22 Oct

Leasing on Montreal LRT corridor to get boost: Panel

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Posted by: James Moysey

Leasing on Montreal LRT corridor to get boost Panel

Leasing on Montreal LRT corridor to get boost Panel

Montreal’s Technoparc could emerge as the victor of the leasing stakes when the city gets its new light-rail transit network, says Laurent Benarrous, principal at Avison & Young in Montreal.

When the REM (Réseau électrique métropolitain) is completed, it will be the science and high-tech companies on the campus in the borough of Saint-Laurent “that emerges as the winner,” Benarrous says.

He was speaking at a panel providing an overview of the leasing market during the Montreal Real Estate Strategy and Leasing Conference on Oct. 12.

The Technoparc Montréal will have its own dedicated REM station when the 67-kilometre line is completed in 2020 or 2021, one stop away from the line serving Pierre Elliot Trudeau International Airport.

Benarrous says tech companies such as gaming firm Ubisoft are scattered across several buildings in the district. But such companies are now big enough to go from “cool loft spaces” to having their own integrated campuses.

Technoparc created 30 years ago

Launched 30 years ago, Technoparc is home to 100 companies and about 7,000 employees and forecasts it will have 10,000 employees by 2021. In a report to Quebec’s public hearings office on the environment on the impact of the REM, Technoparc estimated the arrival of rail transit would increase public transit users to the site from 6.8 to 15 per cent.

Benarrous says the REM will have a relatively neutral effect on downtown Montreal, as the area is already well-served by the Métro. Still, the REM could help downtown resist competition from the suburbs.

Buildings less than 500 metres away (representing about an eight-minute walk) from a REM station could benefit, he adds, while those more than 500 metres away won’t see any benefits.

Solar Uniquartier leasing-up well

However, Anne-Marie Sauvé, a real estate broker at NAI Commercial, said the retail market will benefit from the REM. She noted leasing of Solar Uniquartier, a massive $1.3-billion mixed-use project in Brossard led by Devimco that will have its own REM station, is going well.

Peter Mouhteros, senior associate, industrial services group at JLL says there may be small rent increases for industrial properties close to REM stations in the West Island of Montreal. Suburbs such as Baie d’Urfé and Ste. Anne de Bellevue, now considered distant, will benefit from the arrival of the trains.

Overall, Montreal has seen an increase in demand for industrial space in the last few years, linked in large part to low interest rates, Mouhteros says. This demand is likely to continue at least in the short-term.

Mouhteros notes the recent expansion of a terminal at the Port of Montreal and the popularity of Highway 30 have helped east-end industrial vacancies drop. “Investors are bullish on the area.”

In addition, land prices in Montreal are slowly creeping up and construction demand is strong, he says. “The city is finally in a market that is seeing some speculative construction of industrial.”

Mouhteros adds he does not see the trend in build-to-suit industrial spaces diminishing, as distribution centres and warehouses require 28-foot ceilings.

Cannabis growers, data centres growth areas

He notes cannabis companies are expressing interest in older industrial buildings with 18-foot ceilings for marijuana cultivation centres (or grow-ops). The same interest holds true for data centres, which see high ceilings as a liability as it requires them to chill more space.

Martine Sirois, director, research, valuation and advisory at Altus Group, noted the Montreal area is home to about 20 per cent of Canada’s industrial space.

Elsewhere, Sauvé notes the planned revamping of Ste. Catherine St. has led to a 35 per cent reduction in net retail rental rates on downtown Montreal’s main shopping street.

Slated to begin next year, the four-year project will see 2.2 kilometres of the street – from Atwater to Place des Arts – redone and will feature heated sidewalks on part of the stretch.

On the office leasing front, Benarrous says there have been no major or exciting transactions so far this year, but he expects movement at the end of the year and early in 2018.

Several tenants could make deals for spaces ranging from 50,000 to 250,000 square feet, in what will amount to a game of musical chairs. However, these deals will not create an imbalance in the market because the city’s economy is solid, he says.

20 Oct

Tour des Canadiens 3 condo tower launches in Montreal

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Posted by: James Moysey

The Montreal Canadiens are having trouble scoring goals but the team has scored a hat trick when it comes to branded condominiums.

