He might prefer to keep a low profile, but make no mistake — Mike McGahan is a towering figure in Canadian real estate.
After cutting his teeth in the business under the tutelage of mentors such as the legendary Jacie Levinson, the 60-year-old Ottawa entrepreneur became an industry giant in his own right. He helped form the CLV Group, which eventually became the property development and management arm of another Ottawa-based real estate firm, InterRent Real Estate Investment Trust.
In more than a dozen years as InterRent’s chief executive, McGahan oversaw the company’s ascent to the upper echelons of the Canadian real estate industry before stepping aside last year and assuming the role of executive chairman. Today, the REIT controls more than $2 billion worth of assets from Quebec to British Columbia, representing nearly 13,000 rental suites, and employs close to 600 people.
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Meanwhile, McGahan continues to lead the CLV Group, which has become an industry trailblazer in office-to-residential conversions thanks to projects such as the Slayte at 473 Albert St., a former federal government building that is now home to 158 rental apartments.
A father of four grown children, three of whom now work alongside him at CLV Group, McGahan is also renowned for his tireless philanthropic efforts.
For two decades, he was a key organizer of the CLV Group’s Ron Kolbus Memorial Charity Golf Tournament, which raised more than $3 million over two decades before wrapping up in 2017. Today, McGahan is a driving force behind another major fundraiser, the Mike McCann Charity Golf Tournament, an event named in honour of the former Ottawa advertising executive and philanthropist who was one of McGahan’s closest friends and passed away from cancer in 2019.
For all those accomplishments and many more, McGahan is the 2023 recipient of the CEO of the Year Award from OBJ and the Ottawa Board of Trade. OBJ’s David Sali recently sat down with McGahan to discuss his career. Here is an edited transcript of their conversation.
OBJ: How did you get your start in the real estate industry?
MM: I started buying properties while at Ottawa U. I was playing hockey and one of my buddies on the hockey team, his father was doing very well buying real estate. He gave me some part-time jobs when I was in university and I learned by watching and helping him. His name was Phil Drouillard. He had his own real estate company. He mentored me and taught me a lot of different things — buying and financing and just what kind of properties to look for. He spent a lot of time with me, which I appreciated. I was running five city park rinks when I was in high school, continued while in university, and that’s how I saved up to make my first down payment (on a property). I ended up buying about two or three properties when I was in university. I bought them, renovated them, refinanced them and reinvested. My buddies would come with me and do painting and all sorts of odd jobs and I’d give them a case of beer. (Laughs.) I was lucky enough to have a really good local banker when I started out. He helped me out a lot with financing. As you go through life, you always have mentors, and I want to do the same thing for others.
OBJ: How did you eventually form the CLV Group?
MM: After graduating from university, I got my realtor’s licence and then I got my mortgage broker’s licence. I ended up working at a large (property management) company called Levinson-Viner for a few years and then left to start my own real estate company called Commvesco. I had a really good relationship with (Levinson-Viner founder) Jacie Levinson, who was another great mentor. I bought Jacie’s company in 1998 and Jacie continued to be involved in the business due to his passion in real estate. We kept on investing together and he ended up being the chair of the REIT. He was an amazing gentleman. He had great business sense and was a great person. I count myself as being very lucky. That’s how CLV came to be — Commvesco Levinson-Viner. We thought it sounded like a law firm, so we just shortened it to CLV. (Laughs.)
OBJ: And how did InterRent come into the picture?
MM: We went through the early ’90s and we saw a lot of pain in the real estate side. We ended up selling off some of our properties to this REIT (InterRent, which was established in 2006). We didn’t know anything about it. They asked me to take back some shares and asked us to stay on as their Ottawa managers. They got into a hostile takeover situation, and then they approached us about doing a friendly takeover. We ended up bringing in a group of pension funds and long-term investors. A lot of them are still in the REIT. In 2008-09, everybody was really nervous (during the financial crisis), as you can imagine. It was a big step, but we all did it together. We ended up doing a private placement. I had made a deal with the old CEO that, over a span of three to six months, we were going to find a new CEO. After we did our deal, he gave me his resignation. I was the temporary CEO for 12 years. (Laughs.) I had no idea about anything to do with public markets. We learned so much as a group. It was fantastic.
OBJ: InterRent is known for its strategy of acquiring older properties and modernizing them. Why did you take that approach?
MM: Essentially, I was doing that from the first property I bought in university. It was the exact same formula that we’d done all the way through. We always wanted to deliver the best experience for our residents. A lot of these buildings were at the end of their life cycle. It was an opportunity to keep them going. We figured out which locations we wanted to grow in, and we sold the other properties that we didn’t think were good opportunities for growth. We just recycled the capital back into areas that we thought had good long-term growth prospects. We had such an amazing team and group of people. Dave Nevins and Ray Lachance were driving with me all over Ontario watching the operations. They even moved to London for I think a couple of years. It was a busy time.
