Groupe Mach president: We're buying Canadian office properties
Danny Kucharsky, RENX
May 1, 2023
Fresh from its acquisition of one of Ottawa’s largest office buildings, Montreal’s Groupe Mach is casting its eye westward to Vancouver and Calgary in its quest to become a coast-to-coast commercial real estate owner and operator.
Last week, Mach and family office investor Sarees Investments closed on the $277-million acquisition from H&R REIT of the 27-storey ONE60 Elgin, the third-largest office property in Ottawa, with one million square feet.
"If we find the right product, we’d like to definitely be coast-to-coast if we can,” Groupe Mach president Vincent Chiara told RENX. “We have a lot of our tenants that would like to accompany us. They have office space coast-to-coast and they’d like to be part of our team.”
Earlier this year, Mach entered the Halifax market with its $40-million purchase from Choice Properties of the 22-storey 1801 Hollis St., one of the largest office buildings in downtown Halifax.
ONE60 is Mach’s 16th acquisition in the Ottawa area in than two years, positioning the developer among the largest real estate owners in the city.
With its acquisition of several office properties from Cominar REIT a year ago, Mach has become the largest office owner in Quebec City. It is also one of the largest players in the Montreal market.
Fresh from its acquisition of one of Ottawa’s largest office buildings, Montreal’s Groupe Mach is casting its eye westward to Vancouver and Calgary in its quest to become a coast-to-coast commercial real estate owner and operator.
Last week, Mach and family office investor Sarees Investments closed on the $277-million acquisition from H&R REIT of the 27-storey ONE60 Elgin, the third-largest office property in Ottawa, with one million square feet.
"If we find the right product, we’d like to definitely be coast-to-coast if we can,” Groupe Mach president Vincent Chiara told RENX. “We have a lot of our tenants that would like to accompany us. They have office space coast-to-coast and they’d like to be part of our team.”
Earlier this year, Mach entered the Halifax market with its $40-million purchase from Choice Properties of the 22-storey 1801 Hollis St., one of the largest office buildings in downtown Halifax.
ONE60 is Mach’s 16th acquisition in the Ottawa area in than two years, positioning the developer among the largest real estate owners in the city.
With its acquisition of several office properties from Cominar REIT a year ago, Mach has become the largest office owner in Quebec City. It is also one of the largest players in the Montreal market.
Mach has acquired about 12M sq. ft. in past year[/B]
Chiara said Mach has integrated about 12 million square feet into its portfolio during the past 12 months and is looking at other acquisitions in Halifax, Quebec City, Montreal and Ottawa, where it already has teams in place.
“It’s a lot more simple once you’ve got the platform.”
ONE60 Elgin appealed to Mach for several reasons, including long WALTs (waited average lease terms) of just over eight years and creditworthy large tenants, including the federal government, Bell and Gowling WLG, which occupy about 80 per cent of the building.
It has a vacancy rate of only three per cent.
In addition, the price per square foot was “a fraction of replacement value, which is very comforting for us as investors.”
The building contains a ground-level food court “so it’s very inviting for off-the-street type clients.”
Why Mach likes Ottawa, ONE60 Elgin
Between $60 and $75 million was invested in 52-year-old ONE60 Elgin during the past four or five years, putting it “definitely up to par with regards to technology and the quality of the spaces.”
Renovations included the addition of a 39x115-foot curved glass wall which surrounds the main entrance.
ONE60 Elgin requires no work other than refreshing spaces tenants occupy, Chiara said. “It’s a tenants’ obligation, but we’re willing to help them get there if they need our financial support.”
Located across from Ottawa City Hall and a few blocks south of Parliament Hill, the building is LEED Gold EB certified for its operations and maintenance.
“It checked all the boxes for Groupe Mach and we’re still very bullish, regardless of what a lot of people are saying about where office space is going,” he said.
Chiara added Mach strongly believes in the long-term prospects for Ottawa.
Like Quebec City, the market is stable despite the fact its reliance on the public sector has declined in recent years: “In both cities, north of 60 per cent of the office space was occupied by the public service. I think it’s 30 per cent today.”
The public service has been replaced in large part by tech startups, the gaming industry, other computer-related industries and pharmaceutical firms.
Chiara remains a fan of the office sector
While much of the investment market has shied away from office of late, “our strategy has been and still is that we’re bullish about office,” Chiara explained.
“We don’t think it’s going to disappear. We think that there’s an expiry date on working from home and we’re going to get there in the next six, 12, 18 months.”
However, “office space as we know it will change” with an evolution to more collaborative and coworking spaces, Chiara says.
“There’s been a huge flight to quality with people moving from the C- and B-class buildings to B+- and A-class buildings. The gap in rent is usually not big enough for an employer not to want to take advantage of better-quality space.”
As a result, much of the obsolete inventory will disappear from the market and either be refitted or converted to residential buildings, which he says will be beneficial to downtown cores that need to densify and house “more warm bodies.”
With one of the issues in the current federal public servants’ strike involving the issue of remote work, Chiara says the federal government will need to step up its game to make offices more attractive to workers.
The biggest problem is that governments have historically gone to tender and rented space based on the cheapest cost, he said.
“That’s probably not the best strategy, especially now. You can’t make someone work in a cubicle with eight-foot walls around them. It’s not happening anymore. The quality of life has to be good.
"People have to want to go to the office.”
https://renx.ca/groupe-mach-presiden...coast-to-coast
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