Today, Strategic Group announced a plan to reorganize its real estate portfolio. This decision reflects the prolonged downturn of the Alberta economy and its negative impact on the real estate office market. For the past five years, Calgary has endured a high office vacancy rate which, according to industry forecasting, will not normalize for many years to come.
“Alberta’s severely negative economy has seen our company try to battle the storm for the past five years. Despite my Teams’ innovative approach to an ever-changing landscape, we must immediately deal with the current market conditions and pessimistic outlook for the real estate office market,” said Riaz Mamdani, CEO of Strategic Group. “This is an evolution of our business given the prolonged high office vacancy in Alberta. We are developing a plan for an orderly disposition of specific assets to ensure a sustainable future for Strategic Group.”
Strategic Group’s sizable exposure to the office market is a significant risk for the longevity of the company. For example, since mid-2014, 78 tenants occupying 573,333 square feet did not survive as going concerns or otherwise did not remain in their leased premises, despite being under lease agreements.
In recent years, Strategic Group has diversified its real estate to include a viable multi-family rental portfolio. This business strategy was designed to support a long-term successful future for the company.
Strategic Group’s plan, in part, includes a select portion of its commercial real estate portfolio yesterday having sought and obtained protection under the Companies’ Creditors Arrangement Act (CCAA). Under the terms of the court order, the companies that have sought protection remain in possession and control of their assets, subject to the oversight of the Court and a court-appointed monitor, Hardie & Kelly Inc. Neil Narfason has been retained as Chief Restructuring Officer. Mr. Narfason has over thirty years of experience advising similar corporate groups and has led numerous successful restructurings.
Strategic Group’s property management, service companies, and development and construction business will not be affected. Strategic Group will continue to manage all of its properties. Projects currently under construction are not impacted.
“We are focused to create a strong new future for Strategic Group and all of our stakeholders,” said Mr. Mamdani. “It is our desire to be a vibrant contributor to our city and province.”