Brookfield Asset Management’s New York branch has purchased a 26.17-acre industrial property — including two buildings with 124,000 square feet of rentable area, outside storage areas and trailer parking — in Dorval, Que. from RF West Island Limited Partnership II for $88 million.
RF West Island Limited Partnership II is an open-ended fund involving RoseFellow, Skyline Industrial REIT and Fit Ventures. Colliers senior vice-president Joe Rullier told RENX the RF fund had acquired the property for development purposes, but then elected to sell.
Rullier represented both the seller and buyer in the transaction, brokering the deal along with executive VP Victor Cotic and vice-chairman Gord Cook’s Toronto team.
It was originally acquired for $34.25 million from an Ontario businessman, according to a January 2021 RENX article.
The fully fenced, secured, lit and paved property at 2800 Avenue André includes a 1970s-built, 100,000-square-foot terminal offering a 24-foot clear height with 107 cross-dock and 13 drive-in shipping doors.
There's also a 24,000-square-foot service garage and 673 trailer/tractor parking stalls.
Dorval, the West Island sub-market of the Greater Montreal Area, is a hub for distribution and logistics-related businesses.
The property, located two kilometres from Montreal-Trudeau International Airport and seven kilometres from a CN intermodal terminal, is one of the largest cross-dock terminals in the Montreal market.
It has four access points from two municipal roads and offers convenient access to Highways 20, 13 and 40.
Property provides good income
The property is currently occupied by multiple transportation tenants but, as of Jan. 1, 2024, it will be completely leased by Maritime-Ontario Freight Lines Ltd. (60 per cent) and Challenger Motor Freight (40 per cent).
The weighted average lease term is 4.6 years, according to Colliers.
The property has in-place annual net operating income of $7.41 million, so Rullier had to emphasize to potential purchasers they would be acquiring revenue in addition to two buildings and land that can be redeveloped.
The acquisition is the first in Quebec for Brookfield New York, according to Rullier, who added that the price of $90.30 per square foot set a new record for industrial land in the province.
Rullier said the high price ruled out non-institutional bidders for the property and “four or five big players” expressed interest.
There are few available development sites in the area and the Avenue André property has redevelopment potential, while demand for cross-dock terminals is anticipated to continue to increase, which made the property especially attractive.
Rullier said the site is on the other side of the road from where building heights are limited due to proximity to the airport, so there are no height restrictions in place.
“I think down the line they will redevelop the property,” Rullier said of Brookfield.
“But, I think they’re considering keeping the revenue until it doesn't make sense anymore, when the value of the land is much higher than the revenue.”
Montreal industrial rents should continue to rise
Montreal industrial rents continue to climb due to a lack of inventory, though Rullier said the rate slowed a bit in Q1 2023 from the previous rapid growth seen in 2021 and 2022.
The industrial vacancy rate was under one per cent in the first quarter, but the city still remains a relative bargain compared to Canada’s two other largest cities.
A recent Colliers report showed the average asking net rent for industrial properties in Vancouver rose to $22.09 per square foot in Q1 2023, while the rate was $18.01 in Toronto.
The average asking rent for Montreal industrial properties was $16.71 per square foot.
“We’re still so far from the pricing in Toronto and Vancouver that we're starting to see a lot more institutional players coming to Montreal and considering buying here as well as tenants renting here in Quebec,” Rullier said.