First National Financial LP

Borrower Perspectives: Michael Balnar, President, Balnar Management Ltd.

  • First National Financial LP

In 1977, as he approached early retirement from ITT Canada, Frank Balnar, along with his wife Grace and a group of investors, purchased Twin Towers in Guelph. That acquisition marked the start of Balnar Management Ltd. Having celebrated its 40th anniversary in 2017, Balnar Management now owns and manages 13 multi-residential properties with 1,700 units and five commercial properties boasting 150,000 square feet in the Guelph, Kitchener-Waterloo and Cambridge regions.

Balnar is now a second and third generation company with Michael Balnar as President. Integrating asset, property and facilities management, Balnar’s mission is to optimize cash flows, provide long-term stability and maximize value for its partners. The company operates based on a tried and true philosophy: “Big enough to know, Small enough to care.” Big enough that Balnar has access to resources, suppliers and services, but small enough that it operates locally close to the ground, is community minded and invests in the region.

Michael shares his perspectives about the Guelph, KW and Cambridge markets, where he sees opportunities, his vision for growth and why he values First National’s entrepreneurial mindset and business acumen.

Q: What are your perspectives on the Guelph, KW and Cambridge markets?
MB: This is our region. Our business has been here for 40 years. Our families are here. We grew up here. We have watched the market evolve and have helped to shape that evolution as well.

Our location is excellent - just one hour west of Toronto - which makes this area very accessible. There is low unemployment and high growth. The region’s economy is diverse, including manufacturing, government, education, technology and agriculture. Down the road, there are plans for high-speed rail to Toronto, which will definitely change the face of the region and spark even more growth. And interestingly, the apartment and condo market has surpassed single-family homes in terms of growth.

The municipalities here are also stable. Prices for everything – office space, rent, single-family homes – are less expensive than the GTA. And people are attracted to the region as a result of the more relaxed lifestyle. We are very fortunate to have struck a unique balance between a small-town feel and mindful, purposeful growth.

Q: Where do you see the opportunities?
MB: Our proficiency is in operating apartment buildings for rent. That is our core business. With the growing population in this area, there is high demand for multi-residential rentals, both existing and new. Currently, acquisitions are challenging. Cap rates are low. There is a lot of competition. As well, most buildings require significant capital expenditures to bring them up to value. As a result, we have shifted a portion of our focus to development. We currently have three development projects and feel very fortunate to have found a development/construction partner with complementary skills and that we trust implicitly.   

Q: What is your vision for growth?
MB: We are actively pursuing more development. With our partner’s strengths in development and construction, and our strengths in asset and property management, we are very excited about this evolving strategic direction.

However, if a quality income property becomes available, and it has an upside, we will evaluate that opportunity. For us, there needs to be potential to add value. For example, we purchased an office/industrial building. The rents were at $6/square foot when we acquired it. We invested significant funds to elevate the quality of the property, and now we’re able to secure $13 - $15/square foot. In addition to the rent bump, we have installed solar panels, which is environmentally conscious and generates income. 

That example illustrates our philosophy and approach regarding our existing stock, which is the core of our business. Operating to maximize income and value is a top strategic priority. So we invest a lot of time, effort and money into excellent customer service for our residents as well as optimizing our capital expenditure program.

In addition, we make decisions with the long term in mind. We don’t have the pressure of meeting quarterly results that force us to make hasty choices. We want to create the best possible scenario for the next generation.

Q: How is First National supporting you in your vision for growth?
MB: From a solutions perspective, First National refinances our existing stock, which allows us to execute on our capital expenditures program or fund new projects. We also rely on First National for construction financing during the development process and permanent financing once we have stabilized our development properties.

Q: From your experience, how does First National deliver on the concept of being “more than a lender?”
MB: Scott Lynds is our person at First National. Scott understands who we are and where we work. Anyone can lend money. Scott thinks like an entrepreneur and fits in perfectly with the entrepreneurial culture at First National. His business perspective has elevated him to trusted advisor status with us. When we need insights or an honest opinion on anything to do with financing or real estate, Scott is our first call.

Often times, we seek Scott out for his opinion. Our conversations are honest and forthright. He provides a knowledgeable assessment – what he sees, where he can provide further research or insight, whether the opportunity is a fit for us. But he also challenges us and asks tough questions. We review all the angles together as a team.

Scott also executes for us. It can be something as simple as asking for a mortgage statement. We have it the next day. Having someone that can address that full continuum – from responsiveness to an administrative request to high-level, critical discussions about real estate transactions – is invaluable to us. Scott is a vital partner in helping us achieve our goals.

With our long-term focus, we can agree not to do a deal or transaction, but that doesn’t preclude the next one from happening. We can spend time exploring an opportunity that may not turn into a deal. Scott and our team share the same perspective on that – any potential transaction is still knowledge.

Q: What stands out to you about working with First National?
MB: Scott and the entire First National team think like business people. When you start with that mindset, everything happens from there. Every opportunity originates from this deep understanding of our business and objectives. We have trusted advisor conversations to evaluate the deal and hash out the pros and cons. Then Scott executes on the transactional part. Unlike working with big institutions, we don’t get bogged down in administrative obstacles.

I really appreciate how tuned in Scott is to our motivations. For example, we bought an existing apartment building with adjacent land. First, Scott helped to facilitate our relationship with the owner of the building because we had mutual motivations. The building definitely had potential to add value through repositioning. But our real interest was the land. We could leverage our strong relationship with our development partner to build and realize even more value from the purchase.

That combination of advisory capabilities, customer service, entrepreneurial thinking and business acumen makes First National much more than a lender for us.