INSPIRED
BY PEOPLE.
INSPIRING
THE INDUSTRY.
2017 Annual Report
COMINAR REAL ESTATE INVESTMENT TRUST
Fiscal Year Ended December 31, 2017
MESSAGE
TO UNITHOLDERS
3
Alban D’Amours, CM, GOQ, LH, Fellow Adm.A.
Sylvain Cossette, B.C.L.
EMBRACING COMINAR 2.0
As an integral part of our evolution into “Cominar 2.0”, we
wish to highlight three important and recent achievements:
› Stabilization of our balance sheet through our agree-
ment to sell $1.14 billion of non-core properties;
› Refocusing our strategy on our core Québec markets
where we enjoy competitive advantages; and
› Revitalization of our Board of Trustees to reflect the
continuously evolving real estate landscape.
In December of 2017, we announced the sale of $1.14 billion
of non-core properties to Slate Acquisitions Inc., allowing
us to exit the Atlantic Provinces, Western Canada and the
Greater Toronto Area. Closing is scheduled for late March,
with the proceeds to be used to repay debt, including appro-
ximately $50 million of debt incurred to fund unit buybacks
under our normal course issuer bid. This is a significant
and important step in stabilizing our balance sheet.
This sale will allow us to narrow our focus to our strong
leadership position in Montreal and Québec City. The
Montreal economy is favorable and vibrant, with strengthe-
ning fundamentals, a deep pool of educated workers, and
a competitive cost environment. With over 50% of our
continuing portfolio located in Montreal, we are eager to
participate in the growth of Canada’s second largest city as
major infrastructure projects, including the REM (Réseau
express métropolitain), further propel the success of this
major urban centre.
Québec City provides both stability and growth opportunities,
with our office and industrial portfolio occupancy at 95.5%.
Like Montreal, Québec City stands to further prosper as it
refines its urban development strategy and mass transit
orientation. Cominar is well positioned to capture future
benefits in our capital region through our leading strategi-
cally positioned portfolio.
5
We plan to review our portfolio looking for both further
opportunities to sell assets, as well as opportunities to
enhance and further intensify our properties to increase
NOI and surface value. Included in our portfolio are many
well-located urban assets with significant potential for value
creation, including our flagship property Gare Centrale de
Montréal, one of Canada’s most important transportation
infrastructure assets.
As an important element of “Cominar 2.0”, we are also pleased
to welcome three new board members with deep real estate
and capital markets experience, enhancing our best in class
board as we navigate a dynamic real estate landscape.
› Paul Campbell joins our board March 8, with over
40 years of leading real estate experience in Canada and
abroad in the office and retail segments. Mr. Campbell has
held numerous board, senior leadership and advisory
positions with several large real estate organizations,
including Kingsett, 20 Vic, SITQ, Bentall, Revenue Proper-
ties, Maron Properties, Oxford, Campeau Corporation,
Trilea and Bramalea. Mr. Campbell was awarded the
NAIOP Lifetime Achievement Award for his contribu-
tions to the real estate industry.
• René Tremblay joins our board March 8, with over
35 years of global real estate experience, primarily
in retail and strong named executive officer (NEO)
experience. Former Chairman and President of Taubman
Asia, the Asian arm of U.S. NYSE listed Taubman Centres,
a leader in the shopping centre industry, Mr. Tremblay
was responsible for driving Taubman’s shopping center
expansion in the Asia-Pacific region. Prior to Taubman,
Mr. Tremblay was CEO of Ivanhoe Cambridge and has
great familiarity with many of Cominar’s core retail centres.
• Heather Kirk, CFA, will stand for election at our
upcoming annual meeting of unitholders. She has over
20 years of capital markets experience in the Canadian
REIT sector, most recently as Managing Director at
BMO from 2013 to 2018, where as an equity analyst
she covered several Canadian REITS including Cominar.
Prior to joining BMO, Mrs. Kirk was at National Bank
as an equity analyst from 2009 to 2013, and as an
investment banker from 2002 to 2009, with coverage
over Cominar.
In 2017 we recorded write-downs totalling $643 million,
including $616 million of reductions to fair value of
investment properties (of which $288 million related to
the sale of non-core properties to Slate) and a $27 million
de-recognition of goodwill. At year-end, our debt ratio was
57.4%, dropping to 50.1% pro forma the closing of the Slate
transaction.
Our path to recovery has also required that we take difficult
but necessary steps with respect to our debt and payout
levels. In order to ensure that Cominar has the required
financial flexibility to pursue its plan, we have significantly
reduced our distributions. At the same time, we are also
re-evaluating our capital plans. These measures aim
to restore our financial flexibility and protect our ability to
make distributions on a sustainable level, which remains
at the heart of our purpose.
Much ink has been spilled on the dynamic retail sector.
As we evolve our retail properties alongside retailers
adapting to an omni-channel environment, we are investing
in the mall experience, and introducing new retailers, features
and amenities to attract shoppers. At our flagship Rockland
shopping centre, innovative initiatives such as bringing a
Mandy’s food truck within our mall and our Womance pop
up road show are examples of our dynamic retail group
differentiating our offering. At the same time, we are
exploring intensification and redevelopment opportunities to
grow revenue streams and bring additional shopper traffic,
such as office, residential and hotel uses to drive value
from our portfolio of large format urban shopping centres.
Cominar has also started an important transition towards
the internalization of certain construction activities and the
diversification of its use of outside construction suppliers.
As part of this transition, the use of Groupe Dallaire for
construction services will be reduced in an orderly
manner, over an approximate 12-month transition period.
As part of this transition, Cominar expects to integrate
certain dedicated elements of Groupe Dallaire’s workforce
in Montreal at no additional cost to the REIT, with a view
of ensuring continuity and best addressing our needs and
those of our clients in the most cost-effective manner.
In 2017, we also undertook a significant modernization
of our governance practices, including executive com-
pensation. Our Board has further enhanced Cominar’s
governance by resolving to update our contract of trust
with current best-in-class practices, including introducing
rights and remedies in favour of unitholders consistent
with those available to shareholders of a corporation
pursuant to the Canada Business Corporations Act. These
changes are to be presented to unitholders for adoption
at our upcoming annual meeting of unitholders.
We take this opportunity to thank all employees, as well
as our trustees for their contribution over the last year. Our
Board and management have been engaged in an intensive
review of Cominar’s governance and strategy. Actions
and steps taken are the result of thoughtful analysis both
internally and externally in consultation with financial and
legal advisors and with various stakeholders including unit-
holders. We thank our unitholders for their constructive
dialogue and input. Finally, we wish to thank Michel Dallaire
and Ghislaine Laberge for their contributions to Cominar
since 1998.
Alban D’Amours, CM, GOQ, LH, Fellow Adm.A.
Chairman of the Board of Trustees
Sylvain Cossette, B.C.L.
President and Chief Executive Officer
07
STARTING
A NEW CHAPTER
OF OUR STORY
INSPIRED BY THE COLLECTIVE INTELLIGENCE
OF OUR PEOPLE
As a society, we are currently in the midst of a technological,
social, environmental and economic upheaval that will
rewrite the future and usher in radical changes in every
facet of our consumption.
This is why, building on our strengths, we have been hard
at work formulating our vision of the future of our industry
and the real estate profession. More than a hundred people
throughout the organization have been called upon to
help integrate this vision into our culture and our business
solutions. We are building Cominar 2.0 and this stimulating
project drives us all deeply.
This vision involves redefining Cominar’s role, raising
the bar for the real estate profession and repositioning the
company’s brands to drive deeper engagement, secure
a unique position on the market, maximize appeal and
foster agility. It underpins the very concept of the role
of leasable space and serves as the impetus. Behind the
creation of “lifestyle spaces” for our clients throughout
our portfolio – be they in shopping centres, office buildings
or industrial and mixed-use properties.
In shaping the future, we will have to strive to gain a better
grasp of the core needs and expectations of the clients
of tomorrow. Many avenues are already beginning to open
up in this regard and point to opportunities that will arise
from the changes that are currently taking place. The time
has come for us to accelerate the emergence of a new,
more sustainable and more prosperous economic model.
And Cominar is well poised to assume an influential,
forwardlooking leadership position in the business world.
ment where teamwork is encouraged and valued. These
spaces emblematic of the creative, contemporary and
vibrant spirit that embodies Cominar’s new vision. They
have been redesigned from A to Z with a focus on coope-
ration, flexibility and technology – a clear look forward
to the workplace of tomorrow. They boast a variety of
different spaces, most of which are open plan, with
height-adjustable, for innovation, health and productivity.
Every member of our workforce plays a unique and valuable
role in putting us at the vanguard of our industry. These
collaborative spaces create a sense of cohesion and
boost the performance of our multidisciplinary teams.
The talent and passion that guide our people are driving
us forward and redefining our relationships with our
clients. We are tapping into the entrepreneurial mindset
that is part of our DNA to rethink how our employees,
partners, clients and users interact.
The approach embraced by our teams every single day is
underpinned by three pillars: agility, creativity and connec-
tion. The diversification of our office, retail and industrial/
mixed-use assets gives us a strategic edge. Located in
robust markets such as Montreal, Quebec City and Ottawa,
they pave the way to unmatched opportunities to create
value by developing and repositioning our properties in
their respective markets. Our vision is built around users’
experience, with a focus on providing them with compelling
environments that meet their needs over the long term.
We are now starting a new chapter in the remarkable story
of our company. And I have every confidence that our
people will enable us to secure a favourable position in
this constantly changing industry.
Accordingly, we have invested in setting up collaborative,
stimulating offices in Montreal, Quebec City and Ottawa
so that our employees can grow and thrive in an environ-
Sylvain Cossette
President and Chief Executive Officer
09
agility
creativity
connection
Cominar Offices
AGILITY
BOLDNESS / ADAPTABILITY / FLEXIBILITY
Agility is more than the capacity to adapt quickly to the
ever-shifting real estate landscape. It is a way of doing
business and an integral part of our processes and our
vision here at Cominar.
Agility is what allows us to adjust our business model
to meet the evolving needs of our industry and cater to
our clients more and more effectively.
It impels us to see and think differently, and stay nimble
in our methods and our overall approach. These are the
foundations for our ambition and our determination to
lead the way in our sector.
This core value manifests itself every day in several vital
aspects of our client offering:
›
›
›
The diversification of our portfolio, which enables us
to optimize our flexible business solutions in line with
the individual needs and aspirations of our clients.
Our ability to adapt our services and roll out initiatives
that keep us one step ahead of the changes in our
industry.
Our commitment to thinking outside the box and
embracing a collaborative management style that
brings teams together in a hands-on way.
Agility, boldness, adaptation and flexibility – these are key
drivers of our ongoing success that will continue to shape
our outlook for the years and decades to come.
Cominar Offices
11
Cominar Offices
″The best way to predict the future is
to create it yourself.″
Peter Diamandis
Engineer, physician and entrepreneur
Founder and Executive Chairman, XPRIZE Foundation
13
″If you can dream it, you can do it.″
Walt Disney
Founder, The Walt Disney Company
Cominar Offices
Cominar Offices
CREATIVITY
PASSION / INNOVATION / CURIOSITY
In business, creativity is what pushes us to see things from
another angle and to keep reinventing ourselves. It fuels
our curiosity of the unknown and sparks our passion for
coming up with new ways to look at our industry and deliver
experiences that are anything but the same old same old.
Our world is changing at breakneck speed, and our proper-
ties have to keep pace with it. But we are able to tap into
the boundless creativity and steadfast commitment of
our people at every level of our organization to develop
tomorrow’s solutions today.
How can we push the innovation envelope to reach out
to current and prospective clients? How can we foster
continuous improvement methods that engage each
and every one of our stakeholders? How can we make
technological innovation a strategic and operational priority?
How can we fundamentally redefine what an office space, an
industrial property or a shopping centre is – and what it does?
This journey toward something new, something more,
something better, motivates us to embrace novel ideas with
an open mind and an exceptional spirit of resourcefulness
to offer solutions that woo and wow our clients in new and
unexpected ways.
Creativity is the renewable energy of our time, an invisible
force that spurs us to excellence, and inspires us to live the
present and dream the future.
15
CONNECTION
APPROACHABILITY / COLLABORATION / RESPECT
What if we redefined the concept of teamwork and took it to a whole
new level?
That’s precisely what’s happening at Cominar: by working together
in an environment where connection, dialogue and respect matter,
we are building the future of our company and reshaping the way
we do business.
Opening the door to innovation, to sharing knowledge and collabo-
rating with others – this is the cornerstone of the philosophy that
guides and inspires our people every single day.
This coming together has been the impetus behind revamping our
work structure to foster an environment where personal excellence
and team cohesion are at the heart of the innovative solutions we
bring to the table. The end goal is to develop practices adapted to
the new realities of the business world and leverage the talents of
every member of our team in order to better serve the interests
of our clients, investors and partners.
At Cominar, we’re about more than real estate. We are committed
to growing and developing in an ecosystem where relationships
nourish our prosperity over the long term. These relationships with
our clients, our suppliers, our people and society as a whole play
a critical role in our success.
Our world is changing a little every day. And it’s up to us to put our
collective spirit of creativity and innovation to work to change with it.
Cominar Offices
Cominar Offices
″Coming together is a beginning; keeping together is progress;
working together is success.″
Henry Ford
Early 20th century industrialist
Founder, Ford Motor Company
PROPERTY PORTFOLIO
17
P O P U P
RETAIL
The Cominar brand is intrinsically linked to market-leading
retail properties in prime locations. Our portfolio is made
up of shopping centres and retail strips that cater to market
and customer needs.
The Cominar shopping centre is a veritable lifestyle hub,
with an ambiance that is open to what customers want in
terms of experience. It can be calm if they wish to sit back
and relax in comfort, or dynamic and engaging if they are
looking to be entertained.
The merchandise mix in our centres must be personalized,
diverse and constantly evolving to keep pace with these
needs. But beyond personalization, products must be locally
and ethically sourced in order to correspond to consumers’
values and allow them to fully express their personalities.
In 2017, we initiated a major strategic shift to redefine the
consumer experience in our retail properties, bringing in
a number of distinctive concepts in sync with this vision.
The Womance concept, for one, travelled to several of our
centres to provide online shoppers with a unique experience
based on the human contact of a store environment. Place
de la Cité, Carrefour Rimouski, Alexis Nihon, Les Rivières,
Galeries de Hull, Centre commercial Rivière-du-Loup and
Galeries Rive Nord proved to be popular destinations for
this new, and diverse, group of customers.
CARTE BLANCHE PROGRAM
Our partnership with Montreal’s Fashion & Design Festival
was also a unique opportunity to bring emerging concepts
together under the same roof and give them a direct line
to their customer base. The pop-up tour kicked off at
Rockland, featuring a lineup of hotter-than-hot Quebec
brands such as Allcovered, Maguire, Le Cartel, Duy and
Horace – to the great delight of shoppers.
In keeping with our commitment to innovation, we welcomed
Mandy’s food truck to the Rockland central court during the
year to serve up their delicious gourmet salads. Rockland
thus became the first shopping centre in Quebec to host
a full-size food truck indoors. The move was also a first
for Mandy’s, whose “create your own salad” concept is
already faring extremely well in five locations in Montreal.
In addition, we are investing in the renovation of the Rockland
food court, inspired by the latest design and restaurant
trends. It will feature a large atrium with open-air kitchens
for permanent restaurateurs as well as a few novel pop-
up concepts. Through this initiative, we will be redefining
the culinary experience and making Rockland one of
Montreal’s groundbreaking culinary destinations, where
professional chefs will hold demonstrations and unique
gastronomic events.
Womance Tour
Mandy’s Food Truck – Rockland
Food Court – Rockland
We expanded and revamped our already popular gift card program, which extends
to 18 shopping centres across Canada. The new program allows consumers to
purchase gift cards online or at one of our centres, or to order them electronically.
The accompanying promotional campaign was greeted with great enthusiasm,
lending an extra measure of visibility to Cominar and our participating properties.
TOTAL NUMBER
OF PROPERTIES
TOTAL LEASABLE
SPACE (SQ. FT.)
OCCUPANCY
RATE
154
12.1M
93.2%
PROPERTY PORTFOLIO
19
OFFICE
We are a leader in the Quebec office space market. Our office properties boast
strategic locations, excellent visibility and easy access for both our clients and
their clients.
There were multiple success stories in office leasing in 2017. For one, our teams
finalized several deals at 3055 Saint-Martin Boulevard, in Laval, to incorporate
clients such as Lafarge and Kiewit into the property’s roster of occupants.
In keeping with our ongoing commitment to serving our clients better and more
effectively, we introduced a number of innovative promotional tools in the past
year – including augmented and virtual reality applications. These tools help
optimize our efforts to market our available space and showcase our business
solutions in an increasingly impactful way. What’s more, Cominar’s own collabo-
rative, stimulating offices reflect our steadfast determination to be a source of
inspiration for our clients and the industry as a whole.
Companies that choose to team up with Cominar enjoy first-rate amenities in line
with their business imperatives and the requirements specific to their sector of
activity. We are proud to specialize in creating environments that enable our
clients to thrive in their market and remain focused on their growth.
Cominar Offices
Complexe Jules-Dallaire
TOTAL NUMBER
OF PROPERTIES
TOTAL LEASABLE
SPACE (SQ. FT.)
OCCUPANCY
RATE
136
14.8M
89.1%
PROPERTY PORTFOLIO
21
INDUSTRIAL
AND MIXED-USE
Our industrial and mixed-use properties are ideally located
and designed to accommodate the particular needs of this
segment. Facilities can easily be adapted to suit a variety
of purposes, including production, processing, distribution,
warehousing, administration and/or manufacturing.
In an effort to meet the less conventional needs of certain
clients during the year, we came up with solutions to adapt
industrial spaces for office use for companies such as
Ubisoft, InnovMetric and Coveo, and create entertainment
venues such as iSaute Quebec.
A number of development projects will be kicked off in 2018
to meet robust market demand.
A new website has been developed to view available spaces
in the Cominar portfolio. The search tool makes it easy for
real estate agents and direct clients to find industrial and
mixed-use properties that match their requirements.
At Cominar, we take pride in working hand in hand with our
clients to ensure their success by providing them with flexible
environments that energize, engage and inspire.
1201 Marie-Victorin Street, Saint-Bruno-de-Montarville, QC
TOTAL NUMBER
OF PROPERTIES
TOTAL LEASABLE
SPACE (SQ. FT.)
OCCUPANCY
RATE
235
17.5M
95.2%
SOCIAL
RESPONSIBILITY
Guided by the human values that have been at the core of our organization
since day one and our deep-seated commitment to building better communities,
we are passionate about doing our part to improve our collective future.
VOLUNTEERING
PROGRAM IN 2017
69%
RATE OF EMPLOYEE
ENGAGEMENT
7,640
HOURS INVESTED
IN THE COMMUNITY
Accessibility Ramp
CRIR Project – Alexis Nihon
Under our volunteering program, the aim of which is to encourage employees
to give back to the communities where they live and work, a total of 14,961 hours
has been invested in local charities since 2016.
ARTS AND
CULTURE
18
EDUCATION
8
SPORTS
6
104
INITIATIVES
IN 2017
30
HEALTH
36
HUMANITARIAN
ENDEAVOURS
6
BUSINESS OUTREACH
AND DEVELOPMENT
With the support of our people throughout the organization, we are proud
to contribute to no fewer than 104 initiatives that are making a difference
in multiple spheres.
″Effective philanthropy requires a lot of time
and creativity – the same kind of focus and
skills that building a business requires.″
Bill Gates
Founder, Microsoft Corporation
23
n
o
i
l
l
i
F
l
i
e
n
a
D
:
o
t
o
h
p
Spin-O-Cage Event – Place de la Cité
Interdisciplinary Research in Rehabilitation of Greater
Montreal (CRIR), we adapted the renovations to provide
a safe environment for people with mobility and visual
impairments. Alexis Nihon is actually the first building in
North America to introduce these features. In recognition
of its efforts, the property received a Maple Leaf Silver
Award in 2015 from the ICSC Canadian Shopping Centre
Awards in the Renovations/Expansions category.
The dedication of each and every individual involved in
these activities helps us enhance the quality of life of
thousands of people and reinforce Cominar’s reputation
as an industry leader committed to striking a balance
between empathy, humanity and business acumen.
Since 2008, our employees and managers have voluntarily
contributed to Centraide/United Way – and every year we
as a company proudly match these amounts. The combined
total to date comes to $1,874,028. In 2017 alone, we raised
$383,700 for this very worthy cause, thanks to the partici-
pation of 448 employees, or 71% of our organization.
In 2017, 18 of our shopping centres in Quebec took part in
our signature event, Cominar’s Forest of Stars, benefiting
Opération Enfant Soleil. The $161,000 raised handily
surpassed the initial target of $150,000. The success
of this initiative is attributable to the generosity of our
partners and the hard work of our volunteers, employees
and retailers in the nine regions covered by the event.
Our corporate social responsibility priorities have also been
reflected in the revitalization project at the Alexis Nihon
shopping centre. Working closely with the Centre for
ENVIRONMENTAL
STEWARDSHIP
We took up the sustainability mantle in the mid-’90s as the first company in Quebec to spearhead a project, at our Place
de la Cité shopping centre in collaboration with Hydro-Québec, in which generators were used to offset power consumption
peaks incurred through the utility. For more than two decades, a central platform has allowed the engineering team
in charge of energy management for the portfolio to introduce and monitor best practices, especially those related
to the recommissioning of existing buildings. This involves a process designed to reoptimize HVAC systems in order to
enhance occupant comfort and save energy.
This environmentally responsible approach is the backbone of everything we do and all of the projects we undertake at
Cominar. What can we improve to reduce our carbon footprint? How can we get everyone on board to build a cleaner,
greener, more eco-minded world?
The sum of our actions, day in and day out, is decisive in creating a better future for our company, our people and the
communities we operate in.
›
›
›
27 of our properties are BOMA-certified. Complexe
Jules-Dallaire is certified under the LEED program, and
certification procedures are currently underway for
Tower 5 of Place Laval.
Participation in the GRAME environmental program
and the SOVERDI project to plant over 300 trees on
our properties in Dorval, Lachine and Saint-Laurent.
Development of the Plug & Drive program, in partnership
with the FLO network, so drivers of electric vehicles
(EVs) can recharge their batteries at 18 of our shopping
centres, as well as Complexe Jules-Dallaire in Quebec
City and Montreal Central Station.
›
›
›
›
›
A fast-charge station, part of Hydro-Québec’s Electric
Circuit, at Centre commercial Rivière-du-Loup, serving
EV drivers along the corridor between Montreal and
Mont-Joli.
Bicycle parking facilities at Alexis Nihon, complete with
a Biciborne bicycle repair station for cycle commuters.
Car-sharing service at Alexis Nihon in conjunction with
Car2go.
Program to collect recyclables, organic waste, power
chargers, cables, computer peripheral devices, small
electronics and printer cartridges.
In 2017, close to 44,900 electronic devices were recycled
through the Electrobac program.
At Cominar, sustainability isn’t about looking good – it’s about doing good.
