Quebec City developer Douville, Moffet et Associés (DMA) has spent $118 million to acquire from Oxford Properties Group a portfolio of 526 apartments in three recently built complexes in the provincial capital.
Oxford “felt that the timing was right and that there was opportunity in other core markets,” said Mark Sinnett, executive vice-president of JLL Capital Markets, which represented the vendor. “The Quebec (City) assets have performed very well for them and I think it was just time to monetize the performance that those properties have given them.”
Low interest rates and the resiliency of multifamily residential in Quebec City were other factors that affected the timing of the sale, Sinnett said in an interview with RENX.
The properties are in the heart of Lebourgneuf area of Quebec City. They comprise:
– L’Aristocrate (2300, 2355, and 2450 de Bilbao St. and 2350 de Bogota St.);
– Villas Cortina (511-513 Louis-XIV Blvd.);
– and Le Domaine des Méandres (8530-8675 du Chevalet St).
The three complexes are a mix of 62 one-bedroom, 408 two-bedroom and 56 three-bedroom apartments.
The November vacancy rate in the portfolio was less than one per cent “which is pretty impressive,” Sinnett said, particularly during COVID-19. Rents are in the $1.04 per square foot range and tenants include empty-nesters as well as families.
Largest acquisition for DMA
This is the largest-ever acquisition for rapidly expanding DMA, which builds most of its projects. DMA now has about 2,000 existing and under-construction apartment units in Quebec City.
The portfolio was put up sale around Thanksgiving and garnered interest from a wide variety of local and national investors and one group of international investors. “It was a strong and competitive process. It went overall very smoothly,” Sinnett said.
The buyer was selected at the end of November and the deal closed a few weeks ago following approvals and standard due diligence.
The ability to close the deal quickly was a consideration in the sale, Sinnett said, noting “the local investor stepped up because he knew the market better than anybody else.”
“In a pandemic, going with someone who knows the market, who’s local and could work with all of the players, was a big factor.”
COVID-19 played a role in limiting interest from international investors as they would have had to quarantine for 14 days in order to visit the properties, Sinnett noted. “In normal circumstances, the Big Cheese from the U.S. would have come down.”
Oxford had acquired the portfolio from Quebec City developer Société Immobilière Huot, which built the properties between 2011 and 2018.
The sale does not mark Oxford’s departure from Quebec City. It still owns the Les Galeries de la Capitale shopping mall in partnership with CPP Investments.
The portfolio properties
L’Aristocrate is a four-property complex featuring condo-style accommodation. Le Domaine des Méandres is a garden-style community featuring wellness amenities. Villas Cortina offers luxury-style accommodation with modern finishings.
The apartments are marketed as so-called “rental condos” – apartments with condo-style amenities included in the monthly rent – which are extremely popular in Quebec City.
“There isn’t a big condo market as there is in Montreal,” Sinnett said. There is no stigma for rental in Quebec City and there has been some negative publicity around condos, condo ownership and condo boards, he said.
While about 60 per cent of new construction in Montreal is condos, in Quebec City that number is below 10 per cent. About 5,000 rental condos were built last year in Quebec City and fewer than 500 condos.
Amenities in the portfolio include a pool and a fitness centre.
Sinnett noted the portfolio includes garden-style, brick-and-wood properties that are common in the U.S. and Quebec City.
Le Domaine des Méandres is a series of six-plexes with walk-up parking, no elevators and “a village lifestyle.”
About the buyer, DMA
Established in the early 1990s by Gilles Douville and Pierre Moffet, DMA specializes in real estate acquisition, development, construction, management and ownership.
DMA is currently building a 240-unit apartment complex at 2595 des Quatre-Bourgeois Rd. in Sainte-Foy. The six-storey building is expected to be complete in 2022. DMA is active primarily in Sainte-Foy with developments such as La Suite and Le Wow.
Sinnett said interest in the Quebec City market is growing. “The fundamentals in Quebec City, particularly through the pandemic, have been exceptional.”
Quebec City is increasingly “a hot market” that represents “an interesting investment opportunity.” The city offers comparable quality as Montreal and a better return for investors in terms of pricing “because there aren’t as many buyers.”
– With files from Don Wilcox