Kevric Real Estate Corp.’s acquisition of the 28-storey National Bank headquarters at 600 De la Gauchetière West in Montreal perfectly fits its strategy of being an opportunistic investor in the downtown core, said president Richard Hylands.
“This one falls right into our pattern,” he told RENX. “We like to take assets that will have hair on them and turn them around.”
Kevric and an unnamed institutional investor acquired the 710,000-square-foot building, which was constructed in 1983, for an undisclosed sum. (The purchase price for its 935,866-square-foot companion building next door at 700 De la Gauchetière West, was $322.5 million. It was sold in July by Dream Office REIT (D-UN-T) to Allied Properties REIT (AP-UN-T).)
With the National Bank preparing to move to its new 40-storey headquarters, the building will be 75 per cent vacant in 2023. Kevric is being given “a perfect opportunity to reposition the building completely,” Hylands said.
Kevric will invest more than $50 million on renovations that will include creating more open spaces, adding natural light and moving its main entrance to front onto the public square Place Victoria.
To increase natural light, “we will probably be modifying the outside curtain wall of the building to double the amount of windows and vision panels.”
Hylands said National Bank renovated a few floors of the building to create open, cooperative working spaces, which “worked quite well” and Kevric will continue with transformations along those lines.
“It’s a question of taking it where the current rents are and bringing that building more into the 21st century.”
Remove Place Bonaventure exhibition halls
Hylands also told RENX Kevric will eliminate the exhibition halls at its 1.3-million-square-foot Place Bonaventure, which is located steps from its newly acquired 600 De la Gauchetière West.
The 315,000-square-foot exhibition spaces, a mainstay of Place Bonaventure since its 1967 opening, will be repositioned into big-box retail and office spaces.
“An exhibition hall is a golden opportunity for a box retailer. We have 19 truck docks that can fit 53-foot trucks. You don’t find that too often in the downtown core,” Hylands said.
Kevric is “very advanced in negotiations with tenants” and new street-level entrances are being created. The new spaces should be completed next year.
Hylands noted office space in Place Bonaventure is fully leased. Rogers renewed a lease for more than 300,000 square feet in the building last year and IBM is among its other tenants.
“New-economy” tenants like downtown
“Everyone said (Rogers) were going to go midtown; they were going to go to the suburbs or whatever. But, the reality is their workforce wants to be downtown.
“That confirms to us that the downtown is extremely relevant and it’s where it’s going to happen as long as there’s interesting opportunities for space in the core.”
Hylands says Kevric found “new-economy” types of tenants previously sought spaces outside the downtown core because they couldn’t find the “funky” types of spaces they wanted. “But, because millennials all want to live downtown, those tenants are coming back to the core.”
At 600 De la Gauchetière West, Kevric will aim to lease space to the same types of tenants that are in its fully leased 35-storey Aimia Tower (soon to be Air Canada Tower) next door. That means “the Shopifys of this world,” including tech-, multi-media- and artificial intelligence-type tenants.
“Montreal is not a banking centre. We do have banking in the city, but that’s not the main focus of where the economy is. You’ve got to go toward the new-economy tenants which have been responsible for a huge part of the relaunch of Montreal as an economy.”
New leases for 1100 Atwater
Hylands adds he expects another Kevric property, 1100 Atwater Ave., to be fully leased by the fall. Major announcements of new tenants will be made by the end of August, he said.
Kevric has spent more than $20 million to transform the building – a former window-less Royal Bank data centre constructed in the 1970s – into a seven-storey structure with 175,500 square feet of space.
“It’s really a tremendous asset,” Hylands said.
Part of the attraction is being located in an area of downtown undergoing a major transformation with the Square Childrens condo developments being built across the street at the former Montreal Children’s Hospital site.
Kevric’s Toronto projects
Hylands said Kevric has as much work underway in Toronto as it does in Montreal.
Topping the list is Consilium Place in Scarborough.
Consilium consists of three office towers with more than one million square feet of office at 100, 200 and 300 Consilium Place. However, plans call for the development of several additional buildings with about 3,000 condos and hotel rooms and more office spaces.
“That’s over a $1-billion project,” he said. “It’s a very important development project for us in Toronto.”
Hylands said Kevric hopes to begin construction of the first new tower within 18 months.
Kevric is also repositioning 65 Heward, at Heward and Eastern Avenues, into a loft-style office building with about 35,000 square feet of space as well as two film and television studios. A development plan for land at the site also foresees construction of a six-storey office building and two 14-storey buildings.
Construction has now reached the third floor of the eight-storey, 140,000-square-foot 99 Atlantic in Liberty Village in Toronto. The building will have 10,500 square feet of retail space on the ground floor and 130,000 square feet of office space.
Formed more than 20 years ago, Kevric – so-named since it combines Hylands’ names Kevin and Richard – now has a portfolio of more than 3.4 million square feet.