CANMARC REIT Board of Trustees unanimously reject Cominar's unsolicited Offer

CANMARC Real Estate Investment Trust  announced that its Board of Trustees  unanimously recommends that CANMARC unitholders  REJECT the hostile takeover offer from Cominar Real Estate Investment Trust  to acquire all of the issued and outstanding units of CANMARC for $15.30 in cash per CANMARC unit  or a unit election option for 0.7054 trust units of Cominar, subject to proration at a maximum of 16 million Cominar units  and NOT TENDER their Units to the hostile Offer.  Unitholders who have already tendered their CANMARC Units should WITHDRAW them immediately.

The Board of Trustees has carefully reviewed and fully considered the Offer. In making its recommendation, the Board of Trustees received the unanimous recommendation of  the Special Committee, which is comprised of Karen Prentice (Chair), Gérard A. Limoges and John Levitt.  The Special Committee, with the assistance of its legal and financial advisors, carefully reviewed the terms and conditions of the hostile Offer and unanimously concluded that the Offer is inadequate and not in the best interests of CANMARC and its Unitholders.

A copy of the Trustees' Circular, which sets forth in greater detail the Board's recommendation and the reasons for rejecting the unsolicited Offer, is available on SEDAR at www.sedar.com and is being mailed to all Unitholders.

The Special Committee's financial advisor, TD Securities Inc. ("TD Securities"), has provided an opinion dated December 12, 2011, that the consideration pursuant to the Offer is inadequate, from a financial point of view, to CANMARC's Unitholders, other than the Offeror and its affiliates.  The full text of the opinion, setting out the scope of review, assumptions and limitations in connection with the opinion, is attached as Schedule A to the Trustees' Circular and should be reviewed and considered in its entirety in conjunction with the review of the Circular.

"Cominar's unsolicited Offer price is below the current trading price of CANMARC Units on the TSX and the market price is clearly indicating that CANMARC's high quality assets and track record for growth are worth much more," said Karen Prentice, Chair of the Board of Trustees and of the Special Committee. "Cominar's unsolicited Offer is inadequate and Unitholders should not tender their Units to it."

"CANMARC has delivered an annualized total return of 31% to CANMARC Unitholders since its initial public offering in May 2010.  With eleven acquisitions completed and with a demonstrated ability to deliver strong organic growth from its office and retail assets, CANMARC has become one of the leading growth and income vehicles in the REIT sector," said Jim Beckerleg, President and Chief Executive Officer.  "Since our IPO in May of 2010, we have substantially outperformed both Cominar and the S&P TSX REIT sub-index.  Our Unitholders deserve to be fully compensated for the quality and potential of our assets, and for our demonstrated ability to generate growth.  Unitholders should not expect less than a substantial premium for their Units."