25
Energy Recovery System – Complexe Jules-Dallaire
EV Charging Station – La Plaza de la Mauricie
″Sustainable development is essential to the
survival of the market economy.″
Louis Schweitzer
French government official and business executive
Former Chair and CEO of Renault
20
17
27
TABLE OF CONTENTS
02 MESSAGE TO UNITHOLDERS
06 PRESIDENT AND CHIEF EXECUTIVE OFFICER VISION
16 RETAIL
18 OFFICE
20
INDUSTRIAL AND MIXED-USE
22 SOCIAL RESPONSABILITY
24 ENVIRONMENTAL STEWARDSHIP
29 MANAGEMENT’S DISCUSSION AND ANALYSIS
30 Real estate portfolio
32 Highlights
34 Subsequent events
34 Caution regarding forward-looking statements
35 Non-ifrs financial measures
35 Performance indicators
36 Financial and operational highlights
37 Selected quarterly information
38 Selected annual information
39 General business overview
40 Objectives and strategy
41 Reconciliations to Cominar’s proportionate share
43 Performance analysis
44 Results of operations
55 Funds from operations and adjusted funds from operations
58 Adjusted cash flows from operations
59 Distributions
60 Liquidity and capital resources
63 Financial instruments
65 Property portfolio
66 Acquisitions, investments and dispositions
69 Real estate operations
72
73 Related party transactions
75 Disclosure controls and procedures and internal control over financial reporting
76 Significant accounting policies and estimates
80 Future accounting policy changes
80 Risks and uncertainties
Issued and outstanding units
89 CONSOLIDATED FINANCIAL STATEMENTS
96 Notes to consolidated financial statements
126 CORPORATE INFORMATION
127 UNITHOLDERS INFORMATION
29
4
MANAGEMENT’S
DISCUSSION AND ANALYSIS
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 fiscal year ended
December 31, 2017, in comparison with the fiscal year ended December 31, 2016,
as well as its financial position as at that date and its outlook. Dated March 7,
2018, 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”).
income,
BASIS OF PRESENTATION
Certain financial information in this MD&A present the consolidated balance
sheets and consolidated statements of comprehensive
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 of its joint ventures, provides more useful
information to current and prospective investors to assist them in understanding
Cominar’s financial performance. The reader is invited to refer to the section
Reconciliations to Cominar’s proportionate share for a complete reconciliation of
Cominar’s consolidated financial statements prepared 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.
Additional information on Cominar, including its 2016 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.
30
31
REAL ESTATE PORTFOLIO
525
PROPERTIES
44.4M sq. ft.
LEASABLE AREA
$7.8B
ASSETS
GEOGRAPHIC
DIVERSIFICATION
(PROPERTIES)
41.6%
36.7%
21.7%
OFFICE
RETAIL
INDUSTRIAL
SEGMENT
DIVERSIFICATION
(NET OPERATING INCOME)
REAL ESTATE PORTFOLIO
CORE MARKETS
429
PROPERTIES
38.4%
38.4%
23.2%
OFFICE
RETAIL
INDUSTRIAL
SEGMENT
DIVERSIFICATION
(NET OPERATING INCOME)
38.1M sq. ft.
LEASABLE AREA
$6.7B
ASSETS
GEOGRAPHIC
DIVERSIFICATION
(PROPERTIES)
127
QUEBEC
REGION
282
MONTREAL
REGION
20
OTTAWA
24
TORONTO
REGION
58
14
ATLANTIC
PROVINCES
WESTERN
CANADA
127
QUEBEC
REGION
282
MONTREAL
REGION
20
OTTAWA
33
33
HIGHLIGHTS
SURFACE LOCATIVE
$120.7M
DISPOSITIONS OF
INVESTMENT PROPERTIES
70.7%
INCREASE IN
RETENTION RATE TO
HIGHLIGHTS
CORE MARKETS
-0.1%
GROWTH IN THE AVERAGE
NET RENT OF RENEWED LEASES
76.0%
INCREASE IN
RETENTION RATE TO
0.6%
GROWTH IN THE AVERAGE
NET RENT OF RENEWED LEASES
1.4 M sq. ft.
COMMITTED LEASES COMMENCING
IN THE COMING QUARTERS
93.2%
INCREASE IN THE
OCCUPANCY RATE TO
1.2 M sq. ft.
COMMITTED LEASES COMMENCING
IN THE COMING QUARTERS
92.6%
INCREASE IN THE
OCCUPANCY RATE TO
$1.1B
DEFINITIVE AGREEMENT TO
SELL INVESTMENT PROPERTIES
IN NON-CORE MARKETS
34
35
SUBSEQUENT EVENTS
NON-IFRS FINANCIAL MEASURES
On January 10, 2018, Cominar announced the increase of its normal course issuer bid (“NCIB”), increasing the maximum number of
units that can be repurchased for cancellation from 9,000,000 units to 17,596,591 units. Under this NCIB, Cominar has repurchased,
since the beginning of fiscal year 2018, 2,709,500 units at an average price of $14.58, for a total consideration of $39.5 million paid
cash. Since December 19, 2017, Cominar has repurchased a total of 3,440,400 units at an average price of $14.50, for a total
consideration of $49.9 million paid cash.
On January 15, 2018 and February 15, 2018, Cominar declared a monthly distribution of $0.095 per unit for each of these months.
Subsequent to the end of fiscal 2017, Cominar entered into the following loans: a $75.0 million bridge loan bearing interest at the
prime rate plus 110 basis points or at the bankers’ acceptance rate plus 210 basis points and repayable on the closing of the
$1.1 billion sale of investment properties, a 10-year $42.5 million mortgage payable, bearing interest at 4.484% and a 5-year
$45.0 million mortgage payable, bearing interest at prime rate plus 90 basis points or 4.00%, whichever is greater. The net proceeds
from these loans were used to repay a portion of the unsecured revolving operating and acquisition credit facility.
On February 12, 2018, Alban D’Amours was appointed as Cominar’s Chairman of the Board of Trustees following the departure of
Michel Dallaire.
On March 7, 2018, Cominar decreased the monthly distribution from $0.095 per unit to $0.06 per unit, beginning with the distribution
of March 2018, payable in April 2018.
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 2018 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 financial 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 schedules and to raise capital to finance growth as well as the interest rate variations.
We caution readers 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 2016 Annual Information Form.
In this MD&A, we provide guidance and report on certain non-IFRS measures, including “net operating income,” “adjusted net
income,” “funds from operations,” “adjusted funds from operations,” “adjusted cash flows 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 closest IFRS measure and given no more prominence
than the latter. You may find such information in the sections dealing with each of these measures.
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;
Funds from operations ("FFO") per unit, which represents a standard real estate benchmark used to measure an entity’s
performance;
Adjusted funds from operations ("AFFO") per unit, which, by excluding the rental income arising from the recognition of leases
on a straight-line basis, the investments needed to maintain the property portfolio’s ability to generate rental income from the
calculation of funds from operations and a provision for leasing costs, provides a meaningful measure of Cominar’s ability to
generate steady profits;
Adjusted cash flows from operations (“ACFO”) per unit, which provides a helpful real estate benchmark to measure Cominar’s
ability to generate stable cash flows;
Debt ratio, which is used to assess the financial balance essential to the smooth running of an organization;
Occupancy rate, which gives an indication of the economic health of the geographical regions and sectors in which Cominar
Interest coverage ratio, which is used to assess Cominar’s ability to pay interest on its debt from operating revenues;
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;
Segment and geographic diversification, which contributes to revenue stability by spreading real estate risk.
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.
36
37
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,
2017
Sept. 30,
2017
June 30,
2017
March 31,
2017
Dec. 31,
2016
Sept. 30,
2016
June 30,
2016
March 31,
2016
$
$
$
$
$
$
$
$
Operating revenues –
Financial statements
Operating revenues –
Cominar’s proportionate share(4)
Net operating income(4) –
Financial statements
Net operating income(4) –
207,418
204,160
209,955
213,956
210,350
217,946
217,262
221,424
211,197
207,753
213,032
216,858
213,008
220,371
219,859
223,857
110,487
110,180
109,487
105,883
114,301
124,569
116,069
113,670
Cominar’s proportionate share
112,654
112,247
111,268
107,417
115,790
126,055
117,456
115,053
Net income (net loss)
Adjusted net income(4)
Recurring FFO(4)
Recurring AFFO(4)(5)
Cash flows provided by operating
activities – Financial statements
Recurring ACFO(4)
Distributions
(581,256)
(1)
68,551
63,892
51,628
81,471
52,117
52,792
63,981
63,981
65,287
55,414
100,702
54,924
58,006
PER UNIT
Net income (net loss) (basic and
diluted)
Adjusted net income (diluted)(4)
Recurring FFO (FD)(3)(4)
Recurring AFFO (FD)(3)(4)
Recurring ACFO (FD)(3)(4)
Distributions
(3.14)
(1)
0.37
0.34
0.28
0.28
0.35
0.35
0.35
0.30
0.30
65,837
63,553
64,902
56,312
15,299
59,275
68,079
0.36
0.35
0.35
0.31
0.32
59,713
59,713
61,008
52,473
35,753
50,380
67,646
0.33
0.33
0.33
0.29
0.30
26,341
(1)
77,529
(2)
67,996
69,423
59,213
66,805
68,511
58,782
102,031
120,213
60,601
67,156
54,181
63,513
0.14
(1)
0.37
0.38
0.33
0.33
0.46
0.39
0.40
0.35
0.32
69,787
69,787
71,359
62,908
23,214
65,614
61,817
0.41
0.41
0.42
0.37
0.39
68,081
68,081
69,277
61,034
38,632
65,592
61,970
0.40
0.40
0.41
0.36
0.39
0.2850
0.3125
0.3675
0.3675
0.3675
0.3675
0.3675
0.3675
Includes the change in fair value of investment properties of -$616.4 million in 2017 [-$46.7 million in 2016] and the derecognition of goodwill of $27.0 million.
Includes the net proceeds of $10.7 million from the settlement approved by the court between Target Canada and its creditors.
(1)
(2)
(3) Fully diluted
(4) Non-IFRS financial measure. See relevant section for definition and reconciliation to closest IFRS measure.
(5) Following the publication by REALpac of a White Paper on AFFO effective January 1, 2017, the amounts for 2016 have been restated to comply with the REALpac definition.
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 (net loss)(7)
Adjusted net income(1)
Recurring funds from operations (FFO)(1)
Recurring adjusted funds from operations (AFFO)(1)
Cash flows provided by operating activities – Financial Statements
Recurring adjusted cash flows from operations (ACFO)(1)
Distributions
Total assets
PER UNIT FINANCIAL PERFORMANCE
Net income (net loss) (basic and diluted)
Adjusted net income (diluted)(1)
Recurring funds from operations (FFO)(FD)(1)(2)
Recurring adjusted funds from operations (AFFO)(FD)(1)(2)
Recurring adjusted cash flows from operations (ACFO)(FD)(1)(2)
Distributions
Payout ratio of recurring adjusted cash flows from operations (ACFO)(1)
Cash payout ratio of recurring adjusted cash flows from operations (ACFO)(1)
Payout ratio of recurring adjusted funds from operations (AFFO)(2)
FINANCING
Debt ratio(3)
Interest coverage ratio(4)
Weighted average interest rate on total debt
Residual weighted average term of total debt (years)
Unsecured debts-to-total-debt ratio(5)
Unencumbered income properties
Unencumbered assets to unsecured debt 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
DEVELOPMENT ACTIVITIES
Properties under development – Cominar’s proportionate share(1)
2017
$
2016
$
% Δ Page
835,489
866,982
848,840
877,095
436,037
468,609
443,586
474,354
436,771
445,904
(3.6)
(3.2)
(7.0)
(6.5)
(2.0)
(391,725)
241,738
(262,0)
(6.2)
(8.4)
(10.8)
(17.9)
(11.9)
(3.1)
(5.6)
(252.1)
(12.0)
(14.3)
(16.4)
(17.5)
(9.4)
9.8
(0.6)
8.5%
255,798
272,669
255,089
278,570
215,827
241,938
233,225
284,090
216,696
245,988
246,523
254,456
7,824,993
8,287,785
(2.13)
1.39
1.38
1.17
1.18
1.3325
112.9%
94.7%
1.40
1.58
1.61
1.40
1.43
1.4700
102.8%
95.3%
113.9%
105.0%
57.4%
2.43:1
4.10%
3.7
52.1%
52.4%
2.65:1
4.23%
4.5
53.0%
3,347,839
3,736,476
1.43:1
1.62:1
525
539
44,370
44,919
92.6%
70.7%
0.6%
92.4%
68.2%
1.8%
43,547
63,647
44
45
46
46
46
54
54
55
55
58
58
59
43
54
54
55
55
58
59
58
58
55
62
62
62
62
63
63
63
65
65
69
70
70
41
(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 and debentures divided by the total assets minus the total of cash and cash equivalents.
(4) Net operating income less Trust administrative expenses divided by finance charges.
(5) Unsecured debt divided by total debt.
(6) Fair value of unencumbered income properties divided by the unsecured debt.
(7)
Includes the change in fair value of investment properties.
38
39
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
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 (net loss)(2)
Adjusted net income(3)
Recurring FFO(3)
Recurring AFFO(3)
Cash flows provided by operating activities – Financial statements
Recurring ACFO(3)
Distributions
2017
$
835,489
848,840
436,037
443,586
(391,725)
255,798
255,089
215,827
233,225
216,696
246,523
2016
$
866,982
877,095
468,609
474,354
241,738
272,669
278,570
241,938
284,090
245,988
254,456
2015
$
889,175
898,042
487,488
492,378
272,434
298,910
302,240
265,430
263,942
268,489
251,295
Total assets
7,824,993
8,287,785
8,225,697
PER UNIT
Net income (net loss) (basic and diluted)
Adjusted net income (diluted)(3)
Recurring FFO (FD)(1)(3)
Recurring AFFO (FD)(1)(3)
Recurring ACFO (FD)(1)(3)
Distributions
(2.13)
1.39
1.38
1.17
1.18
1.3325
1.40
1.58
1.61
1.40
1.43
1.62
1.78
1.79
1.57
1.59
1.4700
1.4700
(1) Fully diluted
(2)
(3) Non-IFRS financial measure. See relevant section for definition and reconciliation to closest IFRS measure.
Includes the change in fair value of investment properties and the derecognition of goodwill.
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 Quebec. As at December 31, 2017, Cominar owned and managed a high-quality portfolio
of 525 properties including 136 office buildings, 154 retail buildings and 235 industrial and mixed-use buildings located in Quebec,
Ontario, the Atlantic Provinces and Western Canada, representing a total leasable area of 44.4 million square feet. Cominar’s
properties are mostly situated in prime locations and benefit from high visibility and easy access by both our tenants and their
clients.
Since its inception in 1998, Cominar has made a series of acquisitions and completed numerous construction and property
development projects, bringing the value of its assets to $7.8 billion as at December 31, 2017.
In December, 2017, Cominar announced that it has entered into a definitive agreement to sell its entire non-core market portfolio, for
total gross proceeds of $1.14 billion. The portfolio comprises 96 properties totalling 6.2 million square feet, located in the Greater
Toronto Area, the Atlantic Provinces and Western Canada. As a result of this transaction, Cominar will concentrate its activities in
the cities of Montréal, Québec and Ottawa.
Cominar’s asset and property management is internalized. Cominar is an integrated and self-managed real estate investment
company. This property management structure enables us to rapidly and efficiently respond to our clients’ needs, while minimizing
our operating cost.
PROPERTY SUMMARY AS AT DECEMBER 31, 2017
Operating segment
Office
Retail
Industrial and mixed-use
TOTAL
Number of
properties
Leasable area
(sq. ft.)
Occupancy rate
136
154
235
525
14,830,000
12,075,000
17,465,000
44,370,000
89.1%
93.2%
95.2%
92.6%
PROPERTY SUMMARY AS AT DECEMBER 31, 2017 – CORE MARKETS
Operating segment
Office
Retail
Industrial and mixed-use
TOTAL
Number of
properties
Leasable area
(sq. ft.)
Occupancy rate
100
131
198
429
11,955,000
10,445,000
15,749,000
38,149,000
90.0%
93.1%
95.9%
93.2%
Geographic market
Number of
properties
Leasable area
(sq. ft.)
Occupancy rate
Québec
Montréal
Ottawa
TOTAL
127
282
20
429
10,253,000
25,420,000
2,476,000
38,149,000
94.9%
92.9%
89.7%
93.2%
40
41
OBJECTIVES AND STRATEGY
RECONCILIATIONS TO COMINAR’S PROPORTIONATE SHARE
Cominar’s primary objectives are to provide unitholders with stable and sustainable 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.
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 the assets,
liabilities, revenues and charges of its joint ventures, provides more complete information on Cominar’s financial performance.
In December, 2017, Cominar announced that it has entered into a definitive agreement to sell its entire non-core market portfolio, for
total gross proceeds of $1.14 billion. The portfolio comprises 96 properties totalling 6.2 million square feet, located in the Greater
Toronto Area, the Atlantic Provinces and Western Canada.
The following tables present the reconciliations between Cominar’s consolidated financial statements prepared in accordance with
IFRS and consolidated financial statements including its proportionate share of the assets, liabilities, revenues and charges of its
joint ventures.
As at December 31, 2017, Cominar is the third largest diversified real estate investment trust in Canada and its portfolio
totals 44.4 million square feet located in Quebec, Ontario, the Atlantic Provinces and Western Canada. Cominar is the largest
commercial property owner in the Province of Quebec in each of its three asset segments, being office, retail and industrial. After
the sale of its entire non-core market portfolio, the REIT will continue to benefit from the diversification resulting from its three very
distinct core markets, Montréal, Québec and Ottawa. This focus will allow the REIT to capitalize on its leading position in its core
markets. The highly internalized management platform in the core markets further enhances its competitive advantage and
operating synergies. It will also allow the REIT to focus its growth and developments in the markets where the competitive
advantage exists.
As at December 31
2017
2016
Consolidated
financial
statements
$
Joint
ventures
$
Cominar’s
proportionate
share(1)
$
Consolidated
financial
statements
$
Joint
ventures
$
Cominar’s
proportionate
share(1)
$
ASSETS
Investment properties
Income properties
Properties under development
Land held for future development
Investment properties held for sale
Investments in joint ventures
Goodwill
Mortgage receivable
Accounts receivable
Prepaid expenses and other assets
Cash and cash equivalents
6,239,383
37,692
91,580
6,368,655
1,143,500
86,299
139,982
—
62,956
16,673
6,928
163,475
5,855
10,126
179,456
—
(86,299)
—
—
481
100
77
Total assets
7,824,993
93,815
6,402,858
43,547
101,706
6,548,111
1,143,500
—
139,982
—
63,437
16,773
7,005
7,918,808
7,676,134
45,776
90,820
99,197
17,871
41,288
7,775,331
63,647
132,108
7,812,730
158,356
7,971,086
143,130
90,194
166,971
8,250
42,518
14,139
9,853
—
143,130
(90,194)
—
—
305
88
692
—
166,971
8,250
42,823
14,227
10,545
8,287,785
69,247
8,357,032
LIABILITIES
Mortgages payable
Mortgages payable related to the investment
properties held for sale
Debentures
Bank borrowings
Accounts payable and accrued liabilities
Deferred tax liabilities
Total liabilities
UNITHOLDERS’ EQUITY
Unitholders’ equity
Total liabilities and unitholders’ equity
(1) Non-IFRS financial measure.
1,873,776
79,286
1,953,062
2,048,009
56,437
2,104,446
276,350
1,721,577
620,366
117,482
6,681
4,616,232
—
—
11,950
2,579
—
93,815
276,350
1,721,577
632,316
120,061
6,681
4,710,047
—
1,970,566
332,121
109,861
11,715
—
—
10,800
2,010
—
—
1,970,566
342,921
111,871
11,715
4,472,272
69,247
4,541,519
3,208,761
7,824,993
—
93,815
3,208,761
7,918,808
3,815,513
8,287,785
—
3,815,513
69,247
8,357,032
42
43
For the quarters ended December 31
2017
2016
Consolidated
financial
statements
$
Joint
ventures
$
Cominar’s
proportionate
share(1)
$
Consolidated
financial
statements
$
Joint
ventures
$
Cominar’s
proportionate
share(1)
$
207,418
3,779
211,197
210,350
2,658
213,008
(96,931)
(1,612)
(98,543)
96,049
1,169
97,218
110,487
2,167
112,654
114,301
1,489
115,790
Operating revenues
Operating expenses
Net operating income(1)
Finance charges
Trust administrative expenses
Change in fair value of investment
properties
Share of joint ventures’ net income
Derecognition of goodwill(2)
(42,839)
(11,408)
(616,354)
108
(26,989)
Income (loss) before income taxes
(586,995)
Income taxes
Net income (net loss) and comprehensive
income
5,739
(581,256)
(1) Non-IFRS financial measure.
(2) Share of goodwill associated with investment properties held for sale
For the years ended December 31
Consolidated
financial
statements
$
(989)
(6)
(1,064)
(108)
—
—
—
—
2017
Joint
ventures
$
(43,828)
(11,414)
(42,482)
(4,490)
(617,418)
(46,675)
—
(26,989)
5,795
—
(586,995)
26,449
5,739
(108)
(581,256)
26,341
(692)
(22)
5,020
(5,795)
—
—
—
—
(43,174)
(4,512)
(41,655)
—
—
26,449
(108)
26,341
2016
Cominar’s
proportionate
share(1)
Consolidated
financial
statements
$
$
Joint
ventures
$
Cominar’s
proportionate
share(1)
$
Operating revenues
835,489
13,351
848,840
866,982
10,113
877,095
Operating expenses
(399,452)
(5,802)
405,254
398,373
4,368
402,741
Net operating income(1)
436,037
7,549
443,586
468,609
5,745
474,354
Finance charges
Trust administrative expenses
Change in fair value of investment
properties
Share of joint ventures’ net income
Derecognition of goodwill(2)
(168,752)
(25,977)
(616,354)
5,276
(26,989)
Income (loss) before income taxes
(396,759)
Income taxes
Net income (net loss) and comprehensive
income
5,034
(391,725)
(1) Non-IFRS financial measure.
(2) Share of goodwill associated with investment properties held for sale
(3,449)
(172,201)
(44)
(26,021)
(170,645)
(16,719)
(2,691)
(173,336)
(68)
(16,787)
1,220
(5,276)
—
—
—
—
(615,134)
(46,675)
—
(26,989)
8,006
—
(396,759)
242,576
5,034
(838)
(391,725)
241,738
5,020
(8,006)
—
—
—
—
(41,655)
—
—
242,576
(838)
241,738
PERFORMANCE ANALYSIS
FINANCIAL POSITION
The following table indicates the changes in assets and liabilities as well as in unitholders’ equity as at December 31, 2017, and
2016, as shown in our consolidated financial statements:
As at December 31
ASSETS
Investment properties
Income properties
Properties under development
Land held for future development
Investment properties held for sale
Investments in joint ventures
Goodwill
Mortgage receivable
Accounts receivable
Prepaid expenses and other assets
Cash and cash equivalents
Total assets
LIABILITIES
Mortgages payable
Mortgages payable related to the investment properties
held for sale
Debentures
Bank borrowings
Accounts payable and accrued liabilities
Deferred tax liabilities
Total liabilities
UNITHOLDERS’ EQUITY
Unitholders’ equity
Total liabilities and unitholders’ equity
2017
$
2016
$
$ Δ
% Δ
6,239,383
7,676,134
(1,436,751)
37,692
91,580
45,776
90,820
(8,084)
760
(18.7)
(17.7)
0.8
6,368,655
7,812,730
(1,444,075)
(18.5)
1,143,500
86,299
139,982
—
62,956
16,673
6,928
143,130
1,000,370
90,194
166,971
8,250
42,518
14,139
9,853
(3,895)
(26,989)
698.9
(4.3)
(16.2)
(8,250)
(100.0)
20,438
2,534
48.1
17.9
(2,925)
(29.7)
7,824,993
8,287,785
(462,792)
(5.6)
1,873,776
2,048,009
(174,233)
(8.5)
276,350
1,721,577
620,366
117,482
6,681
4,616,232
3,208,761
7,824,993
—
276,350
1,970,566
(248,989)
100.0
(12.6)
86.8
6.9
288,245
7,621
(5,034)
(43.0)
332,121
109,861
11,715
4,472,272
143,960
3.2
3,815,513
(606,752)
(15.9)
8,287,785
(462,792)
(5.6)
44
45
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table indicates the main changes in our results of operations for the periods ended December 31, 2017 and 2016, as
shown in our consolidated financial statements:
For the periods ended December 31
Operating revenues
Operating expenses
Net operating income(1)
Finance charges
Trust administrative expenses
Change in fair value of investment properties
Share of joint ventures’ net income
Derecognition of goodwill(2)
Income taxes
Net income (net loss)
Quarter
Year
2017
$
207,418
(96,931)
110,487
(42,839)
(11,408)
(616,354)
108
(26,989)
5,739
(581,256)
2016
$
210,350
(96,049)
114,301
(42,482)
(4,490)
(46,675)
5,795
—
(108)
% Δ
(1.4)
0.9
(3.3)
0.8
154.1
1,220.5
(98.1)
100.0
(5,413.9)
2017
$
835,489
(399,452)
436,037
(168,752)
(25,977)
(616,354)
5,276
(26,989)
5,034
2016
$
866,982
(398,373)
468,609
(170,645)
(16,719)
% Δ
(3.6)
0.3
(7.0)
(1.1)
55.4
(46,675)
1,220.5
8,006
—
(34.1)
100.0
(838)
(700.7)
26,341
(2,306.7)
(391,725)
241,738
(262.0)
(1) Non-IFRS financial measure.
