Cominar Reit grows and Grows
Cominar Reit is largely based in Quebec but it has properties in Ontario and eastern Canada also.It has industrial and residential and office properties.It is the largest reit in Quebec and the third largest diversified reit in Canada.It has had considerable growth in the last five years.
Increased Financing
Cominar has increased it's debt and equity by a considerable amount over the last four years, in particular.The number of outstanding shares has gone from 60 million (estimated) to 170 million shares. Most of this has come from convertible share issues.But the shares have been converted to common shares and not always at a great price for existing sharholders.So market capitalization has gone up and the number of shares has gone up but the share price has stumbled since 2013.Also debt has gone up from $1.225 to $ 4.500 billion.Cominar expanded like all the reits ;debt is cheap and easy to get and stock prices are buoyant(on average).This blog considers the price was buoyant as CUF.UN was priced then at $23 per share and most of the reits had a multiple greater than 18.On average the multiple should be around 15;18 to 20 means that the price is getting expensive. However it looks like Cominar has been better at increasing it's financing than most reits.As Cominar has purchased a substantial amount of properties in 2012 and 2013 and early 2014 when real estate prices were relatively cheap in Quebec and eastern Canada.It's capitalization rates seem better than bigger and smaller reits.While it's debt to book value ratio went up only from about .5 to .55.This is high but not considering the enormous gains in revenues and assets.On the other hand,the number of shares almost tripled over the last five years.And many bought at low conversion rates.There are lots of shares bought at $15 to $17 per share.
Growth in Revenues
As previously mentionned revenues tripled over the last four years.Also EBITDA as a percentage of revenues is above average; it was at 54% in 2015.Consequently not only did assets triple in the past four years but EBITDA grew faster than that of other reits.I used revenues divided by total assets as a proxy for the capitalization rate.I found out that the CUF "cap rate" was at .125 in 2011 and dropped to around .10 in 2012 to 2014 before rising back to .115 in 2015.So in conclusion Cominar had a very solid "cap rate" before it started to expand.Revenues increased from 2012 to 2014 but the "cap rate" was not as profitable.But it has turned up again in 2015.
Earnings grow too
Several brokers ,including Qtrade, show EBITDA for 2015 at close to $400 million.Yahoo shows EBITDA at $475 million .This blog estimates 2015 EBITDA at about $485 million.But earnings per share are shown on several wqebsites only at $.80 per share.If you use EBITDA to calculate the earnings per share you get $2.79 per share.However if there is a deduction for annual interest charges of $160 million you are left with earnings of about $325 million ;this makes earnings per share of $1.80 per share.This jives with Yahoo's figure of $1.60 per share.Therefore one of Cominar's problems is that many financial websites are making Cominar earnings per share too low and their price/earnings ratio too high.Using more accurate figures makes Cominar look like a bargain at even $16. It appears that Cominar has grown and grown effectively and even $16 a share is now a good bargain for the largest commercial reit in Quebec.
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