The Tour des Canadiens condo towers are part of the Quad Windsor development in downtown Montreal.

The Tour des Canadiens condo towers are part of the Quad Windsor development in downtown Montreal. (Image courtesy Quad Windsor)

The close-to-$150 million Tour des Canadiens 3 condominium development has been launched near the Bell Centre in downtown Montreal. The tower is the third condo build in the proposed $2 billion Quad Windsorventure.

Construction of the 55-storey, 567-unit condo tower is to begin sometime in 2018, depending on pre-sales, as part of a joint venture between developers Cadillac Fairview and Canderel and the Club de hockey Canadien. The building, located at de la Montagne St. and Saint-Antoine St., should be completed in 2021.

“We expect that the sales will be very strong,” says Brian Salpeter, senior vice-president, development, Eastern Canada portfolio at Cadillac Fairview.

Condos ranging from one to three bedrooms, as well as penthouses, will sell for between $200,000 and more than $1 million. There will also be 12 townhouses on the south side of the tower next to a two-acre municipal park planned by the City of Montreal.

Tour des Canadiens 1-2 sold out

The first Tour des Canadiens with 552 units was the quickest-selling condo project in the history of Montreal, while the 590-unit Tour des Canadiens 2 sold out almost as quickly, says Daniel Peritz, senior vice-president of Canderel.

Canderel’s roles in the three Tour des Canadiens include production, construction, sales and marketing and after-sales service.

The first Tour des Canadiens has been completed and Tour des Canadiens 2 is on target for delivery in the second half of 2019.

Overall, the Montreal market continues to be strong, with the city doing well economically, he says.

“People are feeling really positive about things in Montreal.”

Cadillac Fairview leads Quad Windsor venture

Quad Windsor, which has been led by Cadillac Fairview, is part of a strategic move by the company to “create communities and not just sort of one project here and there,” Salpeter says.

The developer is “trying to be very thoughtful about what we develop and not just develop quickly for the sake of development.”

Cadillac Fairview started to assemble the land that comprises Quad Windsor in 2006.

Aside from the three condo towers, it includes the 495,000-square-foot Tour Deloitte, the first downtown office tower to be built in 20 years. Also proposed are two office towers with a potential of 1.2 million square feet at 750 Peel St., just east of the Tours des Canadiens sites, and additional residential buildings at 600 Peel St.

Development of additional office towers will depend on finding anchor tenants, Salpeter says.

“We’re in active discussions with a number of companies who are looking for modern, state-of-the-art office buildings.”

Office towers could accommodate Amazon

He noted new office space at Quad Windsor could accommodate Amazon’s needs as part of Montreal’s bid to land the Seattle-based company’s second North American headquarters.

Residential developments at Quad Windsor are part of “a trend of having sports and entertainment as an anchor for development.” He notes Quad Windsor is similar to the Cadillac Fairview-led Maple Leaf Square in Toronto and similar developments around the Staples Center in Los Angeles, Victory Park in Dallas and the ICE District in Edmonton.

“People want an environment which is the proverbial live, work and play. That’s what we’re helping develop in this area. That didn’t exist in Montreal.”

So far, buyers at Tour des Canadiens run the gamut of young and old, local and foreign, but the majority are Montrealers buying units for their own uses or for investment purposes, Salpeter says.

He contends media reports many of the units in the first Tour des Canadiens have been used for Airbnb rentals – and often by rowdy partiers – have been overblown.

Long list of amenities in development

The Tour des Canadiens 3 will include a boutique hotel-style, two-storey lobby, WiFi lounge with large- screen TVs and pool tables, an indoor-outdoor pool, a skylounge on the 55th floor and a storage area for online purchases and grocery deliveries. There will also be a pocket park outside the building, inspired by New York City’s Paley Park.

A pedestrian bridge will cross above Saint-Antoine St. connecting the condo tower to Tour Deloitte, Windsor Station, the Bell Centre and Montreal’s underground network.

As with the two other condo towers, the emblem of the Canadiens will be illuminated at the top of the building. Residents will be eligible for discounts for Montreal Canadiens games and other Bell Centre events.

