Commercial real estate | Blackstone invests 230 million in downtown Montreal

The American giant Blackstone adds further marbles to its Quebec real estate portfolio by acquiring two buildings in downtown Montreal, a transaction valued at $230 million.

Maxime Bergeron
The Press

Blackstone will buy the shares of the Montreal fund PSP Investments in the Air Canada tower, located in front of Victoria Square, as well as in a newly renovated office building called 1100 Atwater, in Westmount.

Montreal Real Estate Corporation Kevric will retain an interest in both buildings and will continue to manage them. “For the very long term, so for us, it was a perfect marriage,” he told The Press Richard Hylands, President of Kevric, on the new partnership with Blackstone.

Kevric built the Air Canada tower – formerly known as Aimia – starting in 2010. The first 10 office floors accommodate prestigious tenants such as Shopify, Air Canada and Multi-Prêts. The 25 upper floors, made up of condos in the Altoria complex, are not covered by the transaction.

1100 Atwater is a former RBC data center that Kevric converted into offices in 2020. The building is 90% leased and mostly home to tech companies like Microsoft, Hylands says.

Third partnership with Blackstone

This is the third partnership concluded between Kevric and Blackstone in the past six months, and it is probably not the last, if we are to believe the president of the Montreal group.

Blackstone has been increasing acquisitions and partnerships of all kinds in Quebec lately. The group is part of the consortium that bought the real estate fund Cominar for 5.7 billion – a transaction approved in February 2022 – and it also created a joint venture with Groupe Sélection to acquire 13 residences for seniors, in August 2021.

Blackstone also has partnerships with the Caisse de depot et placement du Quebec and Hydro-Quebec, among other Quebec investments.

Nadeem Meghji, Head of Real Estate Americas for Blackstone, said the transaction announced Friday morning “reflects Blackstone’s continued growth in Canada, as well as [sa] forward-thinking vision of the demand for high-end, worker-friendly office space”.

“Montréal is a thriving and dynamic market, and we are pleased to be the long-term owners of these high-quality assets,” added Mr. Meghji in a press release.

Place Bonaventure

Owner of Place Bonaventure since 1998, Kevric estimates that he has invested around $200 million to modernize the building with its brutalist architecture over the years. Among other things, the group added windows to the imposing concrete walls, in addition to renovating several of the office floors occupied by long-time tenants such as Rogers and the STM.

Very recently, Kevric added commercial premises located on De La Gauchetière Street, on the ground floor of the building. Several remain vacant to this day. “It is certain and certain that the pandemic did not help us to rent these spaces,” recognizes Mr. Hylands.

Former National Bank

Kevric also recently purchased 600 De La Gauchetière, the current head office of National Bank. The building will be virtually emptied when the financial institution moves into a new skyscraper, towards the end of 2023.

Kevric wants to completely change the appearance of the tower, both inside and out, in particular to double the glass surface.

Mr. Hylands says he is “absolutely” convinced that the office building market will rebound in the metropolis, despite the marked increase in vacancy rates caused by the pandemic and telecommuting.

However, the slope promises to be quite steep to climb for landlords like Kevric. According to a recent study by the real estate firm Avison Young, the office availability rate jumped to 16.9% in Greater Montreal in the fourth quarter of 2021, a “record level”.

This rate was 10.9% before the pandemic.