Investment Report – Q1 2014 Montreal, Quebec GMA Investment

Investment Report – Q1 2014
Montreal, Quebec
GMA Investment Market Overview
Q1 - 2014
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Investment Report – Q1 2014
Montreal, Quebec
GMA Investment Market Overview
Quarterly Market News

Cominar REIT was one of the few active
institutional investors in the first quarter
of 2014, acquiring 7 office properties
from the Redbourne group as well as
Carrefour Lachenaie; a retail centre
located in Terrebonne, QC amongst
other transactions.

These transactions were indication of a
reappearance of REIT investments after
a slowdown in 2013

Devimco Inc. acquired a 50% stake
from RioCan REIT in Quartier DIX30 for
$193,000,000.

Campus Crest Communities acquired
the Holiday Inn Montreal for
$65,000,000 and will convert the
property into student housing.

Post quarter, liberals were elected in
Quebec with a majority government.
Investment activity expected to increase
in 2014 and beyond, as political
instability subsides.
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Quarter in Review

The commercial real estate investment market in
Greater Montreal Area (GMA) had a slow start to the
year as investment transactions decreased 40% from
the previous quarter.

Total acquisitions totaled just over $485 million in
sales volume for the GMA in Q1 2014, down
approximately 40% if you exclude Devimco’s
acquisition of Quartier DIX10 at a purchase price of
$193,000,000 which represented more than 45% of
investment activity in the GMA.

Q1 2014 was a quarter in which investors largely took
a wait and see approach to the Quebec market as the
weight of the provincial election took hold. The most
active investor in the Quebec market was Cominar
REIT who continued its aggressive investment
strategy, acquiring a portfolio of 7 office buildings from
the Redbourne Group totaling upwards of
$92,500,000 as well as the purchase of Carrefour
Lachenaie Shopping Centre for $28,200,000 from
Morguard.

Private investors continued their strong presence in
the GMA; responsible for 50% of all investment
transactions; totaling approximately $263,000,000 this
quarter alone.

