Groupe Mach has spent $40 million to purchase the 22-storey 1801 Hollis St., one of the largest office buildings in downtown Halifax and marking the developer’s foray into Atlantic Canada.
Montreal-based Groupe Mach is also on the verge of completing the acquisition of the 207,000 square foot Metropolitan Place at 99 Wyse Rd. in neighbouring Dartmouth. The deal, in the low-$30 million range for the 17-storey building, is expected to close in the coming weeks.
Both buildings are being purchased from Choice Properties.
“These were two large acquisitions,” Groupe Mach president Vincent Chiara told RENX. “Four hundred thousand square feet in that market is pretty substantial. It probably makes us the second-largest landlord downtown in Halifax.”
Chiara said Halifax is “a pretty stable market. We compare it a lot to Quebec City where we’re very dominant.”
The market has about 13.1 million square feet of office inventory according to Q4 2022 stats from CBRE. Vacancy was at 15.2 per cent. Absorption for Q4 was about 81,000 square feet, and for the year 2022 stood at just over 197,000 square feet.
The 1801 Hollis office property
With 223,000 square feet, 1801 Hollis is one of the top four or five office buildings in Halifax, Chiara said. “We’re a value-add landlord and we think that we can add a lot of value to this asset both by its operating costs and the price that we paid that we evaluate to be substantially lower than its replacement cost.”
The purchase price “is south of $200 a foot and that replacement value could be anywhere between $500 to $700 a foot. We have a lot of comfort in the fact we paid a fraction of its replacement value.”
Built in the mid-1980s, 1801 Hollis has a 17 or 18 per cent vacancy rate and major tenants that include HSBC, Public Works Canada, Mercer Canada, MNP and engineering and law firms.
Chiara said Groupe Mach plans to make sure the building is “up to par with the way we operate our buildings” and attractive to existing and potential tenants.
Unlike a lot of institutional investors, “we don’t treat (Halifax) as a secondary market. We like to think that if you’ve got your third line on the ice all the time, you can’t win a hockey game, so we’re hoping to put a first line on the ice and supervise these assets. We’re very hands on and we're going to spend some time in that market and in the community.”
Built in 1985 and renovated in 2020, the building is certified BOMA Best Silver and Energy Star and features change rooms with shower facilities, a full-service cafeteria, bike storage, gym, shared conference rooms and a rooftop terrace.
Metropolitan Place in Dartmouth
Metropolitan Place was built in 1987 and is located beside the MacDonald Bridge and is connected to the Double Tree Hotel by Hilton. Amenities include bike storage, tenant shower facilities, indoor/surface parking, high speed elevators and a full-service restaurant and café.
Groupe Mach will set up a Halifax office and “we intend to be there for the long haul,” Chiara said. “That’s what we do when we acquire assets in a new market.
"We’re there to stay. This is not a purchase and a flip for two, three, five or 10 years.”
Chiara noted his parents landed at Pier 21 in Halifax when they immigrated to Canada in the 1950s, before making their way to Montreal. “I have a little part of me that feels a certain attachment to Halifax because that’s where I guess it all started.”
Mach has decision to make in Ottawa
Last fall, Groupe Mach further expanded its office portfolio in the National Capital Region with a $110 million purchase from Cominar of 550 Boulevard de la Cité in Gatineau and 222-230 Queen in downtown Ottawa.
(In March 2022, Cominar REIT was sold to a Canderel Group-led consortium and became Cominar. As part of the transaction, Groupe Mach acquired 42 of Cominar's retail and office properties and Pure Industrial acquired Cominar's industrial portfolio.)
The 10-storey 550 Boulevard de la Cité was built in 2003 and renovated in 2018.
The 15-storey 222-230 Queen was built in 1972 and contains 205,000 square feet of space. It “needs some work,” Chiara said. “There’s some CAPEX issues that we’re going to be dealing with.”
Chiara noted Cominar has a few office and retail assets on the market “and we’re showing some interest.”
He added that Groupe Mach plans to decide by the next quarter whether to maintain 110 O’Connor, a downtown Ottawa office building that Groupe Mach acquired in the Cominar REIT deal, as an office space or convert it to residential.
“Ultimately we would like to keep it office, but the market will dictate.”
Mach sees end to work-from-home trend
While some institutional landlords are exiting the sector, Groupe Mach is bullish on the office market.
“We’re of the opinion that work from home is going to have an expiry date and because of that the value of these assets will increase in the coming years,” Chiara said.
Banks are on board with that strategy “because every transaction we’ve done has been financed by a major bank. They have confidence we can create value with these assets.”
Founded in 2000, Groupe Mach describes itself as the largest private owner in Eastern Canada, with a real estate portfolio of 40 million square feet and more than 230 properties.
Some of its landmark buildings in its Montreal home base include the Sun Life Building, 1000 de la Gauchetière, the CIBC Tower, Place Victoria and the KPMG Tower.