The Montreal Canadiens “are not just about hockey,” in Montreal, Salpeter says. “It really is a team that resonates across the world.”

Peritz also revealed a proposed Canderel development on the site of the former Spectrum concert hall on Ste. Catherine St. in the Quartier des Spectacles area is being rethought by the developer.

Once slated for an office tower, the project with a density of 1.1 million square feet will likely become a mixed-use development, with shovels hopefully in the ground in the next 12 to 24 months.

“Montreal is very healthy,” Peritz says. “The question is will that health extend to the office market?”

 

3 Oct

RioCan selling 100 properties, valued at about $2B

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Posted by: James Moysey

RioCan Real Estate Investment Trust (REI.UN-T) is taking the final major step toward becoming a REIT which focuses almost solely on Canada’s six major markets. The trust announced Monday it will sell about 100 properties, valued at nearly $2 billion, in secondary markets across the country.

Riocan REITAt the same time, RioCan CEO Ed Sonshine said the trust doesn’t expect its FFO to take a hit, because of major redevelopments it has already started, and will be completed over the next year or so.

“The simple fact is that while the properties we intend to sell are solid, reliable income properties, the annual NOI growth lags the growth we are able to achieve in our primary market portfolio.” Sonshine told analysts and media on a conference call. “At the same time the current phase of our development program will have sufficient completions over the next few years to more than make up for that which we’ll be selling.”

Two major focuses for RioCan

RioCan, Canada’s largest REIT, has been conducting two major campaigns in recent years. First, it has been focusing on what it calls Canada’s six core urban markets – Toronto, Montreal, Vancouver, Ottawa, Edmonton and Calgary.

It also announced about two years ago it would undertake an extensive program of redevelopment and intensification at up to three dozen existing retail/commercial sites which it considers to be underperforming. Two major Toronto projects (Yonge and Eglinton, and King and Portland) as well as two projects in Calgary are nearing completion.

“This is a pipeline we’ve been creating for years and the finished products, including our first residential rental tower at Yonge and Eglinton, will all start adding to FFO by the end of this year or beginning of next year,” Sonshine said.

It late 2015, it exited from U.S. markets, selling its 49 American properties to The Blackstone Group for about $2.7 billion.

Management vision for RioCan

Sonshine also laid out management’s vision of what RioCan will look like by 2020 when it has divested these properties, the first round of redevelopments are complete and a new round under way.

“Equally important, every property RioCan owns by then will have a story of what can be done to improve it, or change it, to adapt to whatever the changing face of business and population growth requires. That story on certain properties may be 20 years in the future, but that is OK.”

RioCan expects about $1.5 billion in revenue from the sale, after expenses and paying off about $500 million in existing financing on some of the properties. About half of the revenue will be used to buy back its own stock.

“Our unit price is at levels that make a robust NCIB program very sensible,” said Sonshine. “Not only are we trading before our IFRS value, that number does not take into account the value of our platform, nor does it take into account the approximate $1B of value in our zoned, or almost zoned, densities, the vast majority of which is in the GTA.

“We estimate that value of density is in the neighbourhood of $3 per unit. And that is just the density we have already identified and have either already zoned, or applied to have zoned but not yet monetized or started to build.”

Reinvest in development pipeline

RioCan also plans to continue reinvesting $300 to $400 million annually in its development and redevelopment program.

Sonshine would not discuss specific properties which are on the sale block, nor would he reveal if any potential deals are already in the works. He did say market conditions are favourable for the sale and RioCan will be strategic in releasing the properties or portfolios.

In all, about 12.5 million square feet of gross leasable area will be sold off. He said occupancy of the portfolio for sale is about 93.5 per cent, compared to RioCan’s 96.5 per cent overall occupancy rate.

“The success of the program will, quite frankly, dictate the timing. If we find big appetites out there which will lead to better pricing, then obviously we may accelerate,” he said.  “Conversely we may slow it down.

“But there are lots of interested buyers. We have been pleasantly surprised by the numbers of people who have expressed interest.”