At the beginning, we only had two analysts following us, and they rated us a strong sell because they thought the whole REIT model was broken. We just basically went about our business, did what we thought was the right thing to do, and then everything started proving itself in the results. It was kind of funny — one of the analysts who had us as a strong sell was Brad Cutsey, our current CEO. That’s how we became friends. I said, ‘Wait. We’ll prove you wrong.’ (Laughs). I guess he believed in us after all. By the way, Brad shall end up being a better CEO than me going forward. He is doing a fantastic job. You shall see it prove out in the results in the future.
OBJ: How did you get into the office-to-residential conversion business?
MM: We love to innovate. If you look at LIV (a major apartment complex on Bell Street that CLV renovated), we took those apartments on and just totally redid them. We thought it was a good move and saw the same thing with 473 Albert St. We had a lot of challenges with (Albert St.) — the time it took to get (applications) processed, supply chain issues, all sorts of things. The timing of converting that building probably couldn’t have been worse. But saying that, it ended up being terrific for us. We’ve done really well (on rentals) and learned a ton. We think we’re really good at doing office conversions, and you can’t do that with many buildings — maybe only about 20 per cent of buildings make sense for conversions. But we understand how it works. We’re excited about doing it, and we’re not only going to do it in Ottawa, we’re going to do it in other cities. We’d like to do more in Ottawa, but we’re going to have to see how things go from here. We really need the city to become proactive like other cities across North America. This is a pivotal time where we can add housing and do it in a very sustainable way.
OBJ: What were the biggest lessons you learned when converting 473 Albert St.?
MM: You really don’t know everything about a building until you peel (all the layers) back. Due to supply chain issues, we should have ordered things a bit more in advance. Even dealing with the city was a big issue. They hadn’t seen many of these office conversions, so I think they were challenged too, especially during COVID. I think we’re better for it now. I feel a lot more optimistic as we go forward.
OBJ: What’s your take on the potential for more conversions in Ottawa?
MM: I think about 20 per cent of buildings could be conversion candidates, but you have to make sure the buildings are vacant. If you look at what’s going on with the federal government (looking to sell off surplus properties in Ottawa) and what’s going on with class-C buildings, I think about 31 per cent of them are vacant now, which is terrible. We need a housing solution, but everybody’s got to get on board. We’re really happy with the feds (agreeing to waive the GST on new rental construction), but it’s not a silver bullet. That’s one item. To get the housing that we need, we need to look at (lowering) development charges, property taxes and parkland fees and creating a concierge service for office conversions at the city so that your application doesn’t sit for a long time. Speed is a big thing. We’ve got a problem here and across the country (with rising office vacancies in downtown cores), and it’s not going away. We need to deal with it. It’s not like we can just flip a switch and it’s going to change. You need all levels of government and everybody to co-operate to get to where we need to go.
OBJ: Environmental concerns are now top of mind for many developers and property owners. How are CLV and InterRent addressing those issues?
MM: Part of that is office conversions. If you look at what you save in steel and concrete alone, I think at 473 Albert it was 770 truckloads of concrete, which is huge. That’s just one small component of the green movement. To be quite frank, a lot of green initiatives are good business — when you convert toilets, lighting, the whole bit, you’re saving on the other side of it too, so it’s smart. We’ve been doing that for 25 years. We want to run efficient buildings, and for a lot of our residents, it means a lot to them.
OBJ: InterRent has a significant presence in many Eastern Canadian cities and more recently expanded into Vancouver. Where do you see the biggest growth opportunities?
MM: I think we’re going to stick to our core markets — Montreal, Ottawa, the Greater Toronto-Hamilton area and Vancouver. I could see us moving into Alberta at some point and potentially Halifax at some point. We’ve looked at both of those markets before. I don’t see that happening in the near term, but in the long term I could see us venturing into those markets.
OBJ: What accomplishments are you most proud of?
MM: It’s just working with so many great people along the way. We literally had a dream team at the REIT, with Curt Millar (CFO), Martin Vervoort, Will Chan, Dave Nevins, Oz Drewniak, and so many more who I have had the pleasure to work with. Right now, I feel proudest about my kids working in my own CLV business. I know I am a challenge and very demanding, but I like to think they see it in a good way. (Laughs.) I feel proud that my kids want to work with me. They’ve put up with a lot along the way. So has my wife Jill — she’s had my back all the way through from the beginning. Without her, being successful in family and real estate wouldn’t have been possible. I also really want to thank my mother, Annette, for being there for me my whole life.
OBJ: Where does your desire to give back to the community come from?
MM: It goes back to having great mentors. When I started out in the business, I was lucky enough to know Ron Kolbus. Ron was a city councillor and he also ran Ottawa Housing and was a commercial realtor. He used to always talk about giving back to your community. He was an unbelievably generous person. Jacie was the same type of person. And my close buddy, Mike McCann, was the cornerstone of our golf tournament. He kept saying, ‘We’ve got to do more.’ He really drove us. Unfortunately, he’s no longer with us, but he’s been our inspirational leader. You learn from that. It’s not just me — it’s our whole team. We want to give back to our community. It’s not about what you take, it’s what you give. We’re super lucky, and I think it’s incumbent on all of us to try to give back what we can. I feel really strongly about that.
