Market Commentary

Residential Market Commentary - Week of October 12, 2015

With concerns growing about foreign ownership driving Canadian real estate prices out of reach there is word non-resident buyers could be looking to new markets. 

A recent report compiled by the Urban Land Institute and the consulting firm PwC says Vancouver and Toronto will both remain attractive to foreign buyers despite their high prices.  But the report points to two factors that could have foreign buyers looking elsewhere: the low loonie and falling oil prices. 

Canada’s low dollar should benefit the manufacturing sector based in Ontario and Quebec.  With manufacturing poised for growth, Montreal and areas outside the GTA could look more attractive to foreign investors. 

Weak oil prices have already had an impact on real estate in Calgary and Edmonton as buyers, foreign and domestic, take a wait-and-see approach or look elsewhere. 

The report also suggests high prices in Vancouver and Toronto could slow the pace of urbanization in those markets as first time buyers look elsewhere for affordable homes. 



Bien que nous nous préoccupions davantage de l’augmentation des prix causée par les propriétaires étrangers dans le secteur de l’immobilier au Canada, il semblerait que les acheteurs non résidents soient intéressés par de nouveaux marchés. 

Un récent rapport de l’association Urban Land Institute et de la société d’experts-conseils PwC soutient que Vancouver et Toronto demeurent des marchés très prisés des acheteurs étrangers malgré leurs prix élevés.  Toutefois, le rapport soulève deux facteurs qui pourraient repousser les acheteurs étrangers : la faible valeur du huard et la chute des prix du pétrole. 

Les secteurs manufacturiers de l’Ontario et du Québec pourraient bénéficier du faible dollar canadien.  Grâce à cette croissance assurée, Montréal et les secteurs hors du Grand Toronto pourraient attirer davantage les investisseurs étrangers. 

La faiblesse des prix du pétrole a déjà eu une incidence sur le marché de l’immobilier à Calgary et à Edmondton, alors que les acheteurs canadiens et étrangers adoptent une attitude attentiste ou cherchent tout simplement ailleurs. 

Le rapport soutient également que les prix élevés à Vancouver et à Toronto pourraient ralentir le rythme de l’urbanisation dans ces marchés, car ceux qui achètent leur première propriété cherchent ailleurs pour des maisons plus abordables.

by First National Financial LP 15. October 2015 14:59

Seniors housing in Canada: modernization and consolidation

Brian Kimmel, Assistant VP, Commercial Financing

On one hand, it couldn’t be a better time to develop seniors housing in Canada. Debt and equity capital are readily available. On the other hand, it couldn’t be a more challenging time to develop seniors housing in Canada. The industry has never been so capital intensive, dominated by well-capitalized players.

With the growth of Canadian seniors housing into a multi-billion dollar market, banks, investment dealers, pension funds, REITs and foreign investors are intrigued by the potential economies of scale for their investments. The boom in real estate investment in Canada by institutional investors and the favourable demographics of an aging population has also made seniors housing a desired investment. 

It is now possible for a developer to raise up to 100 per cent of the required equity and debt for a well planned project in a good location within Canada. With multiple sources of equity and debt financing, developers have stronger negotiating power.  Compared to 20 years ago, a developer was lucky to get debt financing for 65 per cent of his development cost and had to invest his own money or ask family and friends for the equity portion of the deal. 

As the industry flourishes in Canada, so have the expectations of wealthier seniors for larger and more luxurious accommodations. This demand has developed so rapidly during the past few years that we are now seeing private retirement homes that can rival a Four Seasons hotel. And the trend is only intensifying. 

In addition, some new retirement home developments offer a full continuum of care from independent living to assisted living to full memory care for seniors with dementia. As a result, the development costs of these new properties have risen dramatically, sometimes exceeding high-end condominium units on a price per unit basis.  Catering to wealthy seniors requires investments of up to $500,000/suite, which is only possible for developers with deep pockets.

