The offer by Montreal-based Canderel to buy Cominar shows the interest of national and international investors in the commercial real estate market in Quebec, despite the uncertainties hanging over the post-pandemic economic recovery.
Valued at $ 2.2 billion (after deducting the debt), the offer of the real estate company Canderel aims to acquire the Cominar portfolio, which counts among its assets several commercial, office and industrial buildings. If the buyback were to materialize, it would be one of the largest real estate transactions carried out in Quebec.
“It had been a reflection for almost three years. When [Cominar] entered into strategic analysis – almost twelve months ago – we immediately knocked on their door to come up with this proposal, ”tells the To have to Brett Miller, CEO of Canderel.
The Montreal-based company currently heads a consortium of American and Canadian investment funds, such as FrontFour Capital, Sandpiper Group, Artis REIT and Koch Real Estate Investments. If approved by Cominar shareholders and the Competition Bureau, the deal could be formalized early in 2022.
Admittedly, the popularity of teleworking and the drop in frequentation of downtown Montreal businesses due to the pandemic may give the impression of having changed the situation, says Miller. He specifies, however, that ten-year leases for office space – including those occupied by the Government of Quebec – remain numerous: “This allows us to assess the constant revenues that this will bring. “
He adds: “It is very expensive to build new spaces. Suddenly, there will be little competition that will come from new offers. And in this context, the existing offer will be valuable in the long term. “
As for spaces and shopping centers such as Mail Champlain, Center Rockland, Center Laval or Centropolis? Their value lies in their locations, he notes. “They are well located, well served by public transport. And all this, while there is a shortage of land. “
Canderel will, however, have to redevelop these spaces: “We will certainly have to change the use of parts of these buildings according to the needs of the communities around. “
The main criterion to consider in investment remains demographic growth, says Mr. Miller: “Quebec attracts tens of thousands of new immigrants each year who must have an apartment, a job in an office and buy [des biens et des services] in shops. “
Revised strategies
Investor interest in commercial real estate in Canada continues. Last year, investments increased, reaching $ 14 billion in the second quarter of this year, a record according to CBRE. In recent perspectives, this commercial real estate services company presents Montreal as a “preferred destination for investors”.
“The market is able to anticipate what is to come. And the interest of investors – as this offer demonstrates – indicates that we are planning a return to a certain normality in the use of spaces, ”notes Jean Laurin, CEO of Avison Young.
A similar story from Jean-François Grenier, Senior Director at Groupe Altus. The pandemic has the effect of accelerating the transformations that have been taking place in the industry “for a few years already”.
The growing popularity of e-commerce and the arrival of large retailers like H&M in the retail sector has been shaking up the industry for several years, he recalls. The owners of retail spaces are reviewing their development strategies by focusing on the concentration and diversity of the retail offer, he says.
“We are wondering how to change the composition of tenants within spaces. We can replace certain businesses – such as in the sale of mid-range clothing – by restaurants, food, or entertainment … in short, businesses for which we have no choice of moving. “
And this reality is not specific to Canada and Quebec, he notes: “Everywhere in America, there is this process of densification and diversity. [quant à l’offre dans les espaces commerciaux]. “Strategies are changing, but interest in this market remains,” he says.