims to diversify
our sources of
financing and
increase our financial flexibility.
Indeed, we were able to focus
on senior unsecured debentures
issues totaling $950.0 million, an
important portion for the refinancing
of our existing debts and for the
payment of a portion of our acquisitions.
These actions allowed us to achieve
our objective of increasing the
senior unsecured portion of total
debt to over 50.0%, 52.8% as at
December 31, 2014 and to bring our
unencumbered assets to $3.7 billion.
This prudent management of Cominar’s
debt should ensure stable access
to capital markets at a particularly
interesting cost while increasing
our financial flexibility.
issued
In September 2014, we
$537.5 million
in units which
allowed us to fund a portion of the
acquisition of a properties portfolio
from Ivanhoé Cambridge.
Our distribution reinvestment plan
for fiscal 2014 helped reduce the
debt ratio by releasing cash of
$60.9 million.
Fiscal 2015 began with a public offering
of units of $155.3 million, which
allowed us to reduce our debt ratio
(excluding convertible debentures)
to 52.0% after the end of fiscal 2014.
2014 annual report
a stronger group serving
its clients and unitholders
In 2014, we were pleased to
welcome no less than 200 new
employees. They joined our ranks,
adding their strong and comple-
mentary expertise to the management
of our properties. Today, over
650 dedicated and skilled employees
are deployed across Canada and
form the solid foundation on which
we rely for continued growth in our
markets. We take this opportunity
to extend our thanks to all the
members of our teams, both old
and new, as well as our trustees,
for their excellent cooperation and
contribution following this major
expansion phase. Together, we share
a culture and values strongly focused
on the client and his satisfaction.
Finally, we would like to thank our
unitholders and other financial
partners for their loyalty and
confidence in Cominar. Together,
we contributed to make Cominar an
important business in the Canadian
real estate market over the years. We
reiterate our commitment to grow in
this market with the main objective
of profitability and value creation.
robert Després, O.C., G.O.Q.
Chairman of the Board of Trustees
Michel Dallaire, Eng.
President and Chief Executive Officer
and Trustee
February 23, 2015
rOBErT DESPrÉS, o.C., G.o.Q.
Chairman of the Board of Trustees
7
2014 annual report
MANAGEMENT’S DISCUSSION
AND ANALYSIS
The following Management's Discussion and Analysis (“MD&A”) is provided to
enable the 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, 2014, in comparison with fiscal 2013, as well as its financial position
as at that date and its outlook. Dated February 23, 2015, 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
report.
Unless otherwise indicated, all amounts are in thousands of Canadian
dollars, except for per unit and per square-foot amounts, and are based on the
consolidated financial statements prepared in accordance with International
Financial Reporting Standards (“IFRS”), as issued by the International Accounting
Standards Board (“IASB”).
BASIS OF PRESENTATION
On January 1, 2013, Cominar adopted IFRS 11, "Joint Arrangements" ("IFRS 11"),
and such standard has been applied to joint ventures, as defined by IFRS 11, that
should be accounted for in the consolidated financial statements using the equity
method.
The adoption of IFRS 11 has had an impact on the presentation of the Trust’s
consolidated financial statements only in 2014. Certain financial information in this
MD&A present the consolidated balance sheets and consolidated statements of
comprehensive income including Cominar’s proportionate share in the assets,
liabilities, revenues and charges of its joint ventures, hereinafter referred to as
“Cominar’s proportionate share”, which are non-IFRS measures. Management
believes that presenting the operating and financial results of Cominar, including its
proportionate share in the assets, liabilities, revenues and charges, provides more
useful information
in
understanding Cominar’s financial performance. The reader is invited to refer to the
for a complete
section Reconciliations
reconciliation of
in
accordance with IFRS to the financial information including its proportionate share
in the assets, liabilities, revenues and charges of its joint ventures presented in this
MD&A.
to Cominar’s proportionate share
financial statements prepared
to current and prospective
the Trust’s consolidated
investors to assist
them
Additional information on Cominar, including its 2014 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.
10
8
2014 annual report
TABLE OF CONTENTS
TABLE OF CONTENTS
HIGHLIGHTS
HIGHLIGHTS
LOOKING STATEMENTS
LOOKING STATEMENTS
10 HIGHLIGHTS OF FISCAL 2014
10 HIGHLIGHTS OF FISCAL 2014
14 SUBSEQUENT EVENTS
14 SUBSEQUENT EVENTS
14 CAUTION REGARDING FORWARD-
14 CAUTION REGARDING FORWARD-
14 NON-IFRS FINANCIAL MEASURES
14 NON-IFRS FINANCIAL MEASURES
15 PERFORMANCE INDICATORS
15 PERFORMANCE INDICATORS
16 FINANCIAL AND OPERATIONAL
16 FINANCIAL AND OPERATIONAL
17 SELECTED QUARTERLY INFORMATION
17 SELECTED QUARTERLY INFORMATION
18 SELECTED ANNUAL INFORMATION
18 SELECTED ANNUAL INFORMATION
18 GENERAL BUSINESS OVERVIEW
18 GENERAL BUSINESS OVERVIEW
19 OBJECTIVES AND STRATEGY
19 OBJECTIVES AND STRATEGY
20 RECONCILIATIONS TO COMINAR’S
20 RECONCILIATIONS TO COMINAR’S
22 PERFORMANCE ANALYSIS
22 PERFORMANCE ANALYSIS
23 RESULTS OF OPERATIONS
23 RESULTS OF OPERATIONS
30 DISTRIBUTABLE INCOME AND
30 DISTRIBUTABLE INCOME AND
34 FUNDS FROM OPERATIONS
34 FUNDS FROM OPERATIONS
36 ADJUSTED FUNDS FROM OPERATIONS
36 ADJUSTED FUNDS FROM OPERATIONS
PROPORTIONATE SHARE
PROPORTIONATE SHARE
DISTRIBUTIONS
DISTRIBUTIONS
38
38
43
43
44
44
47
47
50
50
50
50
51
51
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
PROPERTY PORTFOLIO
PROPERTY PORTFOLIO
ACQUISITIONS AND INVESTMENTS
ACQUISITIONS AND INVESTMENTS
REAL ESTATE OPERATIONS
REAL ESTATE OPERATIONS
ISSUED AND OUTSTANDING UNITS
ISSUED AND OUTSTANDING UNITS
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS
DISCLOSURE CONTROLS AND
DISCLOSURE CONTROLS AND
PROCEDURES AND INTERNAL
PROCEDURES AND INTERNAL
CONTROL OVER FINANCIAL
CONTROL OVER FINANCIAL
REPORTING
REPORTING
SIGNIFICANT ACCOUNTING POLICIES
AND ESTIMATES
SIGNIFICANT ACCOUNTING POLICIES
AND ESTIMATES
NEW ACCOUNTING POLICY
NEW ACCOUNTING POLICY
RISKS AND UNCERTAINTIES
FUTURE ACCOUNTING POLICY
CHANGES
FUTURE ACCOUNTING POLICY
CHANGES
51
51
55
55
56
56
56
56
63
63
70
70
99
99
100 UNITHOLDERS INFORMATION
100 UNITHOLDERS INFORMATION
NOTES TO CONSOLIDATED
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL
STATEMENTS
CONSOLIDATED FINANCIAL
STATEMENTS
RISKS AND UNCERTAINTIES
CORPORATE INFORMATION
CORPORATE INFORMATION
9
9
9
2014 annual report
increases
in operating
revenues of
11.8%
in net operating
incoMe of
11.7%
in recurring funds
froM operations of
13.0%
in recurring
adjusted funds froM
operations of
13.1%
in the average net rent
of reneWed leases of
2.4%
in the occupancy
rate to
94.4%
in the retention
rate to
74.3%
10
10
2014 annual RePoR t
2014 annual reportHIGHLIGHTS of fISCAL 2014
iMproveMent in the payout
ratio of recurring
distriButaBle incoMe
iMproveMent in the senior
unsecured deBts-to-
total-deBt ratio
87.5%
52.8%
interest
coverage ratio
2.67:1
deBt ratio
53.9%
(excluding convertible debentures)
increase in the
unencuMBered incoMe
properties
$3.7 billion
iMproveMent in the
unencuMBered assets
to unsecured deBt ratio
1.54:1
11
2014 annual report acqUiSitionS totallinG moRe than $2 Billion
and moRe than 8 million SqUaRe feet
pursuit of our geographic and segMent
diversification oBjective
feBRUaRY 2014
acQuisition of a portfolio
of 11 office properties
$229.3 million
1.2 million square feet
greater toronto area (70% of net operating income) /
Montréal (30% of net operating income)
Weighted average capitalization rate of 7.0%
feBRUaRY 2014
acQuisition of a portfolio
of five retail properties
$26.1 million
121,000 square feet
greater Montréal area
vacant lot – $2.1 million
Weighted average capitalization rate of 7.0%
maY 2014
acQuisition of a portfolio of
14 Mainly industrial and
Mixed-use properties
$100.7 million
1.2 million square feet
greater toronto area
Weighted average capitalization rate of 7.1%
SeptemBeR / octoBeR 2014
acQuisition of a coMMercial
real estate portfolio
froM ivanhoé caMBridge inc.
(« ivanhoé caMBridge »)
31 retail properties / 3 office properties /
1 industrial property
1 office building in development
$1.63 billion
More than 5 million square feet
Québec – Montréal – toronto
Weighted average capitalization rate of 6.5%
12
2014 annual reportpROpERTY pORTFOLIO
financing
achieVement of oUR oBJectiVe to incReaSe
the SenioR UnSecURed poRtion of oUR total
deBt to moRe than 50%, BeinG 52.8% aS at
decemBeR 31, 2014
Weighted average interest rate
on total deBt: 4.29%
UnitS
public offering of $287.5 million
private placement of $250.0 million
SenioR UnSecURed deBentUReS
reopening of 2 series
3 new series
$950 million
the 2nd largest issuer of senior unsecured debentures
in the canadian real estate market
cRedit facilitY
replacement of the secured revolving credit facility by an unsecured
revolving credit facility
diminution of the interest rate
2014 annual RePoR t
13
13
2014 annual report 16
SUBSEQUENT EVENTS
On January 19 and February 18, 2015, Cominar declared a distribution of $0.1225 per unit for each of these two months.
On January 30, 2015, Cominar closed a public offering of 7,901,650 units including a full exercise of the over-allotment option at a
price of $19.65 per unit. The total net proceeds received by Cominar amounted to $148.8 million, after deducting the underwriters’
fee and costs relating to the offering. The net proceeds from this offering were used to repay the revolving unsecured credit facility.
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 reports filed 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 2015 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," and "intend," 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 are valid only as at the date of
this 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 2014 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,” “adjusted net
income,” “recurring distributable income,” “recurring funds from operations,” “recurring adjusted funds from operations” and
“proportionate share in joint ventures adjustments,” which management uses to evaluate Cominar’s 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.
14
2014 annual report
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 same property
portfolio, that is, Cominar’s ability to increase revenues, reduce costs, and generate organic growth;
Recurring distributable income ("DI") per unit, which represents a benchmark that investors can use to evaluate 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, provides 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;
Retention rate, which helps assess client satisfaction and loyalty;
Growth in the average net rent of renewed leases, which is a measure of organic growth and gives an indication of our
capacity to increase our rental revenue;
Leasable area growth, a decisive factor in Cominar’s strategy for reaching its main objectives of providing unitholders with
growing cash distributions and increasing and maximizing unit value;
Segment and geographic diversification, which contributes to revenue stability by spreading real estate risk (refer to the
Results of Operations section).
The above-mentioned performance indicators are not IFRS financial measures. Definitions and other relevant information regarding
these performance indicators are provided in the appropriate sections.
17
15
2014 annual report
16
FINANCIAL AND OPERATIONAL HIGHLIGHTS
For the years ended December 31
FINANCIAL PERFORMANCE
Operating revenues – Financial statements
Operating revenues – Cominar’s proportionate share(1)
Net operating income(1) – Financial statements
Net operating income(1) – Cominar’s proportionate share
Same property net operating income(1)
Net income
Adjusted net income(1)(7)
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)
Adjusted net income (basic)(1)
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
FINANCING
Overall debt ratio(3)
Debt ratio (excluding convertible debentures)
Interest coverage ratio(4)
Weighted average interest rate on total debt
Residual weighted average term of total debt (years)
Senior unsecured debts-to-total-debt ratio(5)
Unencumbered income properties
Unencumbered assets ratio(6)
OPERATIONAL DATA
Number of investment properties
Leasable area (in thousands of sq. ft.)
Occupancy rate
Retention 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 held for future development)
Weighted average capitalization rate
DEVELOPMENT ACTIVITIES
Value of properties under development
2014
2013
%
Page
13.0
13.4
13.0
13.1
11.1
35.2
(27.6)
3.9
5.1
5.1
4.5
0.9
739,884
748,682
411,279
416,202
343,657
199,453
253,148
225,156
255,150
220,363
203,375
662,053
662,053
368,210
368,210
342,718
11.8
13.1
11.7
13.0
0.3
254,969
(21.8)
224,114
198,479
225,855
194,776
182,977
8,109,419
5,997,330
1.47
1.86
1.66
1.86
1.61
1.453
87.5%
89.7%
62.9%
56.1%
53.9%
2.67:1
4.29%
4.2
2.03
1.79
1.58
1.77
1.54
1.440
91.1%
92.9%
69.9%
51.2%
48.2%
2.70:1
4.76%
4.6
52.8%
32.4%
3,692,149
1,181,573
1.54:1
1.19:1
563
45,252
94.4%
74.3%
2.4%
497
37,123
21.9
93.1%
68.6%
5.9%
66
8,065
24
2,317
2,008,774
249,400
6.6%
7.1%
21
23
21
24
24
29
30
31
35
37
31
20
29
30
31
35
37
31
31
37
37
42
42
42
42
42
41
41
41
43
43
47
48
48
44
44
53,150
53,414
20
(1) Non-IFRS financial measure. See relevant section for definition and reconciliation to closest IFRS measure.
(2) Fully diluted.
(3) Total of cash and cash equivalents, bank borrowings, mortgages payable, debentures and convertible debentures divided by total assets less cash and cash equivalents.
(4) Net operating income less Trust administrative expenses divided by finance charges.
(5) Senior unsecured debts divided by total debt.
(6) Fair value of unencumbered income properties divided by the unsecured debt (excluding convertible debentures).
(7) The adjusted net income takes into account non-recurring transaction costs of $26.7 million resulting from the acquisition of an investment property portfolio from Ivanhoé
Cambridge for a purchase price of $1.63 billion and the change in fair value of investment properties.
16
2014 annual report
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,
2014
Sept. 30,
2014
June 30,
2014
March 31,
2014
Dec. 31,
2013
Sept. 30,
2013
June 30,
2013
March
31, 2013
Operating revenues – Financial
statements
217,492
171,262
177,459
173,671
163,150
161,470
167,840
169,593
Operating revenues – Cominar’s
proportionate share(5)
Net operating income(5) – Financial
219,734
173,497
179,625
175,826
163,150
161,470
167,840
169,593
statements
125,435
97,792
97,274
90,778
93,217
93,338
91,733
89,922
Net operating income(5) – Cominar’s
proportionate share
Net income
Adjusted net income(5)
Recurring DI(5)
Recurring FFO(5)
Recurring AFFO(5)
Distributions
PER UNIT
Net income (basic)
Net income (diluted)
Adjusted net income (basic)(5)
Recurring DI (basic)(5)
Recurring FFO (FD)(2)(5)
Recurring AFFO (FD)(2)(5)
126,539
45,827(1)(4)
99,131
38,997(3)
77,497
70,517
77,429
68,541
59,199
0.29(1)(4)
0.29(1)(4)
0.49
0.45
0.49
0.43
61,022
53,579
61,713
52,331
51,211
0.30(3)
0.30(3)
0.47
0.41
0.47
0.40
98,539
59,559
59,559
52,051
60,308
51,172
46,688
0.47
0.45
0.47
0.41
0.47
0.40
91,993
55,070
55,070
49,009
55,700
48,319
46,277
0.43
0.42
0.43
0.39
0.44
0.38
93,217
74,568(1)
57,418
50,768
58,475
49,044
46,338
0.59(1)
0.58(1)
0.46
0.40
0.46
0.39
93,338
58,348
56,620
51,369
57,193
50,593
45,886
0.46
0.46
0.45
0.41
0.45
0.40
91,733
62,356
54,741
48,473
54,797
47,765
45,598
0.50
0.48
0.44
0.39
0.43
0.38
89,922
59,697
55,335
47,869
55,390
47,374
45,155
0.48
0.47
0.45
0.38
0.44
0.38
Distributions
0.368
0.365
0.360
0.360
0.360
0.360
0.360
0.360
(1) Includes the change in fair value of investment properties.
(2) Fully diluted
(3) Includes non-recurring transaction costs of $21.5 million resulting from the acquisition of an investment property portfolio for a purchase price of $1.63 billion.
(4)
(5) Non-IFRS financial measure.
Includes non-recurring transaction costs of $5.2 million resulting from the acquisition of an investment property portfolio for a purchase price of $1.63 billion.
19
17
2014 annual report
20
SELECTED ANNUAL INFORMATION
The following table presents a summary of Cominar’s financial information for the last 3 fiscal years:
For the years ended December 31
2014
2013
2012
Operating revenues – Financial statements
Operating revenues – Cominar’s proportionate share(3)
Net operating income(3) – Financial statements
Net operating income(3) – Cominar’s proportionate share
Net income
Adjusted net income(3)
Recurring DI(3)
Recurring FFO(3)
Recurring AFFO(3)
Distributions
Total assets
PER UNIT
Net income (basic)
Net income (diluted)
Adjusted net income (basic)(3)
Recurring DI (basic) (3)
Recurring FFO (FD)(1)(3)
Recurring AFFO (FD)(1)(3)
Distributions
739,884
748,682
411,279
416,202
199,453(2)
253,148
225,156
255,150
220,363
203,375
662,053
662,053
368,210
368,210
254,969
224,114
198,479
225,855
194,776
182,977
564,537
564,537
317,815
317,815
342,171
199,573
169,905
200,450
166,412
164,021
8,109,419
5,997,330
5,617,049
1.47(2)
1.45
1.86
1.66
1.86
1.61
1.453
2.03
1.98
1.79
1.58
1.77
1.54
1.440
3.13
2.91
1.82
1.55
1.78
1.50
1.440
(1) Fully diluted
(2) Includes non-recurring transaction costs of $26.7 million resulting from the acquisition of an investment property portfolio for a purchase price of $1.63 billion.