Despite the growing demand for seniors housing in Canada, it is no longer a case of “build it and they will come.” There is a significant amount of supply right across the country, and seniors housing developers are competing for residents who can afford to pay very high rents (rents have risen from less than $2,000/month to $5,000/month or more). Annual turnover rates of 30-40 per cent are also forcing property owners to continually promote in order to keep their homes filled. At one time, marketing was a nice to have. Now, it’s a need to have. And it can be costly.

With the significant costs involved in both developing and marketing the “modern” retirement home, the industry is consolidating under very large and well-capitalized developers/owners who often have institutional money backing them. Smaller developers are struggling to compete, and I fear, they may become an endangered species in the not too distant future.  

Brian Kimmel is a leading expert on senior housing in Canada.

Connect with Brian on LinkedIn, 416.593.2916 or speak with Brian at the Canadian Seniors Housing Forum on November 3-4, 2015 Marriot Bloor Yorkville in Toronto.  

Click here for a special conference invitation from Brian.

Join Brian in Vancouver as well at Western Canadian Seniors Housing Symposium on November 6, 2015.   



by First National Financial LP 15. October 2015 09:14

Providing expert advice to financial growth and succession planning - Case Study

Client Objective: growth and expansion in seniors housing market

The client began with one site, and during the span of 20 years, was consistently seeking expert advice regarding how to finance growth and approach succession planning. The goal was to ensure that growth never exceeding borrowing capability.

The First National Solution: 20-relationship, multiple financings

The First National team always kept the client’s objective top of mind – controlled growth, supported by the success of the real estate asset. During the course of 20 years, First National provided $6 million in refinancing, a $22 million construction loan, $31 million in combined CMHC/private funding and $2.3 million to purchase an adjacent site.
The First National Approach: consistency

The client was able to rely on one team and one company for successive renewals – a rarity in an industry where people move around and change a lot. The First National team had a deep knowledge of the client’s business, supported by a trust built during many years. That depth of relationship combined with the team’s courage to be resourceful created successful outcomes for a few more complex deals, where the challenges seemed insurmountable. 

by First National Financial LP 14. October 2015 09:57

Creative thinking got client the financing that he envisioned - Case study

Client Objective: improve building, secure CMHC financing

The client had a valuable 120-unit rental project in poor condition in a challenging neighbourhood in Toronto. He wanted to improve the building and then secure CMHC insured financing when the first and second mortgages came to maturity. 

The First National Solution: get the deal up to CMHC standards

Building quality and financial reporting didn’t meet CMHC standards, so the First National team took a three-step solution strategy: provided $1 million in financing to repair the roof, balconies and garage; recommended an engineering company to develop specs and budget for the improvements and managed that relationship; connected the client with a Chartered Accountant to tackle the financial reporting issues. 

The First National Approach: expertise and network

The First National team took a long view, emphasizing partnership and recognizing that the deal would deliver value over time. The client wasn’t able to access the experts that he needed on his own. He looked to First National for guidance, negotiation, consultation and expertise so he could get the deal done the way that he envisioned it.

by First National Financial LP 9. October 2015 09:44

Residential Market Commentary - October 5, 2015

Ahhh, election promises.  Those snappy little sound bites that grab your attention and get you talking.  The latest is Stephen Harper’s pledge to create 700,000 new homeowners in Canada by 2020.  

Based on the latest available numbers – which are from 2011 – that would push the Canadian home ownership rate from 69% to 72.5%; a record high. 

It sounds exciting: job creation, financial stability, strong communities.  But how?  The Harper announcement was light on details and it turns out the 700,000 figure is based on projections already in place from CMHC and the Canadian Home Builders Association.  They are calling for 140,000 new homeowners per year over the next six years. 

