First National Financial LP

Borrower Perspectives: Joe Caprera

  • First National Financial LP
Founded in 1997, Joe Caprera Companies owns and manages more than 1,800 units, with more than 3,000 occupants in the Greater Montreal Area (Cote St. Luc, Outremont, Ville St. Laurent and West Island). Founder Joe Caprera has a building engineering and architecture background, so his passion for building structures runs deep. He remains committed to providing tenants with comfort, service and security in the communities he creates. 

We spoke to Joe about how he continues to adapt in year two of the pandemic, his vision and key priorities for growth, and how First National supports his ambition and continued growth. 

Q: As we contemplate year two of the pandemic, what do you feel are the biggest industry impacts?
JC: Multi-residential is still going strong. As people spend more time at home, apartments are becoming increasingly more important and have more value. Regardless of the changes going on around us, we always remain committed to providing our tenants with the utmost in comfort, service and security, as we have since 1997. 

Q: What changes have you seen in your business and market, and how are you adapting?
JC: These days, we have more people in our buildings at any given time. Before the pandemic, half of the building would be out during the day and come back in the evening. But now, people are less mobile. From an ownership and management point of view, we’ve definitely seen reduced turnover. When the pandemic first hit, we put all the necessary health measures in place including hand sanitizers, disinfecting procedures in all 18 buildings three times per week and protective plexiglass modules in all of the rental offices. We adopted electronic payments for all of our buildings to reduce physical contact.  We also pivoted from in person showings to Facetime. Those changes have continued and are now just a part of how we do business. To accommodate the growing number people working from home for the foreseeable future, I am considering creating common rooms where people can have de-facto offices. We will of course implement the proper safety and distancing measures. But we want to give people a safe working option, so they can reclaim their living spaces.  Our focus is to always adapt to the changing times in order to provide tenants with the best possible service and comfort.

Q: What is your vision for growth? As you look ahead to 2021, and even into 2022, what are your priorities?
JC: Our vision is to grow 10 to 15% every year. Interest rates continue to be beneficial for acquisition, but a lack of available properties is making our growth vision challenging this year.  I am also very committed to vertical growth in my properties through reinvestment and creating additional value through substantial modernization. My strategy is to decrease variable costs while increasing Net Operating Income (NOI). With First National’s help, I have been able to leverage CMHC’s Energy Efficiency Program, which offers subsidies for decreasing variable costs. Keeping sustainability in mind, I have implemented high efficiency boilers, changed windows and doors to increase air tightness, replaced existing roofs with high R-value composition type and replaced all lighting with LED fixtures. As I have been doing since 1997, I will continue to create value in my properties through capital expenditures and offer our tenants affordable rents related to the areas’ demographics. 

When the pandemic hit, we were working on a large development to be built in Montreal’s downtown core. The MONTREAL 1 development was planned as a mixed-use building, offering a high level of luxury not currently available in Montreal. It would have been the tallest of its kind in Montreal at 62 floors. MONTREAL 1 was designed to have an international modern glass look, dominantly in blue with aluminum color accents. Blue represents Quebec's official provincial color, and the aluminum accents represent one of Quebec's dominant natural resources. Occupants in the building would benefit from large exterior glass walls spanning the whole height of each floor, allowing them to experience a feeling of openness. With the pandemic, the nature of downtown has changed. We’ve put the project on hold for now, and will consider it again when the city rebounds post pandemic. 

Q: How is First National supporting you in your vision for growth beyond financing?
JC: My advisor, Jonathan Phillips, educated me about CMHC’s Energy Efficiency Program, which I didn’t know existed. I was able to qualify for subsidies from CMHC, which I invested in modern, sustainable building equipment. The new equipment contributed to significantly lower energy consumption costs. 

In March 2020, a few days prior to Montreal’s shutdown, I acquired a 17-floor complex for $35.2 million, financed with First National. When I bought the property, the energy costs totaled $242,000.  During due diligence, I set a goal of reducing this variable cost.  To achieve this, I replaced all heating controls in the units with electronic, pre-programmed thermostats and replaced all existing lighting in the common areas and in the apartments with LED fixtures. With those improvements, I decreased our annual energy consumption costs to $168,000. Based on this investment, I was able to decrease my variable costs by approximately 31% and was able to increase the rents by 3.5%.

Q: Can you describe your first deal with First National? What stood out to you about the experience?
JC: I started working with First National in 2009 – and not by choice. I made an offer to acquire 134 units, and one of the conditions was that I had to assume the existing First National mortgage. That’s when I met Robert St. Pierre. He was really knowledgeable and helped me secure a better loan amount with CMHC. We also had a great relationship outside of business. We met for lunch and talked a lot about cars, which was a shared passion. When Robert retired, Michael Williams took over his position. I knew Michael from TD Bank for several years, and we had a great relationship. Once he started at First National as Regional Vice-President, I knew our relationship would continue. Michael then introduced me to Jonathan Philipps, Vice-President of Commercial Financing, who would be responsible for my file. That was in 2014. Since then, Jonathan and I have done many successful deals together. 

Q: How does your First National advisor empower you in achieving your goals?
JC: Jonathan understands my vision and believes in my management methods. He advocates on my behalf at First National and with CMHC and finds ways to make challenging deals work. And if the deal isn’t going to work, he’s transparent and explains why.  I trust his knowledge and expertise, and he says it like it is.  With Jonathan I always know what to expect.  

Q: What do you value about your relationship with First National?
JC: For me, First National is Michael and Jonathan. Jonathan is incredibly resourceful and responsive. He is solution minded and tries to find alternatives.  In my organization, CMHC’s Energy Efficiency Program has become an important part of my value creation strategy -- for tenants, for my portfolio and for my acquisition potential.  We have a very cooperative and collaborative relationship. I trust Jonathan implicitly and ask for his opinion on potential acquisitions prior to drafting up a purchase offer.

Q: Any final thoughts?
JC: Jonathan and I work very well together because we understand each other’s priorities. We are fair with each other and have a mutual respect for our time and reputations. Jonathan appreciates that I am a hands-on owner/manager, very organized and highly involved with all of my buildings’ operations. He acknowledges the improvements I make on my properties and knows that I carry out the works I plan. First National supports my ambition and continued growth. Michael’s entire team recognizes that I am a serious player, and everyone invests time and effort in my ongoing success.