Montréal, January 23, 2014 – The Fonds immobilier de solidarité FTQ (previously SOLIM) made no exception for Claude Blanchet when it invested in Capital BLF, now called Fonds de placement immobilier BLF.
Before investing in BLF, the Fonds immobilier followed all the usual procedures: examination of the business plan, property appraisal, and management, growth potential and profitability analyses.
The Fonds’ investments, both in Cominar in 1998 and in BLF in 2009, were made with a view to furthering the growth of Québec’s real estate investment trust (REIT) industry. Québec REITs have a very hard time raising the necessary capital to reach a critical mass. Unlike the Toronto market, which has many institutional investors open to investing in REITs, Québec has only a few.
Given that it is underdeveloped, this industry offers investors a prospect of good returns in the years ahead. More than ever today, with aging rental properties, the rental market is flourishing and the REIT model is viable. REITs are extremely popular and some have been very successful. Thus, in keeping with the economic development component of its mission, the Fonds de solidarité FTQ is supporting the emergence of this industry.
The market targeted by BLF has good growth potential and down the road could become another Cominar, the first REIT in which the Fonds invested. Although made by the Fonds (SOLIM was too small at the time), the investment was managed by SOLIM, contrary to what La Presse reported this morning. As proof, the former president and CEO of SOLIM, served on the Cominar Board of Directors from 1998 to 2005.
It is a generally accepted principle that stock performance must be looked at over a 5- to 15-year period. With the arrival of Mathieu Duguay from COGIR with his impressive track record and who himself invested heavily in the company, BLF will do well because there are excellent acquisition prospects for developing residential rental properties.
In an article published on October 7, 2013, five experts consulted by La Presse Affaires acknowledged the strong potential of the industry in general and of BLF in particular:
BLF is a young company managed by Mathieu Duguay, a businessman who acquired his real estate management skills at COGIR, a company founded by his father.
Mathieu Duguay holds 650,000 shares or 20% of BLF.
“Profits are not going to go through the roof in four years. What will drive up the stock price is an increase in the book value by buying properties at a good price or by raising rents and the occupancy rate and then reselling them at a higher price,” explained Philippe Hynes.
BLF will target multi-residential properties in Québec. “BLF will focus on the regional markets in order to achieve the growth needed to generate economies of scale.”
- Richard Dufour, “À la chasse aux vedettes de demain,” La Presse, October 8, 2013
As the investments in Cominar and BLF show, the Fonds de solidarité sometimes invests in publicly traded real estate companies. With its 500 properties across the country, Cominar is today the largest REIT in Québec and the second largest in Canada. The success of this REIT prompted the Fonds to invest in the residential rental market.
Lastly, it bears mentioning that Claude Blanchet and Marc Marois resigned from the BLF Board on December 6, 2013, and are no longer shareholders of BLF.
Independent evaluation committee
Contrary to what La Presse reported this morning, the Fonds de solidarité’s independent evaluation committee and its members, who include Pierre Laflamme, are not involved in any way in the evaluation of Fonds de solidarité or Fonds immobilier investment projects. The role of this committee is to vet the evaluation process used to determine the Fonds’ net assets and share price. Pierre Laflamme therefore was never involved in any way in the Fonds immobilier’s investment in BLF. Incidentally, this committee is required by the AMF.
About the Fonds de solidarité FTQ
The Fonds de solidarité FTQ helps drive our economy. With net assets of $9.7 billion as of November 30, 2013, the Fonds is a development capital investment fund that channels the savings of Quebecers into investments in all sectors of the economy to help further Québec's economic growth. Its investments, in all sectors of the economy, contribute to the creation and maintenance of businesses and development in Quebec. The Fonds is a partner, either directly or through its network members, in close to 2,400 companies. With its more than 615,000 owner-shareholders, it has helped, on its own or with other financial partners, to create, maintain and protect more than 170,000 jobs. For more information, visit www.FondsFTQ.com.
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