(3) Non-IFRS financial measure.
GENERAL BUSINESS OVERVIEW
Cominar Real Estate Investment Trust is one of the largest diversified REITs in Canada and remains the largest commercial
property owner and manager in the province of Québec. As at December 31, 2014, Cominar owned and managed a high-quality
portfolio of 563 properties including 136 office buildings, 196 retail buildings and 231 industrial and mixed-use buildings located in
Québec, Ontario, the Atlantic Provinces and Western Canada, representing a total leasable area of 45.3 million square feet.
Cominar’s properties are mostly situated in prime locations and benefit from high visibility and easy access by both tenants and
tenants’ customers.
Since its inception in 1998, Cominar has made a series of acquisitions and completed numerous construction and property
development projects, increasing the value of its assets to $8.1 billion as at December 31, 2014.
Cominar’s asset and property management is internalized. Cominar is an integrated and self-managed real estate investment
operation. This property management structure enables to rapidly and efficiently respond to our clients’ needs, while minimizing our
operating cost.
PROPERTIES SUMMARY AS AT DECEMBER 31, 2014
Number of
properties
Leasable area
(sq. ft.)
Occupancy rate
(%)
136
196
231
563
14,994,000
12,845,000
17,413,000
45,252,000
93.5
94.7
94.9
94.4
Segment
Office
Retail
Industrial and mixed-use
TOTAL
18
2014 annual report
OBJECTIVES AND STRATEGY
Cominar’s primary objectives are to provide unitholders with stable and growing monthly cash distributions which are tax deferred,
from investments in a diversified portfolio of properties and to increase and maximize unit value through the proactive management
of properties and the ongoing expansion of its real estate 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 60% (65% if convertible
debentures are outstanding). In addition, Cominar is targeting a payout ratio that should annually be under 90% of distributable
income.
Cominar seeks to pursue acquisition and development opportunities that allow for economies of scale benefiting both tenants and
Cominar in terms of operating cost savings and efficient property management operations.
To sustain and eventually increase the pace of its growth, Cominar is developing new markets outside the province of Québec,
as demonstrated by certain large acquisitions realized over the past three years. Through this strategy, Cominar has enhanced its
geographical diversification. Cominar also intends to keep investing in Québec in order to benefit from the competitive advantage it
has in this market. Cominar will mainly grow through acquisitions and development projects.
21
19
2014 annual report
RECONCILIATIONS TO COMINAR’S PROPORTIONATE SHARE
According to IFRS 11, joint ventures are accounted for under the equity method in Cominar’s consolidated financial statements.
Management considers that presenting operating and financial results including Cominar’s proportionate share of assets, liabilities,
revenues and charges provides more complete information on Cominar’s financial performance.
The following tables present the reconciliations between Cominar’s consolidated financial statements and consolidated balance
sheet and consolidated statement of comprehensive income including its proportionate share in each component of the consolidated
financial statements.
As at December 31, 2014
ASSETS
Investment properties
Income properties
Properties under development
Land held for future development
Investments in joint ventures
Goodwill
Mortgage receivable
Accounts receivable
Prepaid expenses and other assets
Bond investments
Cash and cash equivalents
Total assets
LIABILITIES
Mortgages payable
Debentures
Convertible debentures
Bank borrowings
Accounts payable and accrued liabilities
Deferred tax liability
Total liabilities
UNITHOLDERS’ EQUITY
Unitholders’ equity
Total liabilities and unitholders’ equity
Consolidated
financial
statements
Joint ventures
Cominar’s
proportionate
share
$
$
$
7,697,823
53,150
86,719
2,806
7,784,542
55,956
68,788
6,013
74,801
7,819,761
41,633
166,971
8,250
52,044
10,025
4,826
5,909
95,538
(41,633)
—
—
496
40
—
204
7,915,299
—
166,971
8,250
52,540
10,065
4,826
6,113
8,109,419
54,645
8,164,064
1,968,919
1,945,627
183,081
457,323
133,728
10,310
4,698,988
3,410,431
8,109,419
52,327
—
—
—
2,318
—
54,645
—
54,645
2,021,246
1,945,627
183,081
457,323
136,046
10,310
4,753,633
3,410,431
8,164,064
22
20
2014 annual report
For the periods ended
December 31, 2014
Operating revenues
Rental revenue from investment
properties
Operating expenses
Operating costs
Realty taxes and services
Property management expenses
Quarter
Cumulative
Consolidated
financial
statements Joint ventures
Cominar’s
proportionate
share
Consolidated
financial
statements Joint ventures
Cominar’s
proportionate
share
$
$
$
$
$
$
217,492
2,242
219,734
739,884
8,798
748,682
43,229
44,785
4,043
92,057
326
753
59
1,138
43,555
45,538
4,102
93,195
151,199
163,270
14,136
328,605
1,242
2,433
200
3,875
152,441
165,703
14,336
332,480
Net operating income
125,435
1,104
126,539
411,279
4,923
416,202
Finance charges
Trust administrative expenses
(46,402)
(3,723)
(626)
—
(47,028)
(3,723)
(149,385)
(12,977)
(2,450)
(151,835)
—
(12,977)
Share of net income from investment in
joint ventures
8,923
(8,923)
—
10,918
(10,918)
—
Change in fair value of investment
properties
Transaction costs – business
combination
Income before income taxes
Income taxes
Net income and comprehensive
income
(33,951)
8,445
(25,506)
(33,951)
8,445
(25,506)
(5,143)
45,139
688
—
—
—
(5,143)
(26,667)
45,139
199,217
688
236
—
—
—
(26,667)
199,217
236
45,827
45,827
199,453
—
199,453
23
21
2014 annual report
24
PERFORMANCE ANALYSIS
OPERATIONAL RESULTS – COMINAR’S PROPORTIONATE SHARE
The following table summarizes our main operating results according to Cominar’s proportionate share for the periods ended
December 31, 2014 and 2013.
For the periods ended December 31
2014
2013
%
2014
2013
%
Quarter
Cumulative
Operating revenues
Operating expenses
Net operating income
Change in fair value of investment properties
Finance charges
Trust administrative expenses
Restructuring charges
Transaction costs – business combination
Other revenues
Gain on disposal of a subsidiary
Gains on disposal of investment properties
Income taxes
Net income
219,734
93,195
126,539
(25,506)
(47,028)
(3,723)
—
(5,143)
—
—
—
688
45,827
163,150
69,933
93,217
34.7
33.3
35.7
17,150
(248.7)
(32,429)
(2,313)
—
—
—
—
—
45.0
61.0
—
100.0
—
—
—
(1,057)
(165.1)
748,682
332,480
416,202
(25,506)
(151,835)
(12,977)
662,053
293,843
368,210
13.1
13.1
13.0
17,150
(248.7)
(131,811)
(12,063)
15.2
7.6
—
(1,062)
(100.0)
(26,667)
—
—
—
236
—
100.0
4,906
(100.0)
8,010
(100.0)
3,370
(100.0)
(1,741)
(113.6)
74,568
(38.5)
199,453
254,969
(21.8)
Lower 2014 net income is mainly due to transaction costs – business combination of $26.7 million resulting from the acquisition of
an investment property portfolio from Ivanhoé Cambridge for a purchase price of $1.63 billion as well as a decrease in the fair value
of investment properties of $25.5 million (taking into account an upward adjustment of $ 8.4 million in the joint ventures), compared
to an increase in the fair value of investment properties of $17.2 million and non-recurring income of $16.3 million recorded in 2013.
Not taking into account these elements, adjusted net income would have been $77.5 million for the quarter ended December 31,
2014 [$57.4 million in 2013] and $253.1 million for the year ended December 31, 2014 [$224.1 million in 2013].
NON-IFRS FINANCIAL MEASURES
For the periods ended December 31
2014
2013
%
2014
2013
%
Quarter
Cumulative
Adjusted net income
Recurring distributable income
Distributions
Recurring funds from operations
Recurring adjusted funds from operations
77,497
70,517
59,199
77,429
68,541
57,418
50,768
46,338
58,475
49,044
35.0
38.9
27.8
32.4
39.8
253,148
225,156
203,375
255,150
220,363
224,114
198,479
182,977
225,855
194,776
13.0
13.4
11.1
13.0
13.1
22
2014 annual report
FINANCIAL POSITION – COMINAR’S PROPORTIONATE SHARE
The following table summarizes assets and liabilities as well as unitholders’ equity according to Cominar’s proportionate share as at
December 31, 2014 and 2013:
25
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
Other liabilities
Total
UNITHOLDERS’ EQUITY
Total
2014
2013
$
%
7,784,542
5,654,825
2,129,717
130,757
166,971
81,794
107,961
166,971
67,573
22,796
—
14,221
8,164,064
5,997,330
2,166,734
2,021,246
1,945,627
183,081
457,323
146,356
1,794,830
994,824
181,768
105,697
94,831
226,416
950,803
1,313
51,525
4,753,633
3,171,950
1,581,683
3,410,431
8,164,064
2,825,380
585,051
5,997,330
2,166,734
351,626
332.7
37.7
21.1
—
21.0
36.1
12.6
95.6
0.7
54.3
49.9
20.7
36.1
RESULTS OF OPERATIONS
OPERATING REVENUES
For the periods ended December 31
2014
2013
%
2014
2013
%
Quarter
Cumulative
Same property portfolio(1)
152,894
152,903
—
626,796
621,631
0.8
Acquisitions and developments – Financial
statements
Acquisitions and developments – Joint ventures
Acquisitions and developments – Cominar’s
64,598
2,242
10,247
—
530.4
100.0
113,088
8,798
40,422
—
179.8
100.0
proportionate share
66,840
10,247
552.3
121,886
40,422
201.5
Total operating revenues – Cominar’s
proportionate share
219,734
163,150
34.7
748,682
662,053
13.1
(1) The same property portfolio includes the properties owned by Cominar as at December 31, 2012, except for properties sold in 2013 and 2014, but does not include the
results of properties acquired and those under development in 2013 and 2014.
During fiscal 2014, operating revenues rose 13.1% from fiscal 2013. This increase resulted primarily from the contribution of
acquisitions completed in 2013 and 2014.
23
2014 annual report
26
The chart below shows growth in Cominar’s 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
2014
2013
%
2014
2013
%
Quarter
Cumulative
Same property portfolio(1)
87,257
85,715
1.8
343,657
342,718
0.3
Acquisitions and developments – Financial
statements
Acquisitions and developments – Joint ventures
Acquisitions and developments – Cominar’s
38,178
1,104
7,502
—
408.9
100.0
67,622
4,923
25,492
—
165.3
100.0
proportionate share
39,282
7,502
423.6
72,545
25,492
184.6
Total net operating income – Cominar’s
proportionate share
(1) See “Operating Revenues.”
126,539
93,217
35.7
416,202
368,210
13.0
Although net operating income ("NOI") is not an IFRS financial measure, it is widely used in the real estate industry to assess
operating performance. We define it as operating income before the change in fair value of investment properties, finance charges,
Trust administrative expenses, restructuring charges, transaction costs – business combination, gains on disposal of subsidiaries,
gains on 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 13.0% during fiscal 2014, from fiscal 2013, due mainly to the acquisitions completed in 2013 and 2014. During the
fourth quarter of 2014, net operating income of our same property portfolio increased 1.8% compared to the same period of 2013.
24
2014 annual report
The chart below shows growth in Cominar’s net operating income over the past 10 years.
27
(1) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
25
2014 annual report
28
SEGMENT NET OPERATING INCOME
BY OPERATING SEGMENT
For the periods ended December 31
2014
2013
%
2014
2013
%
Quarter
Cumulative
Operating segment
Office
Retail
Industrial and mixed-use
Total net operating income – Cominar’s
proportionate share
55,350
47,659
23,530
48,540
23,369
21,308
14.0
103.9
10.4
207,084
118,590
90,528
190,611
91,342
86,257
8.6
29.8
5.0
126,539
93,217
35.7
416,202
368,210
13.0
For the periods ended December 31
2014
2013
2014
2013
Quarter
Cumulative
Operating segment
Office
Retail
Industrial and mixed-use
43.7%
37.7%
18.6%
52.1%
25.1%
22.8%
49.8%
28.5%
21.7%
51.8%
24.8%
23.4%
100.0%
100.0%
100.0%
100.0%
Net operating income increased in all operating segments during fiscal 2014 compared to fiscal 2013.
BY GEOGRAPHIC MARKET
For the periods ended December 31
2014
2013
%
2014
2013
%
Quarter
Cumulative
Geographic market
Québec City
Montréal
Ontario(1)
Atlantic Provinces
Western Canada
28,691
65,151
21,589
5,734
5,374
19,391
52,216
9,356
5,899
6,355
48.0
24.8
130.8
(2.8)
(15.4)
87,895
217,101
62,667
23,221
25,318
78,634
199,480
40,481
23,133
26,482
11.8
8.8
54.8
0.4
(4.4)
Total net operating income – Cominar’s
proportionate share
126,539
93,217
35.7
416,202
368,210
13.0
(1) For presentation purposes, the Gatineau area is included in the Ontario geographic market.
For the periods ended December 31
2014
2013
2014
2013
Quarter
Cumulative
Geographic market
Québec City
Montréal
Ontario(1)
Atlantic Provinces
Western Canada
22.7%
51.5%
17.1%
4.5%
4.2%
20.8%
56.0%
10.0%
6.4%
6.8%
21.1%
52.2%
15.0%
5.6%
6.1%
21.3%
54.2%
11.0%
6.3%
7.2%
100.0%
100.0%
100.0%
100.0%
(1) For presentation purposes, the Gatineau area is included in the Ontario geographic market.
26
2014 annual report
29
27
The net operating income of the Ontario geographic market increased by 54.8% during fiscal 2014 compared to fiscal 2013. The
Ontario geographic market now represents 17.1% of total net operating income. These results are driven by our focus on
geographic diversification and the recent acquisitions made in the Ontario area.
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 2014, management revalued the real estate portfolio and
determined that a decrease of $25.5 million (taking into account an upward adjustment of $ 8.4 million in the joint ventures) was
necessary to adjust the carrying value of investment properties to their fair value [increase of $17.2 million in 2013].
Internally valued investment properties have been measured using the following method and key assumptions:
Capitalized net operating income method – Under this method, capitalization rates are applied to standardized net operating income
in order to comply with current valuation standards. The standardized 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 different 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 2014 of 0.10% in the applied capitalization rate for the entire real estate
portfolio would result in a decrease or increase of approximately $118.0 million [$85.0 million in 2013] in the fair value of its
investment properties.
2014 annual report
30
28
WEIGHTED AVERAGE CAPITALIZATION RATE
As at December 31
2014
2013
Office
Retail
Industrial and mixed-use
Québec City
Montréal
Ontario
Atlantic
Provinces
Western
Canada
Weighted
average rate
Weighted
average rate
%
6.1
6.5
7.3
6.6
%
6.4
6.5
7.1
6.6
%
6.3
6.8
7.1
6.5
%
7.4
7.9
8.0
7.6
%
6.0
6.3
6.8
6.0
%
6.3
6.6
7.2
6.6
%
6.4
6.7
7.3
6.7
The slight decrease in the weighted average capitalization rate is explained mainly by the new segmented repartition of our
properties resulting from the increased retail segment and the acquisitions in the Greater Toronto Area.
FINANCE CHARGES
For the periods ended December 31
2014
2013
%
2014
2013
%
Quarter
Cumulative
Interest on mortgages payable
Interest on debentures
Interest on convertible debentures
Interest on bank borrowings
Net amortization of premium and discount on
debenture issues
Amortization of deferred financing costs and
others
Amortization of fair value adjustments on
assumed indebtedness
Less: Capitalized interests(1)
Total finance charges – Cominar’s
proportionate share
Percentage of operating revenues
Weighted average interest rate on total debt(2)
24,719
17,436
2,861
3,630
(183)
2,552
(2,793)
(1,194)
47,028
21.4%
22,659
9,890
2,873
9.1
76.3
(0.4)
483
651.6
(48)
281.3
1,373
85.9
94,123
54,512
11,445
5,379
(575)
6,253
88,670
29,492
14,804
10,113
6.1
84.8
(22.7)
(46.8)
(183)
214.2
6,861
(8.9)
(3,062)
(1,739)
(8.8)
(31.3)
(11,946)
(7,356)
(13,680)
(12.7)
(4,266)
72.4
32,429
19.9%
45.0
151,835
131,811
15.2
20.3%
4.29%
19.9%
4.76%
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 related to the acquisition of income properties completed in
2014. The weighted average interest rate on total debt decreased by 47 basis points since December 31, 2013.
During the fiscal year ended December 31, 2014, Cominar wrote off $0.5 million in deferred financing costs attributable to the
secured revolving operating and acquisition credit facility that has been replaced by an unsecured revolving operating and
acquisition credit facility. Cominar also wrote off $1.0 million in deferred financing costs paid for the unsecured bridge loan used for
the acquisition of an investment property portfolio from Ivanhoé Cambridge, which has been repaid on December 18, 2014, then
cancelled.
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.
TRUST ADMINISTRATIVE EXPENSES
During fiscal 2014, trust administrative expenses stood at $13.0 million, accounting for 1.7% of operating revenues, compared to
1.8% in 2013.
2014 annual report
TRANSACTION COSTS – BUSINESS COMBINATION
During fiscal 2014, Cominar incurred non-recurring transaction costs of $26.7 million resulting from the acquisition of an investment
property portfolio from Ivanhoé Cambridge for a purchase price of $1.63 billion. Under IFRS, transaction costs related to business
combinations must be expensed when incurred.
