Real estate developers squeezed by interest rates are increasingly offloading ongoing projects, according to Montreal market watchers, creating attractive opportunities for “alternative” developers.
This is particularly the case of the Work Unit for the Implementation of Student Housing (UTILE), which has just bought a ready-to-build project from the promoter Mondev in the southwest of Montreal, architectural plan and building permit included. .
The planned luxury condos will therefore give way to student apartments.
“Opportunities like this, we didn’t see them three years ago,” said co-founder Laurent Lévesque, in an interview at his offices in downtown Montreal. This is a recent phenomenon. The phone is ringing. We see more land for sale. »
The land bought by Mr. Lévesque’s team is located on Saint-Patrick Street, in a former industrial sector undergoing redevelopment. A limit of six floors has been set. “We expect to be able to accommodate at least 135 people,” he said. The Charlevoix metro and the Lachine Canal bike path are nearby.
According to Mr. Lévesque, the organization is less exposed than private promoters to the vagaries of the market. “There are three elements of the equation that we are changing: our rental price is affordable, so the risk of marketing is less great […], we are non-profit, so already we can take away the part profit, and you have access to grants,” he explained.
Mondev is far from being the only developer to divest itself of real estate projects whose preparation is however well underway. Offers abound from real estate brokers in Greater Montreal.
Simon Boyer, boss of the brokerage firm Landerz, specializes in the sale of land. He observes a marked increase in the field.
“There’s more of that land for sale,” he said in a phone interview. We see a lot of that these days. »
But there’s another factor to keep in mind, Boyer points out: obstacles to real estate development (social acceptability, environmental protection, etc.) have increased so much in recent years that more and more projects are being split up. Some firms specialize in starting projects, while others execute them.
“The approval part of projects — which sometimes requires rezoning, regulatory approvals — is increasingly time-consuming, difficult and unpredictable,” Boyer explained. A real estate developer who has operations to keep going […] will have difficulty managing this first portion because there is unpredictability. »
Both Laurent Lévesque and Simon Boyer warn, however, that buying a ready-to-build real estate project is not necessarily a guarantee of commercial success. Many projects end up on the market precisely because they were only profitable with interest rates approaching 0%.
“There are a lot of lemons, you see them going by,” Mr. Lévesque said.
“Just because you have a permit doesn’t mean you’ve increased the value of your land. There are poorly developed projects that will destroy the value of the land,” Boyer explained. “I have lots of examples of projects being refused for sale. People hope to go and recover their investment cost in permits, in architecture, but in reality they have destroyed the value. If a promoter did this project, he would lose money. »
