Place LaSalle was an enclosed centre with a dated aesthetic appearance and a dysfunctional layout. The asset is located in a densely populated pocket of Greater Montreal, relatively close to downtown with improving demographics as the area is undergoing a transformation from a predominately industrial region. The shopping centre had been operated by a 3rd party service provider that had been attempting to keep the format in place and preserve the base income. The mall, however, continued to lose market share, sales and credibility with retailers. Strathallen recognized that the asset would benefit from a change in format from an enclosed to an open strip centre that would better serve the community, increase occupancy and net operating income.
Executing the Value Add Asset Plan
In 2006 Strathallen acquired this asset on behalf of its value add fund: Strathallen Retail Fund 1. Subsequent to acquisition, Strathallen worked with key tenants on a redevelopment program which included the demolition of approximately 84,000 SF of the 305,000 SF enclosed mall, new updated exterior facades for the remaining retailers and the development of five freestanding pads totaling over 33,000 SF. The pad tenant mix included a prototype Pharmaprix, McDonalds, Tim Hortons, SAQ and National Bank. Surplus lands were then severed and sold to residential developers further adding to the more affluent customer base that serves the centre. Strathallen utilized construction financing throughout the project.
Strathallen completed a redevelopment that resulted in a modern 221,000 SF strip centre with superior parking and customer access. The new pad tenants benefited from high profile visibility to the main arterial road, Boulevard Champlain. In executing the strategic plan, Strathallen was able to successfully double the asset’s Net Operating Income and provide Strathallen Retail Fund 1 investors with a realized IRR of approximately 17% over a 9-year hold and a 3.4x equity multiple (pre-performance fees).