(2) Share of goodwill associated with investment properties held for sale
OPERATING REVENUES
For the periods ended December 31
Operating revenues – Financial statements
Operating revenues – Joint ventures
Operating revenues – Cominar’s proportionate
share(1)
(1) Non-IFRS financial measure.
Quarter
Year
2017
$
207,418
3,779
2016
$
210,350
2,658
% Δ
(1.4)
42.2
2017
$
835,489
13,351
2016
$
866,982
10,113
% Δ
(3.6)
32.0
211,197
213,008
(0.9)
848,840
877,095
(3.2)
During fiscal 2017, operating revenues, according to the financial statements, decreased by 3.6% [3.2% according to Cominar’s
proportionate share] compared with fiscal 2016, due to the dispositions of income properties for a total amount of $221.4 million
completed in 2016 and 2017 and to the non-recurring net proceeds of $10.7 million obtained in 2016 from the settlement of the
claim against Target.
For the periods ended December 31
Same property portfolio – Financial statements
Same property portfolio – Joint ventures
Same property portfolio(1) – Cominar’s proportionate
share(2)
Acquisitions, developments and dispositions –
Financial statements
Acquisitions and developments – Joint ventures
Operating revenues – Cominar’s proportionate
share(2)
Quarter
2017
$
204,850
3,571
2016
$
% Δ
205,372
2,531
(0.3)
41.1
Year
2016
$
831,768
9,788
2017
$
825,566
12,596
% Δ
(0.7)
28.7
208,421
207,903
0.2
838,162
841,556
(0.4)
2,568
208
4,978
(48.4)
127
63.8
9,923
755
35,214
325
(71.8)
132.3
211,197
213,008
(0.9)
848,840
877,095
(3.2)
(1) The same property portfolio includes the properties owned by Cominar as at December 31, 2015, except for the properties sold in 2016 and 2017, but does not include the
results of properties acquired and those under development in 2016 and 2017.
(2) Non-IFRS financial measure.
During fiscal 2017, operating revenues of the same property portfolio, according to the financial statements, decreased by 0.7%
[0.4% according to Cominar’s proportionate share] compared with fiscal 2016. This decrease is due to a decrease in the in-place
occupancy rate for the office segment (Western Canada, Atlantic Provinces and Ottawa), and for the retail segment (Western
Canada, Ottawa and Montréal), partially offset by an increase in the in-place occupancy rate for the industrial segment as well as a
decrease in the average net rent of renewed leases for the retail segment.
The chart below presents Cominar’s operating revenues, according to the consolidated financial statements, over the past 10 years.
(1) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
(2) Decrease in operating revenues due mainly to the dispositions of income properties for a total amount of $221.4 million completed in 2016 and 2017.
46
47
NET OPERATING INCOME
The chart below presents Cominar’s net operating income based on the consolidated financial statements over the past 10 years.
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, derecognition of
goodwill, share of joint ventures’ net income, finance charges, Trust administrative expenses 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.
For the periods ended December 31
Net operating income – Financial statements
Net operating income – Joint ventures
Net operating income – Cominar’s proportionate
share(1)
(1) Non-IFRS financial measure.
Quarter
Year
2017
$
110,487
2,167
2016
$
% Δ
114,301
1,489
(3.3)
45.5
2017
$
436,037
7,549
2016
$
468,609
5,745
% Δ
(7.0)
31.4
112,654
115,790
(2.7)
443,586
474,354
(6.5)
During fiscal 2017, NOI, according to the financial statements, decreased by 7.0% [6.5% according to Cominar’s proportionate share]
from fiscal 2016. This decrease is due to the dispositions of income properties for a total amount of $221.4 million completed in
2016 and 2017 and to the non-recurring net proceeds of $10.7 million obtained in 2016 from the settlement of the claim against
Target.
Quarter
Year
2016
$
% Δ
2017
$
2016
$
110,721
1,405
(1.7)
44.4
429,717
440,369
7,054
5,535
2017
$
108,860
2,029
% Δ
(2.4)
27.4
(1) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
(2) Decrease in net operating income due mainly to the dispositions of income properties for a total amount of $221.4 million completed in 2016 and 2017.
SEGMENT NET OPERATING INCOME
Cominar analyzes its segmented results of operations taking into account the proportionate share of its joint ventures to assess the
operating performance of its investment properties.
110,889
112,126
(1.1)
436,771
445,904
(2.0)
BY OPERATING SEGMENT
For the periods ended December 31
Same property portfolio – Financial statements
Same property portfolio – Joint ventures
Same property portfolio(1) – Cominar’s proportionate
share(2)
Acquisitions, developments and dispositions –
Financial statements
Acquisitions and developments – Joint ventures
Net operating income – Cominar’s proportionate
share(2)
1,627
138
3,580
(54.6)
84
64.3
6,320
495
28,240
210
(77.6)
135.7
112,654
115,790
(2.7)
443,586
474,354
(6.5)
(1) The same property portfolio includes the properties owned by Cominar as at December 31, 2015, except for the properties sold in 2016 and 2017, but does not include the
results of properties acquired and those under development in 2016 and 2017.
(2) Non-IFRS financial measure.
Same property net operating income according to Cominar’s proportionate share decreased by 2.0% during fiscal 2017 from fiscal
2016. This decrease is due to the decrease in the in-place occupancy rate for the office segment (Western Canada, Atlantic
Provinces and Ottawa), and for the retail segment (Western Canada, Ottawa and Montréal), partially offset by an increase in the in-
place occupancy rate for the industrial segment as well as a decrease in the average net rent of renewed leases for the retail
segment.
For the periods ended December 31
Operating segment
Office
Retail
Industrial and mixed-use
Net operating income – Cominar’s proportionate
share(1)
Distribution:
Core markets
Other markets
Total
(1) Non-IFRS financial measure.
Quarter
Year
2017
$
46,502
41,503
24,649
2016
$
46,928
44,014
24,848
% Δ
(0.9)
(5.7)
(0.8)
2017
$
184,270
162,965
96,351
2016
$
% Δ
193,309
(4.7)
183,961
(11.4)
97,084
(0.8)
112,654
115,790
(2.7)
443,586
474,354
(6.5)
94,675
17,979
95,371
20,419
112,654
115,790
(0.7)
(11.9)
(2.7)
370,281
73,305
443,586
387,952
(4.6)
86,402
(15.2)
474,354
(6.5)
48
49
The decrease in net operating income according to Cominar’s proportionate share during fiscal 2017 compared to fiscal 2016 is due
mainly to the dispositions of income properties for a total amount of $221.4 million completed in 2016 and 2017 and to the non-
recurring net proceeds of $10.7 million obtained in 2016 from the settlement of the claim against Target.
For the periods ended December 31
Operating segment
Office
Retail
Industrial and mixed-use
Same property net operating income – Cominar’s
proportionate share(1)
Distribution:
Core markets
Other markets
Total
(1) Non-IFRS financial measure.
Quarter
Year
2017
$
45,778
41,226
23,885
2016
$
46,014
42,536
23,576
% Δ
(0.5)
(3.1)
1.3
2017
$
182,213
161,107
93,451
2016
$
188,498
166,080
91,326
% Δ
(3.3)
(3.0)
2.3
110,889
112,126
(1.1)
436,771
445,904
(2.0)
93,119
17,770
93,368
18,758
110,889
112,126
(0.3)
(5.3)
(1.1)
365,115
71,656
436,771
368,549
77,355
445,904
(0.9)
(7.4)
(2.0)
Same property net operating income according to Cominar’s proportionate share decreased by 2.0% in 2017 compared to 2016.
This decrease was much larger in our non-core markets with a decrease of 7.4%, while our core markets had a better performance
with a slight decrease of 0.9%.
NET OPERATING INCOME – COMINAR’S PROPORTIONATE SHARE
For the periods ended December 31
2017
2016
2017
2016
Quarter
Year
Operating segment
Office
Retail
Industrial and mixed-use
41.3%
36.8%
21.9%
40.5%
38.0%
21.5%
41.6%
36.7%
21.7%
40.8%
38.7%
20.5%
100.0%
100.0%
100.0%
100.0%
BY GEOGRAPHIC MARKET
For the periods ended December 31
Core markets
Québec
Montréal
Ottawa(1)
Net operating income, core markets – Cominar’s
proportionate share(2)
Other markets
Toronto
Atlantic Provinces
Western Canada
Total net operating income – Cominar’s
proportionate share(2)
Quarter
Year
2017
$
26,568
59,354
7,197
2016
$
26,388
59,607
7,373
% Δ
0.7
(0.4)
(2.4)
2017
$
104,085
232,943
28,087
2016
$
104,576
233,603
30,370
% Δ
(0.5)
(0.3)
(7.5)
93,119
93,368
(0.3)
365,115
368,549
(0.9)
9,450
3,974
4,346
8,824
4,211
5,723
7.1
(5.6)
(24.1)
36,039
16,613
19,004
37,168
17,384
22,803
(3.0)
(4.4)
(16.7)
110,889
112,126
(1.1)
436,771
445,904
(2.0)
(1) For presentation purposes, the Gatineau area is included in the Ottawa geographic market.
(2) Non-IFRS financial measure.
Same property net operating income according to Cominar’s proportionate share in the Québec area experienced a strong
performance of 5.2% for the industrial segment and a good performance of 3.5% for the office segment, which were offset by a
decrease of 5.5% for the retail segment. In the Montréal area, the industrial segment increased by 2.4%, while the retail segment
decreased by 1.3% and the office segment decreased by 1.0%. The decrease in same property net operating income according to
Cominar’s proportionate share in the Ottawa area is concentrated in the office segment.
The decrease in our non-core market same property net operating income according to Cominar’s proportionate share is due mainly
to a strong decrease of 20.1% in Western Canada for the office segment, a decrease of 9.8% in the Greater Toronto Area for the
retail segment and a decrease of 10.5% in the Atlantic Provinces for the office segment.
50
51
NET OPERATING INCOME – COMINAR’S PROPORTIONATE SHARE
CHANGE IN FAIR VALUE OF INVESTMENT PROPERTIES
For the periods ended December 31
2017
2016
2017
2016
Quarter
Year
Québec
Montréal
Ottawa(1)
Core markets
Toronto
Atlantic Provinces
Western Canada
Overall market
24.0%
53.6%
6.4%
84.0%
8.3%
3.8%
3.9%
23.5%
52.5%
6.4%
82.4%
8.7%
4.0%
4.9%
23.9%
53.3%
6.3%
83.5%
8.2%
4.0%
4.3%
23.4%
52.0%
6.4%
81.8%
8.9%
4.4%
4.9%
100.0%
100.0%
100.0%
100.0%
(1) For presentation purposes, the Gatineau area is included in the Ottawa geographic market.
(1) For presentation purposes, the Gatineau area is included in the Ottawa geographic market.
Cominar opted to present its investment properties in the consolidated financial statements according to the fair value model. Fair
value is determined based on evaluations performed using management’s internal estimates (based on current market data) and by
independent real estate appraisers, plus capital expenditures made during the period, if applicable, or on a definitive agreement to
sell investment properties. External valuations were carried out by independent national firms holding a recognized and relevant
professional qualification and having recent experience in the location and category of the investment properties being valued.
As per Cominar’s policy on valuing investment properties, during fiscal 2017, management revalued the entire real estate portfolio
and determined that a decrease of $615.1 million (taking into account an upward adjustment of $1.2 million in the joint ventures)
was necessary to adjust the carrying amount of investment properties to their fair value [decrease of $41.7 million in 2016].
This decrease’s proportionate share attributable to our non-core market property portfolio amounted to $288.1 million, while the
proportionate share attributable to our non-core market property portfolio amounted to $327.0 million. In 2017, the fair value of
investment properties derived from external valuations or sources amounted to 28% [14% in 2016] of the total fair value of all
investment properties.
The following table presents, in summary form, the changes in fair value for the entire Cominar portfolio as at December 31, 2017:
Québec Montréal
$
$
Ottawa
$
Toronto
$
Atlantic
Provinces
$
Western
Canada
$
Operating segment
Office
Retail
Industrial and mixed-use
(7,030)
(77,928)
137
(54,411)
(114,654)
(18,382)
(36,365)
(18,483)
N/A
TOTAL
(84,821)
(187,447)
(54,848)
(6,961)
43,822
11,754
48,615
(25,864)
(45,200)
(9,215)
(80,279)
(235,114)
(20,126)
(1,114)
(256,354)
Total
$
(365,745)
(232,569)
(16,820)
(615,134)
The following table presents, in summary form, the changes in fair value as a percentage for the entire Cominar portfolio as at
December 31, 2017:
Québec Montréal
Ottawa
Toronto
Atlantic
Provinces
Western
Canada
Operating segment
Office
Retail
Industrial and mixed-use
TOTAL
(0,1)%
(1,0)%
—
(1,1)%
(0,7)%
(1,5)%
(0,2)%
(2,4)%
(0,5)%
(0,2)%
N/A
(0,7)%
(0,1)%
0,6%
0,1%
0,6%
(0,3)%
(0,6)%
(0,1)%
(1,0)%
(3,1)%
(0,3)%
—
(3,4)%
Total
(4,8)%
(3,0)%
(0,2)%
(8,0)%
Internally appraised investment properties have been valued using the capitalized net operating income method. Externally valued
investment properties have been valued either with the capitalized net operating income method and/or the discounted cash flow
method. Here is a description of these methods and the key assumptions used:
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.
Discounted cash flow method – Under this method, the expected future cash flows are discounted using an appropriate rate based
on the risk of the property. Expected future cash flows for each investment property are based upon, but not limited to, rental
income from current leases, budgeted and actual expenses, and assumptions about rental income from future leases. Discount and
capitalization rates are estimated using market surveys, available appraisals and market comparables.
52
53
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 reported in net income.
As required under IFRS, Cominar has determined that an increase or decrease in 2017 of 0.1% in the applied capitalization rates for
the entire real estate portfolio, except for the investment properties held for sale, would result in a decrease or increase of
approximately $103.4 million [$135.3 million in 2016] in the fair value of its investment properties.
Capitalization and discount rates used in both the internal and external valuations are consistent.
WEIGHTED AVERAGE CAPITALIZATION AND DISCOUNT RATES
As at December 31
2017
Québec Montréal
Ontario
Toronto(1)
Atlantic
Provinces(1)
Western
Canada(1)
Weighted
average
rate
2016
Weighted
average
rate
Office properties
Capitalized net operating income method
Capitalization rate
6.1%
6.2%
6.4%
Discounted cash flow method
Overall capitalization rate
Terminal capitalization rate
Discount rate
Retail properties
5.3%
5.5%
6.0%
N/A
N/A
N/A
6.0%
6.5%
7.3%
Capitalized net operating income method
Capitalization rate
6.4%
6.0%
5.9%
Discounted cash flow method
Overall capitalization rate
Terminal capitalization rate
Discount rate
Industrial and mixed-use properties
Capitalized net operating income method
6.8%
7.0%
7.6%
5.4%
5.5%
5.9%
N/A
N/A
N/A
Capitalization rate
7.0%
6.7%
N/A
Discounted cash flow method
Overall capitalization rate
Terminal capitalization rate
Discount rate
Total
Capitalized net operating income
method
6.6%
N/A
N/A
6.4%
6.5%
7.2%
N/A
N/A
N/A
Capitalization rate
6.4%
6.2%
6.3%
Discounted cash flow method
Overall capitalization rate
Terminal capitalization rate
Discount rate
6.0%
6.0%
6.5%
5.5%
5.7%
6.1%
6.0%
6.5%
7.3%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
6.2%
6.2%
N/A
N/A
N/A
N/A
N/A
N/A
5.4%
5.8%
6.3%
5.4%
5.6%
6.7%
N/A
N/A
6.1%
5.9%
N/A
N/A
N/A
N/A
N/A
N/A
5.7%
5.8%
6.2%
5.9%
6.1%
6.9%
N/A
N/A
6.8%
6.9%
N/A
N/A
N/A
N/A
N/A
N/A
6.5%
6.5%
7.2%
N/A
N/A
N/A
N/A
N/A
6.3%
6.2%
N/A
N/A
N/A
N/A
N/A
N/A
5.8%
5.9%
6.3%
5.6%
5.8%
6.7%
(1) For the year ended December 31, 2017, all the properties in the Toronto Area, the Atlantic Provinces and Western Canada have been valued according to a definitive
agreement to sell these investment properties.
FINANCE CHARGES
Quarter
Year
For the periods ended December 31
Interest on mortgages payable
Interest on debentures
Interest on bank borrowings
Net amortization of premium and discount on
debenture issues
Amortization of deferred financing costs and other
costs
Amortization of fair value adjustments on assumed
indebtedness
Less: Capitalized interest(1)
Total finance charges – Financial statements
2017
$
22,329
18,298
5,696
(124)
760
(1,385)
(2,735)
42,839
2016
$
% Δ
22,152
20,898
0.8
(12.4)
2,091
172.4
(203)
(38.9)
898
(15.4)
(1,468)
(1,886)
42,482
(5.7)
45.0
0.8
Percentage of operating revenues
20.7%
20.2%
Weighted average interest rate on total debt
2017
$
89,007
77,952
14,867
(691)
3,454
(5,577)
(10,260)
168,752
20.2%
4.10%
2016
$
87,780
83,456
9,747
% Δ
1.4
(6.6)
52.5
(801)
(13.7)
3,771
(8.4)
(14.2)
50.7
(1.1)
(6,501)
(6,807)
170,645
19.7%
4.23%
(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.
The decrease in finance charges for the year is mainly due to an increase in capitalized interest on properties under development
and on major revitalization projects for income properties.
TRUST ADMINISTRATIVE EXPENSES
During fiscal 2017, Trust administrative expenses amounted to $26.0 million, accounting for 3.1% of operating revenues, compared
to 1.9% during fiscal 2016. This increase resulted from a $5.4 million retirement allowance following the end of the chief executive
officer’s employement, an increase in compensation expense related to the long-term incentive plan of $1.1 million and in total
payroll due to the increase in personnel in the leasing department, as well as in sponsorships and representation costs. Excluding
the retirement allowance following the retirement of the chief executive officer, Trust administrative expenses would have
amounted to $20.6 million, 2.5% of operating revenues.
DERECOGNITION OF GOODWILL
During the last quarter of 2017, Cominar transferred to investment properties held for sale its entire non-core market property
portfolio. In December 2017, Cominar entered into a definitive agreement to sell this investment property portfolio for total gross
proceeds of $1.14 billion. A portion of goodwill, in the amount of $27.0 million, associated with this property portfolio has been
allocated to the assets held for sale and then has been subject to derecognition. The derecognized goodwill was distributed as
follows: $18.6 million for the office segment, $6.6 million for the retail segment and $1.8 million for the industrial and mixed-use
segment.
At year-end, Cominar conducted an impairment test on the $140.0 million goodwill balance presented in the balance sheet and
concluded that, at that date, there was no impairment loss.
54
55
NET INCOME
For the periods ended December 31
Quarter
2017
$
2016
$
Year
2017
$
2016
$
Net income (net loss)
(581,256)
26,341
(391,725)
241,738
Net income (net loss) per unit (basic and diluted)
(3.14)
0.14
(2.13)
1.40
Weighted average number of units outstanding (basic)
Weighted average number of units outstanding (diluted)(1)
185,289,552
181,566,067
184,213,583
172,131,831
185,289,552
181,735,991
184,213,583
172,505,427
(1) The calculation of the diluted weighted average number of units outstanding used to calculate the net loss per unit for the year ended December 31, 2017 does not take into
account the effect of the conversion of options and deferred units due to the fact that they are antidilutive.
Net loss for fiscal 2017 amounted to $391.7 million, compared to a net income of $241.7 million for fiscal 2016. This decrease is
due mainly to the $569.7 million increase in the change in fair value of investment properties compared with fiscal 2016, the
derecognition of goodwill of $27.0 million and the $32.6 million decrease in net operating income previously explained.
ADJUSTED NET INCOME
Adjusted net income is not an IFRS financial measure. The calculation method used by Cominar may differ from those used by other
entities. Cominar calculates an adjusted net income to eliminate the change in fair value of investment properties and the
derecognition of goodwill, which are non-monetary and have no impact on cash flows, as well as to eliminate a non-recurring item.
For the periods ended December 31
Quarter
Year
2017
$
2016
$
% Δ
2017
$
2016
$
% Δ
Net income (net loss)
(581,256)
26,341
(2,306.7)
(391,725)
241,738
(262.0)
Change in fair value of investment properties –
Cominar’s proportionate share(3)
Derecognition of goodwill(4)
Non-recurring items(1)(2)
Adjusted net income(3)
Adjusted net income per unit (diluted)(3)
Weighted average number of units outstanding
617,418
26,989
5,400
41,655
1,382.2
—
—
100.0
100.0
615,134
26,989
5,400
41,655
1,376.7
—
(10,724)
100.0
150.4
68,551
67,996
0.8
255,798
272,669
(6.2)
0.37
0.37
—
1.39
1.58
(12.0)
(diluted)
185,493,800
181,735,991
184,356,722
172,505,427
In 2017, a retirement allowance was allocated following the end of the Chief Executive Officer’s employment.
In 2016, net proceeds of $10.7 million were obtained in settlement of the claim against Target Canada.
(1)
(2)
(3) Non-IFRS financial measure.
(4) Share of goodwill associated with investment properties held for sale.
Adjusted net income for the year decreased by $16.9 million from the year 2016, due mainly to the decrease in net operating income
following the dispositions of income properties for a total amount of $221.4 million completed in 2016 and 2017.
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
Although the concepts of funds from operations (“FFO”) and adjusted funds from operations (“AFFO”) are not IFRS financial
measures, they are widely used in the real estate investment trust industry.
REALpac defines FFO as net income (calculated in accordance with IFRS), adjusted for, among other things, changes in the fair
value of investment properties, deferred taxes, derecognition of goodwill, initial and re-leasing salary costs, adjustments relating to
the accounting of joint ventures under the equity method and transaction costs incurred upon a business combination.
During the first quarter of 2017, REALpac published a White Paper on its AFFO definition. REALpac defines AFFO as FFO net of
rental revenue less leases derived from the recognition of leases on a straight-line basis, capital expenditures for maintaining the
ability to generate income and leasing costs. Cominar adopted this new AFFO definition and adjusted the figures of comparative
periods accordingly.
FFO and AFFO are not a substitute for net income established in accordance with IFRS when measuring Cominar’s performance.
While our methods of calculating FFO and AFFO comply with REALpac recommendations, they may differ from and not be
comparable to those used by other entities.
The fully diluted weighted average number of units outstanding used for the calculation of FFO and AFFO takes into account the
potential issuance of units under the long-term incentive plan, when dilutive.