OTHER REVENUES IN 2013
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 $6.3 million in settlement of various claims. A portion of the payment was recognized against the accounts
receivable recorded in the consolidated balance sheet, and the excess was recorded as revenue in the results for 2013.
GAIN ON DISPOSAL OF A SUBSIDIARY IN 2013
On May 22, 2013, Cominar sold its interest in Hardegane Investments Limited, which held 100% of the shares of Dyne Holdings
Limited (“Dyne”), to Homburg International Limited, 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 consolidated balance sheet and to
record a gain of $8.0 million on this disposal.
GAINS ON DISPOSAL OF INVESTMENT PROPERTIES IN 2013
On June 28, 2013, Cominar disposed of an office building in Lévis, Québec, following the exercise of a purchase option included in
the sole tenant’s lease, for $1.5 million. Cominar recorded 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
Montréal, Québec. 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.
NET INCOME
For the periods ended December 31
2014
2013
%
2014
2013
%
Quarter
Cumulative
Net income
45,827
74,568
(38.5)
199,453
254,969
(21.8)
Net income per unit (basic)
Net income per unit (diluted)
Weighted average number of units (basic)
Weighted average number of units (diluted)
0.29
0.29
157,737
168,590
0.59
0.58
126,290
134,650
1.47
1.45
136,025
146,876
2.03
1.98
125,370
136,016
Lower 2014 net income is mainly due to transaction costs – business combination of $26.7 million resulting from the acquisition of
an investment property portfolio from Ivanhoé Cambridge for a purchase price of $1.63 billion as well as a decrease in the fair value
of investment properties of $25.5 million (taking into account an upward adjustment of $ 8.4 million in the joint ventures), compared
to an increase in fair the value of investment properties of $17.2 million and non-recurring income of $16.3 million recorded in 2013.
Not taking into account these elements, adjusted net income would have been $77.5 million for the quarter ended December 31,
2014 [$57.4 million in 2013] and $253.1 million for the year ended December 31, 2014 [$224.1 million in 2013].
31
29
2014 annual report
The calculation of diluted net income per unit includes the elimination of interest at the effective rate on the convertible debentures
of $3.3 million for the quarter ended December 31, 2014 [$2.9 million in 2013] and of $13.2 million for fiscal 2014 [$14.8 million in
2013].
ADJUSTED NET INCOME
The following table presents net income adjusted in order to eliminate unusual gains and losses:
For the periods ended December 31
2014
2013
%
2014
2013
%
Quarter
Cumulative
Net income
45,827
74,568
(38.5)
199,453
254,969
(21.8)
Change in fair value of investment properties –
Cominar’s proportionate share
Write-off of deferred financing costs(1)
Restructuring charges
Transaction costs – business combination
Gain on disposal of a subsidiary
Gains on disposal of investment properties
Unusual item – other revenues
Unusual item – Holman Grand Hotel
25,506
1,021
—
5,143
—
—
—
—
(17,150)
(248.7)
—
—
—
—
—
—
—
100.0
—
100.0
—
—
—
—
25,506
1,522
—
26,667
—
—
—
—
(17,150)
(248.7)
984
54.7
1,062
(100.0)
—
100.0
(8,010)
(100.0)
(3,370)
(100.0)
(4,906)
(100.0)
535
(100.0)
Adjusted net income
Adjusted net income per unit (basic)
77,497
0.49
57,418
0.45
35.0
8.9
253,148
1.86
224,114
1.79
13.0
3.9
(1) During the fiscal year ended December 31, 2014, Cominar wrote off $0.5 million in deferred financing costs attributable to the secured revolving operating and acquisition
credit facility that has been replaced by an unsecured revolving operating and acquisition credit facility. Cominar also wrote off $1.0 million in deferred financing costs paid
for the unsecured bridge loan used for the acquisition of an investment property portfolio from Ivanhoé Cambridge, which has been repaid on December 18, 2014, then
cancelled. In 2013, $1.0 million of deferred financing costs were written off following the redemption of Series C debentures.
The adjusted net income calculated by Cominar is not an IFRS financial measure. The calculation method used by Cominar may
differ from the ones used by other entities. The adjusted net income for the year rose 13.0% compared to the previous year and the
adjusted net income of the quarter ended December 31, 2014, increased 35.0% compared to the corresponding quarter of the
preceding year. These increases result principally from the acquisitions realized in 2013 and 2014.
DISTRIBUTABLE INCOME AND DISTRIBUTIONS
Although the concept of distributable income ("DI") is not an IFRS financial measure, it is used by many investors in the income trust
industry. 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, recognition of leases on a
straight-line basis, gains on disposal of subsidiaries, gains on disposal of investment properties, provision for leasing costs,
transaction costs incurred upon a business combination and certain other items not affecting cash, if applicable.
During the first quarter of 2014, following the revision by the Real Property Association of Canada ("REALpac") of the definition of
funds from operations, Cominar reviewed its definition of distributable income prospectively to include an adjustment for internal
initial and re-leasing salary costs that would have been capitalized if incurred externally.
32
30
2014 annual report
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
2014
2013
%
2014
2013
%
Quarter
Cumulative
Net income
45,827
74,568
(38.5)
199,453
254,969
(21.8)
+ Change in fair value of investment properties –
Cominar’s proportionate share
25,506
(17,150)
(248.7)
25,506
(17,150)
(248.7)
- Net amortization of premium and discount on
debenture issues
+ Amortization of deferred financing costs
- Amortization of fair value adjustments on assumed
(183)
2,497
(48)
1,322
281.3
88.9
(575)
6,041
(183)
6,572
214.2
(8.1)
indebtedness
(2,793)
(3,062)
(8.8)
(11,946)
(13,680)
(12.7)
+ Amortization of fair value adjustments on bond
investments
+ Compensation expense related to long-term incentive
plan
+ Accretion of liability component of convertible
debentures
+ Restructuring charges
+ Transaction costs – business combination
- Gain on disposal of a subsidiary
- Gains on disposal of investment properties
+ Deferred taxes
- Provision for leasing costs
+ Initial and re-leasing salary costs
- Recognition of leases on a straight-line basis
19
377
55
—
5,143
—
—
(688)
(5,790)
620
(73)
78
(75.6)
76
314
(75.8)
(99)
(480.8)
1,414
2,155
(34.4)
51
—
—
—
—
7.8
—
212
—
289
(26.6)
1,062
(100.0)
100.0
26,667
—
100.0
—
—
—
—
(8,010)
(100.0)
(3,370)
(100.0)
1,057
(165.1)
(236)
1,741
(113.6)
(5,048)
—
(901)
14.7
100.0
(91.9)
(19,840)
(17,758)
2,238
(3,854)
—
(4,101)
11.7
100.0
(6.0)
Distributable income
70,517
50,768
38.9
225,156
202,850
11.0
- Unusual item – other revenues
+ Unusual item – Holman Grand Hotel
Recurring distributable income
—
—
—
—
—
—
—
—
(4,906)
(100.0)
535
(100.0)
70,517
50,768
38.9
225,156
198,479
13.4
DISTRIBUTIONS TO UNITHOLDERS
59,199
46,338
27.8
203,375
182,977
11.1
Distributions reinvested under the distribution
reinvestment plan(1)
Cash distributions
Percentage of distributions reinvested
Per unit information:
18,158
41,041
30.7%
13,372
32,966
28.9%
35.8
24.5
60,858
142,517
29.9%
45,312
137,665
24.8%
34.3
3.5
Recurring distributable income (basic)
0.45
0.40
12.5
1.66
1.58
5.1
Weighted average number of units outstanding for the
recurring distributable income (basic)
157,737
126,290
136,025
125,370
DISTRIBUTIONS PER UNIT
0.368
0.360
2.2
1.453
1.440
0.9
Payout ratio(2)
Cash payout ratio(3)
81.8%
56.7%
90.0%
64.0%
87.5%
61.4%
91.1%
68.5%
(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 basic recurring DI per unit.
(3) The cash payout ratio corresponds to the cash distribution per unit, divided by basic recurring DI per unit.
33
31
2014 annual report
34
Recurring DI for fiscal 2014 amounted to $225.2 million, up 13.4% from 2013. This increase was primarily due to the contribution of
the acquisitions completed in 2013 and 2014. On a basic per unit basis, it totalled $1.66 for fiscal 2014, up 5.1% compared to fiscal
2013.
Distributions to unitholders in 2014 totalled $203.4 million, up 11.1% from 2013. On August 7, 2014, Cominar announced an
increase in monthly distributions per unit to $0.1225 for monthly distributions payable from September 15 and onward. Annual
distribution for 2014 was $1.453 per unit compared to $1.440 per unit in 2013.
The recurring DI payout ratio for the year ended December 31, 2014 was 87.5%. During fiscal 2014, 29.9% of distributions were
reinvested as units under the distribution reinvestment plan [24.8% in 2013]. The recurring DI cash payout ratio per unit (basic)
stood at 61.4%, down 7.0% compared to fiscal 2013.
In 2013, Cominar adjusted the distributable income calculation to take into account two unusual items. The first was the gain
resulting from the settlement of claims against HII, and the second was an adjustment to exclude the impact of the retrocession of
the Holman Grand Hotel to Cominar as part of HII’s restructuring.
TRACK RECORD OF RECURRING DI PER UNIT
For the years ended December 31
2014
2013
2012
2011
2010
Recurring distributable income per unit (basic)
1.66
1.58
1.55
1.56
1.55
The chart below shows growth in Cominar’s recurring distributable income over the past 10 years.
(1) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
32
2014 annual report
The Canadian Securities Administrators (“CSA”) requires Cominar to reconcile cash flows provided by operating activities as shown
in the consolidated financial statements to distributable income and adjusted funds from operations (non-IFRS measures).
The following table presents this reconciliation:
For the periods ended December 31
2014
2013
2014
2013
Quarter
Cumulative
Cash flows provided by operating activities as shown in the
consolidated financial statements
Changes – investments in joint ventures
- Amortization of other assets
+ Restructuring charges
+ Transaction costs – business combination
- Provision for leasing costs
+ Initial and re-leasing salary costs
+ Change in non-cash working capital items
- Unusual item – other revenues
+ Unusual item – Holman Grand Hotel
Recurring distributable income
- Capital expenditures – maintenance of rental income generating
capacity
Recurring adjusted funds from operations
110,266
(332)
(243)
—
5,143
(5,790)
620
(39,147)
—
—
79,322
—
(200)
—
—
(5,048)
—
(23,306)
—
—
229,030
202,760
782
(884)
—
26,667
(19,840)
2 238
(12,837)
—
—
—
(655)
1,062
—
(17,758)
—
17,441
(4,906)
535
70,517
50,768
225,156
198,479
(1,976)
68,541
(1,724)
49,044
(4,793)
220,363
(3,703)
194,776
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
2014
2013
2012
Net income
199,453
254,969
342,171
Cash flows provided by operating activities as shown in the consolidated financial
statements
Distributions to unitholders
Cash distributions
Excess of cash flows from operating activities over cash distributions to unitholders
Adjustments:
+ Transaction costs – business combination
+ Restructuring charges
- Unusual item – other revenues
+ Unusual item – Holman Grand Hotel
229,030
203,375
142,517
86,513
26,667
—
—
—
202,760
182,977
137,665
65,095
—
1,062
(4,906)
535
146,333
164,021
126,304
20,029
27,689
6,929
—
—
Excess of adjusted cash flows from operating activities over cash distributions to
unitholders
113,180
61,786
54,647
For the year ended December 31, 2014, and the prior years, cash flows from operating activities were sufficient to fund cash
distributions to unitholders, as were adjusted cash flows from operating activities.
35
33
2014 annual report
36
The chart below shows Cominar’s distributions over the past 10 years.
(1) Amount of distribution in dollars per unit.
FUNDS FROM OPERATIONS
Although the concept of funds from operations ("FFO") is not an IFRS financial measure, it is widely used in the real estate
investment trust industry. REALpac defines this measure as net income (calculated in accordance with IFRS), adjusted for, among
other things, change in fair value of investment properties, deferred taxes, transaction costs incurred upon a business combination,
gains on disposal of subsidiaries and gains on disposal of investment properties.
During the first quarter of 2014, REALpac revised its definition of funds from operations to include an adjustment for internal initial
and re-leasing salary costs that would have been capitalized if incurred externally. Cominar therefore prospectively adjusted its
calculation method for funds from operations to account for this revision.
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.
The fully diluted weighted average number of units outstanding for the calculation of FFO is adjusted to take into account the
potential issuance of units under the long-term incentive plan and the potential conversion of convertible debentures at their
conversion price, if dilutive.
34
2014 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, 2014 and 2013:
FUNDS FROM OPERATIONS
For the periods ended December 31
2014
2013
%
2014
2013
%
Quarter
Cumulative
Net income
45,827
74,568
(38.5)
199,453
254,969
(21.8)
37
+ Change in fair value of investment properties –
Cominar’s proportionate share
+ Deferred income taxes
+ Transaction costs – business combination
- Gain on disposal of a subsidiary
- Gains on disposal of investment properties
+ Initial and re-leasing salary costs
Funds from operations
+ Write-off of deferred financing costs(1)
+ Restructuring charges
- Unusual item – other revenues
+ Unusual item – Holman Grand Hotel
Recurring funds from operations
Per unit information:
Funds from operations (basic)
Recurring funds from operations (basic)
Recurring funds from operations (FD)(2)(3)
Weighted average number of units outstanding for
25,506
(688)
5,143
—
—
620
(17,150)
(248.7)
1,057
(165.1)
—
—
—
—
100.0
—
—
100.0
30.7
25,506
(236)
26,667
—
—
2,238
253,628
(17,150)
(248.7)
1,741
(113.6)
—
100.0
(8,010)
(100.0)
(3,370)
(100.0)
—
100.0
228,180
11.2
76,408
58,475
1,021
—
—
—
—
—
—
—
100.0
1,522
984
54.7
—
—
—
—
—
—
1,062
(100.0)
(4,096)
(100.0)
535
(100.0)
77,429
58,475
32.4
255,150
225,855
13.0
0.48
0.49
0.49
0.46
0.46
0.46
4.3
6.5
6.5
1.86
1.88
1.86
1.82
1.80
1.77
2.2
4.4
5.1
recurring funds from operations (basic)
157,737
126,290
136,025
125,370
Weighted average number of units outstanding for
recurring funds from operations (FD)(2)
166,236
134,650
144,522
136,016
Payout ratio(4)
Cash payout ratio(5)
75.1%
52.0%
78.3%
55.7%
77.3%
54.2%
80.0%
60.2%
(1) During the fiscal year ended December 31, 2014, Cominar wrote off $0.5 million in deferred financing costs attributable to the secured revolving operating and acquisition
credit facility that has been replaced by an unsecured revolving operating and acquisition credit facility. Cominar also wrote off $1.0 million in deferred financing costs paid
for the unsecured bridge loan used for the acquisition of an investment property portfolio from Ivanhoé Cambridge, which has been repaid on December 18, 2014, then
cancelled. In 2013, $1.0 million of deferred financing costs were written off following the redemption of Series C debentures.
(2) Fully diluted.
(3) The calculation of fully diluted recurring funds from operations per unit includes the elimination of interest at the effective rate on the dilutive convertible debentures of
$3.3 million for the quarter ended December 31, 2014 [$2.9 million in 2013] and of $13.2 million for the year ended December 31, 2014 [$14.8 million in 2013].
(4) The payout ratio corresponds to the distribution per unit, divided by basic recurring FFO per unit.
(5) The cash payout ratio corresponds to the cash distribution per unit, divided by basic recurring FFO per unit.
Recurring FFO for fiscal 2014 rose 13.0% from the previous year, due mainly to the acquisitions completed in 2013 and 2014.
Recurring FFO per unit on a fully diluted basis stood at $1.86 for fiscal 2014, up 5.1% from fiscal 2013.
TRACK RECORD OF RECURRING FUNDS FROM OPERATIONS PER UNIT
For the years ended December 31
2014
2013
2012
2011
2010
Recurring funds from operations per unit (basic)
Recurring funds from operations per unit (FD)(1)
1.88
1.86
1.80
1.77
1.83
1.78
1.73
1.65
1.72
1.64
(1) Fully diluted.
35
2014 annual report
38
The chart below shows growth in Cominar’s recurring funds from operations over the past 10 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 real estate investment trust industry.
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,
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 an IFRS measure 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 may not be appropriate for comparative analysis purposes.
In calculating AFFO, 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.
The fully diluted weighted average number of units outstanding for the calculation of AFFO is adjusted to take into account the
potential issuance of units under the long-term incentive plan and the potential conversion of convertible debentures at their
conversion price, if dilutive.
36
2014 annual report
The following table presents a reconciliation of FFO and AFFO for the periods ended December 31, 2014 and 2013:
ADJUSTED FUNDS FROM OPERATIONS
For the periods ended December 31
2014
2013
%
2014
2013
%
Quarter
Cumulative
Funds from operations
- Net amortization of premium and discount on debenture issues
+ Amortization of deferred financing costs
+ Amortization of fair value adjustment on bond investments
76,408
58,475
30.7
253,628
228,180
(183)
2,497
19
(48)
281.3
1,322
88.9
78
(75.6)
(575)
6,041
76
(183)
6,572
314
- Amortization of fair value adjustments on assumed indebtedness
(2,793)
(3,062)
(8.8)
(11,946)
(13,680)
+ Compensation expense related to long-term incentive plan
377
(99)
(480.8)
1,414
2,155
11.2
214.2
(8.1)
(75.8)
(12.7)
(34.4)
- Capital expenditures – maintenance of rental income generating
capacity
+ Accretion of liability component of convertible debentures
+ Restructuring charges
- Provision for leasing costs
(1,976)
(1,724)
14.6
(4,793)
(3,703)
29.4
55
—
51
—
7.8
—
212
—
289
(26.6)
1,062
(100.0)
(5,790)
(5,048)
14.7
(19,840)
(17,758)
- Recognition of leases on a straight-line basis
(73)
(901)
(91.9)
(3,854)
(4,101)
Adjusted funds from operations
68,541
49,044
39.8
220,363
199,147
11.7
(6.0)
10.7
- Unusual item – other revenues
+ Unusual item – Holman Grand Hotel
—
—
—
—
—
—
—
—
(4,906)
(100.0)
535
(100.0)
Recurring adjusted funds from operations
68,541
49,044
39.8
220,363
194,776
13.1
Per unit information:
Adjusted funds from operations (basic)
Recurring adjusted funds from operations (basic)
Recurring adjusted funds from operations (FD)(1)(2)
0.43
0.43
0.43
0.39
0.39
0.39
10.3
10.3
10.3
1.62
1.62
1.61
1.59
1.55
1.54
2.0
4.5
4.5
Weighted average number of units outstanding for recurring adjusted
funds from operations (basic)
157,737
126,290
136,025
125,370
Weighted average number of units outstanding for recurring adjusted
funds from operations (FD)(1)
166,236
134,650
144,522
136,016
Payout ratio(3)
Cash payout ratio(4)
85.6%
59.3%
92.3%
65.6%
89.7%
62.9%
92.9%
69.9%
(1) Fully diluted.
