Pure Industrial Real Estate Trust (PIRET) has purchased an 11-property industrial portfolio in the Greater Montreal Area from Healthcare of Ontario Pension Plan (HOOPP) for $249 million, RENX has learned.
PIRET is a wholly-owned subsidiary of U.S.-based real estate giant Blackstone and Canadian institutional investor Ivanhoe Cambridge.
The Montreal portfolio comprises about 1.5 million square feet, meaning the transaction is priced at about $166 per square foot.
The acquisition, which is expected to be one of the biggest industrial real estate transactions in Canada this year, includes warehouses, distribution centres and logistics buildings. It is also believed to be one of the largest industrial transactions in Montreal’s history — if not the largest.
Two sources confirmed to RENX the class-A portfolio had been quietly placed on the market in June and went through a bid process overseen by CBRE.
PIRET and its new owners
Most of the buildings are located on the island of Montreal and were built during the early 2000s.
Officials from the companies involved in the transaction were either unavailable, or unable to comment, to RENX regarding the acquisition.
PIRET has been relatively quiet in recent months, since the former investment trust’s acquisition by an affiliate of Blackstone Property Partners, and Caisse de dépôt et placement du Québec subsidiary Ivanhoé Cambridge.
Blackstone and Ivanhoé Cambridge respectively own 62 per cent and 38 per cent of PIRET, having paid about $3.8 billion for it earlier this year.
Prior to the takeover, PIRET had been one of the most active purchasers of industrial property in Canada and the U.S. Its portfolio as of March 31, 2019 consisted of 177 properties (151 in Canada, 26 in the U.S.) comprising almost 28 million square feet of leasable space.
Tight Montreal industrial market
The transaction comes at a time when the Montreal commercial real estate market has been attracting increasing attention and investment volumes.
The industrial sector has been no exception, both from leasing and investment perspectives. Pricing for the acquisition indicates that Toronto-based PIRET is factoring in significant future rental growth.
Montreal’s industrial vacancy rate is at an all-time low of between two and three per cent according to multiple 2019 Q2 market reports.
According to Colliers’ Q2 report: “The market continues to lack industrial buildings in the 100,000-square-foot range with a minimum of 24-foot clear ceiling heights, and this has been the norm over the last 18 months.”
It says absorption during the previous 12 months was close to three million square feet.
CBRE’s Q2 report notes that shrinking availability has led to rent increases of more than seven per cent and sales price increases of 35 per cent during the past 12 months.
Although there is about two million square feet of additional space under construction, CBRE reports almost all of the capacity represents purpose-built space. The report also says significant tracts of industrial land for development are also becoming increasingly scarce.
Blackstone and Ivanhoé Cambridge
Blackstone is one of the largest real estate private equity firms in the world, with US$154 billion of assets under management in North America, Europe, Asia and Latin America.
Through subsidiaries and partnerships, Ivanhoé Cambridge holds interests in more than 1,000 buildings, primarily in the industrial and logistics, office, residential and retail sectors.
The Montreal-based company held close to $65 billion in real estate assets at the end of 2018.