Extracting the value from a property with a stigma

How Koble’s relentless research and local expertise unlocked the value of a challenging industrial asset for Mackenzie Investments in a changing market Client: Mackenzie Investments The challengeMackenzie Investments faced difficulty selling a 66,000 square foot industrial property due to environmental issues, lenders’ reluctance and market fatigue from previous attempts to sell. The solutionKoble conducted in-depth research, consulted with environmental experts, and worked with lenders to address concerns and create a strategic marketing plan to focus on a select group of buyers. The resultKoble’s targeted approach led to multiple strong offers from a select group of buyers, successfully selling the previously “unsellable” property for top dollar. The address2750 Sheffield Road, Ottawa, ON Sometimes making the sale is all about being willing to do enough digging. That was certainly the case for an Ottawa property that Mackenzie Investments had had trouble selling in the past. The 66,000-square-foot industrial facility was previously packaged in a larger portfolio with a different broker but was discarded because it was something the buyers didn’t want to take on, explains Mackenzie assistant vice-president Andrei Novak. What should have been an easy sell thanks to the demand for industrial property was made difficult due to environmental challenges that had lenders balking, adds Graeme Webster, who runs Koble Commercial Real Estate & Brokerage with business partner Marc Morin. “I had a couple brokers trying to kick the tires and bring different players to the table with unrealistic demands,” says Andrei. “when Koble’s team came in, they spent time to understand what the property’s issues meant. They spent their own time, not getting paid, to understand and get themselves educated. They dug really, really deep before they produced advice for me.” Graeme Webster – Partner at KOBLE Commercial Real Estate Inc. Their advice and strategy led to strong offers from multiple buyers on a property that had proven to be a challenge for Mackenzie. But before that could happen, a lot of preparatory work was required, starting with Andrei. When the asset was discarded from the earlier portfolio, he needed to bring in consultants to assess its condition, a process that took several months. Graeme and Marc, who reached out to Andrei about taking on the sale (while the consultants’ environmental reports were in the works), were patient, staying in touch with Andrei throughout. Once the reports were done, the Koble team dug in, taking a deep dive into them to thoroughly understand the complex and technical details. Their research, which took about two months, included multiple calls with each of the report’s authors — some of whom had conflicting conclusions — and even gathering them in meetings together to reach a consensus. All of that research allowed Koble to become experts on the issue, which would serve them well when it came time to approach prospective buyers. “Not a lot of brokers are either capable or willing to do that,” notes Andrei. Also helping to overcome buyer objections was Koble’s wise move to help lenders truly understand the value of the property. “We approached several lenders to discuss the report findings and explain in detail what the implications were and, in doing so, some of the lenders agreed to approve a loan on the property,” says Graeme. “When needed, we will go so far as to get an environmental report writer and the lender at the same table to have a real conversation to fully understand the issues.” With all their preparatory work done, rather than take the property to the market in general and risk deal fatigue on a site that had already been on the market previously, Koble advised a strategy of an invited tender process, using a narrow approach to identify a select group of buyers, Graeme says. Leaning on its experience and knowledge of who’s active in the local market as well as who would have the wherewithal to take on the considerable challenges, Koble approached a selected list of 10 of the best buyers for this type of property, walked them through all the details, helped them interview the environmental consultants, worked with their lenders “and brought in three or four bids on a property that hadn’t seen any in the past,” he says. This case is a prime example of how embracing a challenge in order to best determine how to position it and sell it and to whom, goes a long way toward a successful outcome, says Graeme — but only if you take the time to really dig into it. “We really did take the time to understand every aspect that could become an obstacle and, to a degree, we solved it ahead of time, invited in the right buyers and then executed on the plan.” Andrei doesn’t think it’s an approach a larger national brokerage would have taken with a comparatively small asset. “Larger firms may adjust the level of service they provide for that volume of a deal, whereas with Koble, the size of the deal didn’t matter, the level of service is still the same, the level of focus on doing what needs to be done and providing advice to me as a client was still top-notch.” Being a boutique brokerage and a local one worked in Koble’s favour, he says. “Local market intelligence is very important and Koble are specialists in Eastern Ontario. They know the players, they know the assets and how the municipality works.” “We’ve done multiple deals with Koble and the size of the deal didn’t matter, the level of service is still the same, the level of focus on doing what needs to be done and providing advice to me as a client was still top-notch.” Andrei Novak, Assistant Vice President at Mackenzie Investments This is the second successful transaction that Mackenzie Investments and Koble have worked on together and he wouldn’t hesitate to hire them again.