The following table presents a reconciliation of net income (net loss), as determined in accordance with IFRS, and FFO and AFFO:
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
For the periods ended December 31
Net income (net loss)
Deferred income taxes
Initial and re-leasing salary costs
Change in fair value of investment properties(1)
Capitalizable interest on properties under development – joint
ventures
Derecognition of goodwill(6)
Funds from operations(1)(5)
Non-recurring items(2)(3)
Recurring funds from operations(1)(5)
Provision for leasing costs
Recognition of leases on a straight-line basis(1)
Capital expenditures – maintenance of rental income generating
capacity
Quarter
2017
$
2016
$
Year
2017
$
2016
$
(581,256)
26,341
(391,725)
241,738
(5,739)
882
617,418
198
26,989
58,492
5,400
63,892
(6,583)
(1,554)
108
797
41,655
522
—
69,423
—
69,423
(6,390)
(806)
(5,034)
3,532
615,134
793
26,989
249,689
5,400
255,089
(25,820)
(4,027)
838
3,095
41,655
1,968
—
289,294
(10,724)
278,570
(24,090)
(4,044)
(4,127)
(3,014)
(9,415)
(8,498)
Recurring adjusted funds from operations(1)(5)
51,628
59,213
215,827
241,938
Per unit information:
Recurring funds from operations (FD)(4)(5)
Recurring adjusted funds from operations (FD)(4)(5)
Weighted average number of units outstanding (FD)(4)
0.34
0.28
0.38
0.33
1.38
1.17
1.61
1.40
185,493,800
181,735,991
184,356,722
172,505,427
Payout ratio of recurring ajusted funds from operations(2)
101.8%
111.4%
113.9%
105.0%
Including Cominar’s proportionate share in joint ventures.
In 2017, a retirement allowance was allocated following the end of the Chief Executive Officer’s employment.
In 2016, net proceeds of $10.7 million were obtained in settlement of the claim against Target Canada.
(1)
(2)
(3)
(4) Fully diluted.
(5) Non-IFRS financial measure.
(6) Share of goodwill associated with investment properties held for sale.
56
57
The provision for leasing costs which is deducted in computing the adjusted funds from operations represents the amortization,
over the terms of the leases, of leasehold improvements and initial direct costs, mostly brokerage fees incurred when negotiating
and preparing leases. This allows for better reconciliation of the investments incurred with the operating revenues generated over
the terms of the leases. During the fiscal year ended December 31, 2017, the actual costs incurred by Cominar were $39.2 million in
leasehold improvements and $13.1 million in initial direct costs that will be amortized over the terms of the related leases, while the
provision for leasing costs amounted to $25.8 million.
Recurring FFO for fiscal 2017 decreased by $23.5 million from fiscal 2016, due mainly to the $16.9 million decrease in adjusted net
income explained above.
Recurring AFFO for fiscal 2017 decreased by $26.1 million compared with fiscal 2016, due mainly to the $16.9 million decrease in
adjusted net income explained above.
TRACK RECORD OF RECURRING FUNDS FROM OPERATIONS PER UNIT
For the years ended December 31
2017
$
2016
$
2015
$
2014
$
2013
$
Recurring funds from operations per unit (FD)(1)
1.38
1.61
1.79
1.88
1.80
(1) Fully diluted.
The chart below presents Cominar’s recurring funds from operations over the past 10 years.
TRACK RECORD OF RECURRING ADJUSTED FUNDS FROM OPERATIONS PER UNIT
For the years ended December 31
2017
$
2016
$
2015
$
2014
$
2013
$
Recurring adjusted funds from operations per unit (FD)(1)
1.17
1.40
1.57
1.65
1.58
(1) Fully diluted.
The chart below presents 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.
(2) Decrease in recurring adjusted funds from operations due mainly to the dispositions of income properties for a total amount of $221.4 million completed in 2016 and 2017.
(1) Amounts not restated under IFRS, determined in accordance with Canadian GAAP before changeover.
(2) Decrease in recurring funds from operations due mainly to the dispositions of income properties for a total amount of $221.4 million completed in 2016 and 2017.
58
59
ADJUSTED CASH FLOWS FROM OPERATIONS
DISTRIBUTIONS
During the first quarter of 2017, REALpac published a White Paper on the determination of adjusted cash flows from operations
(“ACFO”). The ACFO are intended to be used as a measure of a company’s ability to generate stable cash flows. The ACFO do not
replace the cash flows provided by operating activities as per the consolidated financial statements prepared in accordance
with IFRS. Our method to determine the ACFO complies with REALpac recommendations but may differ from and not be
comparable to that used by other entities.
The fully diluted weighted average number of units outstanding for the calculation of ACFO takes into account the potential
issuance of units under the long-term incentive plan, when dilutive.
The following table presents a reconciliation between the cash flows provided by operating activities as per the consolidated
financial statements and the recurring ACFO:
For the periods ended December 31
Cash flows provided by operating activities as per the consolidated
financial statements
Adjustments – investments in joint ventures(1)
Provision for leasing costs
Initial and re-leasing salary costs
Changes in adjusted non-cash working capital items(2)
Capital expenditures – maintenance of rental income generating capacity
Amortization of deferred financing costs and other costs
Amortization of fair value adjustments on assumed mortgages payable
Capitalizable interest on properties under development – joint ventures
Adjusted cash flows from operations(1)(7)
Non-recurring items(3)(4)
Recurring adjusted cash flows from operations(1)(7)
Per unit information:
Recurring adjusted cash flows from operations (FD)(5)(7)
Weighted average number of units outstanding (FD)(5)
Payout ratio(5)
Cash payout ratio(5)(6)
Quarter
2017
$
81,471
1,138
(6,583)
882
(27,011)
(4,127)
(636)
1,385
198
46,717
5,400
52,117
2016
$
102,031
(22)
(6,390)
797
(34,108)
(3,014)
(681)
1,468
522
Year
2017
$
233,225
3,720
(25,820)
3,532
2,447
(9,415)
(2,763)
5,577
793
2016
$
284,090
2,061
(24,090)
3,095
(5,445)
(8,498)
(2,970)
6,501
1,968
60,603
211,296
256,712
—
60,603
5,400
216,696
(10,724)
245,988
0.28
0.33
1.18
1.43
185,493,800
181,735,991
184,356,722
172,505,427
101.8%
101.8%
111.4%
88.1%
112.9%
94.7%
102.8%
95.3%
(1)
(2)
Including Cominar’s proportionate share in joint ventures.
Includes working capital changes that, in management’s view and based on the REALpac February 2017 whitepaper, are not indicative of sustainable cash flow available for
distribution. Examples include, but are not limited to, working capital changes relating to prepaid realty taxes and insurance, interest payable and interest receivable, sales and
other indirect taxes payable to or receivable from applicable governments, income taxes and transaction cost accruals relating to acquisitions and dispositions of investment
properties.
In 2017, a retirement allowance was allocated following the end of the Chief Executive Officer’s employment.
In 2016, net proceeds of $10.7 million were obtained in settlement of the claim against Target Canada.
(3)
(4)
(5) Fully diluted.
(6) The cash payout ratio corresponds to the cash distribution per unit divided by the fully diluted recurring adjusted cash flows from operations per unit.
(7) Non-IFRS financial measure.
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 the disposition of investment properties and
certain other items not affecting cash, if applicable.
DISTRIBUTIONS TO UNITHOLDERS
For the periods ended December 31
Cash distributions
Distributions reinvested under the distribution
reinvestment plan(1)
Distributions to unitholders
Percentage of distributions reinvested
Per unit distributions
Quarter
Year
2017
$
2016
$
% Δ
2017
$
2016
$
% Δ
52,792
53,119
(0.6)
206,753
236,000
(12.4)
—
52,792
—
0.2850
14,037
(100.0)
67,156
(21.4)
20.9%
0.3675
39,770
246,523
16.1%
1.3325
18,456
115.5
254,456
(3.1)
7.3%
1.4700
(1) This amount includes units to be issued under the plan upon payment of distributions.
Distributions to unitholders for fiscal 2017 totalled $246.5 million, down 3.1% from fiscal 2016, due to the decrease in distribution
per unit announced on August 3, 2017. The percentage of distributions reinvested under the distribution reinvestment plan
amounted to 16.1% on average, or $39.8 million, for fiscal 2017 and the cash distributions decreased by 12.4% compared with
fiscal 2016.
On August 3, 2017, Cominar announced the suspension of the Distribution Reinvestment Plan and the decrease in the monthly
distribution from $0.1225 per unit to $0.095 per unit, beginning with the distribution of August 2017, which was payable in
September 2017.
In accordance with CSA guidelines, Cominar also provides the following table to allow readers to assess sources of cash
distributions and how they reconcile to net income:
For the periods ended December 31
2017
(3 months)
$
2017
(12 months)
$
2016
(12 months)
$
2015
(12 months)
$
Net income (net loss)
(581,256)
(391,725)
241,738
272,434
Cash flows provided by operating activities as per the consolidated
financial statements
Distributions to unitholders
Surplus (deficit) of cash flows provided by operating activities
compared with distributions payable to unitholders
81,471
52,792
233,225
246,523
284,090
254,456
263,942
251,295
28,679
(13,298)
29,634
12,647
For the three-month period ended December 31, 2017, cash flows provided by operating activities presented a $28.7 million surplus
over distributions to unitholders. For the fiscal year ended December 31, 2017, cash flows provided by operating activities showed a
deficit of $13.3 million compared with distributions to unitholders. This deficit was more than offset by the $39.8 million
distributions reinvested under the distribution reinvestment plan.
During the last two quarters of 2017, our cash flows provided by operating activities exceeded the distributions to unitholders, and
we expect that it will remain this way in the future.
60
61
For fiscal years ended December 31, 2016 and earlier, cash flows provided by operating activities have always been sufficient to
fund distributions to unitholders.
The chart below presents Cominar’s distributions over the past 10 years.
The following table shows mortgage contractual maturity dates for the specified years:
CONTRACTUAL MATURITY DATES OF MORTGAGES PAYABLE
For the years ending December 31
Repayment of
principal
$
Balances at
maturity
$
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028 and thereafter
Total
Weighted
average
contractual
rate
4.65%
6.18%
4.37%
5.48%
3.35%
4.56%
4.08%
3.55%
3.51%
3.85%
4.19%
4.22%
Total
$
641,586
48,841
128,312
135,055
224,393
290,248
208,680
49,488
353,995
54,841
18,457
48,974
44,700
46,299
45,618
40,145
35,598
26,947
19,940
8,310
3,931
6,807
592,612(1)
4,141
82,013
89,437
184,248
254,650
181,733
29,548
345,685
50,910
11,650
327,269
1,826,627
2,153,896
(1) Amount of distribution in dollars per unit.
(2) On August 3, 2017, Cominar decreased the monthly distribution to $0.095 per unit, or $1.14 per unit on an annualized basis.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 2017, Cominar generated $233.2 million in cash flows provided by operating activities. Cominar foresees no difficulty
in meeting its short-term obligations and its commitments, including the monthly payment of distributions, using the funds from
operations, refinancing of mortgages payable, debenture or unit issuance, amounts available on its credit facility and cash and cash
equivalents.
On August 3, 2017, Cominar decreased the monthly distribution from $0.1225 per unit to $0.095 per unit, or $1.14 per unit on an
annualized basis.
MORTGAGES PAYABLE
As at December 31, 2017, the nominal balance of mortgages payable was $2,153.9 million, up $107.9 million from $2,046 million as
at December 31, 2016. This increase is explained by contracted mortgages payable of $321.8 million at a weighted average
contractual rate of 3.27%, by the repayments of balances at maturity of $150.1 million at a weighted average contractual rate
of 4.94% and by the monthly repayments of capital of $63.7 million. As at December 31, 2017, the weighted average contractual rate
was 4.22%, down 15 basis points from 4.37% as at December 31, 2016. As at December 31, 2017, the effective weighted average
interest rate was 3.95%, compared to 4.09% as at December 31, 2016.
Cominar’s mortgages payable contractual maturity dates are staggered over a number of years to reduce risks related to renewal.
As at December 31, 2017, the residual weighted average term of mortgages payable was 4.8 years, compared to 5.5 years as at
December 31, 2016.
(1) Since December 31, 2017, Cominar repaid mortgages payable for $8.7 million and renewed a mortgage payable of $210.6 million that had matured. In addition, mortgages
payable totalling $276.4 million will be assumed by the purchaser or repaid by Cominar on the closing of the sale of investment properties held for sale expected in
March 2018.
SENIOR UNSECURED DEBENTURES
The following table presents the features of Cominar’s senior unsecured debentures:
Date of
issuance
Contractual
interest
rate
Effective
interest
rate
Dates of
interest
payments
Series 2
Series 3
Series 4
Series 7
Series 8
Series 9
December 2012(1)
4.23%
4.37%
May 2013
4.00%
4.24%
July 2013(2)
4.941%
4.81%
September 2014
3.62%
3.70%
December 2014
4.25%
4.34%
June 2015
4.164%
4.25%
Series 10
May 2016
Weighted average interest rate
Total
4.247%
4.23%
4.34%
4.29%
(1) Re-opened in February 2013 ($100.0 million).
(2) Re-opened in January 2014 ($100.0 million) and March 2014 ($100.0 million).
June 4 and
December 4
May 2 and
November 2
July 27 and
January 27
December 21
and June 21
June 8 and
December 8
June 1 and
December 1
May 23 and
November 23
Maturity
date
Nominal
value as at
December 31, 2017
$
December 2019
300,000
November 2020
100,000
July 2020
300,000
June 2019
300,000
December 2021
200,000
June 2022
300,000
May 2023
225,000
1,725,000
On June 15, 2017, Cominar reimbursed at maturity its Series 1 senior unsecured debentures totalling $250.0 million and bearing
interest at 4.274% using its unsecured revolving operating and acquisition credit facility.
As at December 31, 2017, the residual weighted average term of senior unsecured debentures was 3.2 years.
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63
BANK BORROWINGS
As at December 31, 2017, Cominar had an unsecured revolving operating and acquisition credit facility of up to $700.0 million
maturing in August 2019. This credit facility bears interest at the prime rate plus 110 basis points or at the bankers’ acceptance rate
plus 210 basis points. This credit facility contains certain restrictive covenants, with which Cominar was in compliance as at
December 31, 2017. As at December 31, 2017, bank borrowings totalled $620.4 million and cash available was $79.6 million.
Cominar's management intends to use the $1.14 billion proceeds from the sale of investment properties held for sale to repay its
operating and acquisition credit facility.
DEBT SUMMARY
As at December 31
Mortgages payable
Debentures
Bank borrowings
Total debt
2017
Weighted
average
contractual
rate
4.22%
4.23%
3.30%
4.10%
$
2,150,126
1,721,577
620,366
4,492,069
Residual
weighted
average
term
4.8 years
3.2 years
1.7 year
$
2,048,009
1,970,566
332,121
3.7 years
4,350,696
2016
Weighted
average
contractual
rate
4.37%
4.23%
2.81%
4.23%
Residual
weighted
average
term
5.5 years
3.7 years
2.6 years
4.5 years
As at December 31, 2017, the weighted average interest rate on Cominar’s total debt was 4.10%, down 13 basis points from
December 31, 2016.
DEBT RATIO
The following table presents the changes in the debt ratio:
As at December 31
Cash and cash equivalents
Mortgages payable
Debentures
Bank borrowings
Total net debt
Total assets less cash and cash equivalents
Debt ratio(1)(2)
2017
$
(6,928)
2,150,126
1,721,577
620,366
4,485,141
7,818,065
57.4%
2016
$
(9,853)
2,048,009
1,970,566
332,121
4,340,843
8,277,932
52.4%
(1) The debt ratio is equal to the total of cash and cash equivalents, bank borrowings, mortgages payable and 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, 2017, the 57.4% debt ratio increased by 5.0% from December 31, 2016. This increase is due mainly to
the $616.4 million change in fair value of investment properties and to the derecognition of goodwill of $27.0 million that have
increased the debt ratio by 4.4%. Cominar's management intends to use the $1.14 billion proceeds from the sale of investment
properties held for sale to reduce the debt ratio. This transaction is expected to close at the end of March 2018.
INTEREST COVERAGE RATIO
Cominar calculates its interest coverage ratio by dividing net operating income less Trust administrative expenses by finance
charges. The interest coverage ratio is used to assess Cominar’s ability to pay interest on its total debt from operating revenues.
As at December 31, 2017, the annualized interest coverage ratio stood at 2.43:1 [2.65:1 as at December 31, 2016], evidence of its
capacity to meet its interest payment obligations.
UNENCUMBERED ASSETS AND UNSECURED DEBTS
The following table presents information on Cominar’s unencumbered income properties and unsecured debts:
As at December 31
2017
2016
Number of
properties
Fair value of
properties ($)
Number of
properties
Fair value of
properties ($)
Unencumbered income properties
334
3,347,839
322
3,736,476
Unencumbered assets to unsecured debt ratio(1)(2)
Unsecured debts-to-total-debt ratio(2)(3)
1,43:1
52.1%
1.62:1
53.0%
(1) Fair value of unencumbered income properties divided by the unsecured debt.
(2) These ratios are not defined by IFRS and may differ from similar measures presented by other entities.
(3) Unsecured debts divided by total debt.
As at December 31, 2017, Cominar owned unencumbered income properties whose fair value was approximately $3.3 billion.
The unencumbered assets to unsecured debt ratio stood at 1.43:1, whereas the restrictive covenant on debentures requires a ratio
of 1.30:1 or more.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL COMMITMENTS
Cominar has no off-balance sheet arrangements that have or are likely to have a material impact on its results of operations or its
financial position, including its cash position and sources of financing.
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.
FINANCIAL INSTRUMENTS
CLASSIFICATION AND FAIR VALUE
Cominar uses a three-level hierarchy to classify its financial instruments. 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 fiscal years 2017 and 2016.
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 mortgages payable and debentures has been estimated based on current market rates for financial instruments
with similar terms and maturities.
64
65
Financial liabilities and their carrying amounts and fair values, when the fair values do not approximate the carrying amounts, are
classified as follows:
Liquidity risk
Liquidity risk is the risk that Cominar will be unable to meet its financial obligations as they come due.
As at December 31
2017
2016
Financial liabilities
Mortgages payable
Debentures
RISK MANAGEMENT
Level
Carrying
amount
$
Fair
value
$
Carrying
amount
$
Fair
value
$
2
2
2,150,126
1,721,577
2,153,043
1,739,278
2,048,009
2,104,025
1,970,566
2,019,802
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, 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 the operating revenues and by conducting credit assessments on all new tenants.
Cominar has a broad, highly diversified retail client base consisting of about 5,700 clients occupying an average of
approximately 7,000 square feet each. The top three clients, Public Works Canada, Société québécoise des infrastructures and
Canadian National Railway Company, account respectively for approximately 4.8%, 4.7% and 4.2% of operating revenues from
several leases with staggered maturities. The stability and quality of cash flows from operating activities are enhanced by the fact
that approximately 10.8% of operating revenues come from government agencies, representing approximately 100 leases.
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 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, and accounts payable and accrued liabilities do not bear interest.
Almost all mortgages payable and all debentures bear interest at fixed rates.
Cominar is exposed to interest rate fluctuations mainly due to bank borrowings, which bear interest at variable rates.
As required under IFRS, 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 $1.2 million increase or decrease in Cominar’s
net income for the year ended December 31, 2017 [$1.5 million in 2016].
Cominar manages this risk by the management of its capital structure, the continuous monitoring of current and projected cash
flows and adherence to its capital management policy.
Undiscounted contractual cash flows (interest and principal) related to financial liabilities as at December 31, 2017 are
as follows:
Cash flows
One to
five years
$
785,781
1,663,211
633,016
—
Under
one year
$
724,595
72,921
22,016
106,863
Over
five years
$
1,095,321
234,556
—
—
Mortgages payable
Debentures
Bank borrowings
Accounts payable and accrued liabilities(1)
(1) Excludes consumption taxes and other non-financial liabilities
PROPERTY PORTFOLIO
The following table presents information on the property portfolio, including Cominar’s proportionate share:
As at December 31
Income properties – Cominar’s proportionate share(1)
Properties under development and land held for future development
– Cominar’s proportionate share(1)
Investment properties held for sale
Number of income properties
Leasable area (sq. ft.)
(1) Non-IFRS financial measure.
SUMMARY BY OPERATING SEGMENT
As at December 31
Office
Retail
Industrial and mixed-use
Total
2017
$
2016
$
% Δ
6,402,858
7 775 331
(17.7)
145,253
1,143,500
195,755
143,130
(25.8)
698.9
525
539
44,370,000
44,919,000
2017
2016
Number of
properties
Leasable area
(sq. ft.)
Number of
properties
Leasable area
(sq. ft.)
136
154
235
525
14,830,000
12,075,000
17,465,000
44,370,000
134
168
237
539
14,522,000
12,372,000
18,025,000
44,919,000
66
67
SUMMARY BY GEOGRAPHIC MARKET
As at December 31
Québec
Montréal
Ottawa(1)
Total core markets
Toronto
Atlantic Provinces
Western Canada
Total overall market
2017
2016
Number of
properties
Leasable area
(sq. ft.)
Number of
properties
Leasable area
(sq. ft.)
127
282
20
429
24
58
14
10,253,000
25,420,000
2,476,000
38,149,000
2,466,000
2,647,000
1,108,000
129
288
21
438
27
60
14
10,139,000
25,254,000
2,516,000
37,909,000
3,187,000
2,715,000
1,108,000
525
44,370,000
539
44,919,000
DISPOSITIONS OF INCOME PROPERTIES
On July 19, 2017, Cominar completed the sale of a retail property located in Ontario, for a total amount of $0.9 million, at a
capitalization rate of 5.2%.
On July 27, 2017, Cominar completed the sale of a retail property located in the Granby area, Quebec, for a total amount
of $1.0 million, at a capitalization rate of 7.3%.
On August 17, 2017, Cominar completed the sale of a retail property located in Chicoutimi, Quebec, for a total amount
of $2.3 million, at a capitalization rate of 7.9%.
On December 8, 2017, Cominar completed the sale of an industrial and mixed-use property located in the Montréal area, Quebec, for
a total amount of $4.0 million, at a capitalization rate of 5.5%.
(1) For presentation purposes, the Gatineau area is included in the Ottawa geographic market.
The net sale proceeds of these properties were used to repay a portion of the credit facility.
ACQUISITIONS, INVESTMENTS AND DISPOSITIONS
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.
ACQUISITIONS OF ADDITIONAL OWNERSHIP INTEREST IN JOINT VENTURES
Société en commandite Chaudière-Duplessis (IKEA site)
As part of the site development for the new IKEA store in Québec, on January 13, 2017 Cominar acquired from Groupe Dallaire an
additional 25% ownership interest in a joint venture for an amount of $10.0 million, increasing its interest from 75% to 100%, in order
to consolidate its ownership. On that date, Société en commandite Chaudière-Duplessis became a wholly owned subsidiary of
Cominar. The fair value of the net assets acquired for an amount of $10.0 million was established by a national independent
appraiser holding a recognized and relevant professional qualification, as well as recent experience with respect to the geographical
location and the category of the investment properties being appraised. This acquisition was submitted for analysis and approval by
the investment committee made up of independent trustees, which recommended it to the Board of Trustees, which, in turn,
endorsed it.
Société en commandite Complexe Jules-Dallaire
On May 31, 2017, Cominar acquired from Groupe Dallaire an additional 25% ownership interest in Société en commandite Complexe
Jules-Dallaire for an amount of $21.2 million, increasing its interest to 75%, in order to consolidate its ownership. The fair value of
the net assets acquired for an amount of $21.2 million was established by a national independent appraiser holding a recognized
and relevant professional qualification, as well as recent experience with respect to the geographical location and the category of
the investment properties being appraised. This acquisition was submitted for analysis and approval by the investment committee
made up of independent trustees, which recommended it to the Board of Trustees, which, in turn, endorsed it. The capitalization rate
used to estimate the fair value of this investment property is 5.25%.
