RoseFellow has established a $100 million industrial development fund it calls a first of its kind in Quebec and has made an acquisition with some of its proceeds.
“The goal is to build large-scale logistic projects,” said RoseFellow principal Mike Jager of the RF. Limited Partnership I fund. “We view Montreal as a market that is undersupplied in these types of facilities. We see a huge opportunity when it comes to industrial in the Quebec market.”
The fund has made its first investment of $20 million to acquire a 117,000-square-foot building on a 600,000-square-foot lot at 6000 Trans-Canada in Pointe-Claire in Montreal’s West Island, east of Saint-Jean Boulevard. It was owned by two businessmen.
Once the 18-month leases expire in November 2022, RoseFellow plans to demolish the building and spend an additional $32.8 million to construct a 300,000-square-foot industrial building on spec. The class-A building will have height clearance of 36 feet.
The fund “is a great vehicle to allow us to expand our business to become a leading and dominant industrial developer in the Province of Quebec,” RoseFellow principal Sam Tsoumas told RENX.
Fund targets land for industrial development
Having the fund ensures RoseFellow will be able to secure large and well-situated parcels of land for development and maintain “a good stronghold on opportunities,” during the current explosion of interest in the industrial market in Montreal and much of the province, he said.
“Having that capital in place allows us to grow RoseFellow and grow the industrial footprint in the next couple of years.”
Investors in the fund are a mix of private and public entities. Skyline is a major investor through one of its REITS and others include Fit Ventures LP, a group of local investors which has invested in other RoseFellow developments as well as RoseFellow itself.
Minimum participation was $1 million and the fund has a seven-year horizon for investments and development with with two one-year options to renew if necessary.
Although Broccolini has had real estate funds for years, Tsoumas is not aware of any other real estate fund in Quebec that focuses exclusively on industrial.
“We’ve been toying with the idea for a little while,” Jager said. “In December we said, ‘You know what, this is definitely the route we’ve got to take.’ ”
RoseFellow was able to secure the $100 million in investments for the fund in three weeks.
RoseFellow plans more industrial funds
“We were pleasantly surprised and we were frankly honoured at how quickly investors came to us and were happy with what we had done thus far,” Tsoumas said. “For a company that’s so young, this is a very rare, flattering and unique opportunity.”
Tsoumas said there has been a clear change in industrial market demand from future occupants.
“We’re no longer talking about buildings of 100,000 square feet; 100,000 square feet is small. We’re starting to see the need for 300,000, 400,000 square feet, (with) potentially multiple phases in development.”
In order to acquire sites of that scale, financial backing is required as is the ability to move quickly, particularly in a market in which competition is fierce and due diligence and closing times are tight, Tsoumas said.
“You need the financial (resources) to be able to compete and we think this was the best and easiest way to do it.”
RoseFellow could have easily surpassed the $100 million goal for the fund by $20 to $25 million, but wanted to allow room for another fund to open, Tsoumas said.
“We foresee a second and third fund being opened up to a larger group easily within the next year. We easily see the second fund being at least $125 to $150 million and likely expanding the horizons past the Province of Quebec.”
RoseFellow’s other projects
Meanwhile, RoseFellow has started construction a month ahead of schedule on two 138,000-square-foot spec buildings with 32-feet clearance on Marien Avenue and Highway 40 in Montréal-Est. The developer acquired the site last year.
Initial plans called for construction in phases, but “with the strong demand that we’ve already had in the short little while since we started marketing the property, we went ahead and started construction of both Phase I and Phase 2 at the same time,” Tsoumas said.
RoseFellow will also begin construction June 1 of another 325,000-square-foot industrial building on spec at 151 Reverchon Ave. in Pointe-Claire.