First National celebrates its 30th anniversary in 2018. For 29 of those years, Dru McAuley, our Assistant Vice President, Commercial Financing, has provided expert advice and responsive service to borrowers large and small. As such, Dru has played a formative role in developing our commercial operations and setting the tone for how we build lasting customer relationships. In this interview, we ask Dru to share his philosophy and experiences because to know Dru is to know more about First National.
Over your career, you've developed numerous business relationships. Which ones stand out?
Every relationship is important but to answer, I would say there are three categories that stand out. The first is with people who have been clients since I started 29 years ago and who are still with me today. There is a different kind of personal connection with people you've served for close to three decades. I've gotten to know family members and watched their children grow. It's very meaningful on a personal level. The second category is clients that we have developed relationships with over the years, though maybe not quite as long. The opportunity to help clients through market turmoil, financial crises and other calamities is rewarding and reinforces the view that service is appreciated. The third category is more recent clients, who have become clients in a very competitive landscape and often through the use of technology to help develop the relationship. Looking back, the three categories span the spectrum of an evolving industry.
How many clients have been with you since you started at First National?
When I first started, I think I got lucky. I established relationships with three different borrowing groups who stayed with me over the years. They were family owned and operated businesses that had trouble getting attention at the time due to their size. In any event, each grew to become large, well established and profitable real estate businesses run by astute people.
That's a remarkable track record.
Yes, they've been very loyal and fair to me and I've worked hard for them. In one case, I have funded 100% of the client's deals and in the others, I do about 80% of their financings. One of the factors that really helped to solidify these relationships was the fact that First National remained an active lender through the market turmoil of the early 1990s when others pulled out of the market. This was a low point for the apartment sector. I remember there was one year in which just eight apartment buildings sold on the MLS in Toronto. And again, after the financial crisis of 2008/2009, First National was lending funds and supporting our clients when large numbers of mortgage lenders withdrew from the market due to uncertainty. Our clients never forgot it.
How did you win over these clients in the first place?
Cold calling. Word of mouth. There was no Internet back then, no databanks with borrower contacts. There were classified commercial real estate ads in the newspaper and I called the numbers listed. When I said I was from First National, they would say, "First who?' We were grateful if anyone would even take our call, never mind having a coffee. I guess you'd say, I won these clients over the old-fashioned way; with perseverance and determination.
Other than longevity, what features distinguish those relationships?
Growth, collaboration and transparency. For example, I started with a client by helping him finance his first apartment building about 12 years ago. Today, we finance about 80% of the portfolio with about $70 million in loans outstanding, so his business has grown substantially. Throughout the relationship, we've demonstrated that we could perform in a timely and diligent manner and that we could find creative solutions that other lenders couldn't by working collaboratively with the full knowledge of the client’s vision and objectives. That's where transparency comes in.
In our business, the foundation for every relationship is the trust the client places in us to get the job done. The principle upon which this is founded is transparent disclosure. If a borrower is not willing to share personal financial information and financial data on the asset, or plays his cards too close to the vest, it's not possible to help. You can’t achieve successful outcomes for clients with one hand tied behind your back. In every case, my client relationship journeys began with full transparency in what we are trying to achieve and the path to getting there.
What are the advantages of having the kind of relationships you've described?
It makes business fun. Deals are the same, people make them different, people make them interesting. There is also the advantage that accrues from deep knowledge of the client's needs, preferences and simply understanding their business. For borrowers with substantial holdings, we voluntarily undertake annual financial reviews of their portfolios and then adjust thereafter for dispositions, acquisitions, changes to the debt structure, etc. This permits us to move even faster toward a solution rather than losing time trying to analyze a portfolio’s operations, debt maturities, rental potential, etc. when an opportunity arises for a client. If a client puts in an offer on a building, for example, we know we need to be able to move quickly in order to deliver solutions within the available time frames, which are usually beyond the client’s control.
How did you go about forging these kinds of relationships?