He said interest has come from both other REITs and private investors since the acceleration was first discussed during RioCan’s Q2 conference call with its investors. Although “we’re pretty confident of this list,” Sonshine said there could be additions or deletions based on individual transactions and market conditions.

Other highlights of announcement

Other notes about the announcement:

* In response to questioning, Sonshine mentioned properties in London, Orillia, Collingwood, Renfrew and Leamington, Ont., are among those to be sold

* Sonshine said the portfolio to be sold consists of “a real mixed bag. There’s an awful lot of grocery or Walmart anchored shopping centre strips. The amount of malls, I think, is relatively insignificant. Quite frankly that was the first thing we sold back when we were starting (this process).” There are also retail power centres and single-tenant properties.

* The weighted average cap rate for the sale properties is about 6.5 per cent. Sonshine said that’s about 1.5 per cent lower than the rest of the portfolio on a year-to-date basis.

* Suspension of its Distribution Reinvestment Plan (“DRIP”) effective Nov. 1, 2017, in order to maximize the effectiveness of the NCIB.

* RioCan is retaining some secondary market assets which it sees as exceptional properties, or those with significant redevelopment potential. Two examples are a joint venture with HBC in Barrie, Ont., and the Tillicum Centre in Victoria, B.C. “Victoria is not one of the primary markets, but it’s a great market,” Sonshine said.

* RioCan owns 100 per cent interests in all but “eight or nine” of the properties for sale.

* About 15 of the sites for sale, Sonshine said, have “shadow anchors” such as Walmart, Canadian Tire or a supermarket.

Although the stated goal is to have at least 90 per cent of RioCan’s revenues coming from the six major markets, Sonshine actually expects it to be higher.

“If the whole program works the way we want, it will be closer to 95 (per cent) than 90,” he said.

About RioCan

RioCan is Canada’s largest real estate investment trust with a total enterprise value of approximately $13.9 billion as at June 30, 2017. RioCan owns, manages and develops retail-focused, increasingly mixed-use properties located in prime, high-density transit-oriented areas.

RioCan’s portfolio is curently comprised of 299 properties, including 15 development properties, with an aggregate net leasable area of approximately 45 million square feet.

 

2 Oct

Montreal Real Estate Gets Fancy

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Posted by: James Moysey

For the first time in years, Montreal is a seller’s market.

Homes, particularly luxury condos, are selling in unprecedented numbers. Prices are inching upward. And Canada’s second-largest city—long considered underdeveloped compared with Toronto and Vancouver—is seeing a burst of high-end development thanks to a booming economy and increased interest from Chinese buyers and empty nesters.

A record-setting 13,764 homes sold in the Montreal metro area in the second quarter of 2017, an 8% increase over the same period a year ago, according to the Greater Montréal Real Estate Board. Condo sales jumped 17% to 4,487—a record for the second quarter in a row—and the median sales price increased 3% to 245,084 Canadian dollars, or $196,312.

Much of the gain is at the high end: Sixty-five condos priced over C$1 million, or $801,000, sold in the first half of 2017, a 51% increase compared with the first half of 2016, according to Sotheby’s International Realty Canada. At developer Daniel Revah’s latest project, Le 1420 Boulevard Mont Royal, about 1,000 potential buyers registered on a teaser site in just over a month after presales started in the spring, he said. The average asking price for the development’s 200 apartments tops C$1 million, or $801,000, with penthouses asking C$5.5 million, or $4.41 million—high prices for Montreal.

Cranes are blooming across downtown. And more expensive projects are being built with gyms, indoor pools, built-in retail space and other perks designed to lure affluent families and downsizing baby boomers.

Sonia Ah-Kye, a 35-year-old anesthesiologist, and her husband Christopher Aguba, a 35-year-old application analyst, paid $1.05 million for their three-bedroom apartment in late 2015, excited to live steps from restaurants, shops and their workplaces. But when the couple learned a baby was on the way, “all our priorities changed,” Ms. Ah-Kye said. So they listed the 2,300-square-foot unit for $1.24 million in March—about 18% more than they paid. They have since rejected several offers, content to wait for the right price, Ms. Ah-Kye said.

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