TRANSFERS TO INCOME PROPERTIES
During the fourth quarter of 2017, Cominar transferred two properties from properties under development to income properties.
The first property, a $31.3 million office building with a leasable area of 119,000 square feet, is located at 3055 Saint-Martin
Boulevard, in Laval and has an occupancy rate of 95.0%. This property is part of the Centropolis complex in Laval. Its capitalization
rate is 9.0%. The second property, a $11.3 million industrial and mixed-use building with a leasable area of 75,000 square feet, is
located in Lévis and has an occupancy rate of 67%. Its estimated capitalization rate is 8.1%.
DISPOSITIONS OF INVESTMENT PROPERTIES HELD FOR SALE
On January 31, 2017, Cominar completed the sale of an industrial and mixed-use property and a retail property located in the
Toronto area, for a total amount of $58.3 million, net of costs to sell, at a capitalization rate of 7.0%.
On March 3, 2017, Cominar completed the sale of a portfolio of 8 retail properties located in the Montréal area and in Ontario, for a
total amount of $34.7 million, net of costs to sell, at a capitalization rate of 6.7%.
On April 19, 2017, Cominar completed the sale of a retail property located in the Québec area, for a total amount of $0.8 million, net
of costs to sell, at a capitalization rate of 5.4%.
On June 26, 2017, Cominar completed the sale of a retail property located in Nova Scotia, for a total amount of $0.4 million, net of
costs to sell, at a capitalization rate of 7.8%.
On July 13, 2017, Cominar completed the sale of an industrial and mixed-use property located in the Québec area, for a total amount
of $2.2 million, net of costs to sell, at a capitalization rate of 6.0%.
The net sale proceeds of these properties were used to repay a portion of the credit facility.
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 2017, Cominar incurred $141.5 million [$110.7 million in 2016] in capital expenditures specifically to increase the rental
income generating capacity of its properties or to reduce the related operating expenses. These capital expenditures include, among
others, investment of $51.6 million in revitalization and redevelopment, $14.9 million in property expansion, $25.0 million in roofing
and other structural work, and $11.3 million in facade renovation. During the year, Cominar also incurred $9.4 million [$8.5 million
in 2016] in capital expenditures to maintain rental income generating capacity, consisting mainly of major maintenance and repair
expenses, as well as property equipment replacements, which will garner benefits for Cominar for 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
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 2017, Cominar made investments of $52.3 million in this respect [$45.0 million in 2016].
68
69
Société en commandite Chaudière-Duplessis (IKEA site)
During the first quarter of 2017, Cominar commenced the development of a new commercial centre located at the junction of
Highways 40 and 540, two of the main arteries of Québec, around the Swedish banner IKEA, which made the announcement in the
fall of 2016 and which will itself occupy just over 1 million square feet, including the parking areas. This will make it a major
attraction in the new area. The official opening of the IKEA store is scheduled for the end of summer 2018.
Cominar’s commercial project will have 14 buildings of various sizes to welcome approximately 25 clients, which, with time, will
occupy an estimated area of approximately 500,000 square feet, the first phases of which will be delivered by the end of 2018.
Decathlon, a company specialized in the sale of sporting goods, is the first client to announce its arrival in the commercial complex,
with an expected opening in July 2019. When completed, this project, with an investment estimated at $113 million, will have a
development capitalization rate of approximately 8.1%.
REAL ESTATE OPERATIONS
OCCUPANCY RATE
As at December 31, 2017, the average occupancy rate of our properties was 92.6%, compared to 92.4% as at December 31, 2016.
The following table presents the occupancy rates by operating segment.
OCCUPANCY RATE TRACK RECORD
INVESTMENT PROPERTIES HELD FOR SALE
On December 18, 2017, Cominar entered into a definitive agreement to sell its entire non-core market portfolio, for total gross
proceeds of $1.14 billion. This transaction is expected to close at the end of March 2018. Cominar’s management intends to use the
net proceeds of this transaction to pay down debt. This portfolio comprises 96 properties located in the Greater Toronto Area, the
Atlantic Provinces and Western Canada. A portion of goodwill, in the amount of $27.0 million, associated with this property portfolio
has been allocated to the assets held for sale and then has been subject to derecognition.
For the years ended December 31
2017
2016
Office
properties
Retail
properties
Industrial
and mixed-use
properties
$
$
Total
$
Total
$
$
—
—
590,552
10,000
18,577
(18,577)
93,630
(44,634)
332,711
—
6,564
(6,564)
49,500
(51,683)
143,130
163,733
(96,317)
(117,000)
163,424
1,086,687
96,397
—
1,848
(1,848)
10,000
26,989
(26,989)
—
—
—
Investment properties and goodwill
Balance, beginning of year
Dispositions
Net transfers from income properties
Transfers from properties under development and land
held for future development
Transfers of goodwill
Derecognition of goodwill
Balance, end of year
As at December 31
Liabilities
600,552
381,707
161,241
1,143,500
143,130
December 31, 2017 December 31, 2016 December 31, 2015 December 31, 2014 December 31, 2013
2017
2016
Office
properties
Retail
properties
Industrial
and mixed-use
properties
$
$
$
Total
$
Total
$
Operating segment
Office
Retail
Industrial and mixed-use
Portfolio total
89.1%
93.2%
95.2%
92.6%
89.6%
93.0%
94.3%
92.4%
90.3%
90.3%
94.3%
91.9%
93.5%
94.7%
94.9%
94.4%
93,3%
94,2%
92,4%
93,1%
Mortgages payable related to investment properties held for sale
238,312
3,614
34,424
276,350
—
The following table presents the occupancy rates as at December 31, 2017 by operating segment for our core markets:
Operating segment
Office
Retail
Industrial and mixed-use
Core markets
Québec
Montréal
Ottawa
Total
96.3%
94.1%
94.8%
94.9%
87.7%
92.4%
96.2%
92.9%
89.3%
93.1%
N/A
89.7%
90.0%
93.1%
95.9%
93.2%
PROPERTIES UNDER CONSTRUCTION AND DEVELOPMENT PROJECTS
Société en commandite Bouvier-Bertrand (Québec)
Cominar and Groupe Dallaire Inc., each having 50% ownership interest, are in joint venture for the purpose of developing commercial
land located on Highway 40, one of the main arteries of Québec. Upon completion, this project, Espace Bouvier, will consist of an
office building of 80,000 square feet and five retail buildings totalling approximately 191,500 square feet with more than 900 parking
spaces. The office building was transferred to income properties since it is currently 66% leased, and it is expected to be 77% leased
by the end of the first quarter of 2018. The first retail building, a property of 65,000 square feet 100% leased by a single tenant, was
delivered in December 2015. The second retail building, a property of 25,000 square feet 100% leased by a single tenant, was
delivered in May 2016. The third retail building, a property of 9,000 square feet 100% leased by a single tenant, was completed and
delivered to the tenant at the end of 2016. The fourth retail building, whose construction will be completed during the first quarter
of 2018 with a pre-leasing rate of 89%, will have a total leasable area of approximately 34,400 square feet and an estimated
construction cost of $4.5 million. The fifth retail building to be constructed will have a total leasable area of approximately
58,000 square feet and an estimated construction cost of $7.3 million. The expected weighted average capitalization rate for all of
these properties is estimated at 8.0%.
Société en commandite Marais (Québec)
Cominar, at 75%, and Groupe Dallaire Inc., at 25%, are in joint venture for the purpose of developing 1,542,000 square feet of
commercial land located along du Marais Street, in Québec, at the junction of Robert-Bourassa and Félix-Leclerc Highways, two
major arteries easily accessible, giving it great visibility. The development of this site will depend on market conditions and on
whether we obtain a change of zoning, if necessary.
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71
LEASING ACTIVITY
The following table summarizes Cominar’s leasing activity in 2017:
LEASE MATURITIES
For the years ending December 31
2018
2019
2020
2021
2022
Leases that matured in 2017
Number of clients
Leasable area (sq. ft.)
Average minimum rent ($/sq. ft.)
Renewed leases in 2017
Number of clients
Leasable area (sq. ft.)
Average minimum rent of renewed leases ($/sq. ft.)
Retention rate
New leases in 2017
Number of clients
Leasable area (sq. ft.)
Average minimum rent ($/sq. ft.)
Office
Retail
Industrial
and mixed-use
375
2,174,000
17.79
228
1,504,000
16.75
69.2%
169
768,000
15.07
642
2,179,000
19.11
415
1,629,000
17.85
74.8%
154
622,000
15.69
321
3,679,000
6.80
226
2,545,000
6.43
69.2%
154
1,487,000
6.09
Total
1,338
8,032,000
12.91
869
5,678,000
12.15
70.7%
477
2,877,000
10.49
During the year ended December 31, 2017, 70.7% [68.2% in 2016] of leasable area expiring in 2017 were renewed, while new leases
were also signed, representing 2.9 million square feet of leasable area. Overall, as at December 31, 2017, 106.5% [109.0% in 2016] of
the total leasable area maturing during the year was either renewed or subject to a new lease.
GROWTH IN THE AVERAGE NET RENT OF RENEWED LEASES
For the years ended December 31
Operating segment
Office
Retail
Industrial and mixed-use
Portfolio total
2017
(0.2)%
(0.7)%
4.7%
0.6%
2016
2.0%
(1.0)%
2.5%
1.8%
Office
Leasable area (sq. ft.)
Average minimum rent ($/sq. ft.)
% of portfolio – Office
Retail
Leasable area (sq. ft.)
Average minimum rent ($/sq. ft.)
% of portfolio – Retail
Industrial and mixed-use
Leasable area (sq. ft.)
2,449,000
1,645,000
1,271,000
1,185,000
1,229,000
17.67
16.5%
17.78
11.1%
18.00
8.6%
16.90
8.0%
17.45
8.3%
2,477,000
1,754,000
1,337,000
1,352,000
1,131,000
17.09
20.5%
19.65
14.5%
22.95
11.1%
22.25
11.2%
18.31
9.4%
2,984,000
1,875,000
2,785,000
1,565,000
1,997,000
Average minimum rent ($/sq. ft.)
% of portfolio – Industrial and mixed-use
6.65
17.1%
7.09
10.7%
6.60
15.9%
6.68
9.0%
6.38
11.4%
Portfolio total
Leasable area (sq. ft.)
Average minimum rent ($/sq. ft.)
% of portfolio
7,910,000
5,274,000
5,393,000
4,102,000
4,357,000
13.28
17.8%
14.50
11.9%
13.23
12.2%
14.45
9.2%
12.62
9.8%
The following table summarizes information on leases as at December 31, 2017:
Residual weighted
average term
(years)
Weighted average
term of leases
(years)
Average leased
area per client
(sq. ft.)
Average
minimum rent
($/sq. ft.)
Operating segment
Office
Retail
Industrial and mixed-use
Weighted average of total portfolio
5.2
4.7
5.1
5.0
8.4
7.9
8.3
8.2
6,900
4,200
13,000
7,000
17.89
18.82
6.69
13.51
Cominar has a broad, highly diversified retail client base consisting of approximately 5,700 clients occupying an average
of 7,000 square feet each. The top three clients, Public Works Canada, Société québécoise des infrastructures and Canadian
National Railway Company, account respectively for approximately 4.8%, 4.7% and 4.2% of operating revenues from several leases
with staggered maturities. The stability and quality of cash flows provided by operating activities are enhanced by the fact that
approximately 10.8% of operating revenues come from government agencies, representing approximately 100 leases.
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73
The following table presents our top ten clients by percentage of operating revenues:
RELATED PARTY TRANSACTIONS
Client
Public Works Canada
Société québécoise des infrastructures
Canadian National Railway Company
Scotiabank(1)
Thales Canada
Harvest Operations Corp.
Shoppers Drug Mart
Dollarama
Groupe Immobilier Desjardins
Kraft Canada
Total
% of operating
revenues
4.8
4.7
4.2
1.0
0.8
0.8
0.7
0.7
0.6
0.6
18.9
(1) As at January 1, 2018, Scotiabank will represent 0.4% of operating revenues.
ISSUED AND OUTSTANDING UNITS
On January 10, 2017, Cominar filed a short form base shelf prospectus allowing it to issue up to $1.0 billion in securities during the
25-month period that this prospectus remains valid.
On August 3, 2017, Cominar announced the suspension of the Distribution Reinvestment Plan and the implementation of a NCIB, up
to 9,000,000 units.
On January 10, 2018, Cominar announced the increase of its normal course issuer bid (“NCIB”), increasing the maximum number of
units that can be repurchased for cancellation from 9,000,000 units to 17,596,591 units. Under this NCIB, Cominar has repurchased,
during the fourth quarter of 2017, 730,900 units at an average price of $14.19, for a total consideration of $10.4 million paid cash,
and since the beginning of fiscal year 2018, 2,709,500 units at an average price of $14.58, for a total consideration of $39.5 million
paid cash. Since the beginning of this issuer bid, Cominar has therefore repurchased a total of 3,440,400 units at an average price of
$14.50, for a total consideration of $49.9 million paid cash.
For the years ended December 31
2017
2016
Units issued and outstanding, beginning of year
182,334,562
170,912,647
Public offering
Repurchase of units under NCIB
Exercise of options
Distribution reinvestment plan
Conversion of deferred units and restricted units
Units issued and outstanding, end of year
Additional information
Issued and outstanding units
Outstanding unit options
Deferred units and restricted units
—
(730,900)
3,900
2,887,370
134,565
12,780,000
(2,717,396)
—
1,265,157
94,154
184,629,497
182,334,562
March 7, 2018
181,930,672
12,767,300
244,638
During fiscal years 2016 and 2017, Michel Dallaire and Alain Dallaire were trustees and members of Cominar’s management team,
and they exercised indirect control over the activities of Groupe Dallaire Inc. and Dalcon Inc. (the “related companies”).
On January 1, 2018, Sylvain Cossette was appointed as President and Chief Executive Officer to replace Michel Dallaire.
This appointment was part of the succession plan put in place by the Board of Trustees when Sylvain Cossette joined Cominar
in 2013 as President and Chief Operating Officer. On the same day, January 1, 2018, Sylvain Cossette was appointed as a trustee of
Cominar to fill the vacancy created by the departure of Alain Dallaire as trustee. On February 12, 2018, Alban D’Amours was
appointed as Chairman of the Board of Cominar following the departure of Michel Dallaire. While Alain Dallaire has a passive
indirect economic interest in Groupe Dallaire, Alain Dallaire is neither an employee nor a director of Groupe Dallaire.
In 2016 and 2017, Cominar entered into transactions with those related companies in the normal course of business, the details of
which are as follows:
For the years ended December 31
Investment properties – Capital costs
Acquisition of additional ownership interest in the joint venture
Société en commandite Chaudière-Duplessis
Investment properties held by joint ventures – Acquisition
Investment properties held by joint ventures – Capital costs
Recovery of mortgage receivable
Acquisition of an additional ownership interest in the joint venture
Société en commandite Complexe Jules-Dallaire
Share of joint ventures’ net income
Net rental revenue from investment properties
Interest income
Balances shown in the consolidated balance sheets are detailed as follows:
As at December 31
Investments in joint ventures
Mortgage receivable
Accounts receivable
Accounts payable
2017
$
2016
$
138,129
86,639
10,016
—
3,263
(8,250)
21,190
5,276
313
140
2017
$
86,299
—
1,969
15,696
—
6,204
2,958
—
—
8,006
301
280
2016
$
90,194
8,250
1,182
7,624
In summary, Cominar incurred with related parties capital costs of approximately $138.1 million for its properties. Of this amount,
$43.9 million were invested in three major projects, being $19.6 million for the preparation of the future retail project being built
around the IKEA store in Québec, $13.5 million for the 76,000 square feet expansion of a property located in Montréal (including
tenant work), and $10.8 million for the redevelopment of our Centre Laval retail centre to greet the 66,600 square feet sporting
goods store Sportium (including tenant work).
In addition, Dalcon completed approximately 1,100 jobs with costs varying between $0 and $50,000, and slightly less than 250 jobs
where the costs exceeded $50,000. These investments are allocated as follows: approximately 34% for tenant improvements, 21%
for roofs, pavement and other structural work, 19% for the expansion and construction of properties, 15% for prepping a future retail
site, 9% for work related to common areas and interiors, and finally 2% for miscellaneous maintenance and repairs.
The leasehold improvement, repair and maintenance work on properties carried out by Dalcon Inc. are invoiced to Cominar at cost
plus a 5.0% markup. For construction projects, the work is invoiced at cost plus a 2.5% markup. By retaining the services of related
companies for property construction work and leasehold improvements, Cominar achieves significant time and cost savings while
providing better service to its clients.
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Dalcon Inc. is a fully integrated construction company with hundreds of skilled workers in various construction trades, including
electricians, plumbers, carpenters, interior system installers, plasterers, painters, tilers, roofers, masonry workers, fire protection
mechanics and other. Therefore, Dalcon combines many construction specializations within the company, unlike a standard general
contractor, which has to subcontract these trades to carry out the construction work. Since it hires very few or no sub-trades, Dalcon
is not charged for the usual sub-trade profit margin, with amounts ranging between 15% and 20% of construction costs, depending
on the markets. This represents considerable cost savings for Cominar.
There is no exclusivity between Cominar and Dalcon. Cominar (or its tenants) has the option to work with various sub-trades and
other general contractors if they wish to. In 2017, the total amount of investments in investment properties (capital costs) amounted
to $206.3 million, including $138.1 million with related companies, which represents approximately 67% of the investments.
All leasehold improvement, expansion, refurbishment or building construction work must be subject to prior approval by a vice
president or an executive vice president of Cominar. Execution plans as well as a detailed budget of the work must be prepared and
submitted to the vice president for approval, for each project. Once approval is granted, a project manager from Cominar monitors
and supervises the site to ensure compliance with the deadlines, the quality of construction and the budget. Sometimes, certain
situations force us to deliver client premises as quickly as possible. In such instances, Cominar may ask Dalcon to start renovation
work based on preliminary estimates without detailed construction plans, in order to meet the time constraints of its clients.
Cominar periodically checks that the hourly rates of professionals and workers charged by Dalcon are competitive compared with
the market. Hourly rates of architects, engineers, designers and technicians are compared with the rates included in third party bids
submitted to Cominar and also with the rates charged by different professional firms at the service of Cominar. The hourly rates of
construction workers are partially regulated, and Cominar periodically validates that they are in line with the market rates, but also
with the Association de la construction du Québec (the “ACQ”) recommendations. The construction costs of various specialties,
such as roofing, are also validated periodically and compared with the market to ensure the most competitive prices.
The invoicing at “cost plus a markup” between Cominar and Dalcon also contributes to eliminating the financial risk associated with
the management of extras, as known in the field of construction. During the work, if Dalcon faces unexpected events on the site
and/or additions are requested by Cominar, a change order is issued by Dalcon, with an estimate of the costs related to these
unexpected events and/or additions. These change orders are then approved by a project manager from Cominar, and the additional
costs related to these unexpected events and/or additions are still chargeable at “cost plus a markup” by Dalcon, unlike standard
general contractors that charge these unexpected events by adding significant profit percentages.
By constantly collaborating on matters such as repairs and maintenance costs, durability of products and equipment and
construction techniques, Cominar and Dalcon managed over time to refine their methods and choices of equipment and products,
thus meeting Cominar’s requirements in terms of building operations, maintenance, sustainability and durability.
In order to improve efficiency and speed in performing less significant construction work, Cominar asked Dalcon to set up mobile
teams made up of carpenters, plumbers, electricians and painters. Work that requires few or no professionals and that has an
estimated cost lower than $20,000 is carried out by these mobile workers. This significantly reduces costs and delivery deadlines as
it eliminates the time associated with the implementation of design, architecture and engineering plans as well as calls for tenders.
The added value of these mobile teams can be summarized as a fast, effective and cost-efficient way to carry out work, thus
providing Cominar with an undeniable competitive advantage vis-à-vis competitors. Dalcon’s mobile teams have carried out
approximately 550 construction projects in 2017, for an average value of $2,700 each.
Cominar is a proactive real estate owner in terms of energy management and savings. This energy management is done in
collaboration with various Dalcon engineers who are specialized in energy management. These engineers have been working for a
long time in collaboration with Cominar’s engineers and building operators, and have developed several energy management
principles, techniques and methods that make Cominar one of the leaders in this field.
Leasing of commercial space with the related companies is carried out at the market rate for similar spaces. As at December 31,
2017, Groupe Dallaire and its affiliated companies were occupying 65,425 square feet of office space in Complexe Jules-Dallaire in
Québec, 8,670 square feet of office space in the Alexis Nihon complex in Montréal, and 43,709 square feet of space at 605
Deslauriers Street in Montréal, an industrial and mixed-use building.
The business objective of investments in joint ventures with the related company Groupe Dallaire is the ownership, management
and development of real estate projects.
Cominar has developed a new business plan aiming to diversify its sources of construction suppliers and to create new
partnerships with leaders in the field, with the goal of promoting better development and increasing the value of all of its assets in
the major areas in which it is active. In parallel with the implementation of this new strategy, the business relationship with Groupe
Dallaire for construction services will be terminated in an orderly manner. To ensure an orderly transition, Cominar estimates that an
approximate twelve month transition period could be required.
Contractual rights and obligations
The formation of each joint venture is recognized by limited partnership agreements and unanimous shareholder agreements of the
general partner, in which the rights and obligations of each limited partner or shareholder are provided for. Among these terms and
conditions, the important decisions with regard to joint ventures are taken unanimously by the limited partners for the limited
partnerships, and by the shareholders for the general partners. Capital contributions are made on a pro rata basis between the
limited partners. In addition, each limited partner has the right of first refusal, should the other limited partner transfer its
participation in the joint venture. Recourse or purchase option mechanisms benefit each limited partner with respect of the other
limited partner if it is in default under the agreements or if it becomes insolvent.
In addition, if a Triggering Event (as defined below) occurs in respect of one of the limited partners, the other limited partner shall be
entitled, within a thirty (30) day period following the beginning of the Triggering Event, to provide to the limited partner subject to a
Triggering Event a notice that contains a purchase offer for the entire ownership interest at fair market value of such interest upon
transmission of the notice, and the limited partner in respect of which the Triggering Event occurred will be required to sell its
ownership interest. “Triggering Event” means, in respect of Groupe Dallaire Inc., the loss of control of Groupe Dallaire Inc. by the
Dallaire family, and, in respect of Cominar, situations where there is a change of control resulting from a takeover bid or a business
combination transaction, an acquisition of a significant equity position or an important change outside the normal course of
business in the composition of the Board of Trustees during a period of eighteen (18) consecutive months.
If the parties cannot mutually agree upon the fair market value, an appraisal mechanism is provided for in the agreements.
DISCLOSURE CONTROLS AND PROCEDURES AND
INTERNAL CONTROL OVER FINANCIAL REPORTING
The 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, 2017, 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, 2017, 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 2017 that have materially affected, or
are reasonably likely to materially affect, internal controls over financial reporting.
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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 fiscal 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.
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 management’s
internal measurements and valuations from independent real estate appraisers, performed in accordance with recognized
valuation techniques, as well as a definitive agreement to sell investment properties. Techniques used include the
capitalized net operating income method and the discounted cash flow method, including notably estimates of
capitalization rates and standardized 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 acquisition of a group of assets.
Generally, based on its judgment, when Cominar acquires a property or property portfolio without taking on the management
of personnel or acquiring an operational platform, it categorizes the acquisition as an acquisition of a group of assets.
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 or if it is a joint operation for which it must recognize the proportionate
share of assets, liabilities, revenues and expenses. Cominar holds 50% and 75% interests in its joint arrangements. It has
joint control over them since, under the contractual agreements, unanimous consent is required from all parties to the
agreements in decisions concerning 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 (“CGU”) expected to benefit from the
combination. To test impairment, Cominar must determine the recoverable value of net assets of each group of CGU,
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 fair value less the cost
of disposal. Should the carrying amount 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.