It also turns out the Harper pledge is somewhat aspirational.  The Conservatives “hope” to see this kind of home ownership growth.  The plan to get there includes existing programs like the increased, $10,000 contribution limit for TFSAs along with previous election promises like expanding the Home Buyer’s Plan, a permanent home renovation tax credit and (yet to be defined) measures to control foreign ownership. 

But economists and market watchers agree, the two biggest factors in driving home ownership will be real wage growth and continued low interest rates.



Ahhh, les promesses électorales. Ces expressions très courtes accrocheuses qui retiennent votre attention et vous encouragent à parler. La dernière promesse est celle de Stephen Harper à créer 700 000 nouveaux propriétaires de maison au Canada d'ici 2020.  

Selon les chiffres les plus récents disponibles, qui datent de 2011, cela propulserait le taux d'accession à la propriété de 69 % à 72,5 %, un record historique. 

Ça semble intéressant : Création d'emploi, stabilité financière, collectivités fortes. Mais comment? L'annonce de monsieur Harper était avare de détails et il s'avère que le nombre de 700 000 est fondé sur des projections déjà en établis par la SCHL et l'Association canadienne des constructeurs d'habitations. Ces dernières demandent 140 000 nouveaux propriétaires par an pour les six prochaines années. 

Il apparaît également que la promesse de monsieur Harper est quelque peu ambitieuse. Les conservateurs espèrent voir une telle croissance d'accession à la propriété. Les prévisions pour en arriver là incluent des programmes existants comme l'augmentation à 10 000 $ du plafond des cotisations pour le CELI en plus de précédentes promesses électorales du type du Régime d'accession à la propriété, un crédit d'impôt permanent sur la rénovation domiciliaire et (encore à définir) des mesures de contrôle des propriétaires étrangers. 

Toutefois les économistes et les observateurs du marché sont d'accord pour dire que les deux facteurs décisifs les plus importants seront une croissance véritable des salaires et le maintien des taux d’intérêt faibles.

by First National Financial LP 5. October 2015 12:47

Increasing rents. Deliver better returns and fuel growth - point of view article

Daniel Bragagnolo, Business Development Manager, Commercial Financing  

Many apartment owners often wonder about strategies that they can use to justify higher rents in their buildings. They are often looking for a way to increase investor returns and bottom line performance. 

Obviously, higher rents will inevitably deliver greater returns for investors. But increasing rents goes beyond the bottom line. From a real estate perspective, higher rents can drive up property values. In turn, higher property values can allow owners to secure additional financing, providing the equity needed to fuel the portfolio growth. 

Ways to increase rents

Tenants will be willing to pay higher rents for better quality. Quality can span across three key areas – your brand, the physical building and the suites. 

Your brand:

Good marketing does more than help you sell. Marketing done right helps you establish a trusted, credible brand that tenants covet. It is critical to present yourself, your company and your property in an honest, authentic and professional way both in print and online. Invest time and effort to create a current, informative and easy-to-navigate web site that provides information and value-added services. The perceptions that tenants have of your brand will translate into their expectations of your property. 

The physical building:

Common area features help to enhance the perceived and real value of your property. Amenities including on-site laundry room, building WiFi, games room, party room and gym contribute to more than a simple place to live – they help to create convenience and community. Design amendments are also another way to transform the physical building for greater value. Turning one bedroom into two bedrooms, modern design and diligent upkeep with capital repairs can all contribute increased value. 

The suites:

What is your rent turnover strategy? When former tenants depart, it’s an excellent opportunity to update suites. With some smart investment, you can renovate the unit before it goes back on the market. Updated floors and lighting, fresh paint and cosmetic enhancements to kitchens and bathrooms (countertops, vanities, appliances) can improve your overall product significantly. With a better product, you can command higher rents and greater tenant longevity for return on your investment. 

Trend: purchase and upgrade

Daniel Bragagnolo, Business Development Manager at First National Financial, is seeing a trend with owners buying older, underachieving buildings, upgrading them significantly and transforming them into valuable properties. 

