Three private investors are spending $197.5 million to purchase the Norgate Apartments from KingSett Capital and Starlight Investments in the Montreal borough of Saint-Laurent, in what broker JLL calls the biggest multifamily transaction in Quebec this year in price and unit count.

The deal includes 1,108 units in 74 low-rise, walk-up buildings at 1200-1600 Décarie and 1205-1595 Ouimet streets. It translates to an average of $178,250 per unit. The cap rate is 5.38 per cent.

The buyers are Frédéric Aubry, Jean-Philippe Claude and William Lande.

“We’re seeing a new generation of private investors coming onto the market and rolling up their sleeves and buying properties,” Jacob Hayon, executive vice president of JLL and practice lead for Quebec capital markets, told RENX. “It’s not only the usual suspects that we talk to.”

Hayon says the transaction signals a “dynamic shift” in the real estate landscape as it highlights the emergence of new private investor groups seeking large-scale property acquisitions.

Norgate Apartments history

KingSett and Starlight have owned the Norgate Apartments for several years and made substantial capex and cosmetic investments to stabilize and reposition a development that had an unfavourable reputation some 20 years ago, he said.

The portfolio is well-maintained with all common areas and about 50 per cent of the units having been renovated. Built in the mid-1950s, the units average 786 square feet, and 74 per cent are two bedrooms or greater.

Current rental rates are 62 per cent below market, meaning the development offers a revenue growth opportunity via renovations when units turn over, Hayon said. Average monthly rent is $1,010 and the highest achieved rent is $1,581, compared with a competitive market average rent of $1,633.

There is an existing long-term CMHC-insured mortgage on the development with an affordability covenant and advantageous terms, including $2.45 million in fees and premiums. The $140.8 million loan has an interest rate of 3.90 per cent and expires in 2034, with an amortization of 45 years.

“By transferring these favourable terms, the incoming purchaser can mitigate financing uncertainty and origination costs,” notes JLL’s information brochure on the portfolio. “The assumable debt terms ensure stable cash flow from the outset, enhancing the investment’s overall appeal.”

Hayon noted buyers who take on the mortgage “can’t spike up all the rents like crazy. They need to follow certain metrics. But even there, there’s a lot of upsides.”

Strong interest in the portfolio

Hayon said there was strong investor interest in the Norgate Apartments, which hit the market at the beginning of the summer.

“The biggest challenge for this portfolio was the amount of properties to manage. It’s 74 properties, it’s not like buying a large building with 400 units.”

Given its location in the densely populated heart of Saint-Laurent, one of Montreal’s major employment hubs, close to the Côte Vertu metro station and upcoming light-rail REM Bois-Franc station, the low-density Norgate Apartments site also offers “tremendous” redevelopment and densification potential, JLL notes.

Aubry and Claude already owned a significant rental portfolio on the island of Montreal prior to the Norgate transaction, Hayon said.

Aubry bought his first house at age 18, followed by a triplex. He took a real estate investment course and later became a general contractor and started flipping houses.

Claude bought his first triplex in 2011 and then acquired an additional 150 properties in four years, mainly via partnerships. He’s also been president of the real estate investment club Club d’investisseurs immobiliers du Québec.