A creative approach to maximizing value

The J.L. Richards & Associates Limited story Client: J.L. Richards & Associates The needSelling their Ottawa office of six decades along the Queensway near Westboro The challengeDetermining the best value for a property in a shifting market with numerous challenges The solutionA detailed process to assess the property and determine its ideal use followed by a creatively focused approach that quietly sourced the best candidates without having to go to market The resultThe property sold for an exceptional value, while providing the best terms and conditions for the client When you’ve been in the same location for more than 60 years, a natural question when it comes time to sell is, “What have we got and where do we start?” That’s the situation J.L. Richards & Associates Limited (JLR) faced recently. The well-established engineering, architecture and planning firm had been at the same location since 1960, a prime piece of land next to the Queensway and across the highway from the iconic gold MNP building (formerly the Corel building) and Dymon Storage. Over the years, the company had outgrown its building, spawning two satellite offices and serious discussion about building a new facility on the parking lot adjacent to the existing building. Then the pandemic hit and new possibilities emerged. “COVID brought along the opportunity to re-evaluate,” says JLR vice-president René Lambert, particularly since it freed up office space in the city as workers abandoned the office to work from home. “We had more options than we did pre-COVID in terms of what we wanted to do to meet our growing needs for our staff.” René Lambert, VP, J.L. Richards & Associates Limited No longer was building on their own property the best option. That meant it was time to go look for new office space to rent and sell the valuable asset that was their Ottawa home. The challenge in selling for René and his team was understanding the process. “Our biggest need was probably just assurance of the process. Because of our location, we knew that it would eventually sell, but the question was: How’s it all going to come together? And we have a proactive board that really wanted to know how this was going to work.” That’s where Koble, and partners Marc Morin and Graeme Webster, excelled. “They laid out a game plan in the beginning, which we bought into and thought, ‘OK, we understand why,’” René says, adding with a chuckle, “Marc was patient because he had to explain it to us a few times.” The other challenge was figuring out exactly what JLR had on its hands and what the site could best be used for — despite a myriad of obstacles. It wasn’t zoned for the use with the highest return — high-rise residential. Therefore, in a normal market, the highest value for the site would be for office buildings, but that segment collapsed during the pandemic. An industrial use would be another option, but city services running through the middle of the property, as well as zoning restrictions, made that difficult. “We were just limited, every time we turned around,” says Marc. “As monumental as this site was, it was a real puzzle to figure out how to position it.” The Koble team created a process with René and JLR to overcome those challenges, taking a property that appeared to have limitations affecting its value and spending the time to thoroughly assess what its true options could be, defining a better purpose than, say, office buildings (for which there was no market) or industrial (for which development was restricted). “The goal was to maximize the return for our client without artificially inflating the value for the buyer,” Marc says. “We needed to find this property’s ideal use and therefore ideal value.” Marc Morin, Koble Partner & Co-Founder, Broker of Record It took about six months and began with a detailed assessment of the property, bringing in third-party consultants and carefully determining the best use of the site to maximize the return for the client by focusing on the most suitable prospective buyers — companies that could utilize the property for their own operating business. Then, rather than taking the property to market, Koble quietly reached out to selected people to gauge interest and validate both the value and the strategy. The approach emphasized one-on-one conversations with investors, treating both sides with tremendous respect, something Koble feels strongly about. “Because this is such a unique property, we felt that if we exposed it to an open market and we didn’t find the right buyer immediately, then a property like this could sit on the market and get stigmatized,” Marc says. “We’ve seen that scenario play out many times and much more regularly since the beginning of the pandemic.” René admits that his team was “a little surprised” at how much success the Koble team had in terms of actually drumming up interest by just calling people in their network. That was an interesting experience. Internally, the Koble team spent weeks analyzing the market, recent sales and connecting with the most active investors, consultants, developers and other brokerages to develop a list of prospective parties that would see the incredible value that this site had to offer. As a leader in the development and construction industry themselves, the JLR team also leveraged their network of clients and colleagues and worked with Koble to refine that list. In the end, multiple parties pursued the opportunity. Koble concluded a deal with an excellent buyer who is very active and growing in Ottawa and across the country, with a successful operating business, and who are planning an exciting new development on site. JLR achieved an incredible value, a short due diligence period and quick closing, which greatly enhanced their certainty, and were able to remain on site at very little cost until they completed their transition to their new location on Preston Street. “We’d be lying if we said that’s how we thought it was going to end up. We thought we’d go to market like you normally would. Koble’s strategy actually made the