DBRS Morningstar Places Cominar REIT Under Review with Developing Implications Following Announced Acquisition

DBRS Limited (DBRS Morningstar) placed Cominar Real Estate Investment Trust’s (Cominar or the Trust) Issuer Rating and Senior Unsecured Debentures rating of BB (high) Under Review with Developing Implications following the October 24, 2021, announcement that Cominar entered into an arrangement agreement (Plan of Arrangement or Transaction) to be acquired by Iris Acquisition II LP (the Purchaser). The Recovery Rating is RR4. The Plan of Arrangement will see certain Cominar retail and office properties being acquired by Groupe Mach Acquisition Inc. for approximately $1.5 billion; the acquisition of Cominar’s industrial real estate portfolio by Blackstone for an undisclosed price; and the purchase of Cominar’s units by the Purchaser.

The Under Review with Developing Implications status reflects the lack of clarity regarding the implications of the Transaction on Cominar, specifically, (1) how the events will affect Cominar’s business risk assessment factors (i.e., asset quality, market position, diversification, lease maturity/tenant quality, and portfolio size) and its financial risk assessment factors (i.e., total debt-to-EBITDA and EBITDA-to-interest ratios) incorporated into the real estate methodology (Rating Entities in the Real Estate Industry), (2) if any or all of the Senior Unsecured Debentures will remain outstanding, and (3) if the Trust will be able to maintain compliance with the covenants in the trust indenture governing the Senior Unsecured Debentures.

The Transaction is expected to close early in the first quarter of 2022, subject to receipt of Cominar unitholder, court, and required regulatory approvals, as well as the satisfaction of customary closing conditions. A special meeting of Cominar unitholders to consider the proposed transaction is expected to be held on or about December 21, 2021, with the Management Information Circular being available about a month earlier.

To resolve the Under Review with Developing Implications status, clarification will be more visible once DBRS Morningstar reviews one or more of the following: (1) the public release of the Transaction documents and the Management Information Circular; (2) the outcome of the Unitholders’ Meeting in December; (3) the receipt of the court order approving the Plan of Arrangement; and (4) the execution/completion of the Plan of Arrangement.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodologies are Rating Entities in the Real Estate Industry (April 23, 2021; https://www.dbrsmorningstar.com/research/377358) and DBRS Morningstar Criteria: Recovery Ratings for Non- Investment-Grade Corporate Issuers (August 19, 2021; https://www.dbrsmorningstar.com/research/383238) which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021; https://www.dbrsmorningstar.com/research/373262).

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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