(2) The calculation of fully diluted recurring adjusted funds from operations per unit includes the elimination of interest on the dilutive convertible debentures of $3.0 million for
the quarter ended December 31, 2014 [$2.9 million in 2013] and $11.9 million for the year ended December 31, 2014 [$14.8 million in 2013].
(3) The payout ratio corresponds to the distribution per unit, divided by basic recurring AFFO per unit.
(4) The cash payout ratio corresponds to the cash distribution per unit, divided by basic recurring AFFO per unit.
Recurring AFFO amounted to $220.4 million for fiscal 2014, up 13.1% from 2013, mainly as a result of the acquisitions completed in
2013 and 2014.
Fully diluted recurring AFFO per unit totalled $1.61 for the year ended December 31, 2014, up 4.5% from fiscal 2013.
TRACK RECORD OF RECURRING ADJUSTED FUNDS FROM OPERATIONS PER UNIT
For the years ended December 31
2014
2013
2012
2011
2010
Recurring adjusted funds from operations per unit (basic)
Recurring adjusted funds from operations per unit (FD)(1)
1.62
1.61
1.55
1.54
1.52
1.50
1.53
1.50
1.53
1.49
(1) Fully diluted.
39
37
2014 annual report
40
The chart below shows growth in Cominar’s recurring adjusted funds from operations over the past 10 years.
(1) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 2014, Cominar generated $229.0 million in cash flows from operating activities. Of this amount, $142.5 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 payable, debenture or unit issues, amounts available on its credit facility and
cash and cash equivalents.
On November 27, 2014, Cominar filed a short form base shelf prospectus allowing it to issue up to $1.5 billion in securities during
the 25-month period that this prospectus remains valid. Since then, Cominar has issued $200.0 million in senior unsecured
debentures in December 2014 as well as $155.3 million in units in January 2015, leaving an available balance of $1.1 billion for
future issuances.
MORTGAGES PAYABLE
As at December 31, 2014, the nominal balance of mortgages payable was $1,984.5 million, up $184.6 million from $1,763.9 million
as at December 31, 2013. This increase is explained by mortgages payable contracted or mortgages payable assumed during the
year for $388.5 million at a weighted average interest rate of 3.94%, by the repayments of balances at maturity for $150.8 million at
a weighted average interest rate of 5.89% and by the monthly repayments of capital for $53.1 million. At the end of the year, the
weighted average interest rate was 4.79%, down 27 basis points from 5.06% as at December 31, 2013. As at December 31, 2014,
the effective weighted average interest rate was 4.17%, down 14 basis points from 4.31% as at December 31, 2013.
Cominar’s mortgages payable maturity dates are staggered over a number of years to reduce risks related to renewal.
As at December 31, 2014, the residual weighted average term of mortgages payable was 5.0 years, unchanged from that as at
December 31, 2013.
38
2014 annual report
The following table shows mortgage contractual maturity dates for the coming fiscal years:
CONTRACTUAL MATURITY DATES OF MORTGAGES PAYABLE
Repayment of
principal
For the years ending December 31
Balances at
maturity
Total
Weighted average
interest rate(1)
2015
2016
2017
2018
2019
2020 and thereafter
Total
(1) Calculated on balances at maturity of mortgages payable.
53,948
46,619
39,917
31,727
23,734
106,949
302,894
273,372
146,409
180,173
409,003
4,255
632,356
327,320
193,028
220,090
440,730
27,989
739,305
1,645,568
1,948,462
4.85%
4.77%
4.71%
5.17%
6.57%
4.58%
4.79%
Cominar’s management intends to refinance most of the mortgages payable maturing in 2015 and to increase, in general, the
loan/value ratio of the properties used as collateral.
The chart below presents the weighted average contractual interest rate of mortgages payable over the past 10 years.
41
39
2014 annual report
42
DEBENTURES
The following table presents the features of Cominar’s senior unsecured debentures, as well as the balance per series, as at
December 31, 2014:
DEBENTURES
Series 1
Series 2
Series 3
Series 4
Contractual
interest rate
Effective
interest rate
Date of
issuance
Dates of
interest
payments
Maturity date
Balance as at
December 31, 2014
$
4.274%
4.32%
June 2012(1)
June 15 and
December 15
June 2017
250,000
4.23%
4.37% December 2012(2)
June 4 and
December 4 December 2019
300,000
4.00%
4.24%
May 2013
November 2 November 2020
100,000
May 2 and
4.941%
4.81%
July 2013(3)
July 2020
300,000
October 2015
250,000
July 27 and
January 27
January 9,
April 9,
July 9 and
October 9
September 22,
December 22,
March 22 and
Series 5
3.323%(4)
3.52%
October 2013
Series 6
Series 7
Series 8
Weighted average interest rate
Total
2.37%(5)
2.50% September 2014
June 22 September 2016
250,000
3.62%
3.70% September 2014
December 21
and June 21
June 2019
300,000
4.25%
3.89%
4.34% December 2014
3.97%
June 8 and
December 8 December 2021
200,000
1,950,000
(1) Re-opened in September 2012 ($125.0 million).
(2) Re-opened in February 2013 ($100.0 million).
(3) Re-opened in January 2014 ($100.0 million) and March 2014 ($100.0 million).
(4) Variable interest rate fixed quarterly for the period from October 10, 2014 to January 9, 2015 (corresponding to the CDOR three-month rate plus 205 basis points).The rate
for the period from January 10, 2015 to April 9, 2015 was fixed at 3.35%.
(5) Variable interest rate fixed quarterly for the period from December 22, 2014 to March 21, 2015 (corresponding to the CDOR three-month rate plus 108 basis points).
As at December 31, 2014, the residual weighted average term of debentures was 4.0 years.
On January 13, 2014, Cominar re-opened the Series 4 offering and issued $100.0 million of senior unsecured debentures bearing
an interest rate of 4.941% and maturing in July 2020. The issue price of these unsecured debentures included a premium which
resulted in an effective interest rate of 4.747% for this issuance, excluding amortization of deferred financing costs.
On March 4, 2014, Cominar re-opened the Series 4 offering and issued $100.0 million of senior unsecured debentures bearing an
interest rate of 4.941% and maturing in July 2020. The issue price of these unsecured debentures included a premium which
resulted in an effective interest rate of 4.425% for this issuance, excluding amortization of deferred financing costs.
On September 17, 2014, Cominar issued $250.0 million of Series 6 senior unsecured debentures bearing a variable interest rate
and maturing in September 2016, and issued $300.0 million of Series 7 senior unsecured debentures bearing an interest rate of
3.62% and maturing in June 2019.
On December 3, 2014, Cominar issued $200.0 million of Series 8 senior unsecured debentures bearing an interest rate of 4.25%
and maturing in December 2021.
40
2014 annual report
These issues allowed Cominar to reach its objective of increasing the senior unsecured portion of its total debt to more than 50%,
from 32.4% as at December 31, 2013 to 52.8% as at December 31, 2014.
The following table presents information on Cominar’s unencumbered assets and senior unsecured debts:
As at December 31
2014
2013
Number of
properties
Fair value of
properties ($)
Number of
properties
Fair value of
properties ($)
Unencumbered income properties
286
3,692,149
144
1,181,573
Unencumbered assets ratio(1)(2)
Senior unsecured debts-to-total-debt ratio(2)(3)
1.54:1
52.8%
1.19:1
32.4%
(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 debts divided by total debt.
As at December 31, 2014, Cominar owned unencumbered income properties whose fair value was approximately $3.7 billion. The
unencumbered assets ratio stood at 1.54:1 compared to 1.19:1 as at December 31, 2013.
CONVERTIBLE DEBENTURES
The following table presents the features of Cominar’s unsecured subordinated convertible debentures and their balances by series,
as at December 31, 2014:
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
N/A
September 2014
September 2016
June 2013
June 2015
June 2017
$
$
Total
$
Balance as at December 31, 2014
99,786
86,250
186,036
(1) As of this date of redemption, the debentures may be redeemed by Cominar upon 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.
BANK BORROWINGS
As at December 31, 2014, Cominar had an unsecured revolving operating and acquisition credit facility of up to $550.0 million which
will mature in August 2017. This facility bears interest at prime rate plus 70 basis points or at bankers’ acceptance rate plus 170
basis points. As at December 31, 2014, bank borrowings totalled $457.3 million.
43
41
2014 annual report
44
DEBT SUMMARY
The following table presents a comparative debt summary:
As at December 31
2014
2013
Weighted
average
interest rate
Residual
weighted
average term
$
Weighted
average
interest rate
Residual
weighted
average term
$
Mortgages payable
Debentures
Convertible debentures
Bank borrowings
Total debt
1,968,919
1,945,627
183,081
457,323
4,554,950
4.79%
3.89%
6.15%
3.13%
4.29%
5.0 years
4.0 years
2.1 years
2.6 years
4.2 years
1,794,830
994,824
181,768
105,697
3,077,119
5.06%
4.06%
6.15%
3.91%
4.76%
5.0 years
4.5 years
3.1 years
1.1 year
4.6 years
During fiscal 2014, the weighted average interest rate on Cominar’s total debt decreased by 47 basis points from 4.76% as at
December 31, 2013 to 4.29% as at December 31, 2014.
DEBT RATIO
The following table presents debt ratios as at December 31, 2014 and 2013:
DEBT RATIO
As at December 31
Cash and cash equivalents
Mortgages payable
Debentures
Convertible debentures
Bank borrowings
Total debt
Total assets less cash and cash equivalents
Overall debt ratio(1)(2)
Debt ratio (excluding convertible debentures)(2)
2014
2013
(5,909)
1,968,919
1,945,627
183,081
457,323
4,549,041
8,103,510
56.1%
53.9%
(9,742)
1,794,830
994,824
181,768
105,697
3,067,377
5,987,588
51.2%
48.2%
(1) Total of cash and cash equivalents, bank borrowings, mortgages payable, 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.
As at December 31, 2014, the debt ratio (excluding convertible debentures) was 53.9%. The increase in the debt ratio since
December 31, 2013 was due to acquisitions of income properties realized in 2014.
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 60% (65% if convertible
debentures are outstanding).
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, 2014, Cominar’s interest coverage ratio stood at 2.67:1 [2.70:1 as at December 31, 2013], evidence of its
capacity to meet its interest payment obligations.
42
2014 annual report
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL COMMITMENTS
Cominar has no off-balance sheet arrangements that have or are likely to have a significant impact on its operating results or its
financial position, including its cash position and sources of financing.
Cominar entered into an agreement for the acquisition of a portfolio of 3 industrial properties representing approximately
$34.5 million in value (subject to adjustments), and approximately 697,000 square feet in total leasable area, located in the greater
Montréal area. This acquisition is subject to customary closing requirements. There can be no assurance that this acquisition will be
completed.
Cominar has no significant contractual commitments other than those arising from its long-term debt and payments due under
emphyteutic leases on land held for income properties.
PROPERTY PORTFOLIO
The following table presents information on the property portfolio, including Cominar’s proportionate share:
As at December 31
Income properties
Properties under development and land held for future development
Number of income properties
Leasable area (sq. ft.)
2014
2013
7,784,542
130,757
5,654,825
107,961
%
36.1
12.9
563
497
45,252,000
37,123,000
21.9
SUMMARY BY OPERATING SEGMENT
As at December 31
Office
Retail
Industrial and mixed-use
Total
SUMMARY BY GEOGRAPHIC MARKET
As at December 31
Québec City
Montréal
Ontario(1)
Atlantic Provinces
Western Canada
Total
2014
2013
Number of
properties
Leasable area
(sq. ft.)
Number of
properties
Leasable area
(sq. ft.)
136
196
231
563
14,994,000
12,845,000
17,413,000
45,252,000
120
160
217
497
13,017,500
7,901,500
16,204,000
37,123,000
2014
2013
Number of
properties
Leasable area
(sq. ft.)
Number of
properties
Leasable area
(sq. ft.)
133
301
55
60
14
10,202,000
25,468,000
5,766,000
2,709,000
1,107,000
122
268
32
61
14
8,358,500
22,130,000
2,801,000
2,720,500
1,113,000
563
45,252,000
497
37,123,000
(1) For presentation purposes, the Gatineau area is included in the Ontario geographic market.
45
43
2014 annual report
46
ACQUISITIONS AND INVESTMENTS
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 business segments, namely, office buildings,
retail buildings and industrial and mixed-use properties, and geographic diversification of its property portfolio.
During the year ended December 31, 2014, Cominar focused on strategic acquisitions resulting in the addition of 66 income
properties to its property portfolio and representing a total of 8.1 million square feet.
ACQUISITION OF AN INVESTMENT PROPERTY PORTFOLIO FROM IVANHOÉ CAMBRIDGE FOR A
PURCHASE PRICE OF $1.63 BILLION
On September 30 and October 17, 2014, Cominar acquired 35 income properties, one property under development and land held
for future development from Ivanhoé Cambridge. This acquisition consists of:
• 31 retail properties, of which 2.5 million square feet are located in the Montréal area, 1.6 million square feet are located in the
Québec City area, and 734,000 square feet are located in the Greater Toronto area.
• 3 office properties, of which 271,000 square feet are located in the Québec City area, 263,000 square feet are located in the
Greater Toronto area, and 64,000 square feet are located in the Montréal area.
• 1 industrial property of 99,000 square feet located in the Québec City area.
• 1 office property currently in development, with a leasable area of 118,000 square feet located in the Montréal area.
The weighted average capitalization rate for these transactions is 6.5%.
ACQUISITIONS OF INVESTMENT PROPERTIES
On February 26, 2014, Cominar acquired a portfolio of 11 office properties located in the Greater Toronto Area and in Montréal, for
a net purchase price of $229.3 million, with $128.3 million paid in cash and $101.0 million by assuming mortgages payable. The
acquired portfolio consists of four office properties located in the Greater Toronto Area with a total leasable area of 782,000 square
feet, and seven office properties located in Montréal, with a total leasable area of 407,000 square feet. The capitalization rate for this
transaction is 7.0%. Approximately 70% of the net operating income of this acquisition comes from the Greater Toronto Area.
On February 27, 2014, Cominar acquired five retail properties with a total leasable area of 121,000 square feet located in the
Greater Montréal Area for a purchase price of $26.1 million paid in cash. As part of this transaction, Cominar also acquired a vacant
lot for $2.1 million paid cash. The capitalization rate for this transaction is 7.0%.
On May 1, 2014, Cominar acquired a portfolio of 14 mainly industrial and mixed-use properties in the Greater Toronto Area, with a
total leasable area of approximately 1,184,000 square feet, for a purchase price of $100.7 million, with $63.2 million paid in cash
and $37.5 million by assuming mortgages payable. The capitalization rate for this transaction is 7.1%.
On October 8, 2014, Cominar acquired a retail property with a leasable area of 17,000 square feet located in Québec City, for a
purchase price of $2.2 million paid in cash. The capitalization rate for this transaction is 8.1%.
44
2014 annual report
The following table presents additional information on these acquisitions:
47
Investment properties
Acquisition on February 26, 2014:
3100 Côte-Vertu Boulevard
3773-3777 Côte-Vertu Boulevard
7405 Trans-Canada Highway
9800 Cavendish Boulevard
3900 Côte-Vertu Boulevard
3950 Côte-Vertu Boulevard
7355 Trans-Canada Highway
5500 North Service Road
95 Moatfield Drive
105 Moatfield Drive
225 Duncan Mill Road
Acquisition on February 27, 2014:
400 Montée des Pionniers
330-334 Montée des Pionniers
310-322 Montée des Pionniers
250-302 Montée des Pionniers
216-220 Montée des Pionniers
Acquisition on May 1, 2014:
6300 Northwest Drive
6280 Northwest Drive
3415 American Drive
3405 American Drive
3403 American Drive
3397 American Drive
3395 American Drive
3355 American Drive
6295 Northam Drive
6325 Northam Drive
6305 Northam Drive
6285 Northam Drive
6275 Northam Drive
400 Nugget Avenue
Acquisitions from Ivanhoé Cambridge on September 30 and October 17, 2014:
505 Parc-Technologique Boulevard
805 Frontenac Boulevard East
8585 Lacroix Boulevard
298 Armand-Thériault Boulevard
252 Hôtel-de-Ville Boulevard
95 Cerisiers Street
419 Jessop Boulevard
4125-4575 des Forges Boulevard
3925 des Forges Boulevard
690-700 René-Lévesque Boulevard East
2305 Rockland Road
2151-2153 Lapinière Boulevard
100 Brien Boulevard
2968-3000 Pierre-Péladeau Avenue
City/Province
Business
segment(1)
Montréal, QC
Montréal, QC
Montréal, QC
Montréal, QC
Montréal, QC
Montréal, QC
Montréal, QC
Burlington, ON
Toronto, ON
Toronto, ON
Toronto, ON
Terrebonne, QC
Terrebonne, QC
Terrebonne, QC
Terrebonne, QC
Terrebonne, QC
Mississauga, ON
Mississauga, ON
Mississauga, ON
Mississauga, ON
Mississauga, ON
Mississauga, ON
Mississauga, ON
Mississauga, ON
Mississauga, ON
Mississauga, ON
Mississauga, ON
Mississauga, ON
Mississauga, ON
Toronto, ON
Québec City, QC
Thetford Mines, QC
Saint-Georges-de-Beauce, QC
Rivière-du-Loup, QC
Rivière-du-Loup, QC
Rivière-du-Loup, QC
Rimouski, QC
Trois-Rivières, QC
Trois-Rivières, QC
Québec, QC
Mont-Royal, QC
Brossard, QC
Repentigny, QC
Laval, QC
O
O
O
O
O
O
O
O
O
O
O
R
R
R
R
R
I
I
I
I
I
I
I
I
I
I
I
O
I
I
I
R
R
R
R
R
R
R
R
O
C
R
R
O
Leasable
area
sq. ft.