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 and valuations from independent appraisers, plus capital expenditures
made during the period, where applicable, or from a definitive agreement to sell investment properties. Management regularly
reviews appraisals of its investment properties between the appraisal dates in order to determine whether the related
assumptions, such as standardized 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
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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 construction, expansion or 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.
Leasehold improvements, incurred directly by Cominar or through an allowance to tenants, which represent capital investments
that increase the service capacity and value of properties and for which the economic advantage will extend beyond the term of
the lease and will mainly benefit Cominar, as well as initial direct costs, mostly brokerage fees incurred to negotiate or prepare
leases, are added to the carrying amount of investment properties when incurred, and are not amortized subsequently.
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.
Tenant inducements
Tenant inducements, mostly the payment of a monetary allowance to tenants and the granting of free occupancy periods, are
added to the carrying amount of investment properties as they are incurred and are subsequently amortized against rental
revenue from investment properties on a straight-line basis over the related lease term.
Investment properties held for sale
Investment properties held for sale are classified as being held for sale if their carrying amount will be recovered mainly through
a sale transaction rather than through continuing use. Investment properties continue to be measured using the fair value
model.
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:
−
Cash and cash equivalents, the mortgage receivable and accounts receivable 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, 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 activities.
Deferred financing costs
Issue costs incurred to obtain term loan financing, typically through mortgages payable or 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.
Unit purchase options
Cominar recognizes a compensation expense on units granted, based on their fair value on the date of the grant, 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, which corresponds to
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, which corresponds to 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 taxes payable
or recoverable 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 (net loss) per unit is calculated based on the weighted average number of units outstanding for the year. The
calculation of net income (net loss) per unit on a diluted basis considers the potential issuance of units in accordance with the
long-term incentive plan, 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.
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FUTURE ACCOUNTING POLICY CHANGES
IFRS 9, “Financial Instruments”
In July 2014, the International Accounting Standards Board (“IASB”) issued its final version of IFRS 9, which will replace IAS 39,
“Financial Instruments: Recognition and Measurement” and modifications to IFRS 7, “Financial Instruments: Disclosures,” in order to
add disclosure requirements regarding the transition to IFRS 9. 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. The adoption of this new standard will have no
significant impact on Cominar’s consolidated financial statements.
IFRS 15, “Revenue from Contracts with Customers”
In May 2014, the 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 related interpretations. Adoption 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, 2018, with earlier
adoption permitted. The adoption of this new standard will have no significant impact on Cominar’s consolidated financial
statements.
IFRS 16, “Leases”
In January 2016, the IASB issued IFRS 16, “Leases.” IFRS 16 sets out the principles for the recognition, measurement, presentation
and disclosure of leases for both parties to a contract, i.e. the customer (lessee) and the supplier (lessor). IFRS 16 will cancel and
replace the previous leases standard, IAS 17, “Leases,” and related interpretations. IFRS 16 will be effective for annual periods
beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 is also applied. The adoption of this new standard
will have no significant impact on Cominar’s consolidated financial statements since no important changes were made to the
accounting model by the lessor.
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.
RISK FACTORS RELATED TO THE BUSINESS OF COMINAR
ACCESS TO CAPITAL AND DEBT FINANCING, AND CURRENT GLOBAL FINANCIAL CONDITIONS
The real estate industry is capital intensive. Cominar requires 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,
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
or conditions in its debt instruments. Cominar’s access to the unsecured debenture market and the cost of Cominar’s borrowings
under the Unsecured Revolving Credit Facility are also dependent on its credit rating. A new negative change in its credit rating could
further materially adversely impact Cominar. See “Risks and Uncertainties – Risk Factors Related to the Ownership of Securities –
Credit rating”. Market events and conditions, including disruptions in international and regional credit markets and in other financial
systems and global economic conditions, could impede Cominar’s access to capital (including debt financing) or increase the cost
of such capital. The Canadian economy, including the Province of Alberta, is being adversely impacted by volatile oil prices.
Failure to raise or access capital in a timely manner 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 substantial outstanding consolidated borrowings comprised primarily of hypothecs, property mortgages, debentures,
bridge loan, and borrowings under its acquisition and operating credit facilities. Cominar intends to finance its growth strategy,
including developments and acquisitions, through a combination of its working capital and liquidity resources, including cash flows
from operations, additional borrowings and public or private sales of properties, equities 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 provide that, upon
an event of default, such indebtedness becomes immediately due and payable and distributions that may be made by Cominar may
be restricted. Therefore, upon an event of default under such borrowings, or inability to renew same at maturity, Cominar’s ability to
make distributions will be adversely affected.
A portion of Cominar’s cash flows is dedicated to servicing its debt, and there can be no assurance that Cominar will continue to
generate sufficient cash flows from operations to meet required interest or principal payments, such that it could be required to
seek renegotiation of such payments or obtain additional financing, including equity or debt financing.
The Unsecured Revolving Credit Facility in the stated amount of $700.0 million is repayable in one tranche in August 2019.
Cominar is exposed to debt financing risks, including the risk that the existing hypothecary borrowings 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.
On August 4, 2017, DBRS announced that it had downgraded the rating of the senior unsecured debentures from BBB (low) with a
negative trend to BB (high) with a stable trend. This downgrade materially adversely impacted Cominar.
Any further downgrade of the credit rating assigned by DBRS to Cominar and to the unsecured debentures could materially
adversely impact Cominar. See “Risks and Uncertainties – Risk Factors Related to the Business of Cominar – Credit Rating”.
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, the
economic environment in which they operate and the increase in interest rates. Due to difficult conditions in the Canadian retail
environment, certain retailers have announced the closure of their stores, including Sears Canada Co. and other retailers, who were
or are, as the case may be, tenants of Cominar. Other retailers may follow. The existing difficult retail environment is also materially
impacting Cominar, notably with the increase in e-commerce, while this segment is still hardly recovering from the closing of Target
stores, with the added closing of Sears stores. Cominar has also been impacted by vacancies and by the downward review of rents
in the Montréal area’s suburban office market and the Ottawa office market. The Calgary office market is also adversely impacted
by volatile oil prices. 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 Cominar’s
properties cannot be leased on economically favourable lease terms, or simply re-leased. 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 Cominar’s properties will be affected by many factors, including the level
of general economic activity and competition for tenants by other properties. Significant 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 and operating costs, hypothecary payments, insurance costs
and related charges must be made throughout the period of ownership of immovable property regardless of whether the property is
producing any income. If Cominar is unable to meet mortgage payments on a property, a loss could be sustained as a result of the
mortgage creditor’s exercise of its hypothecary remedies.
Immovable property investments tend to be relatively illiquid, with the degree of liquidity generally fluctuating in relationship with the
demand for and the perceived desirability of such investments. Such illiquidity may tend to limit Cominar’s ability to make changes
to its portfolio promptly in response to changing economic or investment conditions. If Cominar were to be required to liquidate its
immovable property investments, the proceeds to Cominar might be significantly less than the aggregate carrying amount of its
properties.
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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.
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.
ENVIRONMENTAL MATTERS
GOVERNMENT REGULATION
Environmental and ecological legislation and 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 its 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 its properties, nor is Cominar aware of any environmental condition
with respect to any of its properties that it believes would involve material expenditures by Cominar, other than in respect of
remediation expenditures taken into consideration as part of the acquisition of properties.
Pursuant to Cominar’s operating policies, Cominar shall obtain or review a Phase I environmental audit of each immovable property
to be acquired by it. See “Description of the Business – Investment Guidelines and Operating Policies – Operating Policies” on
pages 11 and 12 of the 2016 AIF.
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, pension funds and other 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.
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.
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.
Cominar and its properties are subject to various government statutes and regulations. Any change in such statutes or regulations
that is adverse to Cominar and its properties could affect Cominar’s operating results and financial performance. See “Risks and
Uncertainties – Risk Factors Related to the Business of Cominar – Environmental matters”.
LIMIT ON ACTIVITIES
In order to maintain its status as a “mutual fund trust” under the Income Tax Act, Cominar cannot carry on most active business
activities and is limited in the types of investments it may make. The Contract of Trust contains restrictions to this effect.
GENERAL UNINSURED LOSSES
Cominar carries a blanket comprehensive general liability policy, and a property policy 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 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.
Many insurance companies have eliminated coverage for acts of terrorism from their policies, and Cominar may not be able to
obtain coverage for terrorist acts at commercially reasonable rates or at any price. Damage to a property sustained as a result of an
uninsured terrorist or similar act would likely adversely impact Cominar’s financial condition and results of operations and decrease
the amount of cash available for distribution.
POTENTIAL CONFLICTS OF INTEREST
Cominar may be subject to conflicts of interest due to the fact that Groupe Dallaire and related entities are engaged in a wide range
of real estate and other business activities. Dalcon Inc. is a wholly owned subsidiary of Groupe Dallaire Inc. Cominar rents premises
to Groupe Dallaire Inc. and to Dalcon Inc. Dalcon Inc. also performs leasehold improvements and carries out construction and
development projects, all on behalf of Cominar. Finally, Cominar owns one participation of 50% and two participations of 75% in
joint ventures with Groupe Dallaire Inc. The business objective of these three joint ventures is the ownership, management and
development of real estate projects. The Dallaire Family and related entities may become involved in transactions or leasing
opportunities which conflict with the interests of Cominar. Cominar has started an important transition towards a new business plan
aiming to diversify its sources of construction suppliers and to develop partnerships with new partners who are leaders in the field,
with the goal of promoting better development and increasing the value of all of its assets in the major areas in which it is active. In
parallel with the implementation of this new strategy, the business relationship with Groupe Dallaire for construction services will be
terminated in an orderly manner. To ensure an orderly transition, Cominar estimates that an approximate twelve month transition
period could be required.
CYBERSECURITY EVENTS
Cominar faces various security threats, including cybersecurity threats to gain unauthorized access to sensitive information, to
render data or systems unusable, or otherwise affect Cominar’s ability to operate. Cybersecurity attacks in particular are evolving
and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security
breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information
and corruption of data. The occurrence of one of these events could cause a substantial decrease in revenues, increased costs to
respond or other financial loss, damage to reputation, increased regulation or litigation or inaccurate information reported from
Cominar’s operations. These developments may subject Cominar’s operations to increased risks, as well as increased costs, and,
depending on their ultimate magnitude, could have a material adverse effect on Cominar’s financial position and results of
operations.
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RISK FACTORS RELATED TO THE OWNERSHIP OF SECURITIES
STRUCTURAL SUBORDINATION OF SECURITIES
MARKET PRICE
A publicly traded real estate investment trust will not necessarily trade at values determined solely by reference to the underlying
value of its real estate assets. Accordingly, the Units may trade at a premium or a discount to values implied by the initial appraisal
of the value of its properties or the value of such properties from time to time.
Although Cominar intends to make distributions of its available cash to Unitholders, these cash distributions are not assured.
The actual amount distributed will depend on numerous factors including, 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 to 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 set out the full rationale for the chosen rating symbol, and in other releases.
On August 4, 2017, DBRS announced that it had downgraded the rating of the senior unsecured debentures from BBB (low) with a
negative trend to BB (high) with a stable trend. This downgrade materially adversely impacted Cominar.
Any further downgrade of the credit rating assigned by DBRS to Cominar and to the unsecured debentures could have a material
adverse effect on Cominar.
Real or anticipated changes in the credit rating in respect of the Unsecured Debentures may affect the market value of the
Unsecured Debentures. In addition, real or anticipated changes in such credit rating can affect the ability of Cominar to access debt
capital markets and increase the cost at which Cominar can do so. Any failure or inability on Cominar’s part to access debt capital
markets on satisfactory terms, or at all, could have a material adverse effect on Cominar’s financial position and results of
operations, including on its acquisition and development program. See “Risks and Uncertainties – Risk Factors Related to the
Business of Cominar – Access to capital and debt financing, and current global financial conditions” and “Risks and Uncertainties –
Risk Factors Related to the Business of Cominar – Debt financing”.
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.
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 debts.
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. The $700.0 million unsecured revolving credit facility is
repayable in one tranche in August 2019, and it is expected that it cannot be refinanced in the same amount or under such
favourable terms and conditions in light of the downgrade in the rating of the senior unsecured debentures.
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
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 (an
“annuitant”) 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 the assets of Cominar are intended to be subject to levy or execution.
The Contract of Trust further provides that certain written instruments signed by Cominar (including all immovable hypothecs and,
to the extent the Trustees determine to be practicable and consistent with their obligation as Trustees to act in the best interests of
the Unitholders, other written instruments creating a material obligation of Cominar) shall contain a provision or be subject to an
acknowledgment to the effect that such obligation will not be binding upon Unitholders or annuitants personally. Except in case of
bad faith or gross negligence on their part, no personal liability will attach under the laws of the Province of Québec to Unitholders or
annuitants for contract claims under any written instrument disclaiming personal liability as aforesaid.
However, in conducting its affairs, Cominar will be acquiring immovable property investments, subject to existing contractual
obligations, including obligations under hypothecs or mortgages and leases. The Trustees will use all reasonable efforts to have any
such obligations, other than leases, modified so as not to have such obligations binding upon any of the Unitholders or annuitants
personally. However, Cominar may not be able to obtain such modification in all cases. If a claim is not satisfied by Cominar, there
is a risk that a Unitholder or annuitant will be held personally liable for the performance of the obligations of Cominar where the
liability is not disavowed as described above. The possibility of any personal liability attaching to Unitholders or annuitants under
the laws of the Province of Québec for contract claims where the liability is not so disavowed is remote.
Cominar uses all reasonable efforts to obtain acknowledgments from the hypothecary creditors under assumed hypothecs that
assumed hypothec obligations will not be binding personally upon the Trustees or the Unitholders.
Claims against Cominar may arise other than under contracts, including claims in delict, claims for taxes and possibly certain other
statutory liabilities. The possibility of any personal liability of Unitholders for such claims is considered remote under the laws of the
Province of Québec and, as well, the nature of Cominar’s activities are such that most of its obligations arise by contract, with non-
contractual risks being largely insurable. In the event that payment of 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.
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The Trustees will cause the activities of Cominar to be conducted, with the advice of counsel, in such a way and in such jurisdictions
as to avoid, to the extent they determine to be practicable and consistent with their duty to act in the best interests of the
Unitholders, any material risk of liability on the Unitholders for claims against Cominar.
DILUTION
The number of Units Cominar is authorized to issue is unlimited. The Trustees have the discretion to issue additional Units in other
circumstances. Additional Units may also be issued pursuant to the DRIP (which is currently suspended), the Equity Incentive Plan
and any other incentive plan of Cominar. 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
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 Income Tax Act and remits such payment to the tax
authorities on behalf of the Unitholder. The Income Tax Act contains measures to subject non-residents of Canada to withholding
tax of 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 and results of operations, 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 corporations 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 designations
for income tax purposes. In the context of the sale of a significant part of its investment properties, Cominar could end up with a
substantial taxable profit that would require it to make a sizeable additional special distribution to avoid having to pay taxes itself.
Certain of Cominar’s subsidiaries are subject to tax on their taxable income under the Income Tax Act and the Taxation Act
(Québec).
A special tax regime applies to trusts that are considered SIFTs 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 Income 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 (the “Real Estate Investment Trust Exception”). 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 fiscal 2018 or any other subsequent year.
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CONSOLIDATED
FINANCIAL STATEMENTS
COMINAR REAL ESTATE INVESTMENT TRUST
December 31, 2017
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91
MANAGEMENT’S
RESPONSIBILITY FOR
FINANCIAL REPORTING
INDEPENDENT
AUDITOR’S REPORT
TO THE UNITHOLDERS OF
COMINAR REAL ESTATE INVESTMENT TRUST
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
International Financial
Reporting Standards (“IFRS”). The financial information in
our MD&A is consistent with these consolidated financial
statements.
in accordance with
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, 2017, 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 were effective.
of Trustees
oversees management’s
The Board
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
the
internal control procedures and
their updates,
identification and management of risks, and advising the
trustees on auditing matters and financial reporting issues.
PricewaterhouseCoopers LLP, 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
the Consolidated Financial
an
Statements as at December 31, 2017 and their report
follows. The auditors have full and unrestricted access to
the Audit Committee to discuss their audit and related
findings.
independent audit of
Sylvain Cossette, B.C.L.
President and Chief Executive Officer
GILLES HAMEL, CPA, CA
Executive Vice President
and Chief Financial Officer
Québec, March 7, 2018
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, 2017 and 2016 and the
consolidated
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.
unitholders'
statements
of
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
the preparation of consolidated
necessary
to enable
financial statements
from material
that are
misstatement, whether due to fraud or error.
free
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
in the
evidence about the amounts and disclosures
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, 2017 and 2016, and their financial
performance and their cash flows for the years then ended in
accordance with
Reporting
Standards.
International
Financial
PricewaterhouseCoopers LLP (1)
March 7, 2018
Place de la Cité, Tour Cominar
2640 Laurier Boulevard, Suite 1700
Québec, Quebec G1V 5C2
Canada
"PwC" refers to PricewaterhouseCoopers LLP, an Ontario
limited liability partnership.
(1) CPA auditor, CA, public accountancy permit no. A125971
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93
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS
OF UNITHOLDERS’ EQUITY
[in thousands of Canadian dollars]
ASSETS
Investment properties
Income properties
Properties under development
Land held for future development
Investment properties held for sale
Investments in joint ventures
Goodwill
Mortgage receivable
Accounts receivable
Prepaid expenses and other assets
Cash and cash equivalents
Total assets
LIABILITIES
Mortgages payable
Mortgages payable related to investment properties held for sale
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, 2017 December 31, 2016
$
$
For the years ended December 31
[in thousands of Canadian dollars]
5
6
6
7
8
9
10
11
7, 11
12
13
14
19
6,239,383
37,692
91,580
6,368,655
1,143,500
86,299
139,982
—
62,956
16,673
6,928
7,676,134
45,776
90,820
7,812,730
143,130
90,194
166,971
8,250
42,518
14,139
9,853
7,824,993
8,287,785
1,873,776
276,350
1,721,577
620,366
117,482
6,681
4,616,232
3,208,761
7,824,993
2,048,009
—
1,970,566
332,121
109,861
11,715
4,472,272
3,815,513
8,287,785
Note
Unitholders’
contributions
$
Cumulative
net income
$
Cumulative
distributions
$
Contributed
surplus
$
Total
$
Balance as at January 1, 2017
3,234,693
2,250,944
(1,675,689)
5,565
3,815,513
Net loss and comprehensive income
Distributions to unitholders
Unit issuances
Unit issuance expense
Repurchase of units under NCIB(1)
Long-term incentive plan
15
15
15
15
—
—
41,734
(58)
(10,374)
(391,725)
—
—
—
—
—
1,810
—
(246,523)
—
—
—
—
—
—
(1,908)
—
—
292
(391,725)
(246,523)
39,826
(58)
(10,374)
2,102
Balance as at December 31, 2017
3,265,995
1,861,029
(1,922,212)
3,949
3,208,761
Note
Unitholders’
contributions
$
Cumulative
net income
$
Cumulative
distributions
$
Contributed
surplus
$
Total
$
Balance as at January 1, 2016
3,063,920
2,008,364
(1,421,233)
6,946
3,657,997
Net income and comprehensive income
Distributions to unitholders
Unit issuances
Unit issuance expense
Repurchase of units under NCIB(1)
Long-term incentive plan
15
15
15
15
—
—
220,043
(8,491)
(40,779)
—
241,738
—
—
—
—
842
—
(254,456)
—
—
—
—
—
—
(1,579)
—
—
198
241,738
(254,456)
218,464
(8,491)
(40,779)
1,040
Balance as at December 31, 2016
3,234,693
2,250,944
(1,675,689)
5,565
3,815,513
(1) Normal course issuer bid (“NCIB”)
See accompanying notes to the consolidated financial statements.
Alban D’Amours, CM, GOQ, LH, Fellow Adm.A.
Chairman of the Board of Trustees
Michel Théroux, FCPA, FCA
President of the Audit Committee
94
95
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the years ended December 31
[in thousands of Canadian dollars, except per unit amounts]
For the years ended December 31
[in thousands of Canadian dollars]
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
Change in fair value of investment properties
Share of joint ventures’ net income
Derecognition of goodwill
Income (loss) before income taxes
Income taxes
Net income (net loss) and comprehensive income
Basic and diluted net income (net loss) per unit
See accompanying notes to the consolidated financial statements.
Note
17
17
18
17
5
8
7
19
20
2017
$
2016
$
835,489
866,982
(187,895)
(194,929)
(16,628)
(399,452)
(185,436)
(196,822)
(16,115)
(398,373)
436,037
468,609
(168,752)
(25,977)
(616,354)
5,276
(26,989)
(170,645)
(16,719)
(46,675)
8,006
—
(396,759)
242,576
5,034
(838)
(391,725)
241,738
(2.13)
1.40
OPERATING ACTIVITIES
Net income (net loss)
Adjustments for:
Excess of share of net income over distributions received from the joint
ventures
Change in fair value of investment properties
Depreciation and amortization
Compensation expense related to long-term incentive plan
Deferred income taxes
Derecognition of goodwill
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
Mortgage receivable
Cash consideration paid in a business combination
Cash consideration paid on the acquisition of an additional interest in a joint
venture
Net proceeds from the sale of investment properties
Contributions to the capital of the joint ventures
Return of capital from a joint venture
Change in other assets
Cash flows used in investing activities
FINANCING ACTIVITIES
Cash distributions to unitholders
Bank borrowings
Mortgages payable
Debenture issuance net proceeds
Unit issuance net proceeds
Repurchase of units under NCIB
Repayments of debentures at maturity
Repayments of mortgages payable at maturity
Monthly repayments of mortgages payable
Cash flows used in 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
Cash distributed by a joint venture
See accompanying notes to the consolidated financial statements.
Note
8
5
15
19
7
5
21
5, 21
6, 21
4, 8
8
4, 6
8
8
15
12
11
11
8
2017
$
2016
$
(391,725)
241,738
(5,026)
616,354
(1,504)
2,102
(5,034)
26,989
(3,941)
(4,990)
233,225
(7,206)
46,675
(2,398)
1,028
838
—
(3,931)
7,346
284,090
(203,823)
(178,578)
(50,009)
8,250
(10,016)
(21,190)
116,372
—
—
(3,518)
(39,908)
—
—
—
107,157
(10,850)
2,750
(377)
(163,934)
(119,806)
(206,753)
(236,000)
288,245
320,530
—
3
(10,380)
(250,000)
(150,134)
(63,727)
(72,216)
(2,925)
9,853
6,928
(49,045)
239,354
223,725
191,516
(40,779)
(250,000)
(183,498)
(54,954)
(159,681)
4,603
5,250
9,853
183,217
250
181,469
800
96
97
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
[in thousands of Canadian dollars, except per unit amounts]
1) DESCRIPTION OF THE TRUST
Cominar Real Estate Investment Trust ("Cominar" or the "Trust") is an unincorporated closed-end real estate investment trust
created by a Contract of Trust on March 31, 1998, under the laws of the Province of Quebec. As at December 31, 2017, Cominar
owned and managed a real estate portfolio of 525 high-quality properties that covered a total area of 44.4 million square feet in
Quebec, Ontario, the Atlantic Provinces and Western Canada.
Cominar is listed on the Toronto Stock Exchange, and its units trade under the symbol "CUF.UN." The head office is located at
Complexe Jules-Dallaire – T3, 2820 Laurier Boulevard, Suite 850, Québec, Quebec, 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 March 7, 2018.
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 fiscal 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.
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 management’s
internal measurements and valuations from independent real estate appraisers, performed in accordance with recognized
valuation techniques, as well as a definitive agreement to sell investment properties. Techniques used include the
capitalized net operating income method and the discounted cash flow method, including notably estimates of
capitalization rates and standardized 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 acquisition of a group of assets.
