A Montreal investment firm with a history of acquiring office buildings for conversions into housing has another property in its portfolio. Immo Alliances and affiliated private investors have acquired a five-storey downtown building for $11.15 million from Gestion SIDEV to convert to student housing.

The 44,511-square-foot building at 1434 Sainte-Catherine Street West is on a primary retail artery in close proximity to Concordia and McGill universities. Two Metro stations, the Réseau express métropolitain automated light rail system and three bus routes are easily accessible.

“This is the first $10-million building we are purchasing downtown, but it definitely sets the tone,” Immo Alliances owner Denis Gallico told RENX in an email. “We loved it and are already in the process of buying two more.”

Features of the building that make it desirable for conversion include: its mixed-use and residential zoning; the optimal smaller size of the floor plates; U-shaped floor plans; a low occupancy rate; natural light; two elevators; high ceilings; and indoor parking.

The 92-year-old building in Ville-Marie Borough’s Museum District was last renovated in 2000. The new owners plan on renovating to create 60 rental apartments.

Avison Young’s Mark Sinnett, Sebastian Gatti, Guillaume Monast and MC Laflamme-Sanders were the advisors and agents for Gestion SIDEV.

Building drew interest from investors

Sinnett, an Avison Young principal and head of capital markets for Quebec, told RENX the timing was right for his client to sell the building instead of making a major capital investment to make it a more modern and competitive office building. It was put on the market in the fourth quarter of 2023. 

“We got a couple of offers from owner-users as well as developers,” Sinnett said. “Some were looking to maintain it as office, but I would say the strongest candidates were looking at doing some type of conversion.”

Sinnett said the relatively low price paid for the building was another contributing factor to it being a good candidate for conversion.

The ground floor of 1434 Sainte-Catherine is leased to a police station for a couple of more years while the upper floors have minimal leasing to short-term tenants, according to Sinnett. 

Gallico is the founder of: 5AM Capital, a personal coaching and investment company; and Immo Alliances, which is his partnership company. Gallico was travelling in France and unavailable for an interview, but did respond to several questions via email. 

“With 5AM Capital, I provide one-on-one coaching to investors, helping them structure and finance deals,” Gallico wrote. “Additionally, I have/manage a portfolio of approximately 80 apartments in Montreal.

“With Immo Alliances, I focus on the buying process: finding and structuring deals, negotiating and securing the best financing.”

Immo Alliances has been involved with acquiring 80 to 100 multiresidential rental units in Montreal annually over the past few years. All of them are within an eight-minute walk of a Metro station and close to downtown and universities.

Growing emphasis on conversions

“In the past two years, we have focused on converting office spaces into residential units to address the rental crisis,” Gallico explained. “Once horizontal densification is maximized, we will need to densify vertically. 

“Currently, building downtown takes three to four years to obtain permits and requires significant investment, making rental developments challenging. Big developers typically build condos 90 per cent of the time. 

“For us, converting old office spaces is a much cheaper option that allows for creative expression in each project. While we could develop condos, it is our last option; we have never sold a piece of real estate, because we play the long game.”

Gallico hopes to obtain a building permit in six months and he’s set a 12-month construction timeline to complete the project floor by floor.

“There is a high demand for residential units close to universities, with hundreds of thousands of students arriving each year and struggling to find places to live and study,” he wrote. “We aim to create quiet spaces like WeWork, with amenities such as a gym, possibly a place to grow vegetables, and weekly yoga lessons.”

More Montreal office buildings could be converted

Montreal has a lot of older and smaller office buildings, and the demand for general and student housing is growing. Hotels and other uses are also being contemplated for office buildings considered obsolete.

Avison Young is closely following the evolution of under-utilized office buildings that meet the basic criteria for increasing asset value through adaptive reuse. The firm has identified at least 20 potential projects in downtown Montreal so far.

Avison Young principal and director of market intelligence Marie-France Benoit told RENX one office building conversion has been completed and another is underway in Montreal.

“A year ago people were saying the math is not going to work, and a year later some people are making that math work,” Benoit said of what she believes will be an acceleration of conversions.

“There's also a willingness from the municipal authorities to have more housing. If there are some buildings that are good candidates for that transformation, it only makes sense to go for the highest and best use of those assets, especially in the city core. 

“I don't expect to see these conversions in the suburbs where there is land you can build on.”

Benoit believes conversions could remove nearly one million square feet of excess office inventory and shave at least 100 basis points from Montreal’s office vacancy rate of approximately 18 per cent.