Mark Braun and Raviv Israel are both partners at CanFirst Capital Management. The company was founded in 2002, and is a leader in commercial real estate investment. Through its real estate funds (six to date) that encompass a portfolio of diverse yet specifically targeted properties, CanFirst provides institutions and private high net worth individuals with direct commercial real estate investment opportunities. Mark and Raviv share responsibility for asset management, leasing, financing, acquisition and repositioning for the assets within the portfolio.
Mark and Raviv share their perspectives about the Toronto commercial market, where they see opportunities, the company’s vision for growth and why First National’s trust in their ability to execute is foundational for shared success and the growth of the relationship.
Q: What are your perspectives on the Toronto commercial market?
MB: Toronto is Canada’s biggest market, with 800 million square feet of industrial real estate. The current market cycle, which started in 2010, seems to be continuing. There was a lot of talk about a correction, but we haven’t seen any evidence of that yet. The consensus is that what we are seeing now will continue on for a few more years, maybe with slight modifications. There is a massive amount of capital available, and demand and pricing remain high. From our perspective, we really view the current climate as an asset bubble. Every asset class is really well valued right now, and people are chasing yield across the board.
RI: Land shortage is also playing an important role. Despite the uptick in interest rates, lack of land is driving a continued, upward trend in valuation. As a result, there are other regions to explore, which have ample land and still offer similar distribution advantages for industrial interests.
Q: Where do you see the opportunities?
MB: When we invest for our clients, our focus is on creating value. So we seek out opportunities where we have options and flexibility to deal with the issues inherent in the properties. In addition to the land shortage in the GTA and Toronto proper, there is a lot of obsolescence and many aging assets. There are certainly opportunities for commercial development – pulling down existing assets and building new industrial. Building new, you can better accommodate the needs of e-commerce entities and more intense distribution requirements. Both of those factors are really driving the evolution of industrial real estate.
RI: Many of the existing properties may be old and obsolete in a lot of cases, but their locations cannot be replaced. Given the current land shortage, location is everything. And I definitely agree with Mark’s comment about e-commerce and distribution. Toronto is one of the top tech employers in North America, and companies are seeking offsite staging closer to the city, as most of the new industrial is located in the 905.
Q: What is your vision for growth?
MB: We just finished raising our sixth fund. We plan to continue with that model, offering our investors value add and opportunistic funds. Our plan is to grow the funds in size and expansiveness.
RI: We are also beginning to explore additional markets, which may not be as mainstream as our current focus. With intense competition and high valuation in the market, we are examining options that may not be on other people’s radars yet.
Q: How is First National supporting you in your vision for growth?
MB: Our team at First National trusts us. We’ve done a lot of deals by this point. As we move toward our vision for growth and begin examining new types of asset acquisitions, our First National team is behind us 100%. There is a definitive trust that we can execute on what we say we can do. For example, we just acquired a property in Waterloo, which was fairly complex. First National was instrumental in the seamlessness of the process.
RI: Mitch Tomulka dug in and did pretty extensive research on the area, known as the Idea Quarter. He uncovered the building blocks of the story – the university community, the impending LRT. That story was critical in helping to get the deal across the finish line.
Q: From your experience, how does First National deliver on the concept of being “more than a lender?”
MB: For me, it comes down to that trust and belief. Our team at First National has complete faith in us, and our capabilities. They back us no matter what. And that is really the X factor in the underwriting. There is also reasonableness on securities and requests. Our team, supported by the executives, is willing to take smart risks.
RI: We have a great relationship, both personally and professionally. And Mitch just knows how to fill in the gaps and strengthen the optics of the deal. There are not unnecessary impediments to getting the deals done. Everyone wants to execute as seamlessly as possible.
Q: What stands out to you about working with First National?
MB: Many of the types of lenders that we used to deal with have moved so far up the quality curve and so low on risk tolerance. They just have not been as competitive on deals. First National is comfortable with the types of assets that we are acquiring, as well as our ability to execute. I also appreciate having Mitch as a sounding board. Even if we do not have First National at the table on a deal, I can ask for his feedback, advice and opinion. He is upfront when deals work, but is equally as honest when they do not.
RI: On our last deal, Mitch proposed a financing structure that we had not considered. Typically, we try to secure a one to three-year term. But he challenged us to consider a six-month option, and we went for it. We got the loan to value that we wanted on day one, and First National’s investors were able to exit in a relatively short period of time. That financing structure offered the flexibility we needed to demonstrate leasing and demand to First National’s investors, increasing their comfort with the value add. And we also gained the option to refinance with better terms, interest rate and loan to value.