A long-standing First National client was looking to buy what most would consider a high-risk building because of the 50 per cent vacancy. However, the client was skilled in managing rougher types of properties with challenging tenants. 

“The client wanted to diversify in a particular geography,” says Bragagnolo. “The goal was to purchase the property, renovate it and enhance its value.” 

To secure the building, the First National team provided an interim conventional loan that was 85 per cent of the purchase price as well as financing to cover renovations. The client upgraded the kitchens and added a modern design feel to the living spaces. As a result of the renovations, the client was able to raise rents for those units by $300. 

With full vacancy and higher paying, better quality tenants, the First National team then went to CMHC to secure insured financing. 

“In two years’ time, the client will be applying for a mortgage that will enable the withdrawal of an additional $10 – 12 million in equity on the property,” says Bragagnolo. “In three and half years, the client has been able to amass $22 million in debt on a property purchased for $14 million. It’s a real success story.” 

This client’s purchase and upgrade story illustrates how higher rents can deliver bottom line and investor value but also create opportunities to secure the equity needed to fuel future growth.      

Connect with Daniel on LinkedIn or via email to discuss your commercial property project.

Sign up for Commercial Market update email. Learn more.  

by First National Financial LP 29. September 2015 11:32

Residential Market Commentary - September 28, 2015

With the federal election campaign heating up and a recent spate of media articles (particularly in Vancouver) attention is once again turning to foreign ownership of Canadian real estate. 

Earlier this month Liberal leader Justin Trudeau said he is prepared to launch a review of housing prices with a view to affordability.  In August Conservative leader Stephen Harper said his government would track foreign ownership and, if necessary, move to control it if re-elected. 

In the meantime CMHC says it is working to fill this data gap – a long-standing complaint among market watchers.  The federal housing agency did release some foreign ownership numbers in December of 2014.  They focused on condominiums and were roundly deemed to be woefully lacking. 

A recently revealed CMHC briefing note, from May of this year, says the agency is continuing to solicit ownership information through meetings and roundtables with industry stakeholders and discussions with other data providers. 

There is no word on when the information will be available.


COMMENTAIRE SUR LE MARCHÉ RÉSIDENTIEL pour la semaine du 28 septembre 2015 

Devant la chaude lutte qui se dessine entre les candidats aux élections fédérales et dans la foulée d’une récente série d’articles dans les médias (particulièrement à Vancouver), les regards se tournent de nouveau vers les propriétaires étrangers des immeubles au Canada. 

Plus tôt ce mois-ci, Justin Trudeau a déclaré être prêt à lancer une révision des prix des maisons afin d’en assurer l’abordabilité.  En août, le chef conservateur Stephen Harper annonçait que s’il était réélu, son gouvernement allait surveiller la situation de la propriété étrangère et, au besoin, prendre des mesures pour contrôler celle-ci. 

Entre-temps, en réponse à une plainte de longue date des observateurs du marché, la SCHL déclarait avoir entrepris des travaux visant à fournir des données dans ce domaine.  L’organisme fédéral responsable de l’habitation avait déjà publié quelques données sur la propriété étrangère en décembre 2014, mais elles portaient surtout sur les immeubles en copropriété et avaient été jugées nettement insuffisantes. 

Dans une note d’information publiée en mai cette année, la SCHL a précisé qu’elle continuait à solliciter des renseignements sur les propriétaires d’immeubles dans le cadre de réunions et de tables rondes avec les intervenants de cette industrie et de discussions avec d’autres fournisseurs de données. 

Elle n’a pas mentionné toutefois à quelle date cette information serait accessible.

by First National Financial LP 28. September 2015 15:15

Market Commentary - September 25, 2015


Illiquidity, volatility, and uncertainty.   These are answers to any questions you may have about the markets this week.  Spreads continue to push wider as more investors curl up into the fetal position under their desks.  The most broadly watched benchmark for credit spreads (the CDX investment grade index) is currently at 85 vs. 78 last Friday and 60 in April.  That’s a 42% increase.  Closer to home, CMB, MBS, and Provincial spreads, all moved 2-3bps wider this week.   That’s illiquidity, volatility, and uncertainty.   It’s outrageous, egregious, preposterous!