Generally, based on its judgment, when Cominar acquires a property or property portfolio without taking on the management
of personnel or acquiring an operational platform, it categorizes the acquisition as an acquisition of a group of assets.
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 or if it is a joint operation for which we must recognize the
proportionate share of assets, liabilities, revenues and expenses. Cominar holds 50% and 75% interests in its joint
arrangements. It has joint control over them since, under the contractual agreements, unanimous consent is required from
all parties to the agreements in decisions concerning 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 (“CGU”) expected to benefit from the
combination. To test impairment, Cominar must determine the recoverable value of net assets of each group of CGU,
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 fair value less the cost
of disposal. Should the carrying amount 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.
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
98
99
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 and valuations from independent appraisers, plus capital expenditures
made during the period, where applicable, or on a definitive agreement to sell investment properties. Management regularly
reviews appraisals of its investment properties between the appraisal dates in order to determine whether the related
assumptions, such as standardized 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 construction, expansion or 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.
Leasehold improvements, incurred directly by Cominar or through an allowance to tenants, which represent capital investments
that increase the service capacity and value of properties and for which the economic advantage will extend beyond the term of
the lease and will mainly benefit Cominar, as well as initial direct costs, mostly brokerage fees incurred to negotiate or prepare
leases, are added to the carrying amount of investment properties when incurred, and are not amortized subsequently.
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.
Tenant inducements
Tenant inducements, mostly the payment of a monetary allowance to tenants and the granting of free occupancy periods, are
added to the carrying amount of investment properties as they are incurred and are subsequently amortized against rental
revenue from investment properties on a straight-line basis over the related lease term.
Investment properties held for sale
Investment properties held for sale are classified as being held for sale if their carrying amount will be recovered mainly through
a sale transaction rather than through continuing use. Investment properties continue to be measured using the fair value
model.
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:
−
Cash and cash equivalents, the mortgage receivable and accounts receivable 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, 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 activities.
Deferred financing costs
Issue costs incurred to obtain term loan financing, typically through mortgages payable or 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.
Unit purchase options
Cominar recognizes a compensation expense on units granted, based on their fair value on the date of the grant, 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, which corresponds to
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, which corresponds to the
market value of Cominar units on the date of the grant. The compensation expense is amortized using the graded vesting
method.
100
101
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 taxes payable
or recoverable 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 (net loss) per unit is calculated based on the weighted average number of units outstanding for the year. The
calculation of net income (net loss) per unit on a diluted basis considers the potential issuance of units in accordance with the
long-term incentive plan, 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) FUTURE ACCOUNTING POLICY CHANGES
IFRS 9, “Financial Instruments”
In July 2014, the International Accounting Standards Board (“IASB”) issued its final version of IFRS 9, which will replace IAS 39,
“Financial Instruments: Recognition and Measurement” and modifications to IFRS 7, “Financial Instruments: Disclosures,” in order to
add disclosure requirements regarding the transition to IFRS 9. 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. The adoption of this new standard will have no
significant impact on Cominar’s consolidated financial statements.
IFRS 15, “Revenue from Contracts with Customers”
In May 2014, the 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 related interpretations. Adoption 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, 2018, with earlier
adoption permitted. The adoption of this new standard will have no significant impact on Cominar’s consolidated financial
statements.
IFRS 16, “Leases”
In January 2016, the IASB issued IFRS 16, “Leases”. IFRS 16 sets out the principles for the recognition, measurement, presentation
and disclosure of leases for both parties to a contract, i.e. the customer (lessee) and the supplier (lessor). IFRS 16 will cancel and
replace the previous leases standard, IAS 17, “Leases”, and related interpretations. IFRS 16 will be effective for annual periods
beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 is also applied. The adoption of this new standard
will have no significant impact on Cominar’s consolidated financial statements since no important changes were made to the
accounting model by the lessor.
4) ACQUISITIONS AND DISPOSITIONS
BUSINESS COMBINATIONS
On January 13, 2017, Cominar acquired an additional 25% ownership interest in Société en commandite Chaudière-Duplessis for an
amount of $10,016, increasing its interest in the company from 75% to 100%. On that date, Société en commandite Chaudière-
Duplessis became a wholly owned subsidiary of Cominar.
Cominar accounted for this transaction using the acquisition method, in accordance with IFRS 3 “Business Combinations.” IFRS 3
requires the recognition of 100% of the net assets acquired in the consolidated financial statements as well as the derecognition of
the investment in a joint venture.
The following table summarizes the acquisition-date fair value of net assets acquired and the purchase price:
As at January 13, 2017
Properties under development
Working capital
Net assets of Société en commandite Chaudière-Duplessis
Previously held interest in the joint venture
Cash consideration
Final purchase
price allocation
$
40,334
(207)
40,127
(30,111)
10,016
The cash consideration paid for the acquisition has been financed by the credit facility. The results of this subsidiary are included in
the consolidated financial statements from the date of acquisition.
DISPOSITIONS OF INCOME PROPERTIES
On July 19, 2017, Cominar completed the sale of a retail property located in Ontario, for a total selling price of $850.
On July 27, 2017, Cominar completed the sale of a retail property located in the Granby area, Quebec, for a total selling price of
$1,000.
On August 17, 2017, Cominar completed the sale of a retail property located in Chicoutimi, Quebec, for a total selling price of $2,250.
On December 8, 2017, Cominar completed the sale of an industrial and mixed-use property located in the Montréal area, Quebec, for
a total selling price of $4,000.
These properties sold during fiscal 2017 have been subject to an overall increase in their carrying amount to their fair value of $276.
These properties had been subject to an increase in their carrying amount to their fair value of $157 in 2016.
DISPOSITIONS OF INVESTMENT PROPERTIES HELD FOR SALE IN 2017
On January 31, 2017, Cominar completed the sale of one industrial and mixed-use property and one retail property located in the
Toronto area, for a total selling price of $58,253, net of costs to sell.
On March 3, 2017, Cominar completed the sale of a portfolio of 8 retail properties located in the Montréal area and in Ontario for a
total selling price of $34,658, net of costs to sell.
On April 19, 2017, Cominar completed the sale of a retail property located in the Québec area for a total selling price of $835, net of
costs to sell.
102
103
On June 26, 2017, Cominar completed the sale of a retail property located in Nova Scotia for a total selling price of $388, net of
costs to sell.
On July 13, 2017, Cominar completed the sale of an industrial and mixed-use property located in the Québec area, for a total selling
price of $2,183, net of costs to sell.
The properties sold by Cominar during fiscal 2017 have been subject to an overall decrease in their carrying amount to their fair
value of $819 following an adjustment of the estimated costs to sell. These properties had been subject to an increase in their
carrying amount to their fair value of $7,847 in 2016.
DISPOSITIONS OF INVESTMENT PROPERTIES HELD FOR SALE IN 2016
On January 29, 2016, Cominar completed the sale of a portfolio of 10 retail properties located in Quebec and Ontario, for a total
price of $14,949, net of costs to sell.
On March 31, 2016, Cominar completed the sale of a portfolio of 14 retail properties located in Quebec and Ontario, for a total price
of $55,482, net of costs to sell.
On May 2, 2016, Cominar completed the sale of a portfolio of 5 retail properties located in the Québec and Montréal areas, for a total
price of $39,293, net of costs to sell.
On December 19, 2016, Cominar completed the sale of two retail properties located in the Montréal area, for a total price of $5,914,
net of costs to sell.
The properties sold by Cominar during fiscal 2016 have been subject to an overall decrease in their carrying amount to their fair
value of $1,362. These properties had been subject to an increase in their carrying amount to their fair value of $4,836 in 2015.
TRANSFERS TO INCOME PROPERTIES IN 2017
During the fourth quarter of 2017, Cominar transferred two properties from properties under development to income properties. The
first property, a $31,285 office building with a leasable area of 119,000 square feet, is located in Laval and has an occupancy rate of
95.0%. Its capitalization rate is 9.0%. The second property, a $11,315 industrial and mixed-use building with a leasable area of
75,000 square feet, is located in Lévis and has an occupancy rate of 67%. Its estimated capitalization rate is 8.1%.
TRANSFERS TO INCOME PROPERTIES IN 2016
During the third quarter of 2016, Cominar completed the construction of an industrial and mixed-use property that it transferred
from property under development to income property. Located in Québec, this property valued at $5,599, with a leasable area of
46,000 square feet, has an occupancy rate of 100%. The capitalization rate is 8.5%.
During the fourth quarter of 2016, Cominar completed the construction of two properties that were transferred from properties
under development to income properties. The first one, a $2,262 retail property located in Trois-Rivières with a leasable area of
6,000 square feet, has an occupancy rate of 100% and its capitalization rate is 7.6%. The second one, a $19,970 industrial and
mixed-use property located in Laval with a leasable area of 130,000 square feet, has an occupancy rate of 100% and its
capitalization rate is 8.4%.
5)
INCOME PROPERTIES
For the years ended December 31
Balance, beginning of year
Acquisitions and related costs
Change in fair value
Capital costs
Dispositions
Transfers from properties under development
Net transfers to investment properties held for sale
Change in initial direct costs
Recognition of leases on a straight-line basis
Balance, end of year
Note
4
6
7
2017
$
7,676,134
478
(592,229)
190,151
(8,100)
42,600
(1,086,687)
13,095
3,941
6,239,383
2016
$
7,614,990
10,648
(49,086)
149,011
—
27,831
(96,397)
15,206
3,931
7,676,134
CHANGE IN FAIR VALUE OF INVESTMENT PROPERTIES
Cominar opted to present its investment properties in the consolidated 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 during the period, where applicable, or on a definitive agreement to sell investment
properties. External valuations were carried out by independent national firms holding a recognized and relevant professional
qualification and having recent experience in the location and category of the investment properties being valued.
As per Cominar’s policy on valuing investment properties, during fiscal 2017, management revalued the entire real estate portfolio
and determined that a decrease of $616,354 was necessary to change the carrying amount in fair value of investment properties
[decrease of $46,675 in 2016]. The change in fair value related to investment properties held as at the year-end date amounts to
$615,811 [$45,313 in 2016]. In 2017, the fair value of investment properties from external valuations amounted to 28% [14% in 2016]
of the total fair value of all investment properties.
Internally valued investment properties have been valued using the capitalized net operating income method. Externally valued
investment properties have been valued either with the capitalized net operating income method or the discounted cash flow
method. Here is a description of these methods and the key assumptions used:
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.
Discounted cash flow method – Under this method, the expected future cash flows are discounted using an appropriate rate based
on the risk of the property. Expected future cash flows for each investment property are based upon, but not limited to, rental
income from current leases, budgeted and actual expenses, and assumptions about rental income from future leases. Discount and
capitalization rates are estimated using market surveys, available appraisals and market comparables.
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 reported in net income.
As required under IFRS, Cominar has determined that an increase or decrease in 2017 of 0.1% in the applied capitalization rates for
the entire real estate portfolio, except for the investment properties held for sale, would result in a decrease or increase of
approximately $103,400 [$135,300 in 2016] in the fair value of its investment properties.
Capitalization and discount rates used in both the internal and external valuations are consistent.
104
105
Capitalization and discount rates
2017
2016
6) PROPERTIES UNDER DEVELOPMENT AND LAND HELD FOR FUTURE
Category
Office properties
Capitalized net operating income method
Capitalization rate
Discounted cash flow method
Overall capitalization rate
Terminal capitalization rate
Discount rate
Retail properties
Capitalized net operating income method
Capitalization rate
Discounted cash flow method
Overall capitalization rate
Terminal capitalization rate
Discount rate
Industrial and mixed-use properties
Capitalized net operating income method
Capitalization rate
Discounted cash flow method(1)
Overall capitalization rate
Terminal capitalization rate
Discount rate
Total
Capitalized net operating income method
Capitalization rate
Discounted cash flow method
Overall capitalization rate
Terminal capitalization rate
Discount rate
Range
Weighted
average
Range
Weighted
average
5.3% - 9.3%
6.2%
4.8% - 9.3%
5.3% - 6.0%
5.5% - 6.5%
6.0% - 7.3%
5.4%
5.8%
6.3%
5.3% - 6.3%
5.6% - 6.5%
6.6% - 7.0%
5.0% - 8.3%
6.1%
5.0% - 9.0%
5.0% - 8.0%
5.3% - 8.8%
5.3% - 8.0%
5.7%
5.8%
6.2%
5.8% - 6.3%
6.0% - 6.5%
6.8% - 7.3%
5.5% - 11.0%
6.8%
5.5% - 11.0%
6.0% - 6.8%
6.3% - 7.0%
7.0% - 7.8%
6.5%
6.5%
7.2%
6.3%
5.8%
5.9%
6.3%
6.2%
5.4%
5.6%
6.7%
5.9%
5.9%
6.1%
6.9%
6.9%
N/A
N/A
N/A
6.2%
5.6%
5.8%
6.7%
(1) For the year ended December 31, 2016, no industrial and mixed-use properties have been subject to external valuation according to the discounted cash flow method.
DEVELOPMENT
For the years ended December 31
Balance, beginning of year
Acquisitions and related costs
Change in fair value of properties transferred to investment properties
held for sale
Capital costs
Disposition of a portion of land
Capitalized interest
Transfers to income properties
Transfer to investment properties held for sale
Business combination
Change in initial direct costs
Balance, end of year
Breakdown:
Properties under development
Land held for future development
Note
4, 5
7
4
2017
$
136,596
22,600
(24 125)
16,051
(16,244)
6,636
(42,600)
(10,000)
40,334
24
129,272
37,692
91,580
2016
$
120,760
14,818
3,773
19,191
—
5,252
(27,831)
—
—
633
136,596
45,776
90,820
7)
INVESTMENT PROPERTIES HELD FOR SALE
On December 18, 2017, Cominar entered into a definitive agreement to sell its entire non-core market portfolio, for total gross
proceeds of $1,143,500. This transaction is expected to close at the end of March 2018. Cominar’s management intends to use the
net proceeds of this transaction to reduce the debt ratio. This portfolio comprises 96 properties located in the Greater Toronto
Area, the Atlantic Provinces and Western Canada. A portion of goodwill, in the amount of $26,989, associated with this property
portfolio has been allocated to the assets held for sale and then has been subject to derecognition.
For the years ended December 31
2017
2016
Note
Office
properties
Retail
properties
Industrial
and mixed-use
properties
$
$
Total
$
Total
$
Investment properties and goodwill
Balance, beginning of year
Dispositions
Net transfers from income properties
Transfers from properties under development and land
held for future development
Transfers of goodwill
Derecognition of goodwill
Balance, end of year
4
5
6
9
—
—
93,630
49,500
143,130
163,733
(44,634)
(51,683)
(96,317)
(117,000)
590,552
332,711
163,424
1,086,687
96,397
10,000
18,577
—
6,564
—
10,000
1,848
26,989
(18,577)
(6,564)
(1,848)
(26,989)
—
—
—
600,552
381,707
161,241
1,143,500
143,130
106
107
As at December 31
2017
2016
The following tables summarize the joint ventures’ net assets and net income:
Office
properties
Retail
properties
Industrial
and mixed-use
properties
$
$
$
Total
$
Total
$
Liabilities
Mortgages payable related to investment properties held for sale
238,312
3,614
34,424
276,350
—
8) JOINT VENTURES
As at December 31
Joint venture
Address
City/province
Société en commandite Complexe Jules-Dallaire
2820 Laurier Boulevard
Société en commandite Bouvier-Bertrand
Espace Bouvier
Québec, Quebec
Québec, Quebec
Société en commandite Chaudière-Duplessis
Boulevard de la Chaudière
Québec, Québec
Société en commandite Marais
Du Marais Street
Québec, Quebec
2017
2016
Ownership
interest
Ownership
interest
75%
50%
—
75%
50%
50%
75%
75%
The business objective of these joint ventures is the ownership, management and development of real estate projects.
Contractual rights and obligations
The formation of each joint venture is recognized by limited partnership agreements and unanimous shareholder agreements of the
general partner, in which the rights and obligations of each limited partner or shareholder are provided for. Among these terms and
conditions, the important decisions with regard to joint ventures are taken unanimously by the limited partners for the limited
partnerships, and by the shareholders for the general partners. Capital contributions are made on a pro rata basis between the
limited partners. In addition, each limited partner has the right of first refusal, should the other limited partner transfer its
participation in the joint venture. In the event that one of the limited partners is subject to a change of control, or if its assets are
sold, the other limited partner has a purchase option for the participation at the fair market value. Recourse or purchase option
mechanisms benefits each limited partner in respect of the other limited partner if it is in default under the agreements or if it
becomes insolvent.
On January 13, 2017, Cominar completed the acquisition of an additional 25% ownership interest in Société en commandite
Chaudière-Duplessis, for a purchase price of $10,016. On that date, Société en commandite Chaudière-Duplessis became a wholly
owned subsidiary of Cominar.
On May 31, 2017, Cominar completed the acquisition of an additional 25% ownership interest in Société en commandite Jules-
Dallaire, for an amount of $21,190.
The following table summarizes the financial information on the investments in these joint ventures accounted for under the equity
method:
For the years ended December 31
Investments in joint ventures, beginning of year
Contributions to the capital of the joint ventures
Share of joint ventures’ net income
Cash distributions by a joint venture
Return of capital from a joint venture
Acquisition of an additional interest in a joint venture
Business combination
Investments in joint ventures, end of year
Note
4
2017
$
90,194
—
5,276
(250)
—
21,190
(30,111)
86,299
2016
$
74,888
10,850
8,006
(800)
(2,750)
—
—
90,194
As at December 31
Income properties
Properties under development
Land held for future development
Other assets
Mortgages payable
Bank borrowings(1)
Other liabilities
Net assets of the joint ventures
Proportionate share of joint ventures’ net assets
(1) Société en commandite Bouvier-Bertrand has a $25,000 credit facility, which is secured by Cominar and Groupe Dallaire.
For the years ended December 31
Operating revenues
Operating expenses
Net operating income
Finance charges
Administrative expenses
Change in fair value of investment properties
Net income
Share of joint ventures’ net income
9) GOODWILL
2017
$
2016
$
231,650
198,394
11,711
13,501
1,020
35,741
55,050
2,126
(109,918)
(112,873)
(23,900)
(4,502)
119,562
86,299
(21,600)
(3,942)
152,896
90,194
2017
$
21,503
(9,287)
12,216
(5,525)
(81)
704
7,314
5,276
2016
$
20,226
(8,736)
11,490
(5,383)
(134)
9,461
15,434
8,006
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 CGUs expected to benefit from the combination. To test impairment, Cominar must
determine the recoverable value of net assets of each group of CGUs, making assumptions about standardized net operating
income and adjusted capitalization rates. These assumptions are based on Cominar’s past experience as well as on external
sources of information. The recoverable value is the fair value less the cost of disposal. Should the carrying amount of a group of
CGU, including goodwill, exceed its recoverable value, impairment is recorded and recognized in profit or loss in the period during
which the impairment occurs.
At year-end, Cominar tested its assets for impairment by determining the recoverable value of the net assets of each group of CGUs
and comparing it to the carrying amount, including goodwill. As at December 31, 2017 and 2016, goodwill was not impaired.
Goodwill is measured using Level 3 inputs of the fair value hierarchy, which means that inputs for the asset or liability are not based
on observable market data (unobservable inputs).
108
GOODWILL
Note
Office
properties
$
Retail
properties
$
Industrial and
mixed-use
properties
$
Balance as at December 31, 2016
Transfer to assets held for sale
7
Balance as at December 31, 2017
98,073
(18,577)
79,496
51,212
(6,564)
44,648
17,686
(1,848)
15,838
Total
$
166,971
(26,989)
139,982
The adjusted capitalization rates used to value the recoverable amount of net assets for each group of CGUs are as follows:
Adjusted capitalization rates
As at December 31
Category
Office properties
Retail properties
Industrial and mixed-use properties
10) ACCOUNTS RECEIVABLE
As at December 31
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
2017
Weighted
average
6.0%
5.8%
6.3%
6.0%
2017
$
27,403
(7,581)
19,822
1,969
3,554
8,434
29,177
62,956
5.91%
2016
Weighted
average
5.8%
5.7%
6.5%
5.9%
2016
$
27,693
(8,557)
19,136
1,182
1,044
6,295
14,861
42,518
6.89%
109
11) MORTGAGES PAYABLE
For the years ended December 31
2017
2016
Weighted average
contractual
rate
Weighted average
contractual
rate
Balance, beginning of year
Mortgages payable contracted
Monthly repayments of principal
Repayments of balances at maturity or assigned
Plus:
Fair value adjustments on assumed mortgages payable
Deferred financing costs
Less:
Balance, end of year(1)
1)
Including the $276,350 mortgages payable related to the properties held for sale.
$
2,045,957
321,800
(63,727)
(150,134)
2,153,896
2,167
(5,937)
2,150,126
4.37%
3.27%
—
4.94%
4.22%
$
2,051,335
241,555
(54,954)
(191,979)
2,045,957
7,746
(5,694)
2,048,009
Contractual maturity dates of mortgages payable are as follows as at December 31, 2017:
For the years ending December 31
Repayment
of principal
$
Balances
at maturity
$
2018
2019
2020
2021
2022
2023 and thereafter
48,974
44,700
46,299
45,618
40,145
101,533
327,269
592,612
4,141
82,013
89,437
184,248
874,176
1,826,627
2,153,896
investment properties having a carrying amount of
Mortgages payable are secured by
$4,025,062 [$4,072,140 as at December 31, 2016]. They bear annual contractual interest rates ranging from 2.52% to 7.75% [2.52%
to 7.75% as at December 31, 2016], representing a weighted average contractual rate of 4.22% as at December 31, 2017 [4.37% as
at December 31, 2016], and are renewable at various dates from January 2018 to January 2039. As at December 31, 2017, the
weighted average effective interest rate was 3.95% [4.09% as at December 31, 2016].
immovable hypothecs on
As at December 31, 2017, nearly all mortgages payable were bearing interest at fixed rates. Some of the mortgages payable include
restrictive covenants, with which Cominar was in compliance as at both December 31, 2017 and December 31, 2016.
%
4.46%
3.50%
—
5.44%
4.37%
Total
$
641,586
48,841
128,312
135,055
224,393
975,709
110
111
12) DEBENTURES
14) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
For the years ended December 31
2017
2016
As at December 31
Balance, beginning of year
Issuances
Repayment at maturity
Less:
Plus:
Deferred financing costs
Net premium and discount on issuance
Balance, end of year
Weighted
average
contractual
rate
$
$
1,975,000
4.23%
2,000,000
—
(250,000)
1,725,000
(4,878)
1,455
1,721,577
—
4.274%
4.23%
225,000
(250,000)
1,975,000
(6,552)
2,118
1,970,566
Weighted
average
contractual
rate
3.95%
4.25%
1.97%
4.23%
On June 15, 2017, Cominar reimbursed at maturity its Series 1 senior unsecured debentures totalling $250,000 and bearing interest
at 4.274% using its unsecured revolving operating and acquisition credit facility.
The following table presents characteristics of outstanding debentures as at December 31, 2017:
Series 2
Series 3
Series 4
Series 7
Series 8
Series 9
Series 10
Date
of issuance
Contractual
interest
rate
Effective
interest rate
Maturity
date
Par value as at
December 31, 2017
$
December 2012(1)
May 2013
July 2013(2)
September 2014
December 2014
June 2015
May 2016
4.23%
4.00%
4.941%
3.62%
4.25%
4.164%
4.247%
4.23%
4.37%
4.24%
4.81%
3.70%
4.34%
4.25%
4.34%
4.29%
December 2019
November 2020
July 2020
June 2019
December 2021
June 2022
May 2023
300,000
100,000
300,000
300,000
200,000
300,000
225,000
1,725,000
(1) Re-opened in February 2013 ($100,000).
(2) Re-opened in January 2014 ($100,000) and March 2014 ($100,000).
