Canvar Group is selling a portfolio of three mutiresidential properties and one hotel its broker describes as a rare opportunity in downtown Montreal.
“I don't think in downtown Montreal there’s been that big of a portfolio on centre ice on the market in a long time,” Joe Rullier, senior vice-president and commercial real estate broker at Colliers International (Quebec) in Montreal, said.
The four properties total 755 residential units and more than 663,000 square feet of building area. The group consists of:
- the 33-storey Le 400 at 400 Sherbrooke St. W. with 217 units;
- the 24-storey Le Smith at 2100 Bleury St. with 160 units;
- the 22-storey C-Lofts at 375 de la Concorde St. with 157 units;
- and the 11-storey, 221-room Hilton Garden Inn Montréal Centre-Ville at 380 Sherbrooke St. W.
They were built between 2009 and 2019 and are all near the Quartier des Spectacles and McGill University.
The guidance for the portfolio is between $305 and $310 million, or the equivalent of $400,000 a door, which is well below replacement cost for downtown Montreal construction, Rullier said.
Reason for the sale
Canvar is selling the properties “because they have quite a bit of other projects on the go that need to start construction and they are more of a construction developer than a manager,” Rullier said. As part of this, it is shifting its current portfolio away from older assets to concentrate on new construction projects.
“It's just the nature of the beast for development – it’s heavy on cash flow and they have to move on to their next projects.”
The properties are mortgaged at around three per cent for another two years, well below current interest rates.
“I think the pricing is right for the market today,” Rullier said. “The mortgage helps us, so I think we’re very well-priced.”
Cap rates “are hovering around 4.5 and five,” he said. “We don't think it’s expensive.
"It is a big number that we’re asking in terms of dollar numbers, but in terms of return I think we’re there with everything that should be asked for these kinds of properties.”
He said it has been a while since a high-quality asset of that type has been available in the downtown area.
“It is really above average in terms of finishes and the location can’t be replaced.”
Numerous groups interested
About 25 groups from Vancouver to Montreal to New York have expressed interest in the buildings. The first round of bidding closes Aug. 17.
The top three finishers will then be likely asked to submit a final bid, Rullier said.
The three rental properties are fully leased and cater mostly to young professional and McGill students.
On average, two-bedroom apartments rent for $2,234 at Le Smith, $2,824 at Le 400 and $1,777 at C-Lofts, all below comparable recently completed buildings in the downtown area such as Livmore and Humaniti.
Rullier said the hotel is performing well, particularly this year, but it can be converted to luxury multiresidential rental or student housing.
Buildings that neighbour the Hilton Garden Inn have been converted from hotels to student housing.
“Some purchasers don’t want to hold hotels,” he said. “If you convert it to student housing or multires, there’s quite a bit of upside.”
Canvar is willing to continue involvement with the purchaser during the transition period if the buyer does not have a track record in hotel management, Rullier added.
About $2.2 million of capital investments (representing about $9,900 per key) were done in the hotel in the last few years, including lobby updates and full renovations to guest rooms and event spaces.
“The only thing that needs to be changed is the carpets, but that's minor.”
The hotel has 3,885 square feet of meeting and convention facilities on the ground and 11th floors and access to a recreation facility on the 12th floor that is shared with Le 400.
The Le 400 multires building occupies Floors 12 to 33 of the tower above the podium which houses the Hilton Garden Inn.
Overall, the buildings have five floors of underground parking with 323 stalls.
Rullier said there is no room for additional development on the site.
Canvar was founded in 1975.
Among its other recent projects are the 390-unit Le Duke Apartments on the border of Griffintown and the old Port, the AC Hotel by Marriott Montreal Downtown on René Lévesque Boulevard and the Holiday Inn and Suites Downtown Montreal, also on René Lévesque Boulevard.