First National Financial LP

Transitioning from industrial to condo

Jan 10, 2017

First National structures deal that gets client construction funds despite lack of sales while meeting investor requirements

Key idea: ingenuity, expertise, network, speed, simplicity,

Long-standing client wanted to build both towers of its condo project at once, but was having difficulty securing financing for phase two, which was only 40 per cent pre-sold. First National leveraged its investor network and structured a security-based facility, which was easy to draw on and administer.

What was the client trying to achieve?

Traditionally an industrial builder, this long-standing First National client was embarking on a condo development with two towers. The two sites shared a parking facility on a structural podium, making it much more efficient for future tenants moving in if the buildings were built simultaneously. However, phase one was 75 sold, but phase two was only 40 per cent sold. Without enough sales to cover off the potential loan, the client was struggling to secure financing.

“This client has been in the real estate business for 50 years and is a valued First National client,” says Mitchell Tomulka, Assistant Vice President, Commercial Financing. “There was no question that we were going to do whatever it took to help make the deal happen. As we got deeper into the opportunity, we also realized this could also be a precedent setter for both us and the client.”

Putting the deal together

The client was looking to secure up to $18 million to fund the building of phase two. Leveraging the expertise of the First National team and its network of investors, Tomulka proposed creating a facility by taking security over six industrial buildings and five condo units within the client’s portfolio.

By taking the security, the client received the funds it needed for building and avoided the cost consultant fees typically associated with a traditional construction loan.

The deal took two months to close, despite its technical complexity, and the client received the full amount it requested. Currently, the building is four or five stories above grade, which will help to promote sales. The target buyers aren’t investors; they are people from the area that are downsizing and want the comfort and confidence of buying in a development that’s progressing well in construction.

Why First National?

For Tomulka, trust and honesty are the foundations of any successful client relationship. From that foundation comes faith, which creates the opportunities to blaze new trails.

“We looked at the client request and figured out how to use our strengths to deliver,” says Tomulka. “And that’s exactly what we did. We applied ingenuity to create a facility that provided ample funds and that was easy to draw on. We made it convenient and easy. And we did it fast. It’s that unique combination of service, expertise and speed that clients can only get at First National.”

For this client in particular, the stakes were very high. The profitability of the entire project rested in the client being able to build that second tower in a timely manner. But funding just wasn’t available through traditional channels and processes.

“Another lender approached our investor with this deal, but that lender lacked the expertise to get the structure to work. We understood our client and we understood our investor so we created a better deal that made sense for both parties. At the same time, we set a precedent for what is possible in a deal like this. That’s really First National at its very best.”

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