96,000
53,000
81,000
103,000
29,000
24,000
23,000
222,000
156,000
249,000
156,000
11922,000
6,000
6,000
19,000
77,000
13,000
121,000
26,000
21,000
31,000
20,000
19,000
46,000
16,000
113,000
42,000
77,000
34,000
54,000
50,000
635,000
1184,000
99,000
181,000
305,000
311,000
8,000
6,000
345,000
377,000
39,000
271,000
646,000
723,000
558,000
64,000
45
2014 annual report
48
Investment properties
2888 Cosmôdome Avenue
1731-1799 Pierre-Péladeau Avenue and 2777 Saint-Martin Boulevard West
2900-2940 Pierre-Péladeau Avenue and 101 Centropolis Promenade
105-165 Centropolis Promenade
1820-1880 Pierre-Péladeau Avenue
100-140 Centropolis Promenade
1730-1798 Pierre-Péladeau Avenue and 2929-2981 Saint-Martin Boulevard West
175-245 Centropolis Promenade
485-575 Centropolis Promenade
150-190 Centropolis Promenade
200-250 Centropolis Promenade
450-510 Centropolis Promenade
580-590 Centropolis Promenade and 1825-1955 Daniel-Johnson Boulevard
520-572 Centropolis Promenade
595-655 Centropolis Promenade and 2005-2105 Daniel-Johnson Boulevard
2800 du Cosmodôme Avenue
55 University Avenue
320 Saint-Joseph Boulevard
350 Saint-Joseph Boulevard
1250 South Service Road
1490 Dixie Road
Acquisition on October 8, 2014:
3315-3317 du Carrefour Street
(1) O: Office; R: Retail; I: Industrial and mixed-use.
City/Province
Business
segment(1)
Leasable
area
sq. ft.
Laval, QC
Laval, QC
Laval, QC
Laval, QC
Laval, QC
Laval, QC
Laval, QC
Laval, QC
Laval, QC
Laval, QC
Laval, QC
Laval, QC
Laval, QC
Laval, QC
Laval, QC
Laval, QC
Toronto, ON
Gatineau, QC
Gatineau, QC
Mississauga, ON
Mississauga, ON
R
R
R
R
R
R
R
R
R
R
R
R
R
R
R
R
O
R
R
R
R
74,000
68,000
23,000
21,000
19,000
15,000
57,000
40,000
50,000
15,000
20,000
20,000
28,000
15,000
56,000
100,000
263,000
307,000
8,000
416,000
3,000
5,551,000
Québec City, QC
C
17,000
8,065,000
The results of operations of income properties acquired during fiscal 2014 are included in the consolidated financial statements from
their acquisition dates.
DISPOSAL OF AN INVESTMENT PROPERTY
On May 7, 2014, Cominar sold a commercial building in Kentville, in Nova Scotia, for $2.0 million. This disposal will have no
significant impact on future consolidated results. Cominar recorded no gain or loss on this disposal.
INVESTMENTS IN INCOME PROPERTIES
Cominar continues to develop its income properties in the normal course of business. Investments made include additions,
expansions, modernizations, modifications and upgrades to existing properties with a view to increasing or maintaining their rental
income generating capacity.
During fiscal 2014, Cominar incurred $92.5 million [$89.3 million in 2013] in capital expenditures either to increase the rental income
generating capacity of its properties or to reduce the related operating expenses. Of this amount, $23.2 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 $4.8 million [$3.7 million in 2013] 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 aim to 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
46
2014 annual report
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 2014, Cominar made investments of $36.0 million in this respect [$29.2 million in 2013].
PROPERTIES UNDER CONSTRUCTION AND DEVELOPMENT PROJECT
In 2014, Cominar completed the construction of an office building that is part of the Place Laval complex which was transferred from
properties under development to income properties. This 14-story, 310,000 square-foot building is 100% occupied by a Québec
government agency under a long-term lease. The capitalization rate for this property is 8.1%.
As part of the acquisition of the investment property portfolio from Ivanhoé Cambridge for an amount of $1.63 billion, Cominar
acquired an office property under development with a leasable area of 118,000 square feet located in Laval as part of the
Centropolis complex, for total estimated cost of $28.2 million, including leasing cost and leasehold improvements. The occupancy of
this property began at the end of 2014 and will be continued in 2015. The capitalization rate of this property is estimated at 7.1%.
Cominar jointly owns with Groupe Dallaire Inc. a 50% interest in a joint venture, which began a real estate development project in
several phases on land located along Highway 40, Québec City’s main highway. It is foreseen that this project will consist primarily
of commercial space, the first phase being an office building of approximately 76,000 square feet on six floors. The capitalization
rate of this property is estimated at 8.5%.
INVESTMENT IN A MORTGAGE RECEIVABLE
During the year, Cominar entered into a loan agreement with a related party, a company indirectly owned by the Dallaire family,
regarding the realization of a future real estate development project on Laurier Boulevard, in Québec City, adjacent to the Complexe
Jules-Daillaire. The underlying land is subject to a mortgage guarantee in favour of Cominar. As at December 31, 2014, the
mortgage receivable of $8.3 million bears interest at bankers’ acceptance rate plus 250 basis points, payable monthly. The
timetable, construction plans and the terms of Cominar’s interest in this project are to be finalized. Once that is done, Cominar can
choose either to have the mortgage receivable repaid in full or to participate in the construction of the project. The joint agreement
provides Cominar with the opportunity to contribute to the realization of this large-scale project, in Québec City, while reducing the
risk associated with the development of such project.
REAL ESTATE OPERATIONS
OCCUPANCY RATE
As at December 31, 2014, the average occupancy rate of our properties was 94.4%, compared to 93.1% as at December 31, 2013.
The average occupancy rate for each of our three operating segments has increased in 2014.
OCCUPANCY RATE TRACK RECORD
December 31, 2014 December 31, 2013 December 31, 2012 December 31, 2011 December 31, 2010
Operating segment (%)
Office
Retail
Industrial and mixed-use
Portfolio total
93.5
94.7
94.9
94.4
93.3
94.2
92.4
93.1
94.3
94.6
93.1
93.9
95.2
96.9
91.8
93.6
95.2
96.1
92.3
93.8
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LEASING ACTIVITY
The following table summarizes Cominar’s leasing activity in 2014:
LEASING ACTIVITY
Leases that matured in 2014
Number of tenants
Leasable area (sq. ft.)
Average net rent ($/sq. ft.)
Renewed leases
Number of tenants
Leasable area (sq. ft.)
Average net rent ($/sq. ft.)
Growth in the average net rent (%)
Retention rate (%)
New leases
Number of tenants
Leasable area (sq. ft.)
Average net rent ($/sq. ft.)
Office
Retail
Industrial
and mixed-use
376
1,123,000
12.20
263
2,324,000
6.00
Total
1,023
5,879,000
10.21
277
877,000
12.71
3.6
78.1
79
151,000
15.78
189
741
1,585,000
4,366,000
6.19
4.2
68.2
9.99
2.4
74.3
113
1,092,000
5.45
312
1,741,000
8.67
384
2,432,000
13.33
275
1,904,000
11.91
1.3
78.3
120
498,000
13.60
During 2014, 5.9 million square feet of leasable area expired. Of these leasable areas, 74.3% were renewed and new leases were
also signed, representing 1.7 million square feet of leasable area.
The following table presents growth in the average net rent for leases that were renewed in 2014:
GROWTH IN THE AVERAGE NET RENT OF RENEWED LEASES
Operating segment
Office
Retail
Industrial and mixed-use
Portfolio total
2014
%
1.3
3.6
4.2
2.4
2013
%
7.6
4.9
4.0
5.9
Average net rent of renewed leases rose in all our operating segments by a growth rate of 2.4% overall: 1.3% (office), 3.6% (retail),
and 4.2% (industrial and mixed-use).
Given the current demand for rental space across all our geographic markets, we remain confident of renewing a substantial portion
of our leases maturing in the coming year at a higher rate per square foot.
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2014 annual report
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
2015
2016
2017
2018
2019
2,590,000
2,232,000
1,762,000
1,942,000
1,577,000
12.89
17.3
14.20
14.9
14.14
11.8
13.54
13.0
13.48
10.5
1,348,000
1,304,000
1,671,000
2,138,000
1,489,000
17.15
10.5
18.48
10.2
15.21
13.0
13.17
16.6
16.20
11.6
3,506,000
2,240,000
2,280,000
2,053,000
1,076,000
5.70
20.1
5.91
12.9
6.87
13.1
6.55
11.8
6.88
6.2
7,444,000
5,776,000
5,713,000
6,133,000
4,142,000
10.28
16.5
11.95
12.8
11.55
12.6
11.07
13.6
12.74
9.2
The following table summarizes information on leases as at December 31, 2014:
Office
Retail
Industrial and mixed-use
Portfolio average
Average remaining
lease term
Average leased area
per tenant
Average net rent/
sq. ft.
years
3.9
4.1
4.3
4.2
sq. ft.
7,000
4,100
13,300
7,000
$
13.88
15.17
6.09
11.30
Cominar has a broad, highly diversified retail client base consisting of about 6,100 tenants occupying an average of approximately
7,000 square feet each. Our top three tenants, Public Works Canada, Société québécoise des infrastructures, and Canadian
National Railway Company account for approximately 5.1%, 3.5% and 3.2% of our net operating income, respectively, arising from
several leases with staggered maturities. The stability and quality of our cash flows from operating activities are enhanced by the
fact that approximately 9.7% come from government agencies representing approximately 106 leases.
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The following table presents our top ten tenants by percentage of net operating income:
Tenant
Public Works Canada
Société québécoise des infrastructures
Canadian National Railway Company
Ericsson Canada
Jean Coutu Group
Scotiabank
Target Canada
Shoppers Drug Mart
Cinram Canada
Co-op Atlantic
Total
% of net
operating income
5.1
3.5
3.2
1.3
1.3
1.0
0.9
0.8
0.7
0.7
18.5
ISSUED AND OUTSTANDING UNITS
During fiscal 2014, Cominar closed a public offering of 15,131,700 units at a price of $19.00 per unit. The total net proceeds to
Cominar stood at $275.4 million, net of the underwriters’ fee and costs relating to the offering. Cominar also closed a private offering
of 13,158,000 units at a price of $19.00 per unit. The total net proceeds to Cominar were $249.9 million, net of the costs relating to
the offering.
For the years ended December 31
2014
2013
Units issued and outstanding, beginning of year
127,051,095
124,349,608
+ Public offering
+ Private placement
+ Exercise of options
+ Distribution reinvestment plan
+ Conversion of deferred units
+ Conversion of convertible debentures
Units issued and outstanding, end of year
Additional information
Issued and outstanding units
Outstanding unit options
Potential units – conversion of convertible debentures
Deferred units and restricted units
15,131,700
13,158,000
92,000
3,247,589
8,811
—
—
—
456,500
2,243,459
—
1,528
158,689,195
127,051,095
February 23, 2015
167,125,233
8,907,300
10,032,140
167,958
RELATED PARTY TRANSACTIONS
Michel Dallaire and Alain Dallaire, trustees and members of Cominar’s management team, exercise indirect control over Dallaire
Group Inc. and Dalcon Inc. During fiscal 2014, Cominar recorded $160 thousand in net rental income from Dalcon Inc. and Dallaire
Group Inc. Cominar also incurred costs of $13.6 million for leasehold improvements performed by Dalcon Inc. on its behalf and
costs of $60.0 million for the construction and development of investment properties.
Cominar recorded $306 thousand in interest income from Dallaire Group Inc. during the year.
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2014 annual report
Cominar and Dallaire Group Inc. each owns 50% of two joint ventures for a total net investment by Cominar of $41.6 million. The
business objective of these two joint ventures is the ownership, management and development of its real estate projects.
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 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 consolidated financial
statements. Based on these evaluations, the President and Chief Executive Officer and the Executive Vice-President and Chief
Financial Officer concluded that the DC&P were effective as at the end of the year ended December 31, 2014, and that the current
controls and procedures provide reasonable assurance that material information about Cominar, including its consolidated
subsidiaries, is made known to them during the period in which these reports 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 Cominar concluded that ICFR was effective as at the end of
the year ended December 31, 2014, and, more specifically, that the financial reporting is reliable and that the consolidated 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 2014 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"). The accounting policies and application methods thereof have been consistently applied throughout each of
the years presented in these consolidated financial statements.
b) Basis of preparation
Consolidation
The consolidated financial statements include the accounts of Cominar and its wholly-owned subsidiaries as well as its
proportionate share of the assets, liabilities, revenues and expenses of the property it co-owned until January 2014.
Use of estimates, assumptions and judgments
The preparation of financial statements in accordance with IFRS requires management to make estimates, judgments and
assumptions that affect the reported amounts of assets and liabilities in the financial statements. Those estimates, assumptions
and judgments also affect the disclosure of contingencies as 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
judgments, 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
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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 investment properties acquisition does not correspond to the definition of a business,
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 judgment, 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.
• Joint arrangements
Upon the creation of a joint arrangement, Cominar’s management reviews its classification criteria to determine if it is a joint
venture to be accounted for using the equity method of if it is a joint operation for which we must recognize the proportionate
share of assets, liabilities, revenues and expenses. Cominar holds 50% of the voting rights of its joint ventures. It has joint
control over them since, under the contractual agreements, unanimous consent is required from all parties to the agreements
for all relevant activities. The joint arrangements in which Cominar is involved are structured so that they provide Cominar
rights to these entities’ net assets. Therefore, these arrangements are presented as joint ventures and are accounted for
using the equity method.
• 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. Its useful life is indefinite. 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. These assumptions are based on Cominar’s
past experience as well as on external sources of information. 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 used in 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 fair value of financial instruments.
2014 annual report
• 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.
• 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 should reflect market conditions at the end
of the reporting period. Fair value is time-specific as at 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.
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Concerning properties under development and land held for future development, Cominar capitalizes all direct costs incurred for
their acquisition, development 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.
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.
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 on the balance sheet and are subsequently amortized against rental revenue from investment properties 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 uses the following classifications for its financial instruments:
− Bond investments are classified as investments held until their maturity date. They are initially measured at fair value and are
then measured at amortized cost using the effective interest rate method.
− Cash and cash equivalents, the mortgage receivable 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, 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.
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 payable, 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 the operating and acquisition credit facility are recorded as assets under prepaid expenses and other
assets and are amortized on a straight-line basis over the term of the 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 for 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
2014 annual report
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 vesting 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. 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
allocations from its income for tax purposes. Therefore, no provision for income taxes is required.
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, “Operating segments,” 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 POLICY
During fiscal 2014, Cominar applied the following policy:
IFRS 11, “Joint Arrangements”
In accordance with IFRS 11, “Joint Arrangements,” Cominar accounts for its investments in joint ventures using the equity method.
Under this method, the investment in joint ventures is carried on the consolidated balance sheet at cost plus post-acquisition
changes in Cominar’s share of the joint ventures’ net assets, less distributions received. Cominar’s net income and comprehensive
income then reflects the share of net income and comprehensive income from investment in joint ventures.
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FUTURE ACCOUNTING POLICY CHANGES
IFRS 15, “Revenue from Contracts with Customers”
In May 2014, the International Accounting Standards Board (“IASB”) issued IFRS 15, “Revenue from Contracts with Customers.”
IFRS 15 specifies how and when to recognize revenue and requires entities to provide users of financial statements with more
informative, relevant disclosures. This standard will supersede IAS 18, “Revenue,” IAS 11, “Construction Contracts,” and a number
of revenue-related interpretations. Application of the standard will be mandatory for all IFRS reporters, and will apply to nearly all
contracts with customers: the main exceptions are leases, financial instruments and insurance contracts. IFRS 15 will be effective
for annual periods beginning on or after January 1, 2017, with earlier adoption permitted. Cominar is currently assessing the impacts
of adopting this new standard on its consolidated financial statements.
IFRS 9, “Financial Instruments”
In July 2014, the IASB published its final version of IFRS 9, which will replace IAS 39, “Financial Instruments: Recognition and
Measurement.” The new standard includes guidance on recognition and derecognition of financial assets and financial liabilities,
impairment and hedge accounting. IFRS 9 will be effective for annual periods beginning on or after January 1, 2018, with early
adoption permitted. Cominar is currently assessing the impacts of adopting this new standard on its consolidated financial
statements.
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 Cominar’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. The Canadian economy is currently being adversely impacted by low and falling oil prices. 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.
2014 annual report
The unsecured revolving credit facility in the stated amount of $550.0 million is repayable in August 2017. As at December 31, 2014,
$457.3 million were drawn down under the unsecured revolving credit facility.
Cominar is exposed to debt financing risks, including the risk that the existing mortgages payable secured by its properties and the
unsecured revolving credit facility 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 minimize this risk as regards the mortgages payable, Cominar tries to appropriately structure the
timing of the renewal of significant tenant leases on its respective properties in relation to the refinancing timing of the related
mortgages.
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. Recently, due to difficult conditions in the Canadian retail environment, certain
retailers have announced the closure of their stores, including Jacob, Mexx, Bikini Village Group and Target Canada, which are
tenants of the REIT. Other retailers may follow. 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 favourable 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 level of general economic activity and competition for tenants by other properties. Costs
may need to be incurred to make improvements or repairs to property as required by a new tenant. The failure to rent unleased
space 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, mortgage 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 cash available for distributions.
