Property Biz Canada
"Buy low and keep” seems to work as Kevric’s operating formula
Property Biz Canada
Mon Sep 10 2012
It is a simple strategy that most real estate companies at least pay lip service to: buy underpriced properties, fix `em, fill `em and either sell or keep them.
It’s an operating philosophy that Kevric Real Estate Corp. not only espouses but appears to studiously follow. “We work in situations where we see an asset that is under-utilized or under-valued and try to bring it to another level,” said Richard Hylands, Kevric's president and principal owner.
The Montreal-based company recently made two acquisitions in Ontario and Quebec for a total of $235 million that are, if not fixer-uppers, at least properties that require some love and money.
Kevric buys Consilium Place from Menkes
The majority of that capital was devoted to the acquisition of the 1-million-square-foot Consilium Place complex purchased from Menkes this summer. The three-tower office complex located in the Toronto suburb of Scarborough consists of the 17-storey 100 Consilium Place, 17-storey 200 Consilium Place and 18-storey 300 Consilium Place.
Kevric saw potential in middle-aged complex (built in the mid-eighties) in the form of a light-rail line now under construction and a loyal and predictable tenant base.
“We consider it a prime asset but basically it is a little tired and needs some investment to bring it back up to par in the current marketplace and promote it well,” said Hylands. “It is a very well leased complex but needs a bit of tender loving care.”
Kevric works with FLAP to prevent bird deaths
The Consilium towers are notorious among naturalists who over the past decade have rated the highly reflective towers one of the single biggest threats to birds in North America. A legal case was brought against Menkes for bird deaths at the complex and a verdict is pending.
Hylands said the complex’s history of bird deaths will not be an issue for Kevric. “We basically undertook with FLAP (the non-profit organization Fatal Light Awareness Program) to install film on the buildings.” The film is intended to make it less likely for birds to fly into the towers and will cost Kevric “many hundreds of thousands of dollars,” according to Hylands.
Hylands said capital investment for the Consilium towers is currently the subject of discussion with the complex’s major tenants and while not finalized, will be significant. “I can tell you that it is way north of $10 million, let’s put it that way.”
Three City Strategy
Kevric is active in its home base of Montreal as well as Ottawa and Toronto. Its assets are nearly an even split of assets in the two provinces and it said it owns about one dozen properties in total.
In Montreal, the company’s most notable holding is the Place Bonaventure complex in downtown Montreal. It is currently building the 35-storey Tour Aimia tower, Montreal’s first major office building since 2000. (The office-residential building (the top 25 floors are condos) has garnered attention for its size and the fact that it will use a deep-earth geothermal heating system).
Kevric also owns a number of industrial buildings which it has converted to office space. With the Consilium acquisition, Kevric also announced the purchase of two industrial buildings on Mile End Street in the Villeray district. These buildings, with 350,000 and 120,000 square feet of space respectively, will be converted into commercial buildings. The cost of acquiring and converting the two buildings will total $35 million.
In Toronto, Kevric’s most notable property holding – until Consilium that is – came with its 2008 purchase the 150 Bloor Street West, a 10-storey office and retail building on the northeast corner of Bloor St. and Avenue Road. In the case of 150 Bloor West, “it was an empty building which we totally leased and made into a high-end retail building.” In the tony Yorkville area, the building is also the site of the Canadian flagship stores of Louis Vuitton and Tiffany's. Kevric also owns property in the city’s Liberty Village as well as the GTA area in Mississauga, Meadowvale and Markham.
Don’t Expect `For Sale’ Signs
Hylands, a former development officer with Cadillac Fairview in the eighties, views the buildings in his portfolio as long-term holds. “We acquired Bonaventure in 2005, we did our redevelopment plan in Bonaventure and we are still there. We are not flippers.”