Group Mach is a real estate conglomerate that currently owns 17 million square feet of property in the Greater Montreal area. For 17 years, it has built a prestigious real estate portfolio that encompasses all sectors of activities and continues to grow exponentially every year. The expertise was built by Vincent Chiara, whose passion for real estate surpasses all. His internal drive and persistence has propelled him to become the leading privately owned real estate company in Quebec.
Born and raised in Montreal, from Sicilian origins, Chiara grew up in St Michel, an East neighbourhood of Montreal. He accredits his entrepreneurial drive to his hard working parents, who owned a grocery store. “They worked hard like everyone else, but they worked for themselves, so it was a notch up. That whole immigrant syndrome rubbed off on me”.
After graduating from McGill Business school, he went on to complete his law degree at Sherbrooke University. “It was challenging doing law school in a language that was foreign to me, I realized how badly they kept the english and the french segregated at the time. I'm happy to have done that. I always see the glass half or half empty.”
The drive of wanting to do better came from my immigrant type syndrome you're instilled with this need to accomplish - it's in my DNA.
He practiced law between 1985-2000 in general practice. He concentrated mostly on commercial, business and litigation law.
“That's where my passion for real estate developed. I practiced law for 15 years, and then I had started doing some real estate seriously. Partnered up with serious backers with big means, and bought some bigger real estate that I managed. I realized there was a clash between my practicing law while I was doing real estate, I realized you can't really practice law part time - you have to be dedicated - I realized it was unfair for my law practice to do it in between so I said, I'm done. That's when I gave it to my juniors and I moved on.
In my mind, I had moved on. I'm an overdose type of guy. I'm very intense when I do something. As a lawyer I did a lot of what I did. It was 18 hours a day, so when you do that for 15 years then you have to move on. I didn't mind, I had done my time. It wasn't a hard move to make, I was really ready to start something else. Practicing law and doing a lot of litigation is tough because you carry a burden of what you do, the responsibility of your clients outcome is often on your shoulders. It was a relief, because now I do it for myself and if you do well, you do well for yourself. If you screw up, you have nobody to report to - it doesn't cost any negative consequences to a third party - it's your own baby.
That's when I started Group Mach. At the time we were buying properties that needed to be re positioned, property had some challenges because it was either vacant or needed a lot of renovations - it needed a lot of love of some type. Finding tenants, renewing it, properties with challenges was our approach because we knew we could give value.
Trying to find the right niche, we did some retail we did some office, and then we tried to see what we can find. - We tried to think outside the box. That's what really distinguishes us from the others.
Real estate has change a lot in the last 20 years - mainly the people who are in real estate - the players. Historically, real estate owners were real estate owners. They were families, investment funds, and different investment organizations but who were dedicated to real estate. What's happened since then a lot of investment funds that are buying new revenue are not necessarily buying real estate. They're more interested in the fact that some real estate will give you a revenue stream for some time and less interested in the bricks and mortar. They're in search of buying revenues or it happens to come in real estate where you buy a building with a 10-15 years lease that will give you long term revenue stream, the real estate itself - the quality of the building, the challenges that may come later on, the location are somewhat less important to them. Obviously when the building has challenges or loses that tenant or tenants, they dump the property because they're not in the business. They will not re-position the property. So we have a lot of that type, institutional buyer which is there to benefit from the revenues and the increase in value of the property but they're
not playing the real estate game. Where they're real owners and they deal with the challenges that come with owning a property.
We benefit from that because what is to them a challenging property is an opportunity for us. We'll buy an empty building that they're going to get rid of because obviously their problem is, they tell their shareholders we're going to give you this much a month. When the property stops giving that revenue, then they need to get rid of it. They're not in the business to put money back. So that really changed the profile of real estate. I would say in North America and around the world.
These real estate REITS (Real Estate Investment Trusts), they've created these legal structures which permits you from distributing cash and the REIT itself pays no taxes. Taxes are paid to the people who receive, so you basically can buy a unit of a REIT and the REIT makes 1,000,000 dollars a year, they distribute the million dollars and then the unit holders pay taxes. There's no tax at the corporate level so this structure has really created a ton of people wanting to invest.
Then they complicate it even more in that when you get the money from the REIT, because the REIT depreciates the asset, when they give it to you they're saying we're reimbursing your capital so we use the example that you bought a unit of a REIT from RIO-CAN, and you pay $10 for it. That REIT distributes 8% a year so you get 0.80 on your $10 a year, will they tell you the 0.80 you're getting they're reimbursing your $10 so in your balance sheet your $10 is now worth 9.20 because they gave you back 0.80, basically they're saying we're paying you back your $10 so you don't pay taxes - because they're paying back your capital. It becomes an interesting financial instrument for people who want to invest their money.
Unfortunately these REITs don't run the real estate business because they keep distributing 8% and the way they run them is you distribute all the money that comes in - you’re suppose to do that - part of the law is that you don’t pay any taxes at the condition that you pay it all back to the unit holders - law provides for around 94% - that creates the obligation to dish out all the money and you’ll notice that they do a lot less fixing of their properties.
There’s some challenges, and because they’re there to distribute revenues, they’ve created a new world of real estate. Private companies like ours benefit from what we think are opportunities created by these REITs.
We have a portfolio and we hold them for a long time - we have no plans to see our assets.
There’s four different real estate classes; there’s retail, there’s office, residential, and industrial buildings. We’re in each class - we have a balanced portfolio - about 22 million square feet of buildings. Divided in those three classes,
We develop, we build shopping centres, office buildings, we do about 400,000 square feet of new construction a year and we buy for 1M square feet of buildings. Our average increase of portfolio is about 1.5M Sqft/ a year.
Our expertise is the province of Quebec - we try to concentrate in the Greater Montreal area.
Where do you see Group mach in 10 years from now ?
We've got acquisitions we’re done now that will take us in 10 years - that will be in progress , Radio Canada, CBC Headquarters - that will give us 15 yeas turnover. We’ve got things now that will keep us busy for the next 10 years.
Where O would like to see Group Mach in 10 years is exactly where it is today - but with a bigger portfolio.
What are you the most proud about what you’ve accomplished ?
The team we’ve build which created what we’ve accomplished. Most proud about, how we’ve been perceived by our peers - our reputation. In the market, and the people who work with us The respect we get from our partners. Our tenants are our partners. We grow with them. Our banks, our suppliers, professionals we work with.
What advice would you give young professionals ?
Perseverance - it’s knowing what you want and taking the steps to accomplish what you want to get done. It doesn’t happen by luck, it’s hard work, dedication, there’s no shortcuts to accomplishments, it’s hard work and planning and having the right people around you. There’s no miracles to it.
There’s not too many of good people - when I started practicing law I always heard that - there’s never enough good lawyers, good accountants if you think you can be good - then you should do it. You shouldn’t be intimidated by the fact that the market is saturated, when I started real estate I had no chance, “there’s no room for a punk like you”. There’s no such thing. If you’re confident in the way you do things, then nothing should stop you. Don’t be intimidated by what’s there already. It has to do with your capacity to want to learn, and your capacity to execute. That’s important.
For more information, visit Group Mach.