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 disposed of at other locations. 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 by private plaintiffs or governmental agencies. Cominar is not currently aware of any material non-
compliance, liability or other claim in connection with any of our properties, nor is Cominar aware of any environmental condition
with respect to any properties that it believes would involve material expenditures by Cominar.
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Pursuant to Cominar’s operating policies, Cominar shall obtain or review a Phase I environmental audit of each immovable property
which will be acquired.
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 seek in the future, immovable property investments similar to those desired by
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 distributable income. 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.
LIMIT ON ACTIVITIES
In order to maintain its status as a “mutual fund trust” under the 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.
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,
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.
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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 operation and decrease
the amount of cash available for distribution.
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, Cominar’s 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, but not limited to, 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. Unlike fixed-income securities, there is no obligation of
Cominar 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 rating
The credit rating assigned by DBRS to Cominar and the unsecured debentures 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 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 sets 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 indebtedness 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 actual cash 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.
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 debt obligations of Cominar are replaced with debt that has less favourable terms or if
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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 condition 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 documents 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 documents 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 document 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 mortgage 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 a REIT 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 distribution reinvestment plan, the equity 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
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
2014 annual report
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 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 unitholder does not hold a share of a body corporate. As holders of units, 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 shareholders of corporation in various circumstances.
Status for tax purposes
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 holders and to deduct such distributions and allocations of
its income for tax purposes.
Certain of Cominar’s subsidiaries are subject to tax on their taxable income under the Tax Act and the Taxation Act (Québec).
A special tax regime applies to trusts that are considered specified investment flow-through (“SIFT”) entities as well as those
individuals who invest in SIFTs. Under the SIFT rules, a SIFT is subject to tax in a manner similar to corporations on income from
business carried on in Canada and on income (other than taxable dividends) or capital gains from “non-portfolio properties” (as
defined in the Tax Act), at a combined federal/provincial tax rate similar to that of a corporation.
The SIFT rules apply unless (among other exceptions not applicable here) the trust qualifies as a “real estate investment trust” for
the year. If Cominar fails to qualify for the Real Estate Investment Trust exception, Cominar will be subject to the tax regime
introduced by the SIFT rules.
Management believes that Cominar currently meets all the criteria required to qualify for the Real Estate Investment Trust exception,
as per the Real Estate Investment Trust exception currently in effect. As a result, management believes that the SIFT rules do not
apply to Cominar. 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 Real Estate
Investment Trust exception for the remainder of fiscal 2015 and any other subsequent year.
RISK FACTORS RELATED TO THE OWNERSHIP OF DEBT SECURITIES
Absence of market for debt 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 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 condition, historic financial performance and
future prospects.
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64
Credit risk and prior ranking indebtedness: absence of covenant protection
The likelihood that holders of convertible debentures will receive 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 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.
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.
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2014 annual report
CONSOLIDATED
FINANCIAL
STATEMENTS
COMINAR REAL ESTATE INVESTMENT TRUST
December 31, 2014
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2014 annual report
64
2014 annual report66 MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING The accompanying consolidated financial statements of Cominar Real Estate Investment Trust (“Cominar”) were prepared by management, which is responsible for the integrity and fairness of the information presented, including those amounts that must be based on estimates and judgments. These consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”). The financial information in our MD&A is consistent with these consolidated financial statements. 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, 2014, the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer of Cominar had an evaluation carried out, under their direct supervision, of the effectiveness of the controls and procedures used for the preparation of reports 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 identification and management of risks, and advising the trustees on auditing matters and financial reporting issues. PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., a partnership of independent professional chartered accountants appointed by the unitholders of Cominar upon the recommendation of the Audit Committee and the Board of Trustees, have performed an independent audit of the Consolidated Financial Statements as at December 31, 2014 and their report follows. The auditors have full and unrestricted access to the Audit Committee to discuss their audit and related findings. MICHEL DALLAIRE, Eng. President and Chief Executive Officer GILLES HAMEL, CPA, CA Executive Vice President and Chief Financial Officer Québec City, February 23, 2015
65
2014 annual report67 INDEPENDENT AUDITOR’S REPORT TO THE UNITHOLDERS OF COMINAR REAL ESTATE INVESTMENT TRUST We have audited the accompanying consolidated financial statements of Cominar Real Estate Investment Trust and its subsidiaries, which comprise the consolidated balance sheets as at December 31, 2014 and December 31, 2013 and the consolidated statements of unitholders' equity, comprehensive income and cash flows for the years then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management’s responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting 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. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected 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 evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Cominar Real Estate Investment Trust and its subsidiaries as at December 31, 2014 and December 31, 2013, and their financial performance and their cash flows for the years then ended in accordance with International Financial Reporting Standards. PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.1 February 23, 2015 Place de la Cité, Tour Cominar 2640 Laurier Boulevard, Suite 1700 Québec City, Québec G1V 5C2 Canada "PwC" refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an Ontario limited liability partnership. 1CPA auditor, CA, public accountancy permit No. A104882 68
CONSOLIDATED BALANCE SHEETS
[in thousands of Canadian dollars]
ASSETS
Investment properties
Income properties
Properties under development
Land held for future development
Investments in joint ventures
Goodwill
Mortgage receivable
Accounts receivable
Prepaid expenses and other assets
Bond investments
Cash and cash equivalents
Total assets
LIABILITIES
Mortgages payable
Debentures
Convertible debentures
Bank borrowings
Accounts payable and accrued liabilities
Deferred tax liabilities
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.
Note
December 31, 2014
December 31, 2013
$
$
5
6
6
7
8
9
10
11
12
13
14
15
16
24
7,697,823
53,150
5,654,825
53,414
68,788
54,547
7,819,761
41,633
166,971
8,250
52,044
10,025
4,826
5,909
5,762,786
—
166,971
—
43,230
8,203
6,398
9,742
8,109,419
5,997,330
1,968,919
1,945,627
183,081
457,323
133,728
10,310
4,698,988
3,410,431
8,109,419
1,794,830
994,824
181,768
105,697
84,285
10,546
3,171,950
2,825,380
5,997,330
ROBERT DESPRÉS
Chairman of the Board of Trustees
MICHEL DALLAIRE
Trustee
66
2014 annual report68 CONSOLIDATED BALANCE SHEETS [in thousands of Canadian dollars] Note December 31, 2014 December 31, 2013 $ $ ASSETS Investment properties Income properties 5 7,697,823 5,654,825 Properties under development 6 53,150 53,414 Land held for future development 6 68,788 54,547 7,819,761 5,762,786 Investments in joint ventures 7 41,633 — Goodwill 8 166,971 166,971 Mortgage receivable 9 8,250 — Accounts receivable 10 52,044 43,230 Prepaid expenses and other assets 10,025 8,203 Bond investments 11 4,826 6,398 Cash and cash equivalents 5,909 9,742 Total assets 8,109,419 5,997,330 LIABILITIES Mortgages payable 12 1,968,919 1,794,830 Debentures 13 1,945,627 994,824 Convertible debentures 14 183,081 181,768 Bank borrowings 15 457,323 105,697 Accounts payable and accrued liabilities 16 133,728 84,285 Deferred tax liabilities 24 10,310 10,546 Total liabilities 4,698,988 3,171,950 UNITHOLDERS’ EQUITY Unitholders’ equity 3,410,431 2,825,380 Total liabilities and unitholders’ equity 8,109,419 5,997,330 See accompanying notes to the consolidated financial statements. Approved by the Board of Trustees. ROBERT DESPRÉS MICHEL DALLAIRE Chairman of the Board of Trustees Trustee
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, 2014
2,251,974
1,533,573
(966,563)
4,972
1,424
2,825,380
Net income and comprehensive income
Distributions to unitholders
Unit issues
Unit issue expenses
Long-term incentive plan
17
17
17
—
—
600,001
(12,460)
—
199,453
—
—
—
658
—
(203,375)
—
—
—
—
—
—
—
774
—
—
—
—
—
199,453
(203,375)
600,001
(12,460)
1,432
Balance as at December 31, 2014
2,839,515
1,733,684
(1,169,938)
5,746
1,424
3,410,431
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
Redemption of convertible debentures
17
17
17
—
—
54,254
(106)
—
—
254,969
—
—
—
—
312
—
(182,977)
—
—
—
—
—
—
—
—
2,345
—
—
—
—
—
—
(312)
254,969
(182,977)
54,254
(106)
2,345
—
Balance as at December 31, 2013
2,251,974
1,533,573
(966,563)
4,972
1,424
2,825,380
See accompanying notes to the condensed financial statements.
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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
Finance charges
Trust administrative expenses
Share of net income from investment in joint ventures
Change in fair value of investment properties
Transaction costs – business combination
Restructuring charges
Gain on disposal of a subsidiary
Gains on disposal of investment properties
Other revenues
Income before income taxes
Income taxes
Note
2014
$
2013
$
739,884
662,053
151,199
163,270
14,136
328,605
132,407
149,010
12,426
293,843
411,279
368,210
19
7
5
4
20
21
22
23
(149,385)
(12,977)
10,918
(33,951)
(26,667)
—
—
—
—
(131,811)
(12,063)
—
17,150
—
(1,062)
8,010
3,370
4,906
199,217
256,710
24
236
(1,741)
Net income and comprehensive income
199,453
254,969
Basic net income per unit
Diluted net income per unit
See accompanying notes to the consolidated financial statements.
25
25
1.47
1.45
2,03
1,98
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2014 annual report
CONSOLIDATED STATEMENTS
OF CASH FLOWS
71
For the years ended December 31
[in thousands of Canadian dollars]
OPERATING ACTIVITIES
Net income
Adjustments for:
Excess of share of net income over distributions received from the investment
in joint ventures
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 income taxes
Recognition of leases on a straight-line basis
Changes in non-cash working capital items
Cash flows provided by operating activities
INVESTING ACTIVITIES
Acquisitions of and investments in income properties
Acquisitions of and investments in properties under development and land held
for future development
Cash consideration paid upon business combination
Mortgage receivable
Return of capital from a joint venture – net proceeds from a mortgage payable
Net proceeds from disposal of a portion of the investment in a joint venture
Contribution to the capital of a joint venture - cash
Net proceeds from the sale of investment properties
Maturity of bond investments
Acquisitions of other assets
Cash flows used in investing activities
FINANCING ACTIVITIES
Distributions to unitholders
Bank borrowings
Mortgages payable
Net proceeds from issue of debentures
Net proceeds from issue of units
Redemption of convertible debentures
Repayments of balances at maturity of mortgages payable
Monthly repayments 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 received from a joint venture
See accompanying notes to the consolidated financial statements.
Note
2014
$
2013
$
7
17
21
22
24
5
26
5
6
4
9
7
7
7
22
17
12
12
199,453
254,969
(9,443)
33,951
(5,320)
1,414
—
—
(236)
(3,626)
12,837
229,030
—
(17,150)
(6,033)
2,155
(8,010)
(3,370)
1,741
(4,101)
(17,441)
202,760
(357,225)
(305,753)
(49,254)
(58,220)
(1,615,359)
(8,250)
53,116
20,150
(7,606)
2,000
1,496
(1,741)
—
—
—
—
—
10,351
15,069
(1,643)
(1,962,673)
(340,196)
(142,517)
351,626
248,596
949,610
526,470
—
(150,819)
(53,156)
1,729,810
(3,833)
9,742
5,909
(137,665)
(279,484)
288,809
545,572
8,418
(109,986)
(136,940)
(50,188)
128,536
(8,900)
18,642
9,742
158,339
139,799
7
—
1,475
12
—
69
2014 annual report
72
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
For the years ended December 31, 2014 and 2013
[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 Québec. As at December 31, 2014, Cominar
owned and managed a real estate portfolio of 563 high-quality properties that covered a total area of 45.3 million square feet in
Québec, 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, Québec City, Québec, Canada, G1V 0C1. 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 23, 2015.
2) SIGNIFICANT ACCOUNTING POLICIES
a) Basis of presentation
Cominar’s consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards ("IFRS"). The accounting policies and application methods thereof have been consistently applied throughout each of
the years presented in these consolidated financial statements.
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-owned until January 2014.
Use of estimates, assumptions and judgments
The preparation of financial statements in accordance with IFRS requires management to make estimates, judgments and
assumptions that affect the reported amounts of assets and liabilities in the financial statements. Those estimates, assumptions
and judgments also affect the disclosure of contingencies as 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
judgments, 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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2014 annual report
• 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 investment properties acquisition does not correspond to the definition of a business, 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 judgment, 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.
• Joint arrangements
Upon the creation of a joint arrangement, Cominar’s management reviews its classification criteria to determine if it is a joint
venture to be accounted for using the equity method of if it is a joint operation for which we must recognize the proportionate
share of assets, liabilities, revenues and expenses. Cominar holds 50% of the voting rights of its joint ventures. It has joint
control over them since, under the contractual agreements, unanimous consent is required from all parties to the agreements
for all relevant activities. The joint arrangements in which Cominar is involved are structured so that they provide Cominar
rights to these entities’ net assets. Therefore, these arrangements are presented as joint ventures and are accounted for
using the equity method.
• 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. Its useful life is indefinite. 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. These assumptions are based on Cominar’s
past experience as well as on external sources of information. 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 used in 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 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.
73
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2014 annual report
74
• 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 should reflect market conditions at the end
of the reporting period. Fair value is time-specific as at 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.
Concerning properties under development and land held for future development, Cominar capitalizes all direct costs incurred for
their acquisition, development 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.
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2014 annual report
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.
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 on the balance sheet and are subsequently amortized against rental revenue from investment properties 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 uses the following classifications for its financial instruments:
− Bond investments are classified as investments held until their maturity date. They are initially measured at fair value and are
then measured at amortized cost using the effective interest rate method.
− Cash and cash equivalents, the mortgage receivable 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, 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.
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 payable, 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 the operating and acquisition credit facility are recorded as assets under prepaid expenses and other
assets and are amortized on a straight-line basis over the term of the 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 for 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.
75
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2014 annual report
76
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 vesting 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. 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
allocations from its income for tax purposes. Therefore, no provision for income taxes is required.
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, “Operating segments,” 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 ACCOUNTING POLICY AND FUTURE ACCOUNTING
POLICY CHANGES
a) New accounting policy
In 2014, Cominar applied the following accounting policy:
IFRS 11, “Joint Arrangements”
In accordance with IFRS 11, “Joint Arrangements,” (“IFRS 11”) Cominar accounts for its investments in joint ventures using the
equity method. Under this method, the investments in joint ventures is carried on the consolidated balance sheet at cost plus
post-acquisition changes in Cominar’s share of the joint ventures’ net assets, less distributions received. Cominar’s net income
and comprehensive income then reflects the share of net income and comprehensive income from investment in joint ventures.
b) Future accounting policy changes
IFRS 15, “Revenue from Contracts with Customers”
In May 2014, the International Accounting Standards Board (“IASB”) issued IFRS 15, “Revenue from Contracts with Customers.”
IFRS 15 specifies how and when to recognize revenue and requires entities to provide users of financial statements with more
informative, relevant disclosures. The standard will supersede IAS 18, “Revenue,” IAS 11, “Construction Contracts,” and a
number of revenue-related interpretations. Application of the standard will be mandatory for all IFRS reporters, and will apply to
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2014 annual report
77
nearly all contracts with customers: the main exceptions are leases, financial instruments and insurance contracts. IFRS 15 will
be effective for annual periods beginning on or after January 1, 2017, with earlier adoption permitted. Cominar is currently
assessing the impacts of adopting this new standard on its consolidated financial statements.
IFRS 9, “Financial Instruments”
In July 2014, the IASB published its final version of IFRS 9, which will replace IAS 39, “Financial Instruments: Recognition and
Measurement.” The new standard includes guidance on recognition and derecognition of financial assets and financial liabilities,
impairment and hedge accounting. IFRS 9 will be effective for annual periods beginning on or after January 1, 2018, with early
adoption permitted. Cominar is currently assessing the impacts of adopting this new standard on its consolidated financial
statements.
4) ACQUISITIONS
ACQUISITIONS OF INVESTMENT PROPERTIES REALIZED IN 2014
On February 26, 2014, Cominar acquired a portfolio of 11 office properties for a purchase price of $229,333, net of working capital
adjustments of $11,167, with $128,282 paid in cash and $101,051 by assuming mortgages payable. The acquired portfolio consists
of four office properties located in the Greater Toronto Area, with a total leasable area of 782,000 square feet, and seven office
properties located in Montréal, with a total leasable area of 407,000 square feet.
On February 27, 2014, Cominar acquired five retail properties with a total leasable area of 121,000 square feet located in the
Greater Montréal Area for a purchase price of $26,075 paid in cash. As part of this transaction, Cominar also acquired a vacant lot
for $2,125 paid cash.
On May 1, 2014, Cominar acquired a portfolio of 14 mainly industrial and mixed-use properties in the Greater Toronto Area, with a
total leasable area of approximately 1,184,000 square feet, for a purchase price of $100,720, net of working capital adjustments of
$3,530, with $63,256 paid in cash and $37,464 by assuming mortgages payable.
On October 8, 2014, Cominar acquired a retail property with a leasable area of 17,000 square feet located in Québec City, for a
purchase price of $2,175 paid in cash.
These transactions were accounted for as an asset acquisition. 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 at the acquisition date of acquired net assets:
Income properties
Land held for future development
Mortgages payable
Working capital adjustments
Total cash consideration paid for these acquisitions
Fair value
$
375,334
2,125
(140,849)
(14,697)
221,913
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2014 annual report
78
76
BUSINESS COMBINATION REALIZED IN 2014
On September 30 and October 17, 2014, Cominar acquired 35 income properties, one property under development and land held
for future development from Ivanhoé Cambridge Inc. (“Ivanhoé Cambridge”), a real estate subsidiary of La Caisse de dépôt et
placement du Québec. This acquisition consists of:
• 31 retail properties, of which 2.5 million square feet are located in the Montréal area, 1.6 million square feet are located in the
Québec City area, and 734,000 square feet in the Greater Toronto area.
