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Joshua Varghese Cominar Real Estate Inv Tr CUF.UN-T BUY Dec 02, 2019

Quebec's biggest REIT and once a darling REIT. But they had a lot of dilutive raises which increased leverage and bloated their portfolio. Also, the dividend is too high and will likely get cut. Last year, activists forced the company to change at the board level and cut the dividend (and needs yet another cut). The payout ratio is now much better and they've hired a new CFO who should do a fine job. Now, they are considering what to do with Gare Central in Quebec City, and this may benefit shareholders. A good time to buy.

Joshua Varghese

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$14.220

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COMMENT

They are the best they have been. 62% is industrial with a lot of concentration in Montreal. It has a safe and improving payout ratio 74%. However, their growth is slow and their leverage is high. He would prefer H&R.

HOLD

The Quebec economy is doing quite well. It has been going through a strategic change. He likes the new CFO. Retail today is a tough sector but they seem fully equipped to deal with it. They have a diversified asset base. It is a safe hold.

BUY

They have been doing quite well with a nice yield. It's not too expensive. It could raise its payout quite a bit, and they are largely in Quebec. The province looks in good shape with a clean balance sheet.

DON'T BUY

It is a diversified REIT focused mainly in the Quebec markets. 35% of the portfolio is in retail/malls. Rent collection has been weak. He thinks they will be weak coming out of the pandemic. E-commerce has really taken off.

HOLD

Did all the wrong things at the wrong time. Levered up, asset sales at lower prices. Balance sheet is OK. If you want deep value, other easier REITs are available with better management. Upside from here. You'll probably be fine.

DON'T BUY

A play on Quebec. Announced a strategic review, so potential for some sort of activity. She prefers to own a pure industrial. Summit, for example, has Montreal exposure. Retail is going to face significant challenges to creating a path to growth. Third distribution cut since 2017. Better opportunities elsewhere.

SELL

He would not be buying it here because it has been going through a strategic process for quite a while. Their office and retail assets will be challenged for quite some time.

HOLD

Competing bid from BAM? Opportunistic bid. Will someone else come in? Nice discount to book value. Wait until the second last day before the bid expires. BAM or Canada Pension Plan might come in, but it's a wing and a prayer right now.

COMMENT

Interesting transaction. Takeover at a discount, which is atypical and disappointing. Hard to assess this deal, not enough detail.

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Joshua Varghese Cominar Real Estate Inv Tr CUF.UN-T BUY Dec 02, 2019

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