Globe Property Management’s recently acquired Les Berges du Canal apartment building in Montreal. Image courtesy of Globe Property Management
Globe Property Management’s $60-million purchase of a multifamily apartment in an up-and-coming Montreal neighbourhood may have seemed to come out of nowhere.
However, the Winnipeg-based firm has long had its eye on one of Canada’s hottest real estate markets.
“Most of our growth over the past 15 years has been in Montreal and Ottawa,” says Richard Morantz, CEO and president of Globe Property Management.
“It’s a strategy that has really worked because it’s a market right now that has really been doing well.”
And the company with more than 7,200 suites in Manitoba, Saskatchewan, Alberta, Ontario and Quebec — and assets worth about $1.5 billion — continues to see upside in the city.
Globe makes 11th purchase in Montreal
“Montreal is just a great city and has so much to offer,” says Morantz.
That’s why, Morantz adds, the company purchased Les Berges du Canal recently, Globe’s 11th purchase in the city since it first started buying concrete apartment high-rises in 2005.
The $60-million acquisition of the 168-unit apartment, built about six years ago, is the largest investment ever by the family business, wholly owned by Morantz.
“This building is on the Lachine Canal with bike paths on both sides,” he says about the property located in St. Henri.
“It was an industrial area and the government has cleaned it up.”
Rents can be increased
About 10 minutes’ drive to the west of Old Montreal, the apartment complex requires little upgrading, a departure for Globe.
In the past, the firm looked for “under-managed” properties that could be upgraded, allowing for gradual rent increases, he says.
“But the property we just bought – there’s no money to spend there,” Morantz says. “We just think the vendor we bought it from was not as aggressive as it could have been increasing rents.”
Currently, Les Berges du Canal rents are about $1.50 per square foot. By comparison, similar properties in Old Montreal are about $3 per square foot, he says.
The building does not warrant rents at that price, Morantz adds.
“We do things incrementally so we can look back in five years where we have increased the rents to an average of $2 per square foot.”
Globe founded in the 1920s
Buying low and holding for the long term has long been a key page of Globe’s playbook. The company was founded by Morantz’s grandfather in the 1920s as an accounting and insurance firm.
It then switched to property investment after the Second World War. Morantz’s father took over the business in the 1960s, with Morantz joining the firm in the ’80s.
For decades, commercial real estate had a “mom-and-pop” feel to it, but that changed in the 1990s with the growth of REITs, he says.
So when Morantz took ownership of Globe in the 1990s, the firm was going against the current in some ways, growing as a privately held family business.
Over the last 20 years, however, its focus on buying undervalued residential concrete high-rise rentals has proved to be fruitful, especially today.
Current trends point to growing rental demand as boomers downsize and rent instead of buying a condominium.
“Certainly many millennials at this point anyways don’t see owning a home as important as previous generations,” he says.
He further points to falling home ownership data in Canada. Statistics Canada data from 2019 denotes home ownership fell to about 67 per cent in 2016 down from the peak of 69 per cent in 2011.
Additionally Canada Mortgage and Housing Corporation (CMHC) reported the highest rental unit construction in 30 years in Q3 2019 with 72,000 new suites being built.
Adjusting to market conditions
Morantz notes the sector’s performance has attracted plenty of investor eyes, including new builds. The recent Montreal purchase illustrates how Globe is adjusting to market conditions, focusing on newer properties with more amenities, including in-suite washer-dryers.
Its strategy also involves improving its existing assets.
“Upgrading, modernizing and keeping pace with the trends — that’s not unlike any other business.”
What’s more, existing properties are still competitively priced for rent, with good locations and more floorspace than new product.
Morantz adds Globe remains in acquisition mode.
“We have typically been able to acquire 200 to 400 units a year.”
That trend should continue. Morantz notes Globe could manage as many as 10,000 units within a few years.
Despite its growth arc, he says the firm has no plans to restructure.
“There are companies at this stage of the game looking to convert to a REIT,” Morantz says. “For the time being, that’s just not on my radar.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