• 3 office properties, of which 271,000 square feet are located in the Québec City area, 263,000 square feet are located in the
Greater Toronto area, and 64,000 square feet are located in the Montréal area.
• 1 industrial property of 99,000 square feet located in the Québec City area.
• 1 office property currently in development, with a leasable area of 118,000 square feet located in the Montréal area.
Cominar accounted for this acquisition using the acquisition method, in accordance with IFRS 3. The financial results of these
properties have been included in the consolidated financial statements since the date of acquisition. As part of this transaction,
Cominar incurred transaction costs of $26,667. In accordance with IFRS, transaction costs incurred as part of a business
combination must be expensed as incurred.
The following table summarizes the estimated fair value on the date of purchase of the net assets acquired:
Income properties
Property under development
Land held for future development
Working capital
Total cash consideration paid for the acquisition
Preliminary acquisition
price allocation
$
1,595,115
28,200
8,000
(15,956)
1,615,359
The cash consideration paid for the acquisition was financed by the net proceeds of a public offering of units of $275,328, by the
issuance of two series of unsecured debentures of $548,031, by a private placement with Ivanhoé Cambridge of $249,940, by two
new mortgages payable totalling $250,000, by the temporary use of an unsecured bridge loan facility and finally by a portion of the
unsecured revolving operating and acquisition credit facility.
The purchase price allocation at fair value of the assets acquired and liabilities assumed has not been finalized and is subject to
change.
The amount of operating revenues and net income and comprehensive income arising from the business combination, excluding
transaction costs, since their dates of acquisition, were $47,469 and $17,509 respectively for the year ended December 31, 2014.
Assuming that the acquisition occurred on January 1, 2014, Cominar’s operating revenues and net income and comprehensive
income would amount to approximately $882,721 and $246,700, respectively, for the year ended December 31, 2014.
ACQUISITIONS OF INVESTMENT PROPERTIES REALIZED IN 2013
On January 31, 2013, Cominar acquired a portfolio of 18 industrial properties primarily located on the South Shore of Montréal and
one office property located in Montréal, 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 for $1,400.
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.
2014 annual report
On March 21, 2013, Cominar acquired an office building located in Fredericton 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 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 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 as an asset acquisition. 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 as at the acquisition date of acquired net assets:
Income properties
Land held for future development
Mortgages payable
Debt
Total cash consideration paid for these acquisitions
5)
INCOME PROPERTIES
For the years ended December 31
Note
Fair value
$
227,500
21,900
(43,733)
(6,998)
198,669
2014
$
2013
$
5,654,825
5,294,984
Balance, beginning of year
Business combination
Acquisitions and related costs
Fair value adjustment(1)
Capital costs
Disposals
Transfer of an income property as contribution to a joint venture
Transfer from properties under development
Change in initial direct costs
Recognition of leases on a straight-line basis
4
7
6
1,595,115
386,387
(33,951)
123,456
(2,000)
(97,850)
58,353
9,862
3,626
—
235,667
17,150
114,162
(28,621)
—
9,366
8,016
4,101
Balance, end of year
7,697,823
5,654,825
(1) The total fair value adjustment was related to income properties held as at the year-end date.
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 2014, management re-evaluated its real estate portfolio and
determined that a decrease of $33,951 [increase of $17,150 in 2013] was necessary to adjust the carrying value of its investment
properties to their fair value.
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2014 annual report
80
Method and key assumptions
Internally valued investment properties have been measured using the following method and key assumptions:
Capitalized net operating income method – Under this method, capitalization rates are applied to standardized net operating income
in order to comply with current valuation standards. The standardized 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 different 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:
For the years ended December 31
Category
Office properties
Retail properties
Industrial and mixed-use properties
Total
2014
Capitalization rate
2013
Capitalization rate
Range
Weighted average
Range
Weighted average
5.3% - 9.0%
5.8% - 10.0%
5.8% - 11.0%
6.3%
6.6%
7.2%
6.6%
5.5% - 9.0%
6.0% - 10.0%
6.0% - 10.0%
6.4%
6.7%
7.3%
6.7%
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 decrease in the applied capitalization rate for its entire real estate portfolio would
result in a decrease or increase respectively of approximately $118,000 in the fair value of its investment properties in 2014
[$85,000 in 2013].
6) PROPERTIES UNDER DEVELOPMENT AND LAND HELD FOR
FUTURE DEVELOPMENT
For the years ended December 31
Note
Balance, beginning of year
Business combination
Acquisitions and related costs
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
78
4
5
2014
$
107,961
36,200
2,157
28,248
5,725
(58,353)
—
121,938
53,150
68,788
2013
$
53,234
—
20,500
45,321
3,400
(9,366)
(5,128)
107,961
53,414
54,547
2014 annual report
81
7) JOINT ARRANGEMENTS
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
95%-owned in undivided co-ownership by Cominar and 5% by a company indirectly owned by members of the Dallaire family who
also are trustees and members of Cominar’s management team (“Dallaire Co”), 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 to balance out the investment of each
owner to a 50% interest in Société en commandite Complexe Jules-Dallaire.
Under IFRS 11, this building held in partnership is considered as a joint venture and is accounted for under the equity method,
whereas previously, the investment in the first phase of this building was considered as an investment in a joint operation under
which Cominar recorded its share of assets, liabilities, comprehensive income and cash flows.
JOINT VENTURES
The following table summarizes the information on the joint ventures:
Joint venture
Address
City/province
Ownership interest
Société en commandite Complexe Jules-Dallaire
2820 Laurier Boulevard
Société en commandite Bouvier-Bertrand
1020 Bouvier Street
Québec, Québec
Québec, Québec
50%
50%
The business objective of these joint ventures is the ownership, management and development of real estate projects.
The following table summarizes the financial information of the investments in these joint ventures accounted for under the equity
method in accordance with IFRS 11:
For the year ended December 31, 2014
Investments in joint ventures, beginning of year
Contribution to the capital of a joint venture – transfer of an income property to a joint venture
Disposal of a portion of the investment in a joint venture
Share of net income from investment in a joint venture
Liquidities distributed by a joint venture
Contribution to the capital of a joint venture – cash
Return of capital from a joint venture – net proceeds from a mortgage payable
Investments in joint ventures, end of year
The following tables summarize the cumulative financial information of the joint ventures:
Income property
Property under development
Land held for future development
Assets
Mortgage payable bearing interest at a fixed rate of 4.79% and maturing in February 2024
Other liabilities
Total of net asset
50% investments in joint ventures
$
—
97,850
(20,150)
10,918
(1,475)
7,606
(53,116)
41,633
As at December 31, 2014
$
173,438
5,612
12,026
1,480
(104,654)
(4,636)
83,266
41,633
79
2014 annual report
82
For the year ended December 31, 2014
Operating revenues
Operating expenses
Net operating income
Change in fair value of investment properties
Finance charges
Net income and comprehensive income
Share of net income from the 50% investment in joint ventures
$
17,596
7,750
9,846
16,890
(4,900)
21,836
10,918
OWNERSHIP INTEREST IN A CO-OWNED INVESTMENT PROPERTY IN 2013
Cominar’s share (95%) of the assets, liabilities, revenues, expenses and cash flows of the first phase of the co-owned Complexe
Jules-Dallaire up to January 2014 was as follows:
December 31, 2014
December 31, 2013
Investment property
Other assets
Liabilities
For the year 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
8) GOODWILL
$
—
—
—
2014
$
160
81
79
(667)
—
—
$
97,850
3,565
2,583
2013
$
11,799
5,717
6,082
5,123
(3,009)
(4,490)
Balance as at December 31, 2013 and 2014
98,073
51,212
17,686
166,971
Office
properties
$
Retail
properties
Industrial and
mixed-use properties
$
$
Total
$
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. As at December 31, 2014 and 2013, goodwill was not
impaired.
80
2014 annual report
83
9) MORTGAGE RECEIVABLE
During the year, Cominar entered into a loan agreement with a related party, a company indirectly owned by the Dallaire family,
regarding the realization of a future real estate development project on Laurier Boulevard, in Québec City, adjacent to the Complexe
Jules-Dallaire. The underlying land is subject to a mortgage guarantee in favour of Cominar. As at December 31, 2014, the
mortgage receivable of $8,250 bears interest at bankers’ acceptance rate plus 250 basis points, payable monthly. The timetable,
construction plans and the terms of Cominar’s interest in this project are to be finalized. Once that is done, Cominar can either
choose to have the mortgage receivable repaid in full or to contribute to the construction of the project.
10) ACCOUNTS RECEIVABLE
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, 2014
December 31, 2013
$
$
35,091
(6,741)
29,397
(5,111)
28,350
398
1,775
6,790
14,731
52,044
7.35%
24,286
1,406
1,701
6,358
9,479
43,230
7.87%
11) BOND INVESTMENTS
Cominar holds Government of Canada bonds and mortgage bonds with a weighted average interest rate of 2.97% 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 in 2015 and 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 those of 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 $4,639 as at December 31, 2014 [$6,028 as at December 31, 2013].
81
2014 annual report
%
5.23
4.56
—
5.02
5.06
2014
Total
$
327,320
193,028
220,090
440,730
27,989
739,305
84
12) MORTGAGES PAYABLE
The following table presents changes in mortgages payable for the years indicated:
For the years ended December 31
2014
2013
Weighted
average
contractual rate
Weighted
average
contractual rate
Balance, beginning of year
Net mortgages payable, contracted or assumed
Monthly repayments of principal
Repayments of balances at maturity
Plus:
Fair value adjustments on assumed mortgages payable
Less: Deferred financing costs
Balance, end of year
Contractual maturity dates of mortgages payable are as follows:
For the years ending December 31
$
%
$
1,763,922
388,515
(53,156)
(150,819)
1,948,462
23,729
(3,272)
1,968,919
5.06
3.94
—
5.89
4.79
1,651,202
633,319
(50,188)
(470,411)
1,763,922
33,342
(2,434)
1,794,830
Repayment of
principal
$
Balances at
maturity
$
2015
2016
2017
2018
2019
2020 and thereafter
53,948
46,619
39,917
31,727
23,734
106,949
302,894
273,372
146,409
180,173
409,003
4,255
632,356
1,645,568
1,948,462
Mortgages payable are primarily secured by immovable hypothecs on investment properties with a carrying value of $4,003,083
[$3,541,017 as at December 31, 2013]. They bear annual contractual interest rates ranging from 2.69% to 7.75% [2.77% to 7.75%
as at December 31, 2013], representing a weighted average contractual rate of 4.79% as at December 31, 2014 [5.06% as at
December 31, 2013], and are renewable at various dates from February 2015 to January 2039. As at December 31, 2014, the
weighted average effective interest rate was 4.17% [4.31% as at December 31, 2013].
As at December 31, 2014, all mortgages payable were at fixed rates. Some of the mortgages payable include covenants, with which
Cominar was in compliance as at December 31, 2014.
82
2014 annual report
13) DEBENTURES
The following table presents characteristics of outstanding debentures as at December 31, 2014:
Series 1
Series 2
Series 3
Series 4
Series 5
Series 6
Series 7
Series 8
Total
Date of issuance
Contractual
interest rate
Effective
interest rate
Maturity date
Nominal value as at
December 31, 2014
June 2012(1)
December 2012(2)
May 2013
July 2013(3)
October 2013
September 2014
September 2014
December 2014
%
4.274
4.23
4.00
4.941
3.323(4)
2.37(5)
3.62
4.25
%
4.32
4.37
4.24
4.81
3.52
2.50
3.70
4.34
June 2017
December 2019
November 2020
July 2020
October 2015
September 2016
June 2019
December 2021
$
250,000
300,000
100,000
300,000
250,000
250,000
300,000
200,000
1,950,000
(1) Re-opened in September 2012 ($125,000).
(2) Re-opened in February 2013 ($100,000).
(3) Re-opened in January 2014 ($100,000) and March 2014 ($100,000).
(4) Variable interest rate fixed quarterly for the period from October 10, 2014 to January 9, 2015 (corresponding to the CDOR three-month rate plus 205 basis points).The rate
for the period from January 10, 2015 to April 9, 2015 was fixed at 3.35%.
(5) Variable interest rate fixed quarterly for the period from December 22, 2014 to March 21, 2015 (corresponding to the CDOR three-month rate plus 108 basis points).
Cominar used the net proceeds from the sale of the 2014 issues to repay its unsecured revolving operating and acquisition credit
facility, the temporary unsecured bridge-loan facility, and finance part of the acquisition of an investment property portfolio from
Ivanhoé Cambridge.
The following table presents changes in debentures for the years indicated:
For the years ended December 31
2014
2013
Weighted
average
contractual rate
Weighted
average
contractual rate
$
%
$
Balance, beginning of year
1,000,000
4.06
450,000
Issues
Less: Deferred financing costs
Plus: Net premium and discount on issuance
Balance, end of year
950,000
1,950,000
(8,079)
3,706
1,945,627
3.70
3.89
550,000
1,000,000
(5,578)
402
994,824
%
4.25
3.91
4.06
85
83
2014 annual report
86
14) CONVERTIBLE DEBENTURES
The
following
December 31, 2014:
table presents
features of
the subordinate unsecured convertible debentures outstanding as at
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
25.00
N/A
September 2014 September 2016
June 2013
June 2015
June 2017
Nominal
value as at
December
31, 2014
$
99,786
86,250
186,036
The following table presents the changes in debentures for the years indicated:
For the years ended December 31
2014
2013
Weighted
average rate
Weighted
average rate
Balance, beginning of year
186,036
6.15
296,056
$
%
$
Holders’ option conversion
Redemption
Less
Deferred financing costs
Equity component
Balance, end of year
—
—
186,036
(2,544)
(411)
183,081
—
—
6.15
(34)
(109,986)
186,036
(3,644)
(624)
181,768
%
6.02
6.21
5.80
6.15
On July 8, 2013, Cominar called all its then outstanding Series C convertible debentures bearing interest at 5.80% and totalling
$109,986.
15) BANK BORROWINGS
As at December 31, 2014, Cominar had a revolving unsecured operating and acquisition credit facility of up to $550,000 which will
mature in August 2017. This facility bears interest at prime rate plus 70 basis points or at bankers’ acceptance rate plus 170 basis
points. This credit facility contains certain restrictive clauses, with which Cominar was in compliance as at December 31, 2014.
84
2014 annual report
16) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
87
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, 2014 December 31, 2013
$
$
7,557
3,455
16,084
99,234
7,398
133,728
14,751
5,185
12,734
47,484
4,131
84,285
17) 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.
The following table presents the various sources of unit issues for the years indicated:
For the years ended December 31
2014
Units
2013
$
Units
$
Units issued and outstanding, beginning of year
127,051,095
2,251,974
124,349,608
2,197,826
Public offering
Private placement
Exercise of options
Distribution reinvestment plan
Conversion of convertible debentures
Conversion of deferred units
Reversal of contributed surplus
15,131,700
13,158,000
92,000
3,247,589
—
8,811
—
275,428
249,940
1,426
60,534
—
—
213
—
—
456,500
2,243,459
1,528
—
—
—
—
8,514
45,216
34
—
384
Units issued and outstanding, end of year
158,689,195
2,839,515
127,051,095
2,251,974
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, 2014, options to purchase 9,221,200 units were outstanding.
The following table shows characteristics of outstanding options at year-end:
Date of grant
December 21, 2010
December 15, 2011
August 24, 2012
August 31, 2012
December 19, 2012
August 5, 2013
December 17, 2013
December 16, 2014
Graded
vesting method
Maturity date
Exercise
price $
Outstanding
options
Exercisable
options
As at December 31, 2014
33 1/3%
33 1/3%
50%
50%
33 1/3%
50%
33 1/3%
33 1/3%
December 21, 2015
December 15, 2016
August 24, 2017
August 31, 2017
December 19, 2017
August 5, 2018
December 17, 2018
December 16, 2019
20.93
21.80
24.55
23.93
22.70
20.09
17.55
18.07
797,600
1,052,400
150,000
300,000
1,745,200
150,000
2,366,500
2,659,500
9,221,200
797,600
1,052,400
150,000
300,000
1,199,100
150,000
862,300
36,000
4,547,400
85
2014 annual report
As at December 31, 2014, the average weighted contractual life of outstanding options was 3.4 years [3.7 years as at December 31,
2013].
The following table presents changes in option balances for the years indicated:
For the years ended December 31
2014
2013
Options
Weighted average
exercise price
Options
Weighted average
exercise price
Outstanding, beginning of year
Exercised
Granted
Forfeited
Expired
Outstanding, end of year
7,835,500
(92,000)
2,659,500
(378,200)
(803,600)
9,221,200
$
20.36
15.51
18.07
19.17
20.13
19.81
5,979,500
(456,500)
2,784,900
(443,200)
(29 200)
7,835,500
Exercisable options, end of year
4,547,400
21.22
3,546,900
$
21.63
18.68
17.69
22.44
21.23
20.36
21.50
Restricted units
Restricted units consist of allocations whose values, for the participant, rise or 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 vested 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.
The following table presents changes in restricted unit balances for the years ended December 31, 2014 and 2013:
For the years ended December 31
2014
2013
Outstanding, beginning of year
Granted
Accrued distributions
Outstanding, end of year
Exercisable restricted units, end of year
Deferred units
530
536
81
1,147
—
—
500
30
530
—
Deferred units consist of allocations whose values, for the participant, rise or 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 vested 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.
88
86
2014 annual report
The following table presents changes in deferred unit balances for the years ended December 31, 2014 and 2013:
For the years ended December 31
2014
2013
89
Outstanding, beginning of year
Exercised
Granted
Accrued distributions
Forfeited
Outstanding, end of year
Exercisable deferred units, end of year
Unit-based compensation
38 280
(8 811)
45 261
6 142
—
80 872
12 926
—
—
36,308
2,251
(279)
38,280
6,964
The compensation expense related to the options granted in 2014 and 2013 was calculated using the Black-Scholes option pricing
model based on the following assumptions:
Date of grant
Volatility(1)
Exercise
price(2)
Weighted
average return
Weighted average
risk-free
interest rate
Per unit
weighted average
fair value
August 5, 2013
December 17, 2013
December 16, 2014
14.98%
12.98%
11.67%
$
20.09
17.55
18.07
7.39%
8.45%
8.38%
1.53%
1.33%
1.15%
$
0.62
0.28
0.20
(1) The volatility is estimated by considering the historical volatility of Cominar’s units’ price.