Yields this morning are 5-6 bps higher following Janet Yellen’s speech after yesterday’s close, which was relatively hawkish when compared to last week’s FOMC statement.  Specifically, she suggested that an initial rate hike by the Fed will probably be needed “sometime later this year”.  That comment pushed bond prices down.  At press time, 5yr and 10yr GoC’s are trading at 0.86% and 1.53% (vs 0.76% and 1.46% at the end of last Friday).  Implied probability of a cut by the BoC on October 21st is 10%.  The implied probability of a hike by the Fed on October 28th is 20%.

Somewhere in the middle of all this, CMLS did manage to price their $150 million Super Senior “AAA” CMBS note at GoC +155.  That’s 5bps wider than initial marketing and a lot of spread for something called ‘Super Senior’, but they probably did well to sell it at all given the tone of the market this week.  The new 5 year CMB (1.25% December 2020) was also priced this week.  Individual seller allocations were only slightly smaller than last quarter, but smaller nonetheless.  Next up for CMBs is the re-opening of the 1.95% December 2025 10yr in November.

Finally, on a sad note, Yogi Berra passed away at the age of 90 this week, but he leaves behind his unique brand of wisdom.  In these uncertain times, I’d like pass along some advice originally provided by Yogi:   “When you come to a fork in the road, take it.”  Wiser words were never spoken.

Have a great weekend,

Treasury Guy OUT.

Jason Ellis

Managing Director, Capital Markets

by First National Financial LP 25. September 2015 09:50

The future of affordable housing - point of view article

Daniel Bragagnolo, Business Development Manager, Commercial Financing  

As Federal social housing agreements begin to expire, the fate of affordable housing in some of Canada’s biggest cities rests in the balance. Key players, including owners and lenders like First National, are stepping in to try to ensure a level of continuity and availability for those in need. 

During the 1970’s and 1980’s, the Federal Government established agreements with property providers to create a steady stream of affordable housing in some of Canada’s largest cities. The agreements were put in place to help these providers offer affordable housing while accelerating their ability to pay down their mortgages. 

Fast forward to 2015, and many of those agreements are expiring. While remaining mortgages on the properties may be minimal, so are any surplus funds. Based on the obligations and restrictions of these agreements, many providers were able to operate their properties, but could not upgrade them. Providers now find themselves wanting to continue to provide affordable housing, but their properties require significant capital improvements, and they lack sufficient funds to execute on them. 

Provider challenges

Many owners who entered into these agreements are now faced with a funding shortfall. First, most buildings require significant capital upgrades. The agreements limited owners’ ability to put money into their properties. Contemplating an end to the restrictions, owners lack the funds to plan and complete necessary improvements. 

Cash flow is also an issue. Many owners still have balances on their agreements or are trying to get out of the agreements early because the amortizations are short (i.e. five or six years left). Even with low interest rates, their monthly payments are high. As a result, they are looking for solutions that can enable lower monthly payments and more manageable cash flow. 

The opportunity

First National has been investing resources and expertise in learning and understanding affordable housing and identifying where it can play a role in the sustainability and evolution of the space. 

During the next six years, the Government has committed $1.2 billion to affordable housing across the country. Once that amount trickles down to the different cities, it equals approximately 100 to 200 suites in Toronto per year. Yet, there are approximately 140,000 people who require affordable housing. And that number will only grow year over year. 

One of First National’s clients has taken it upon itself to advocate with the Government for a more comprehensive affordable housing commitment. In pulling together its pitch to the Government, the client consulted with First National significantly, leveraging First National’s deep expertise in apartment assets and CMHC. The strategy proposes that more than $6 billion be allotted to affordable housing for the same timeframe. 