The debentures, under the trust indenture, contain restrictive covenants, with which Cominar was in compliance as at December 31,
2017 and 2016.
13) BANK BORROWINGS
As at December 31, 2017, Cominar had an unsecured renewable operating and acquisition credit facility of up to $700,000 maturing
in August 2019. This credit facility bears interest at the prime rate plus 110 basis points or at the bankers’ acceptance rate plus
210 basis points. This credit facility contains certain restrictive covenants, with which Cominar was in compliance as at December
31, 2017 and 2016. As at December 31, 2017, bank borrowings totalled $620,366 and cash available was $79,634.
Trade accounts payable
Accounts payable – related parties
Accrued interest payable
Prepaid rent and tenants’ deposits
Other accounts payable and accrued expenses
Commodity taxes and other non-financial liabilities
2017
$
2,617
15,696
17,473
29,188
41,889
10,619
2016
$
4,848
7,624
18,818
27,848
39,961
10,762
117,482
109,861
15) 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 all Cominar distributions. All issued units are fully paid.
For the years ended December 31
2017
2016
Units
$
Units
$
Units issued and outstanding, beginning of year
182,334,562
3,234,693
170,912,647
3,063,920
Public offering
Repurchase of units under NCIB
Exercise of options
Distribution reinvestment plan
Conversion of deferred units and restricted units
—
—
(730,900)
(10,380)
3,900
2,887,370
134,565
57
39,717
1,908
12,780,000
(2,717,396)
—
1,265,157
94,154
191,516
(40,779)
—
18,457
1,579
Units issued and outstanding, end of year
184,629,497
3,265,995
182,334,562
3,234,693
During the fourth quarter of 2017, Cominar repurchased 730,900 units under its normal course issuer bid of a maximum of
17,596,591 units, at an average price of $14.19, for a total consideration of $10,380, including transaction costs.
112
113
LONG TERM INCENTIVE PLAN
The following table presents changes in the number of restricted units for the years indicated:
Unit options
Cominar has granted unit options to management and employees under the long-term incentive plan. As at December 31, 2017,
options to purchase 12,928,000 units were outstanding.
The following table shows characteristics of outstanding options at year-end:
As at December 31, 2017
Date of grant
August 5, 2013
December 17, 2013
December 16, 2014
December 15, 2015
December 13, 2016
August 24, 2017
Graded
vesting method
50%
33 1/3%
33 1/3%
33 1/3%
33 1/3%
33 1/3%
Expiration date
August 5, 2018
December 17, 2018
December 16, 2019
December 15, 2022
December 13, 2023
August 24, 2024
Exercise
price $
Outstanding
options
Exercisable
options
20.09
17.55
18.07
14.15
14.90
13.46
150,000
1,757,300
1,996,300
2,565,500
2,995,700
3,463,200
12,928,000
150,000
1,757,300
1,996,300
1,845,900
1,267,700
451,200
7,468,400
As at December 31, 2017, the average weighted contractual life of outstanding options was 4.6 years [4.3 years as at December 31,
2016].
For the years ended December 31
Outstanding, beginning of year
Exercised
Granted
Accrued distributions
Outstanding, end of year
Vested restricted units, end of year
2017
$
5,250
(697)
—
473
5,026
—
2016
$
4,047
(637)
1,373
467
5,250
—
Deferred units
Deferred units consist of allocations whose values, for the participant, rise or fall according to the value of Cominar units on the
stock market. 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. 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. Once a year, the deferred unit holder can convert
its vested deferred units into Cominar units. 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.
The following table presents changes in the number of deferred units for the years indicated:
The following table presents changes in the number of options for the years indicated:
For the years ended December 31
For the years ended December 31
2017
2016
Outstanding, beginning of year
Exercised
Granted
Forfeited or cancelled
Expired
Outstanding, end of year
Exercisable options, end of year
Weighted
average
exercise
price
$
17.02
14.15
13.46
15.83
23.05
15.28
16.20
Options
10,493,750
—
3,424,200
(561,800)
(900,700)
12,455,450
6,408,150
Weighted
average
exercise
price
$
18.15
—
14.90
17.51
21.80
17.02
18.89
Options
12,455,450
(3,900)
3,689,400
(1,377,100)
(1,835,850)
12,928,000
7,468,400
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.
Outstanding, beginning of year
Exercised
Granted
Accrued distributions
Outstanding, end of year
Vested deferred units, end of year
2017
$
161,676
(133,868)
122,045
25,895
175,748
56,858
2016
$
180,434
(93,517)
54,520
20,239
161,676
37,185
Unit-based compensation
The compensation expense related to the options granted in 2017 and 2016 was calculated using the Black-Scholes option pricing
model based on the following assumptions:
Date of grant
Volatility(1)
Weighted
average
return
Weighted
average
risk-free
interest rate
Weighted
average
expected
life
(years)
Weighted
average fair
value
per unit
$
Exercise
price(2)
$
December 13, 2016
August 24, 2017
14.34%
14.25%
14.90
13.46
9.51%
8.47%
1.04%
1.61%
4.5
6.0
0.18
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 March 2017 was calculated based on the market
price of Cominar units on the grant date, which was $14.52.
The overall compensation expense for the fiscal year was $2,102 [$1,028 in 2016].
A maximum of 16,819,525 units may be issued under the long-term incentive plan.
114
115
DISTRIBUTIONS TO UNITHOLDERS
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 fair value adjustments, 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 investment properties and certain
other items not affecting cash, if applicable.
For the years ended December 31
Distributions to unitholders
Distributions per unit
2017
$
246,523
1.3325
2016
$
254,456
1.4700
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 103% of the cash
distributions. For the year ended December 31, 2017, 2,887,370 units [1,265,157 in 2016] were issued for a total net consideration of
$39,770 [$18,457 in 2016] under this plan.
On August 3, 2017, Cominar decreased the monthly distribution from $0.1225 per unit to $0.095 per unit and temporarily suspended
the distribution reinvestment plan, beginning with the distribution of August 2017, which was payable in September 2017.
16) OPERATING LEASE INCOME
a) The future minimum lease payments from tenants are as follows:
- Less than one year
- More than one year to five years
- More than five years
b) Contingent rents included in revenues for the year are as follows:
For the years ended December 31
Contingent rents
As at December 31, 2017
$
473,097
1,323,623
832,241
2017
$
7,219
2016
$
7,417
17) OPERATING COSTS, PROPERTY MANAGEMENT EXPENSES AND
TRUST ADMINISTRATIVE EXPENSES
The following table presents the main components of operating costs, property management expenses and Trust administrative
expenses based on their nature:
For the years ended December 31
Repairs and maintenance
Energy
Salaries and other benefits
Professional fees
Costs associated with public companies
Other expenses
18) FINANCE CHARGES
For the years ended December 31
Interest on mortgages payable
Interest on debentures
Interest on bank borrowings
Net amortization of premium and discount on debenture issues
Amortization of deferred financing costs and other costs
Amortization of fair value adjustments on assumed borrowings
Less: Capitalized interest(1)
Total finance charges
2017
$
69,759
65,851
58,990
2,574
653
32,673
230,500
2017
$
89,007
77,952
14,867
(691)
3,454
(5,577)
(10,260)
168,752
2016
$
68,209
66,063
50,088
2,205
556
31,149
218,270
2016
$
87,780
83,456
9,747
(801)
3,771
(6,501)
(6,807)
170,645
(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. The
weighted average interest rate used in 2017 was 4.13% [4.21% in 2016].
19) 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 years ended December 31, 2017 and 2016, Cominar believes that it met all of these conditions
and qualified as a REIT. As a result, the SIFT trust tax rules for 2017 and 2016 did not apply to Cominar and no deferred tax
provision, be it an asset or liability, was recorded in relation to the Trust’s activities. Cominar’s management intends on taking the
necessary steps to meet these conditions on an ongoing basis in the future.
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.
116
117
The tax expense (income) 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:
Changes in deferred income tax assets and liabilities during the year, excluding the offsetting of balances within the same tax
jurisdiction, were as follows:
For the years ended December 31
Income (loss) before income taxes
Canadian combined statutory tax rate
Tax expense (income) at the statutory tax rate
Loss (income) not subject to income tax
Other
Income taxes
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
Investment properties
Deferred taxes (net)
Changes in the deferred income tax account were as follows:
For the years ended December 31
Balance, beginning of year
Tax expense (income) recorded in the consolidated statements of comprehensive income
Balance, end of year
2017
$
2016
$
(396,759)
242,576
29.38%
(116,568)
28.16%
68,309
112,438
(68,107)
(904)
(5,034)
2017
$
7
353
360
(7,041)
(6,681)
2017
$
11,715
(5,034)
6,681
636
838
2016
$
30
250
280
(11,995)
(11,715)
2016
$
10,877
838
11,715
Deferred tax assets
Balance as at January 1, 2016
Origination and reversal of timing differences included in profit or loss
Balance as at December 31, 2016
Origination and reversal of timing differences included in profit or loss
Balance as at December 31, 2017
Deferred tax liabilities
Balance as at January 1, 2016
Origination and reversal of timing differences included in profit or loss
Balance as at December 31, 2016
Origination and reversal of timing differences included in profit or loss
Balance as at December 31, 2017
20) PER UNIT CALCULATION BASIS
Mortgages
payable
$
Tax
losses
$
59
(29)
30
(23)
7
263
(13)
250
103
353
Total
$
322
(42)
280
80
360
Income
properties
$
(11,199)
(796)
(11,995)
4,954
(7,041)
The following table provides a reconciliation of the weighted average number of units outstanding used to calculate basic and
diluted net income (net loss) per unit for the years indicated:
For the years ended December 31
Weighted average number of units outstanding – basic
Dilutive effect related to the long-term incentive plan
Weighted average number of units outstanding – diluted
2017
Units
2016
Units
184,213,583
172,131,831
—
373,596
184,213,583
172,505,427
The calculation of the diluted weighted average number of units outstanding does not take into account the effect of the conversion
into units of 12,928,000 options outstanding for the year ended December 31, 2017 [7,140,850 options in 2016] due to the fact that
the exercise price of the options, including the unrecognized portion of the related compensation expense, is higher than the
average price of the units or due to the fact that they are antidilutive.
118
119
The leasehold improvement, repair and maintenance work on properties carried out by Dalcon Inc. are invoiced at cost plus a 5.0%
markup. For construction projects, the work is invoiced at cost plus a 2.5% markup. By retaining the services of related companies
for property construction work and leasehold improvements, Cominar achieves significant time and cost savings while providing
better service to its clients.
Leasing of commercial space with the related companies is carried out at the market rate for similar spaces.
23) 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
Retirement allowance
Total
2017
$
5,717
179
1,351
5,400
12,647
2016
$
4,928
169
650
—
5,747
Unit options granted to senior executives and other officers may not be exercised, even if they have vested, until the following three
conditions have been met. The first condition requires that the market price of the security must be at least ten percent (10%) higher
than the exercise price of the option, and this condition will be considered as met if the unit price has remained at such level for a
period of twenty (20) consecutive trading days during the option’s term. The second condition requires that the senior executive or
other officer must undertake to hold a number of units corresponding to the multiple determined for his base salary. The third
condition is that 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.
21) SUPPLEMENTAL CASH FLOW INFORMATION
For the years ended December 31
Accounts receivable
Prepaid expenses
Accounts payable and accrued liabilities
Changes in non-cash working capital items
Other information
Accounts payable and accrued liabilities relating to
investing activities
Accounts receivable relating to investing activities
2017
$
(8,623)
(1,052)
4,685
(4,990)
2016
$
14,238
(1,572)
(5,320)
7,346
14,834
11,814
11,898
—
22) RELATED PARTY TRANSACTIONS
During fiscal years 2016 and 2017, Michel Dallaire and Alain Dallaire were trustees and members of Cominar’s management team,
and they exercised indirect control over the activities of Groupe Dallaire Inc. and Dalcon Inc. (the “related companies”).
On January 1, 2018, Sylvain Cossette was appointed as President and Chief Executive Officer to replace Michel Dallaire. This
appointment was part of the succession plan put in place by the Board of Trustees when Sylvain Cossette joined Cominar in 2013
as President and Chief Operating Officer. On the same day, January 1, 2018, Sylvain Cossette was appointed as a trustee of
Cominar to fill the vacancy created by the departure of Alain Dallaire as trustee. On February 12, 2018, Alban D’Amours was
appointed as Chairman of the Board of Cominar following the departure of Michel Dallaire. While Alain Dallaire has a passive
indirect economic interest in Groupe Dallaire, Alain Dallaire is neither an employee nor a director of Groupe Dallaire.
In 2016 and 2017, Cominar entered into transactions with those related companies in the normal course of business, the details of
which are as follows:
For the years ended December 31
Investment properties – Capital costs
Acquisition of an additional ownership interest in the joint venture
Société en commandite Chaudière-Duplessis
Investment properties held by joint ventures – Acquisition
Investment properties held by joint ventures – Capital costs
Recovery of mortgage receivable
Acquisition of an additional ownership interest in the joint venture
Société en commandite Complexe Jules-Dallaire
Share of joint ventures’ net income
Net rental revenue from investment properties
Interest income
Balance as at December 31
Investments in joint ventures
Mortgage receivable
Accounts receivable
Accounts payable
Note
4
8
8
Note
8
10
14
2017
$
2016
$
138,129
86,639
10,016
—
3,263
(8,250)
21,190
5,276
313
140
2017
$
86,299
—
1,969
15,696
—
6,204
2,958
—
—
8,006
301
280
2016
$
90,194
8,250
1,182
7,624
120
121
24) 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
Bank borrowings
Unitholders’ equity
Total capitalization
Debt ratio(1)
Interest coverage ratio(2)
2017
$
(6,928)
2,150,126
1,721,577
620,366
3,208,761
7,693,902
57.4%
2.43:1
2016
$
(9,853)
2,048,009
1,970,566
332,121
3,815,513
8,156,356
52.4%
2.65:1
CLASSIFICATION
Non-financial assets and their carrying amount and fair value as well as financial liabilities and their carrying amount and fair value,
when that fair value does not approximate the carrying amount, are classified as follows:
December 31, 2017
December 31, 2016
Level
Carrying
amount
$
Fair
value
$
Carrying
amount
$
Fair
value
$
3
3
3
2
2
6,239,383
1,143,500
91,580
6,239,383
1,143,500
91,580
7,676,134
7,676,134
143,130
90,820
143,130
90,820
2,150,126
1,721,577
2,153,043
1,739,278
2,048,009
2,104,025
1,970,566
2,019,802
Recurring valuations of non-financial assets
Income properties
Investment properties held for sale
Land held for future development
Financial liabilities
Mortgages payable
Debentures
26) 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.
(1) The debt ratio is equal to the total of cash and cash equivalents, bank borrowings, mortgages payable and 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.
Credit risk
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
if convertible debentures are outstanding).
As at December 31, 2017, Cominar had maintained a debt ratio of 57.4%.
the carrying amount of
its assets (65%
The interest coverage ratio is used to assess Cominar’s ability to pay interest on its debt from operating revenues. As such, for the
year ended December 31, 2017, the interest coverage ratio was 2.43:1, reflecting Cominar’s capacity to meet its debt-related
obligations.
Capital management objectives remain unchanged from the previous period.
25) FAIR VALUE
Cominar uses a three-level hierarchy to classify its financial instruments measured at fair value. The hierarchy reflects the relative
weight of inputs used in the valuation. 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 were no transfers made between hierarchy levels during fiscal years 2017 and 2016.
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 mortgages payable and debentures has been estimated based on current market rates for financial instruments
with similar terms and maturities.
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, 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 operating revenues and by conducting credit assessments on all new tenants.
Cominar has a broad, highly diversified retail client base consisting of about 5,700 clients occupying an average of approximately
7,000 square feet each. The top three clients, Public Works Canada, Société québécoise des infrastructures and Canadian National
Railway Company, account respectively for approximately 4.8%, 4.7% and 4.2% of operating revenues from several leases with
staggered maturities. The stability and quality of cash flows from operating activities are enhanced by the fact that approximately
10.8% of operating revenues come from government agencies, representing approximately 100 leases.
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 accounts receivable and the 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, and accounts payable and accrued liabilities do not bear interest.
Almost all mortgages payable and all debentures bear interest at fixed rates.
Cominar is exposed to interest rate fluctuations mainly due to bank borrowings, which bear interest at variable rates.
122
123
As at December 31, 2017
Office
properties
$
Retail
properties
$
Industrial and
mixed-use
properties
$
Cominar’s
proportionate
share
$
Income properties
2,554,803
2,492,891
1,355,164
Investment properties held for sale
600,552
381,707
161,241
Investments in joint ventures
As at December 31, 2016
—
$
—
$
—
$
6,402,858
1,143,500
—
$
Joint
ventures
$
(163,475)
—
86,299
Consolidated
financial
statements
$
6,239,383
1,143,500
86,299
$
$
Income properties
3,327,390
2,974,870
1,473,071
7,775,331
(99,197)
7,676,134
Investment properties held for sale
Investments in joint ventures
—
—
93,630
—
49,500
143,130
—
—
—
90,194
143,130
90,194
28) COMMITMENTS
The annual future payments required under emphyteutic leases expiring between 2046 and 2065, on land for three income
properties having a total fair value of $49,692, are as follows:
For the years ending December 31
2018
2019
2020
2021
2022
2023 and thereafter
Emphyteutic
Leases
$
634
634
648
654
689
21,832
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.
As required under IFRS, 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 impacted Cominar’s net income by more or less $1,195 for
the year ended December 31, 2017 [$1,543 in 2016].
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.
Undiscounted contractual cash flows (interest and principal) related to financial liabilities as at December 31, 2017 are as follows:
Cash flows
One to
five years
$
785,781
1,663,211
633,016
—
Under
one year
$
724,595
72,921
22,016
106,863
Over
five years
$
1,095,321
234,556
—
—
Note
11
12
13
14
Mortgages payable
Debentures
Bank borrowings
Accounts payable and accrued liabilities(1)
(1) Excludes consumption taxes and other non-financial liabilities
27) 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 in note 2.
Cominar uses net operating income as its main criterion to measure operating performance, that is, the operating revenues less the
operating expenses of 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 segments.
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, where the investments in joint ventures are accounted for using the equity method.
The following tables provide financial information on Cominar’s three property types:
For the year ended
December 31, 2017
Rental revenue from investment
properties
Net operating income
Share of joint ventures’ net income
December 31, 2016
Rental revenue from investment
properties
Net operating income
Share of joint ventures’ net income
Office
properties
$
Retail
properties
$
Industrial and
mixed-use
properties
$
Cominar’s
proportionate
share
$
Joint
ventures
$
Consolidated
financial
statements
$
372,757
184,270
312,752
162,965
163,331
96,351
848,840
443,586
—
$
—
$
—
$
—
$
(13,351)
(7,549)
5,276
835,489
436,037
5,276
$
$
380,761
193,309
—
334,187
183,961
—
162,147
97,084
—
877,095
474,354
—
(10,113)
(5,745)
8,006
866,982
468,609
8,006
124
125
29) SUBSEQUENT EVENTS
On January 10, 2018, Cominar announced the increase of its normal course issuer bid (“NCIB”), increasing the maximum number of
units it intends to repurchase for cancellation from 9,000,000 units to 17,596,591 units. Under this NCIB, Cominar has repurchased,
since the beginning of fiscal year 2018, 2,709,500 units at an average price of $14.58, for a total consideration of $39,517 paid cash.
Since December 19, 2017, Cominar has repurchased a total of 3,440,400 units at an average price of $14.50, for a total
consideration of $49,891 paid cash.
On January 15 and February 15, 2018, Cominar declared a monthly distribution of $0.095 per unit for each of these months.
Subsequent to the end of fiscal 2017, Cominar entered into the following loans: a $75,000 bridge loan bearing interest at the prime
rate plus 110 basis points or at the bankers’ acceptance rate plus 210 basis points and repayable on the closing of the $1,143,500
sale of investment properties, a 10-year $42,500 mortgage payable, bearing interest at 4.484% and a 5-year $45,000 mortgage
payable, bearing interest at prime rate plus 90 basis points or 4.00%, whichever is greater. The net proceeds from these loans were
used to repay a portion of the unsecured revolving operating and acquisition credit facility.
On February 12, 2018, Alban D’Amours was appointed as Cominar’s Chairman of the Board of Trustees following the departure of
Michel Dallaire.
On March 7, 2018, Cominar decreased the monthly distribution from $0.095 per unit to $0.06 per unit, beginning with the distribution
of March 2018, payable in April 2018.
126
127
CORPORATE
INFORMATION
CORPORATE
INFORMATION
BOARD OF TRUSTEES
Alban D’Amours, CM, GOQ, LH, Fellow Adm.A. (1)(3)
Johanne M. Lépine (3)(4)
Corporate Director
Chairman of the Board of Trustees
President and Chief Executive Officer
Aon Parizeau Inc.
Michel Théroux, FCPA, FCA (1)(3)
Corporate Director
Claude Dussault, B. Sc. (1)(2)
President
Placements ACVA Inc.
Luc Bachand (1)(4)
Corporate Director
Mary-Ann Bell, Eng., M.Sc., ASC (2)(4)
Corporate Director
Sylvain Cossette, B.C.L.
President and Chief Executive Officer
Cominar Real Estate Investment Trust
Ghislaine Laberge (2)(4)
Corporate Director
KEY OFFICERS
Sylvain Cossette, B.C.L.
Todd Bechard, CPA, CMA, CFA
President and Chief Executive Officer
Executive Vice President, Acquisitions
Alain Dallaire
Executive Vice President and
Chief Operating Officer
Gilles Hamel, CPA, CA
Executive Vice President and
Chief Financial Officer
Guy Charron, CPA, CA
Executive Vice President,
Operations Retail
Wally Commisso
Executive Vice President,
Operations and Property Management
Jean Laramée, Eng.
Executive Vice President, Development
Michael Racine
Executive Vice President, Leasing
Office and Industrial
Manon Deslauriers
Vice President, Legal Affairs and
Corporate Secretary
UNITHOLDERS
INFORMATION
UNITHOLDERS
INFORMATION
COMINAR REAL ESTATE
INVESTMENT TRUST
Complexe Jules-Dallaire – T3
2820 Laurier Boulevard, Suite 850
Québec, Quebec, 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
TRANSFER AGENT
Computershare Trust Company of Canada
1500 Robert-Bourassa Blvd., Suite 700
Montréal, Quebec, Canada H3A 3S8
Tel.: 514 982-7555
Fax: 514 982-7580
Toll-free: 1-800 564-6253
Email: service@computershare.com
TAXABILITY OF
DISTRIBUTIONS
In 2017, 89.72% of the distributions made by Cominar to
unitholders were returns of capital, reducing the adjusted
cost base of the units.
LEGAL COUNSEL
Davies Ward Phillips & Vineberg LLP
AUDITORS
PricewaterhouseCoopers LLP
ANNUAL MEETING OF
UNITHOLDERS
May 16, 2018
11:00 a.m. (HAE)
Hôtel Plaza Québec
3031 Laurier Boulevard
Québec (Québec)
UNITHOLDERS DISTRIBUTION
REINVESTMENT PLAN
(the
Cominar Real Estate Investment Trust offers unitholders the
opportunity to participate in its Unitholders Distribution
Reinvestment Plan
“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 3% of
each cash distribution reinvested pursuant to the DRIP,
which will be reinvested in additional units.
On August 3, 2017, Cominar temporarily suspended the
distribution reinvestment plan, starting with the distribution
of August 2017, which was payable in September 2017. If
Cominar decides to resume the plan in the future, the
unitholders who were registered in the plan at the time of its
suspension and who are still registered at the time of its
resumption shall automatically resume their participation in
the plan.
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.
(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
The units of Cominar Real Estate Investment Trust are listed
on the Toronto Stock Exchange under the trading symbol
CUF.UN.