(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 2014 was calculated based on the market price
of Cominar units on the grant date, which was $18.58.
The overall compensation expense for the fiscal year was $1,414 [$2,155 in 2013].
A maximum of 12,756,610 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
2014
$
203,375
1.453
2013
$
182,977
1.440
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, 2014, 3,247,589 units [2,243,459 in 2013] were issued for a total net consideration
of $60,534 [$45,216 in 2013] under this plan.
87
2014 annual report
90
18) 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
19) FINANCE CHARGES
For the years ended December 31
Interest on mortgages payable
Interest on debentures
Interest on convertible debentures
Interest on bank borrowings
Net amortization of premium and discount 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, 2014
$
445,945
1,222,690
801,642
2014
$
2013
$
3,886
3,431
2014
$
91,684
54,512
11,445
5,379
(575)
6,242
(11,946)
(7,356)
149,385
2013
$
88,670
29,492
14,804
10,113
(183)
6,861
(13,680)
(4,266)
131,811
(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, 2014, Cominar wrote off $501 in deferred financing costs for the secured revolving
operating and acquisition credit facility that has been replaced. Cominar also wrote off $1,021 in deferred financing costs paid for the
unsecured bridge loan used for the acquisition of an investment property portfolio from Ivanhoé Cambridge, which has been repaid
on December 18, 2014, then cancelled.
During the fiscal year ended December 31, 2013, Cominar wrote off $984 in deferred financing costs following the redemption of
convertible Series C debentures.
20) RESTRUCTURING CHARGES IN 2013
For the year ended December 31, 2013, Cominar incurred charges of $1,062 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.
88
2014 annual report
21) DISPOSAL OF A SUBSIDIARY IN 2013
On May 22, 2013, Cominar sold its interest in Hardegane Investments Limited, which held 100% of the shares of Dyne Holdings
Limited (“Dyne”), to Homburg International Limited, 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.
22) DISPOSAL OF INVESTMENT PROPERTIES
On May 7, 2014, Cominar sold a commercial building in Kentville, in Nova Scotia, for $2,000. Cominar recorded no gain or loss on
this disposal.
On January 9, 2013, Cominar sold a commercial building in the Montréal area for $3,500. Cominar recorded no gain or loss on this
disposal.
On June 28, 2013, Cominar sold an office building located in Lévis, in Québec, 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
Montréal, Québec. 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, in British Columbia, for $4,000.
Cominar recorded no gain or loss on this disposal.
23) OTHER REVENUES IN 2013
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 on the balance sheet, and the excess was recorded as revenue in the results for 2013.
24) 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 allocations
from its income for tax purposes. Therefore, no provision for income taxes is required.
Taxation of distributions of specified investment flow-through (“SIFT”) trusts and exception for real estate investment
trusts (“REITs”)
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.
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, 2014, Cominar believes that it met all of these conditions and qualified
as a REIT. As a result, the SIFT trust tax rules for 2014 did not apply to Cominar and no deferred tax provision, be it an asset or
91
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2014 annual report
92
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.
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
2014
$
2013
$
199,217
256,710
27.60%
26.99%
54,976
69,272
(55,310)
(67,741)
98
(236)
210
1,741
The increase in the combined Canadian statutory tax rate, compared to 2013, 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:
As at December 31
Deferred tax assets to be recovered after more than 12 months
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, beginning of year
Income tax expense recorded in the statement of income
Deferred tax liability on acquisition of income properties
Balance, end of year
90
2014
$
94
276
370
2013
$
164
247
411
(10,680)
(10,957)
(10,310)
(10,546)
2014
$
10,546
(236)
—
10,310
2013
$
8,805
1,741
—
10,546
2014 annual report
Changes in deferred income tax assets and liabilities during the year, excluding the offsetting of balances within the same tax
jurisdiction, were as follows:
93
Deferred tax assets
Balance as at January 1, 2013
Origination and reversal of timing differences included in profit or loss
Balance as at December 31, 2013
Origination and reversal of timing differences included in profit or loss
Balance as at December 31, 2014
Deferred tax liabilities
Balance as at January 1, 2013
Origination and reversal of timing differences included in profit or loss
Balance as at December 31, 2013
Origination and reversal of timing differences included in profit or loss
Balance as at December 31, 2014
Mortgages
payable
Tax losses
$
$
145
19
164
(70)
94
174
73
247
29
276
Total
$
319
92
411
(41)
370
Income properties
$
(9,124)
(1,833)
(10,957)
277
(10,680)
25) PER UNIT CALCULATION BASIS
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 periods indicated:
For the periods ended December 31
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
2014
Units
2013
Units
136,024,611
125,369,581
179,753
150,092
10,671,791
10,496,193
146,876,155
136,015,866
The calculation of the diluted weighted average number of units outstanding does not take into account the effect of the
conversion in units of 4,856,200 outstanding options for the year ended December 31, 2014 [4,698,183 options in 2013] since the
exercise price of the options, including the unrecognized portion of the related compensation expense, is higher than the average
price of the units. The calculation of diluted net income per unit also includes the elimination of interest at the effective rate on the
convertible debentures of $13,191 in interest on convertible debentures for the year ended December 31, 2014 [$14,804 in 2013].
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2014 annual report
26) SUPPLEMENTAL CASH FLOW INFORMATION
Changes in non-cash working capital items were as follows:
For the years ended December 31
Note
Prepaid expenses and other assets
Accounts receivable
Accounts payable and accrued liabilities
Deferred tax liabilities
Other information
Acquisitions of investment properties through assumption of mortgages payable
Unpaid acquisitions of and investments in investment properties
Contribution to the capital of a joint venture – transfer of an income property to a joint venture
Transfer from properties under development to income properties
7
5, 6
2014
$
5,036
(8,650)
16,451
—
12,837
138,515
13,539
97,850
58,353
2013
$
1,540
785
(19,754)
(12)
(17,441)
43,733
19,960
—
9,366
27) RELATED PARTY TRANSACTIONS
During fiscal 2014 and 2013, Cominar entered into transactions with companies controlled by unitholders who are also officers of
Cominar 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
Investment properties – Capital costs
Proportionate share of net income from the investment in joint ventures
7
Net rental revenue from investment properties
Interest income
For the years ended December 31
Investments in joint ventures
Mortgage receivable
Note
7
9
2014
$
73,612
10,918
160
306
2014
$
41,633
8,250
2013
$
69,717
—
148
—
2013
$
—
—
94
92
2014 annual report
28) 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
Contribution to the retirement savings plans
Long term incentive plan
Total
2014
$
4,218
131
1,071
5,420
2013
$
4,067
142
949
5,158
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 retain at least five percent (5%) of the units purchased until he has the multiple
corresponding to his base salary.
29) CAPITAL MANAGEMENT
Cominar manages its capital to ensure that capital resources are sufficient for its operations and development, while maximizing
returns for unitholders by adequately maintaining the debt ratio. Cominar’s capital consists of cash and cash equivalents, long-term
debt, bank borrowings and unitholders’ equity.
Cominar’s capitalization is 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 capitalization is as follows:
As at December 31
Cash and cash equivalents
Mortgages payable
Debentures
Convertible debentures
Bank borrowings
Unitholders’ equity
Total capitalization
Overall debt ratio(1)
Debt ratio (excluding convertible debentures)
Interest coverage ratio(2)
2014
$
(5,909)
1,968,919
1,945,627
183,081
457,323
3,410,431
2013
$
(9,742)
1,794,830
994,824
181,768
105,697
2,825,380
7,959,472
5,892,757
56.1%
53.9%
2.67:1
51.2%
48.2%
2.70:1
(1) The overall debt ratio is equal to the total of cash and cash equivalents, bank borrowings, mortgages payable, debentures and convertible debentures divided by 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.
95
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2014 annual report
96
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,
2014, Cominar had maintained a debt ratio (excluding convertible debentures) of 53.9%.
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, 2014, the interest coverage ratio was 2.67:1, reflecting Cominar’s capacity to meet its debt-related obligations.
Capital management objectives remain unchanged from the previous period.
30) 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 changes in circumstances that caused the
transfer. There was no transfer between hierarchy levels in fiscals 2014 and 2013.
The fair value of cash and cash equivalents, mortgages receivable, accounts receivable, accounts payable and accrued liabilities
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:
Level
December 31, 2014
December 31, 2013
Carrying
amount
$
Fair
value
$
Carrying
amount
$
Fair
value
$
3
3
2
2
2
1
7,697,823
7,697,823
5,654,825
5,654,825
68,788
68,788
54,547
54,547
4,826
4,831
6,398
6,409
1,968,919
2,033,907
1,794,830
1,816,702
1,945,627
2,004,418
183,081
191,121
994,824
181,768
990,054
193,727
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
Debentures
Convertible debentures
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2014 annual report
31) 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.
Cominar mitigates credit risk via segment and geographic portfolio diversification [Note 32], 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 6,100 tenants occupying an average area of
approximately 7,000 square feet each. The three largest tenants account for approximately 5.1%, 3.5% and 3.2% 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 9.7% 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, mortgage
receivable, bond investments and cash and cash equivalents 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 borrowings 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 10, and accounts payable and accrued liabilities
do not bear interest.
Mortgages payable, debentures, except Series 5 and Series 6 debentures, and convertible debentures bear interest at fixed rates.
Cominar is exposed to interest rate fluctuations mainly due to bank borrowings, the mortgage receivable and Series 5 and Series 6
debentures, which bear interest at variable rates.
A 25-basis-point increase or decrease in the average interest rate on variable interest debts during the period, assuming that all
other variables are held constant, would have resulted in a $1,358 increase or decrease in Cominar’s net income for the year ended
December 31, 2014 [$661 in 2013].
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 capitalization, continuously monitoring current and projected cash flows and adhering to
its capital management policy [Note 29].
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2014 annual report
98
Undiscounted contractual cash flows (interest and principal) related to financial liabilities as at December 31, 2014 are as follows:
Mortgages payable
Debentures(1)
Convertible debentures
Bank borrowings
Accounts payable and accrued liabilities(2)
Cash flows
Under
one year
$
414,565
325,816
11,445
13,765
126,330
One to
five years
$
Over
five years
$
1,104,899
1,318,501
199,961
479,118
—
896,534
635,823
—
—
—
Note
12
13
14
15
16
(1) The rate used for the variable rate debentures is the CDOR three-month rate plus 205 basis points (Series 5) and 108 basis points (Series 6) as at year-end.
(2) Excludes consumption taxes and other non-financial liabilities
32) 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, that is, 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.
For the year ended December 31, 2014, the segments include Cominar’s proportionate share in joint ventures. The Joint ventures
columns reconcile the segment information including the proportionate share in assets, liabilities, revenues and charges, to the
information presented in these consolidated financial statements, of which the investments in joint ventures are accounted for using
the equity method.
The following tables provide financial information on these three property types:
For the years ended
December 31, 2014
Rental revenue from investment
properties
Net operating income
Share of net income from investment in
joint ventures
December 31, 2013
Rental revenue from investment
properties
Net operating income
Office
properties
Retail
properties
Industrial and
mixed-use
properties
Cominar’s
proportionate
share Joint ventures
Consolidated
financial
statements
$
$
$
$
$
$
382,147
207,084
213,597
118,590
152,938
90,528
748,682
416,202
(8,798)
(4,923)
739,884
411,279
—
$
—
$
—
$
—
$
353,640
190,611
163,306
91,342
145,107
86,257
662,053
368,210
10,918
10,918
$
—
—
$
662,053
368,210
As at December 31, 2014
$
$
$
$
$
$
Office
properties
Retail
properties
Industrial and
mixed-use
properties
Cominar’s
proportionate
share
Joint ventures
Consolidated
financial
statements
Income properties
Investments in joint ventures
As at December 31, 2013
3,331,189
3,085,880
1,367,473
7,784,542
—
$
—
$
—
$
—
$
(86,719)
41,633
$
7,697,823
41,633
$
Income properties
2,838,495
1,582,215
1,234,115
5,654,825
—
5,654,825
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2014 annual report
98
Undiscounted contractual cash flows (interest and principal) related to financial liabilities as at December 31, 2014 are as follows:
Mortgages payable
Debentures(1)
Convertible debentures
Bank borrowings
Accounts payable and accrued liabilities(2)
Cash flows
Under
one year
$
414,565
325,816
11,445
13,765
126,330
One to
five years
$
1,104,899
1,318,501
199,961
479,118
—
Over
five years
896,534
635,823
$
—
—
—
Note
12
13
14
15
16
(1) The rate used for the variable rate debentures is the CDOR three-month rate plus 205 basis points (Series 5) and 108 basis points (Series 6) as at year-end.
(2) Excludes consumption taxes and other non-financial liabilities
32) 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, that is, 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.
For the year ended December 31, 2014, the segments include Cominar’s proportionate share in joint ventures. The Joint ventures
columns reconcile the segment information including the proportionate share in assets, liabilities, revenues and charges, to the
information presented in these consolidated financial statements, of which the investments in joint ventures are accounted for using
the equity method.
The following tables provide financial information on these three property types:
For the years ended
December 31, 2014
Rental revenue from investment
properties
Net operating income
Share of net income from investment in
joint ventures
December 31, 2013
Rental revenue from investment
properties
Net operating income
Office
properties
Retail
properties
Industrial and
Cominar’s
mixed-use
proportionate
Consolidated
financial
properties
share Joint ventures
statements
$
$
$
$
$
$
382,147
207,084
213,597
118,590
152,938
90,528
748,682
416,202
(8,798)
(4,923)
739,884
411,279
—
$
—
$
—
$
—
$
353,640
190,611
163,306
91,342
145,107
86,257
662,053
368,210
10,918
10,918
$
—
—
$
662,053
368,210
As at December 31, 2014
$
$
$
$
$
$
Office
properties
Retail
properties
Industrial and
mixed-use
properties
Cominar’s
proportionate
share
Joint ventures
Consolidated
financial
statements
Income properties
Investments in joint ventures
As at December 31, 2013
3,331,189
3,085,880
1,367,473
7,784,542
—
$
—
$
—
$
—
$
(86,719)
41,633
$
7,697,823
41,633
$
Income properties
2,838,495
1,582,215
1,234,115
5,654,825
—
5,654,825
99
33) COMMITMENTS
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 $72,262, are as follows:
For the years ending December 31
2015
2016
2017
2018
2019
2020 and thereafter
Total
$
556
562
600
600
600
22,508
Cominar entered into an agreement for the acquisition of a portfolio of 3 industrial properties representing approximately
$34,500 million in value (subject to adjustments), and approximately 697,000 square feet in total leasable area, located in the
greater Montréal area. This acquisition is subject to customary closing requirements. There can be no assurance that this
acquisition will be completed.
Cominar has no significant contractual commitments other than those arising from its long-term debt and payments due under
emphyteutic leases on land held for income properties.
34) SUBSEQUENT EVENTS
On January 19 and February 18, 2015, Cominar declared a distribution of $0.1225 per unit for each of these two months.
On January 30, 2015, Cominar closed a public offering of 7,901,650 units including a full exercise of the over-allotment option at a
price of $19.65 per unit. The total net proceeds received by Cominar amounted to $148,757, after deducting the underwriters’ fee
and costs related to the offering. The net proceeds from this offering were used to repay the unsecured revolving credit facility.
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2014 annual report
99
Total
$
556
562
600
600
600
22,508
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 $72,262, are as follows:
33) COMMITMENTS
For the years ending December 31
2015
2016
2017
2018
2019
2020 and thereafter
Cominar entered into an agreement for the acquisition of a portfolio of 3 industrial properties representing approximately
$34,500 million in value (subject to adjustments), and approximately 697,000 square feet in total leasable area, located in the
greater Montréal area. This acquisition is subject to customary closing requirements. There can be no assurance that this
acquisition will be completed.
Cominar has no significant contractual commitments other than those arising from its long-term debt and payments due under
emphyteutic leases on land held for income properties.
34) SUBSEQUENT EVENTS
On January 19 and February 18, 2015, Cominar declared a distribution of $0.1225 per unit for each of these two months.
On January 30, 2015, Cominar closed a public offering of 7,901,650 units including a full exercise of the over-allotment option at a
price of $19.65 per unit. The total net proceeds received by Cominar amounted to $148,757, after deducting the underwriters’ fee
and costs related to the offering. The net proceeds from this offering were used to repay the unsecured revolving credit facility.
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2014 annual report
100
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)
Corporate Director
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
KEY OFFICERS
Michel Dallaire, Eng.
President and Chief Executive Officer
Sylvain Cossette, B.C.L.
Executive Vice-President and Chief Operating Officer
Gilles Hamel, CPA, CA
Executive Vice-President and Chief Financial Officer
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, Acquisitions
Jean Laramée, Eng.
Executive Vice-President, Development
Michael Racine
Executive Vice-President, Leasing – Office and Industrial
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 Nomination and Governance Committee
(4) Member of the Investment Committee
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2014 annual report
UNITHOLDERS INFORMATION
101
UNITHOLDERS DISTRIBUTION
REINVESTMENT PLAN
Cominar Real Estate Investment Trust offers unitholders
the opportunity to participate in its Unitholders 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
Québec City, Québec, Canada G1V 0C1
Tel.: 418-681-8151
Fax: 418-681-2946
Toll-free: 1-866-COMINAR
Email: info@cominar.com
Website: www.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
Montréal, Québec, 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 2014, 82.05% of the distributions made by
Cominar to unitholders were tax deferred.
LEGAL COUNSEL
Davies Ward Phillips & Vineberg LLP
AUDITORS
PricewaterhouseCoopers LLP
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2014 annual report
cominar.com