First, you must differentiate yourself by showing what service you can provide to people. You can't do that just by talking, you have to demonstrate it by going deep and by working harder than competitors. There may be others in our industry who are better known than we are, but there are few lenders, if any, that work as hard as First National for the customer. One of the ways to demonstrate service is to come to meetings with ideas and informed perspectives and to offer something that's of value to the person you want to work with. Value is in the eye of the beholder, it isn't the same in every relationship.
Can you provide an example?
A few years ago, one of my long-term clients got into a deal and decided he wanted out. Unwinding a deal is very hard and very expensive. I managed to do it at no cost. He never forgot that because he knew that other lenders might have tried to exploit the circumstances for a big payday. In this case, the value we demonstrated didn't benefit First National, but it did help the client who rewarded us with other opportunities over many years.
Trust must be a critical component in these relationships.
It absolutely is. I've probably done 20 deals with one particular client and they are at the point now where they won't start looking at an opportunity until they ask my opinion and they won't sign off on any deal until they ask what I think. For every deal that this client makes, we probably assess 20 prospective opportunities, so it's a very active relationship. The level of trust they exhibited in us didn't happen overnight and it wasn't a matter of happenstance. They learned to trust First National because we do exhaustive research and great analysis and are prepared to put in the time to find creative solutions.
Does trust work both ways?
Definitely. Borrowers have to trust that First National will do what it says it will do, and I have to trust that my clients will do what they say they will do. Even in a transactional relationship, the parties get to the point where you have to trust somebody. We set out to demonstrate that we can be trusted by saying what we do and doing what we say. This seems obvious and I am sure most sales or marketing organizations feel they are doing it. But so often borrowers are simply left hanging as they work with their lender. Over promising and under delivering are not appreciated by clients.
Did you know intuitively how to form these types of relationships?
No, I would say it's been learned and developed here at First National with guidance and mentoring from others.
You have relationships with other advisors and funding partners. Do you approach those relationships the same way?
Absolutely. In every deal, there are many moving parts and many advisors, engineers, lawyers and so forth. The common element is that we're serving the same borrower so it's incumbent upon me to help smooth the path for the client's deal to be done. As a firm, we show tremendous respect to third-party advisors. We don't rock the boat, we try to get everyone pulling in the same direction.
What advice do you give to younger members of the First National team?
Work hard, put customers first, earn their business with every phone call, get inside the most with customers by understanding their needs and preferences and say what you mean and do what you say. You also have to be patient. Sometimes you work your socks off and get nowhere. That's the nature of the business. It's also important to speak your client's language.
What do you mean by "language"?
Some of the clients I work with are all real estate, all the time. It's how they think and talk and industry chatter and investment jargon are like food and drink to them. The language I use in communicating with them is different than the language I might use with other clients who are sophisticated but just in other ways. All the brains and training in the world won't help you if you don't know how to reach your audience with information that suits their purposes. A good example is lending on retirement homes. One of my colleagues is a noted authority on that subject, which is quite complex, and if I was going to speak to an audience of retirement home owners, I'd certainly consult him before I spoke to ensure I was able to converse fluently.
Do you have some do's and don'ts of relationship management you can share?
Always be professional and never get frustrated. You can spend a lifetime building a relationship and destroy it with one intemperate phone call. It's also important to admit your strengths and your weaknesses. If you don't recognize your weaknesses, you can't figure out what to improve and if you don't understand your strengths, you won't put your best foot forward.
After 30 years, do you have any weaknesses?
There are still lots of things for me to learn. Technology is one of those areas that challenges me and I recognize it as a weakness. Fortunately, I'm part of a team that does know technology and so I learn from my colleagues. That's the great thing about First National today: as Canada's largest commercial mortgage lender, we have the depth and breadth of talent and experience to draw upon to continuously advance our long-term client relationships and to forge meaningful new relationships based on knowledge, expertise and service capacity.
If you could like to know more about Dru's approach, you can reach him at email@example.com or 416.593.2918.