Brasswater and Vista Properties have partnered to acquire a 23-building industrial portfolio in the Montreal boroughs of St. Laurent and LaSalle for $100 million from DHP Corporation, in what Brasswater president Ian Quint calls one of the largest industrial transactions in the city this year.
The buildings have a total 588,375 square feet of gross rentable area and are 99 per cent leased to 166 tenants.
Seventeen of the properties are in St. Laurent on Bégin, Guénette and Garand Streets, Thimens Boulevard and Bois Franc Road. The remaining six buildings are on Lapierre and Clément Streets in LaSalle.
“It was extremely appealing to us,” Quint says of the deal. “Supply is not going to increase and demand is increasing, so we’re very comfortable with it.”
St. Laurent and Lasalle are two of the most central industrial markets in Montreal, he adds.
Small-bay industrial expensive to build
Another attraction is that “the buildings are irreplaceable in terms of bay size. They’re all 2,500-square-foot bays, which is impossible to build now because construction costs are just too high. They’re not making any more of this product.”
The 2,500-square-foot bays also have their own loading docks, which Quint says is atypical for small-bay industrial buildings, which usually have only ground-floor drive-in.
The buildings have an average of about 25,000 square feet of rentable space. By contrast, almost all new industrial construction in Montreal is at least 100,000 square feet, Quint says.
Quint says the transaction came about through Brasswater’s (formerly Group Quint) existing relationship with DHP. DHP will wrap up its operations in the wake of the deal.
DHP built the buildings within a 10-year period starting about 50 years ago. DHP once had a pre-cast concrete business and many of the buildings were constructed with pre-cast concrete, Quint notes.
Outside of the Cominar deal, the transaction is one of the largest this year in Montreal’s industrial market, in terms of gross leasable area and purchase price, Quint says.
Quint declined to divulge Vista Properties’ stake in the deal. Brasswater has previously partnered on industrial acquisitions with Vista.
Vista Properties describes itself as one of Montreal’s largest property holders, with more than eight million square feet of commercial and industrial space under management.
Many tenants have short-term leases
Quint says Brasswater also liked the fact most of the leases for the DHP properties are short-term. “It offers us the ability to bring all the leases over the next two-and-a-half, three years to (market rates).”
The average current rent in the buildings is about $7 per square foot. However, “we’ve already started doing many (new) leases at $14, $15 net. We haven’t done any deals below that.” Tenants are mostly signing five-year leases.
As most of the leases are short-term, “we’re constantly doing renewals within the portfolio,” he adds. New tenants and existing tenants that are expanding are also seeking deals.
Demand for space in the buildings of the former DHP portfolio is “tremendous” and surpasses supply, Quint says.
The Brasswater website currently lists availability at 1100-1190 and 1400-1490 Bégin and 4201-4331 Garand in St. Laurent and 9641-9675 and 9681-9725 Clément and 2502-2536 Lapierre in LaSalle.
“It attracts, obviously, a lot of small businesses,” Quint says of the buildings. “It’s like an incubator for growing start-ups.”
Brasswater, Vista plan $5-$10M in spending
Brasswater plans to spend $5 to $10 million on capital expenditures and renovations on the properties over the next few years.
“We’re working right now on deferred maintenance that hasn’t been done on the facades, parking lots and roofs,” he says, noting the properties on Thimens and Garand will have their facades redone.
The DHP acquisition is one of several industrial transactions for Brasswater this year.
Brasswater bought a 285,000-square-foot building at 3215-3235 Guénette in St. Laurent from Hagen Industries for about $45 million. The property has been leased back to Hagen.
The developer also spent about $45 million to buy from a private individual the 235,000-square-foot Kraft Canada facility at 8550 Montview Rd. in the Town of Mount Royal’s industrial park.
After the purchase, Brasswater signed a long-term lease with Kraft for 12 years.
The properties do not require major improvements, Quint says.
Brasswater has also purchased about 1.5 million of industrial land for development in Delson on the South Shore, 4.5 million square feet of industrial land in St. Eustache off Highway 640 north of Montreal and 1.5 million square feet of land on Montée-Masson near Highways 25 and 440 in Laval
“We should be under construction within the next 12 months on all of the sites with our first phases,” Quint says.