In addition to its contributions to community and social development with its participating in its client’s advocacy and budget strategy, First National has an opportunity to bring its diverse strengths to the table to help to ensure the viability of the space. In Toronto alone, there are 40 to 50 properties where federal agreements will expire in the next three to seven years. Many of those providers will need to put money back into their properties to keep them operating at a quality level. 

In exploring the possible financing solutions that it can provide to these providers, several First National professionals have delved deep into the intricacies of affordable housing. They have been communicating and collaborating with provincial and municipal governments (who have taken over the operations and oversight of these agreements in many cases) as well as CMHC to determine the art of the possible once the current agreements no longer influence the ebb and flow of affordable housing. 

Freedom in financing

From a financing perspective, First National is well positioned to help owners find freedom – to manage cash flow more effectively and to pursue much-needed capital improvements. 

For many of the owners with time left on their agreements, First National can offer a new first mortgage, so owners can exit their agreements earlier. A premature exit offers many benefits. First, it voids any rigid conditions that affected operations or potential improvements. Second, by taking the time remaining and stretching it across a 20 or 30-year amortization period, owners will have lower monthly payments, which increases cash flow. Third, owners not bound by agreements can seek additional funds for upgrades, which weren’t previously available from the Government. 

By eliminating the often cumbersome restrictions and gaining the ability to lower the monthly cash commitment, owners now have an alternative that allows them to pay off their mortgages, build up their cash reserves and, ultimately, become self sufficient.

Daniel’s cell phone: 647-465-8524.

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Download a PDF of this article here

by First National Financial LP 23. September 2015 09:02

Residential Market Commentary - September 21, 2015

Both the U.S. Federal Reserve and the Bank of Canada have decided to leave their trend setting interest rates where they are.  In the States that is 0 – 0.25%.  In Canada it is 0.5%. 

The U.S. Fed appears to be more concerned about volatility internationally, especially China, while the BoC is focusing on getting inflation above 2.0% without assistance from a falling Loonie. 

Market watchers now see December as a likely date for an interest rate lift-off in the U.S. – probably a 25 bps increase.  In Canada at least one of the big banks sees our central bank staying on the sidelines until 2017.

Low rates continue to fuel the Canadian housing market.  In its latest forecast CREA is calling for a 2.0% price increase in 2016, for an average of more than $442,000.  Of course Vancouver and Toronto (which account for 60% of Canada’s real estate activity) will skew what is a softer and more balanced market in the rest of the country.   


COMMENTAIRE SUR LES PRÊTS HYPOTHÉCAIRES pour la semaine du 21 septembre 2015

La Réserve fédérale américaine et la Banque du Canada ont toutes les deux opté pour le statu quo en ce qui concerne leur taux directeur, soit entre 0 et 0,25 % aux États-Unis et 0,5 % au Canada.

La Fed semble plus préoccupée par la volatilité à l’échelle mondiale, plus particulièrement en Chine, tandis que la Banque du Canada vise à maintenir l’inflation au-dessus de 2 % sans compter sur la faiblesse du huard.

Les observateurs estiment désormais qu’aux États-Unis, c’est en décembre que les taux augmenteront, probablement de 25 points de base. Au Canada, au moins une des grandes banques s’attend à ce que notre banque centrale maintienne son taux jusqu’en 2017.

Cette faiblesse des taux d’intérêt continue de stimuler le marché canadien de l’habitation. Dans ses plus récentes prévisions, l’Association canadienne de l’immeuble entrevoit une hausse de 2 % du prix des maisons en 2016, pour une moyenne de plus de 442 000 $. Bien entendu, Vancouver et Toronto (où sont menées 60 % des activités immobilières au Canada) viennent fausser les résultats moins mirobolants mais plus équilibrés observés ailleurs au pays.

by First National Financial LP 21. September 2015 15:32