Reasons For Rejecting the Unsolicited Offer
The Board of Trustees fully considered the Offer and there are numerous reasons for their recommendation to reject the unsolicited Offer including the following:
●     The unsolicited Offer is financially inadequate.
     a)     Since the announcement of the Offer on November 28, 2011, the CANMARC Units have consistently traded at a premium to the Offer price.
     b)      The Offer represented only a 15.2% premium to CANMARC's Unit closing price on the TSX on the last trading day prior to announcement of the Offer, which is well below the average of comparable historical REIT transactions considered most relevant. These transactions suggest that the premium implied by the Offer does not provide Unitholders with an appropriate change of control premium.
     c)      The financial advisor to the Special Committee has provided their opinion that the consideration pursuant to the Offer is inadequate, from a financial point of view, to CANMARC's Unitholders, other than the Offeror and its affiliates.
     d)      Several equity research analysts have suggested that the Offer does not fully value CANMARC.
     e)      The Offer fails to compensate Unitholders for CANMARC's future growth potential.  CANMARC's highly experienced management team has demonstrated a strong ability to capitalize on internal growth opportunities and acquire high quality assets adding significant value to the REIT.  Since its IPO, CANMARC has closed $437 million of acquisitions representing approximately 2.3 million square feet of additional Gross Leasable Area ("GLA"), an increase of 34%.  As part of its continued growth strategy, management of CANMARC has identified and is pursuing an acquisition pipeline that is currently in excess of $250 million.
●     The value of the unit alternative in the Offer may be negatively affected by downward movements in the value of the Cominar units.
     Any decline in Cominar's market capitalization or valuation multiples, due to any number of factors including poor operating or financial performance, could result in a material reduction in the implied price of the unit alternative.
●     Historically, CANMARC has delivered significantly higher returns to Unitholders than Cominar.
     Since its IPO to November 25, 2011, CANMARC has delivered an annualized total return of 31% to CANMARC Unitholders, compared to Cominar which has delivered only 18% to its unitholders.
●     Under the unit alternative, the value of the combined entity's units is uncertain;
     a)      Electing the unit alternative would increase Unitholders' exposure to the Quebec market from CANMARC's current level of 67% of GLA to 84%.
     b)      CANMARC Unitholders electing the unit alternative would be exposed to increased leverage and higher corresponding financial risk.  CANMARC's Total Debt / Gross Book Value ("GBV") ratio was approximately 50% as of September 30, 2011 compared to Cominar's pro forma Total Debt / GBV ratio of approximately 58%.  During Cominar's most recent earnings call on November 10, 2011, Cominar indicated it would pursue a target debt level of 50% of the portfolio's value.  In addition to exposure to higher financial risk, higher leverage may limit future growth and the objective to significantly reduce leverage could create an overhang or negatively impact the trading price of the Cominar units.
●     CANMARC Unitholders who elect either the cash alternative or the unit alternative may be subject to income tax.
     As per the Offer Circular, taxable CANMARC Unitholders who dispose of CANMARC Units under the Offer will generally be subject to income tax on the cash received plus the fair market value of any Cominar units received.
●     The unsolicited Offer has been rejected by all of the trustees and officers of CANMARC;
     The Board has been informed that, as of the date of this Circular, all of the trustees and officers of CANMARC intend NOT TO ACCEPT the Offer.
●     Cominar's unsolicited Offer is not a permitted bid as defined under the unitholder rights plans of CANMARC;

CANMARC adopted its first unitholder rights plan on May 25, 2010 and a new unitholder rights plan on December 6, 2011 (together, the "Unitholder Rights Plans"). The purpose of each Unitholder Rights Plan is to provide the Board and CANMARC Unitholders with sufficient time to appropriately evaluate the Offer and explore and surface all other strategic alternatives that are in the best interests of CANMARC Unitholders, as well as to protect CANMARC Unitholders by providing an incentive for all potential bidders to comply with the conditions specified in the "Permitted Bid" provisions of the plans. If such bidders do not comply with the Permitted Bid provisions, they will be subject to the dilutive features of the Unitholder Rights Plans.
●     The timing of the unsolicited Offer is opportunistic and is designed to take advantage of the difficulty that other potential counterparties could have in organizing their affairs through the holiday season;
     The commencement of the Offer on December 2, 2011 serves the purpose of taking advantage of the difficulty other potential bidders and interested parties could be expected to incur in organizing their affairs on short notice over the holiday period to complete a due diligence review of CANMARC and propose and negotiate agreements respecting potentially higher value alternative transactions prior to the expiry of the Offer on January 12, 2012.
●     Superior proposals delivering greater value for CANMARC Unitholders may emerge;
     In fulfilling its duties to CANMARC, the Special Committee is pursuing and evaluating alternatives to the Offer in order to identify the alternative that is in the best interests of CANMARC Unitholders. CANMARC and its financial advisor are broadly canvassing other parties who may be interested in a transaction with CANMARC that reflects higher value and better recognition of CANMARC's quality assets, operating platform and numerous growth opportunities.
●     The unsolicited Offer is highly conditional and is not a firm offer.

The Offer contains numerous conditions which must be satisfied or waived before Cominar is obligated to take up and pay for any securities deposited under the Offer. A number of the conditions are broad, in the sole discretion of Cominar and are not subject to any materiality thresholds or other objective criteria commonly found in other offers, giving in effect Cominar the option to decline to proceed with the Offer. CANMARC believes that the conditions give Cominar broad discretion not to complete the Offer.
"In fulfilling its duties to CANMARC, the Special Committee is pursuing and evaluating alternatives to the Offer in order to identify the alternative that is in the best interests of CANMARC Unitholders," said Karen Prentice. "CANMARC and its financial advisors have already commenced a process to contact parties who may be interested in a superior alternative transaction with CANMARC that reflects the higher value of the REIT."
 

on December 19, 2011