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Borrower Perspectives: Frederic and Alexandre Godbout, Atwater Properties

  • First National Financial LP

Founded in 2012, Atwater Properties is a boutique investment firm, focused on existing multi-residential properties in the greater Montreal area. Frederic and Alexandre Godbout are third generation real estate investors. They own some of their buildings outright, and for others, they invest with financial and equity partners. Boasting a strong, skilled management team, Frederic and Alexandre focus on properties that are too big for small players, but too small for larger players. Building size typically ranges from 100 – 200 units, with valuations of $15 - $25 million. From an acquisition perspective, the brothers choose properties with below market average rents that present opportunities for turnaround and value add.

Frederic and Alexandre share their perspectives about the greater Montreal market, where they see opportunities, Atwater’s vision for growth and why First National’s flexibility and ability to present alternatives supports Atwater’s growth strategy.

Q: What are your perspectives on the greater Montreal market?
FG: We are seeing a very bullish market on the multi-residential side. Montreal is a well-regarded, international city. Rents are still relatively cheap when compared with other cities with similar profiles. We believe that rents will continue to rise and demand will continue to increase. Institutional investment is definitely validating that perspective, when you consider the scope of development currently underway.

AG: I believe that lifestyle and life choices have evolved during the past few years. Amongst our circle of friends and employees, renting is now a way of life. There is no shame in it anymore. In fact, people that rent are respected because they often choose to invest in experiences. Economically in Montreal, we have been seeing the pendulum shift since approximately 2014. The Government is investing in growth drivers including mass transit and rebuilding highways and bridges. The real estate market will only benefit from that focus on revitalization.

Q: Where do you see the opportunities?
FG: Competition is diversifying and becoming more global in Montreal. We have seen many examples of foreign investors who are very aggressive in the investment market and have deep pockets. They are often the ones buying the flagship properties.

AG: They seem to have unlimited capital. And they care more about investment objectives than return objectives. As a result, prices are rising, making acquisition more challenging for smaller players like us. We are still open to buying for sure, but we are also looking inward at our own portfolio to find investment opportunities.

Q: What is your vision for growth?
FG: We are looking for value opportunities within our own portfolio. Do we have any excess land where we could intensify? Where can we reposition for greater returns? We are still actively open to acquisition, but we are also accepting the reality of the market and diversifying our strategy.

AG: It’s a few years out, but we may also consider expanding geographically by looking at the outskirts of Montreal in areas like the north and south shore. We haven’t seen any significant foreign investment there yet, so it could be a potential avenue for growth. 

Q: How is First National supporting you in your vision for growth?
FG: With our imminent shift toward investing further in our own facilities and properties, we know that we can rely on First National for the financing products to facilitate that strategy. For example, our last acquisition was a downtown Montreal property. We secured a conventional loan with 75% loan to value. Our business plan included reinvesting 15% of the purchase price into the property during the next 24 months. First National provided bridge financing to help us execute on our business plan. We appreciated the flexibility and First National’s faith in our ability to deliver what we were promising. 

AG: Fred really focuses on the financing piece. I’m more of the operations guy. When we’re contemplating an acquisition, I visit the site with my people – the architects and engineers – and we create a plan for Fred to take to First National detailing the work that needs to be done to achieve our desired rents. Sometimes, during the course of the repositioning work, we’ll find some surprises. First National is always flexible in those situations. 

It’s comforting to feel like a partner and have that deep level of trust. While the initial plan is solid, it’s not binding to the bone. We’ve never had to delay a construction project, even in the face of unforeseen circumstances, because First National reacted and imposed an obstacle. Our team of financing professionals works with us because of its confidence that we will deliver a superior product when the work is completed. 

Q: From your experience, how does First National deliver on the concept of being “more than a lender?”
FG: We are a smaller player with shallower pockets. When First National submits a letter of intent, the commitment letter and final loan reflect it accurately. I don’t remember even one occasion where there was a discrepancy. That constancy is extremely important for us, and we appreciate it. I never want to be in a position where I commit to buy and make deposits and then get surprised by a smaller loan amount or different conditions. That never happens with First National, which reduces our transaction risk significantly.

AG: Recently, I attended a Chamber of Commerce event on the West Island. There were a few players of our size there, and a lot of traditional financial institutions. When they asked what I do, and told them that I have a commercial mortgage department, the next question was, “who is your lender?” When I answered that it’s First National, the conversation pretty much ended there. They don’t want to compete to get our business because they know that First National provides such a unique combination of pricing, service and flexibility. 

Q: What stands out to you about working with First National?
FG: There is never only one answer or possibility when working with First National. Recently, we had a refinance coming up on one of our flagship properties. We had two First National loans on it, but the maturities weren’t synchronized. When the second loan was coming due, we were contemplating our next move because we wanted to extract some equity.

Benoit presented us with three scenarios. He clearly explained them with analysis and potential benefits. In the end, we chose to repay the mortgage and schedule a new CMHC loan on the building, eliminating the two-loan structure. There was a small penalty involved, but that scenario made the most sense economically. Interestingly, it’s not something I would have ever thought of or considered in the first place. But Benoit had the expertise and foresight to provide us with options and alternatives, so we could choose what was best suited to our objectives. 

AG: I think the people at First National are exceptional. We had a long, prosperous relationship with Robert St-Pierre who recently retired. And now we have an equally positive and productive relationship with Benoit. I’ve also met with Jeremy several times in Toronto. And every time we chat, he knows what we are up to, is up to speed on what we just bought and inquires about the status of past acquisitions. That connection and caring makes us feel really important. We know we may not be First National’s biggest client but we also know that we are well regarded as a trusted financial partner.