Metrocap and Prime Properties have completed the off-market acquisition of six properties in Montreal’s Old Port area previously jointly owned by Nexus Industrial REIT and Sandalwood Management.
The partners plan to acquire two more properties on Oct. 9 to complete the portfolio acquisition. In total, the portfolio comprises almost 450,000 square feet of space.
Montreal-based Metrocap was founded by Richard Kertzer, a former partner at MTRPL. He branched out on his own a year-and-a-half ago and now oversees a seven-person operation, while still being involved with properties at his former company.
“We do everything from acquisitions to dispositions and everything in between, including management, financing and development,” Kertzer said in an interview with RENX about the portfolio acquisition.
Metrocap’s strategy is to select sites suitable for AAA tenants through buying and repositioning older and heritage properties in the Greater Montreal Area, preferably close to public transit.
“It’s generally retail-oriented with residential components,” Kertzer said.
Metrocap is also doing ground-up, greenfield development in the Montreal suburb of Mirabel.
Funding and Prime partnership
Kertzer said funding is raised on a deal-by-deal basis and mostly comes from high-net-worth individuals and families as well as syndications.
Metrocap has partnered with Prime Properties for this latest acquisition.
“I’m doing the management and financing it, but they’re also involved to a certain degree operationally as well,” Kertzer explained. “Metrocap is taking care of all the day-to-day management and development.”
Kertzer has been working on the acquisition since January.
“I know a lot of REITs are selling a lot of different things to clean up their balance sheets, but I can’t comment specifically as to why they were selling,” Kertzer said.
Kertzer said he’s not able to reveal the price of the portfolio due to a non-disclosure agreement.
“It was a very good deal at a very good price per square foot,” he said.
Nexus acquired a 50 per cent stake in the properties from Sandalwood in June 2017 as part of a larger $147 million deal encompassing 26 properties totalling 1.53 million square feet.
The newly acquired properties
The six properties acquired so far are:
- 410 Saint-Nicolas, a six-storey, 140,000-square-foot commercial building completed in 1907;
- 353 Saint-Nicolas, a five-storey, 35,000-square-foot office building with an inner courtyard and a restaurant and art gallery at grade that was built in 1818;
- 360 Notre Dame Ouest, a five-storey, 31,000-square-foot property that went through several changes in the 1990s. It is a combination of two buildings constructed in 1875 that were previously separated by a narrow street;
- 321 De La Commune Ouest, a three-storey, 12,239-square-foot commercial building constructed in 1855 and renovated in 1984;
- 329 De La Commune Ouest, a four-storey, 20,075-square-foot commercial building that was built in 1874;
- and 137 Saint-Pierre, a five-storey, 32,879-square-foot building with two commercial storeys, three residential floors and a rear courtyard that was completed in 1875 and updated in the 1980s.
Plans for some of the new properties
Metrocap will move its office from its current location at 6252 Somerled Ave. into 360 Notre Dame Ouest.
The company is thinking of converting 353 Saint-Nicolas back into one of its former uses as a hotel.
Metrocap will convert the entire ground floor of 410 Saint-Nicolas to retail space and create new entrances for the building. The upper floors are largely vacant but Kertzer expects a lot of leasing traction by targeting service-oriented office tenants as well as such businesses as hair and nail salons, tattoo parlours, gyms and fitness studios.
The new retail space at grade is expected to be ready in six months to a year and Kertzer expects the entire building to be occupied in 18 months.
“We’re converting it to be more like a vertical shopping centre,” Kertzer explained. “A lot of these services are missing from the Old Port.”
October portfolio acquisitions
The two properties being acquired in October are:
- 63 De Bresoles, a five-storey, 39,606-square-foot office building constructed in 1874;
- and 425 Guy, a renovated two-storey, 36,792-square-foot commercial/industrial building constructed in the Griffintown neighbourhood in 1930.
Expedia formerly had its offices at 63 De Bresoles, which is now largely vacant.
“We’re looking at repositioning that asset into residential, with retail on the ground floor,” said Kertzer.
Applications for the redevelopment were submitted more than a month ago and Kertzer hopes to have building permits in hand in the next six months. Work on the property will begin as soon as possible.
Metrocap is going to apply to have 425 Guy rezoned so it can redevelop the site with a high-density multi-residential building.
Vacancies in the portfolio
Much of the remainder of the newly acquired properties are largely stabilized and will require little additional work, according to Kertzer. There’s 85,000 square feet of vacancies across the portfolio, ranging in size from 380 to almost 18,000 square feet, and lease terms for tenants vary widely.
“We’re working with some existing tenants in the portfolio that are going from 1,500 square feet to 3,500 square feet and some larger tenants are also looking to expand,” said Kertzer.
Metrocap, which recently became involved with third-party property management, will be the property manager for all of the newly acquired properties.
Other Metrocap activity
Metrocap just repositioned a building at 4350 Notre Dame Ouest St. for Tacos Frida restaurant in the Saint-Henri neighbourhood.
The company delivered a new retail space at 8480 Saint-Jacques St. in Mirabel in June that will open as a Pharmaprix in October. It’s also delivering a new space at 8500 Saint-Jacques that Dollarama will take possession of on Nov. 1.
In addition to being on the lookout for properties similar to those in the portfolio it just purchased, Kertzer said Metrocap is working on acquiring land near a major Montreal highway exit where it plans to build retail space of up to 30,000 square feet for five or six tenants.