Groupe Mach has added to its growing shopping list by spending $80 million to acquire, from Cominar, the Les Promenades Beauport shopping centre in Quebec City.

With 600,000 square feet and over 125 stores and services, Promenades Beauport is the largest shopping centre in the eastern part of the Quebec City region. It is Mach’s 14th shopping centre and gives the company retail holdings of more than nine million square feet, including about two million square feet of shopping malls and power centres in the Quebec City area. 

The developer and Sarees Investments partnered 50-50 to acquire Les Promenades Beauport. Family-run Sarees has partnered with Mach in several transactions over the past 10 years.  

Groupe Mach president Vincent Chiara says Mach bought the shopping centre because of its location, the value of the underlying land and the quality of its tenants. 

“We think that land’s probably worth as much as the value of the asset itself,” Chiara told RENX. 

"A lot of traction" to Les Promenades Beauport

Most of the mall’s major tenants, including Dollarama, Jean Coutu, Sports Experts and Winners, are also tenants in other shopping centres owned by Mach.

“We’ve had conversations with them regarding the performance of their stores in that centre and they seem quite pleased (about the acquisition).” 

Chiara said Mach plans to keep the shopping mall as long as the retailers maintain their current performance. The retailer is already in negotiations with some of the tenants about expanding or reconfiguring their spaces.

“There’s a lot of traction here and we think we can make it better.”

The shopping centre “needs some attention and we intend to give it the attention it needs,” he said. “It needs some love, it needs some investment and we intend to give it that.”

Promenade Beauport’s current vacancy rate of about 12 per cent, including about 20 office spaces on the second storey of the mall, is “not significant,” Chiara said.

Mach has history with Cominar

Mach has done several transactions with Cominar, Chiara noted, and “the relationship is such that it wasn’t a complicated negotiation. We went back and forth and came to a price that made sense for both parties.”

He adds that “the market’s pretty tight with regards to potential buyers at a ticket of $80 million.” 

Mach had seen Promenades Beauport when it bought 42 of Cominar’s assets during the privatization of the former REIT.

“This was one of the assets we were looking to buy, but it never materialized, so (we) knew the asset well. The due diligence wasn't that complicated - it was just a refresh of what we had already done on it.”

Mach's other recent acquisitions

Since the beginning of the year, Montreal-based Mach has concluded several major acquisitions, including the 922,000-square-foot Atria office complex in North York, the Intercontinental Hotel in Old Montreal and 1801 Hollis Street in Halifax.

The large number of transactions have been possible by having the right team and financial partners, Chira said: “The financial institutions believe in our strategy and they’ve been on board.

“We still continue to get reasonable leverage for our acquisitions from the financial institutions so we’re lucky to have them as partners.

"If you get between 60 and 75 per cent leverage, it makes acquisitions much easier.” 

Mach deals with most of the chartered Canadian banks and some foreign banks, such as Citibank and Germany’s LBBW (Landesbank Baden-Württemberg).

“They believe in our story and they’re accompanying us through this strategy of acquiring more assets,” Chiara says. 

Possible densification of Promenades Beauport

Chiara says Mach is considering densifying the Promenades Beauport site by including residential development while maintaining the mall footprint. “We are in conversations with the city to explore that.”

Adding residential would be “pretty natural because there is a lot of residential next to the site,” he says. Any residential that would be added would be rental.

“We don’t do condos,” as Mach’s philosophy is to maintain properties for the long term. 

Built in 1978 and renovated in 2015, Promenades Beauport has 3,325 exterior parking spaces. Located at 3333 du Carrefour, just off the Félix-Leclerc Highway (Highway 40), the shopping centre has nearly 3.5 million visitors annually. 

Chiara adds there is a Plan B if the brick-and-mortar retail market collapses – and it follows the firm's strategy to acquire properties with valuable underlying land.

“If the retail component doesn’t work, we think we can extract more value from the land than we can from the asset itself. It gives us a Plan B and because it gives us that Plan B, it checks the boxes.”