Post quarter, the results of the provincial election
promises political stability as election results were
conclusive with the liberal party winning majority
government. These results are expected to provide a
significant boost in investment activity as many
projects took a back seat awaiting the results. With
stability back in the market, expect to see positive
investment activity through 2014 and beyond.
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Investment Report – Q1 2014
Montreal, Quebec
GMA Investment Market Overview Cont’d
Purchaser Profile 2013
Private
Purchaser Profile
Public (REITs, REOCs & Listed Funds)
8%
Institutional
 The profile of investors for Q1 2014 remains
consistent from previous years for the GMA.
Activity from public players picked up this quarter
but the majority of sales volumes still came from
private investors including developers, operators
and equity funds. Up to date, private players
account for 50% of all investment transactions;
totaling approximately $263,000,000 this quarter
compared to last quarter’s total of $165,000,000.
56%
36%
Source: Real Capital Analytics
Purchaser Profile Q1 - 2014
Private
Public (REITs, REOCs & Listed Funds)
Institutional
6%
 REIT’s picked up momentum through the quarter
and contributed upwards of $207,200,000 of
investment transactions this quarter. This is a
significant increase from Q4 2013, where REITs
only contributed $94,050,000 to the investment
pool.
 Investment activity from institutional players
stayed stable quarter to quarter (excluding the
50% acquisition of Place Ville Marie by Ivanhoe
Cambridge last December). Institutions were
responsible for 6% of the purchasing pool this
quarter.
50%
44%
Source: Real Capital Analytics
($) Millions
Most Active Purchasers vs. Vendors (Last 12 months)
450.0
400.0
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0.0
Acquisitions ($ Millions)
1
2
Source: Real Capital Analytics
www.jll.ca
3
4
5
Dispositions ($ Millions)
6
7
8
9
10
2
Investment Report – Q1 2014
Montreal, Quebec
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3
Investment Report – Q1 2014
Montreal, Quebec
GMA Sales Transactions
Market Sales Volumes
Market Sales Volumes (Quarter by Quarter)
2013 Q4
 Retail transactions in the first quarter of 2014 were
given a massive boost with the 50% acquisition of
Quartier DIX-30 by Devimco. Excluding the
aforementioned transaction, the retail market was
relatively slow and totaled just over $69 million
dollars this quarter.
2014 Q1
$350
$300
Millions ($)
$250
$200
$150
$100
$50
$-
Office
Industrial
Retail
Multi-Housing
Sales Volumes by Asset Type – Q1 2014
Office
Industrial
Retail
Multi-Housing
8%
27%
3%
63%
Source: Real Capital Analytics
 Office sales volumes fell considerably quarter to
quarter, however this decrease was primarily
attributed to the 50% acquisition of Place Ville Marie
which took place in the previous quarter. Office
transactions reached just over $115 million for the
first quarter of 2014. Cominar’s portfolio acquisition of
7 office properties from the Redbourne Group
accounted for approximately $92 million dollars of
that. With multiple office investment opportunities
including Liberty Sites and Iscanco currently in the
pipeline, we can expect increased activity in the
office sector for the coming quarter.
 Investment sales in the Industrial sector remained
sluggish in the first quarter of 2014, representing just
3% of sales. One notable transaction was the sale
and leaseback of Outdoor Gear Canada’s Henri
Bourassa headquarters to the Canada Post
Corporation for $11,300,000 representing $94/sq.ft.
 Multi-Housing transactions also decreased quarter
over quarter, only accounting for $33.5 million in Q1
while last quarter saw more than double the activity
with approximately $90 million in transactions.
Historic Government of Canada Bond Yields
(%)
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4
Investment Report – Q1 2014
Montreal, Quebec
REIT share prices show stability
REIT Overview
9.00
Dundee (Ind)
RioCan REIT
H&R REIT
3.00
- 3.00
%
- 9.00
- 15.00
- 21.00
- 27.00
May2013
Jul2013
Sep2013
Nov2013
Jan2014
Mar2014
9.00
Cominar REIT
BTB REIT
CREIT
3.00
- 3.00
%
Outlook
- 9.00
- 15.00
- 21.00
- 27.00
As evidenced in the following charts, REIT share
prices lost ground in the second half of 2013. This
decrease was primarily attributed to interest rate
volatility following the Federal Reserve’s
announcement concerning the tapering of it’s bond
purchasing program. Speculations surrounding hikes
in interest rates resulted in a substantial decrease in
REIT share prices consequently leading to a pull back
in their investment strategy.
Dundee Industrial REIT was relatively hardest hit with
share prices of $36.82 in May down to $27.14 in
November, representing a 26% decrease. Cominar
also experienced a considerable loss with a
November low of $17.47 in its share price, down from
$23.94 in May, a decrease of 27% over the 6 months
period. With interest rates staying stable following the
Fed’s announcement, REIT shares have stabilized
over the past several months and as evidenced in the
following charts, have begun seeing growth once
again.
May2013
Jul2013
Sep2013
Nov2013
Source: Globe & Mail
Jan2014
Mar2014
Regarding the Quebec market; political instability
has subsided as results from the elections were
conclusive with a majority liberal party elected.
These results are expected to show a boost in
investment activity as many projects took a back
seat awaiting election results. With stability back in
the market, expect to see positive investment
activity across most sectors in the Quebec Market
for the second quarter of 2014.
Historic Cap Rate by Asset Class
Tier I Regional Mall
Office "AA" Downtown
Multi-Tenant Industrial
Suburban Multi-Residential
Single-Tenant Industrial
9.00%
8.50%
8.00%
7.50%
7.00%
6.50%
6.00%
5.50%
5.00%
2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Source: Altus Insight
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5
Investment Report – Q1 2014
Montreal, Quebec
Greater Montreal Area – Q1 2014 Highlights
Notable Transactions
Office
3100 de la Cote-Vertu
Saint-Laurent, QC
Buyer: Cominar REIT
Seller: Redbourne Group
Sale Price: $32,206,700
85 Rue St Paul E
Montreal, QC
Buyer: Allied Properties
REIT
Seller: N/A
Sale Price: $21,027,228
7355 Autoroute
Transcanadienne
Montreal, QC
Buyer: Cominar REIT
Seller: Redbourne Group
Sale Price: $ 16,923,279
Retail
Quartier DIX30
6000 Blvd Rome
Brossard, QC
Buyer: Devimco Inc
Seller: RioCan REIT
Sale Price:
$193,000,000 (50%
interest)
Carrefour Lachenaie
250-400 Mtee Des
Pionniers
Terrebonne, QC
Buyer: Cominar REIT
Seller: GreyStone
Sale Price:
$ 28,200,000
Multi - Residential
Le Castel Senior
Residence
45 Rue Horsfall
St-Lambert, QC
Buyer: Financiere
Anjamah Inc.
Seller: Societe en
Commandite 663 Notre
Dame le Castel
Sale Price: $ 11,396,600
6405-6415 Rue
Sherbrooke O
Montreal, QC
Buyer: Theodoris
Debeyiotis Trust
Seller: Gestion Shilaem
Inc.
Sale Price:
$ 8,900,000
Industrial & Hotel
Outdoor Gear Canada
10555 Blvd HenriBourassa O
Saint-Laurent, QC
Buyer: Canada Post Corp
Seller: Outdoor Gear
Canada
Sale Price: $11,300,000
Holiday Inn
420 Rue Sherbrooke O
Montreal, QC
Buyer: Campus Crest
Comm.
Seller: N/A
Sale Price: $65,000,000
9800 Blvd Cavendish
Saint-Laurent, QC
Buyer: Cominar REIT
Seller: Redbourne Group
Sale Price:
$ 16,379,565
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6
Investment Report – Q1 2014
Montreal, Quebec
About JLL
JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to
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has $48.0 billion of real estate assets under management. For further information, visit www.jll.com.
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Prepared by:
For more information, please
contact:
Sebastien Gatti
Research Analyst
Direct +1 514 667 5682
[email protected]
Jones Lang LaSalle
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Suite 2121
Montréal, QC H3B 2C6
Tel +1 514 849 8849
Fax +1 514 849 6919
Jones Lang LaSalle
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Suite 2121
Montréal, QC H3B 2C6
Tel +1 514 849 8849
Fax +1 514 849 6919
For further information, please visit our website,
http://www.jll.ca
The Montreal Capital Markets Team
Scott Speirs
Vice President
Real Estate Broker
[email protected]
514 667 5663
Joseph von Maltzahn
Associate Vice President
Consultant
[email protected]
514 667 5699
Robert MacDougall
Senior Vice President
Chartered Real Estate Broker
[email protected]
514 667 5654
Mark Sinnett
Executive Vice President
Real Estate Broker
[email protected]
514 667 5696
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representation or warranty is made to the accuracy thereof.
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