First National Financial LP

When 50% vacancy is more opportunity than risk

Oct 25, 2016

First National takes on smart risk to help long-standing client secure funds for renovation of new property with 50 per cent vacancy rate

Key idea: ingenuity, speed, relationship focus, malleable
Considered high risk by most lenders because of the 50 per cent vacancy rate, First National trusts its long-standing client relationship to help fund building renovation, improve property value and ultimately secure CMHC loan.

What was the client trying to achieve?
A long-standing First National client, this real estate company had deep experience in managing rougher types of properties and challenging tenants. Looking to build its portfolio in a specific geography, the client purchased a building that was 50 per cent vacant, with the goal of renovating it and enhancing its value.

“We go very deep with this client,” says Peter Cook, Assistant Vice President, Commercial Financing. “As a result of that close relationship, we’re more than a lender. We’re a partner and consultant. We don’t really view opportunities as deals. We just do whatever we can do for the client, as a partner in its business.”

Putting the deal together
Traditionally, most lenders would pass on this opportunity as a result of the risk created by the vacancy rate. However, First National has a deep and long-standing relationship with this client. Together, the two companies have done many successful deals. So there was a high level of trust, faith and belief inherent in the relationship.

“We took the proper steps to secure the financing, but never questioned the viability of the deal,” says Cook. “We knew that the combination of our ingenuity and nimbleness and the client’s real estate legacy would make this a quick, straightforward deal.”

First National provided a loan that was 85 per cent of the acquisition price and the financing necessary to enable the renovation. Once the renovation was complete and the building was full, First National secured a CMHC loan. The whole process took six to eight months.

Why First National?
For Cook, relationship trumps risk. He knows that First National is able to take on smart risks and pursue deals that other lenders would never consider. In this case, First National had done similar types of deals with this client, with great success. So the question was never a matter of if, but how.

“We do whatever we can do for this client,” says Cook. “It’s both service and financing. We know we’re nimble enough to take on a deal like this one that includes interim financing and meet our client’s expectations. The client knows that there isn’t another lender out there that would have been able to get this deal done.”

First National is also an organization that prides itself on getting deals done right, which means quickly, simply and seamlessly. This deal is a great example. The turnaround time was quick, the process was straightforward and adjustments were completed on very short notice.

“When you have a relationship, the knowledge of your client’s business, the level of communication and the understanding of how to work together accelerates the process. That’s why we can do things others lenders can’t do, while keeping the process simple and straightforward. What other lenders see as obstacles, we see as opportunities to apply ingenuity and help our clients grow their businesses,” says Cook.

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