TURNING A PROBLEM INTO AN OPPORTUNITY, THE VINCENT CHIARA WAY

BY RENÉ VÉZINA, JOURNALIST

Business requires boldness, but if things don't go as anticipated it's best to have a Plan B. That is the strategy pursued by Vincent Chiara, CEO of the MACH Group, which is why he is on a buying spree, at a time when the economy is expected to slow down. Bold, but still cautious. He knows how to hedge his bets.

"To use hockey parlance, we watch the game for opportunities and if there are any, we go on the offensive!" He makes no secret of the fact that he is a buyer, but the key is knowing when, where and what to purchase. "Take the whole office sector. Right now, it's in decline. But I don't think that situation will continue."

On that matter he is quite talkative, and his analysis goes far beyond his immediate interests. "People will gradually come back to the office, but when? In 12 months? 24 months? Yes, remote work is also here to stay, but it's not true that you're naturally more efficient at home. Working from home lacks inspiration, stimulation, a sense of belonging. Yet office décor, layout and amenities need to be overhauled. We need to go the beyond cubicles and fluorescent lights model. I think we're moving toward a hybrid formula."

With no tenants, office property values risk decreasing. "It's an illustration of our Plan B. For example, we've just purchased the ONE60 Elgin property in Ottawa. There is renovation work to be done but we paid a low price, a fraction of its value a few years ago. That allows me to be comfortable, and it offers lots of options for the next phase."

A Changing Real Estate Market

On that subject, Vincent Chiara has much to say. "The market has changed over the past three decades. Previously there were wealthy families at the heart of companies like Trikek and Ivanhoe, families like the Steinbergs. Today it is dominated by groups like financial institutions or pension funds. They tend to abandon asset classes such as offices and retail, so there are not many buyers left. All the more reason for us to be interested."

At the same time, there is a trend toward conversion of retail or office buildings to residential, as demand remains strong in the residential sector. "With the pandemic, we've seen a flight to quality from B- and C-class buildings to a higher level. But land values have not budged. If we can then repurpose the buildings because we can't keep them as is, then take action and do so."

Such transactions require solid financing. MACH is able to count on dependable partners. "We are blessed. Our track record helps us, our financial institutions know us and support us. It's about trust and performance," he said. They are not the only ones who do business with MACH. Wealthy families like the Saputos and others are coming on board, helping to keep the company on a roll.

Their support is welcome, for Vincent Chiara remains in acquisition mode. In autumn 2021 the firm spent $6 billion to purchase 42 properties from Cominar. MACH then expanded across Québec, and that offensive continues. The group recently announced the acquisition of Centre Victoriaville, a commercial property consisting of 4 buildings, a site that is home to major anchor stores such as Canadian Tire and a Métro supermarket.

Venturing Beyond Qu Bec

Now a dominant force in Québec, the MACH Group intends to expand its horizons and continue to grow. It is well on its way. "We recently bought two office buildings in Halifax, the largest city in the Maritimes and a major business hub. I mentioned the ONE60 Elgin in Ottawa, a city that is an interesting destination for us, similar to Québec City in many ways."

The public service is also ubiquitous, although now occupying a smaller proportion of the office building sector. "The knowledge economy is creating companies that need space and we feel we can serve them. Unemployment is low, wages are stable and it's a vibrant market close to Montréal."

And Toronto? "We already have a presence there, with 2 million square of property in sectors like Mississauga and Markham, and new acquisitions are being planned," he added, noting that the MACH Group is in attack mode.

Is he worried about a slowdown or even a recession, as many analysts predict? "At any rate, it will be an odd recession. The unemployment rate is low, the stores, shops and restaurants are full, and when I go to a car dealership I'm told that I will have to wait two years for a vehicle."

However, he acknowledges that many contractors may have been caught off guard. "Some thought that 2 or 3 per cent interest rates were the new normal. That wasn't realistic, and their business plans suffered. The premium is at 6.75 percent, the highest in 20 years. But we're a long way from the 20% of the 1980s and if it goes back down, we'll have had a fairly mild recession."

He took a moment to return to the issue of remote work, pointing out its limitations and the consequences if it remains so widespread. "I'm afraid it's going to end up breaking the ecosystem of the cities if we don't go back to the office, that it's going to hurt the stores, the restaurant owners who have invested their capital to acquire a franchise, the cab drivers who are running out of customers... The energy is down. You can feel it."

He then launched a final salvo. "We are talking more and more about ESG factors to evaluate a company's performance. The E stands for environment, the G for governance. The letter S refers to society. We need to protect it too."

Editor-in-chief of the magazines Le Québec économique, Montréal Economic Powerhouse and contributor to Commercial Real Estate magazine, René Vézina has practiced journalism for 40 years. He has worked both in the print media, such as Les Affaires newspaper, of which he was editor-in-chief in the early 2000s, and in the electronic media, notably at Radio-Canada, where he spent 15 years. Over time, he has become a recognized expert for his coverage of economic news.