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Borrower Perspectives: Wing Choy, Director, Corporate Finance, Conundrum Capital Corporation

  • First National Financial LP

Wing Choy has been a part of the Conundrum Capital team for the past 11 years. He joined as a financial analyst responsible for financial modeling, and all number crunching other than accounting. In 2012, he took on the sole responsibility for financing at Conundrum.

Conundrum Capital Corporation is a private equity management firm that devises and delivers innovative real estate solutions to meet the investment needs of Canadian and international institutional and private investors. Founded in 2000 by a senior management team that has worked together since 1990, Conundrum has acquired and managed assets exceeding $4.3 billion Canadian.

Wing shares his perspectives about the Ontario market, where he sees opportunities, Conundrum’s vision for growth and why First National’s flexibility and ingenuity are an excellent fit for Conundrum’s return-driven business model.

What are your perspectives on the Ontario market?
WC: The market is very strong. We are seeing a continued input from institutional capital from all over Canada and the world. Specifically, we are seeing a steady uptrend in the GTA and Ottawa. With the growing cost of single-family homes and an overheating condo market, more and more people are considering renting as a more long-term option. As a result, multi-residential will remain a very attractive option for institutional investors.

Where do you see the opportunities?
WC: Ontario has a lot of older, undercapitalized properties. Primarily concerned with cash flow, the owners haven’t invested in upkeep. In partnership with our investors, we are able to buy those types of buildings and transform them into quality products that can attract high-grade tenants and command better rents.

What is your vision for growth?
WC: We are focused on transforming old and undercapitalized buildings into institutional grade products. Our management team has the skills and longevity to execute on this strategy at the highest level. The plan is to turn the buildings around, attract new tenants and boost valuation.

How is First National supporting you in your vision for growth?
WC: I look to First National for financing and market intelligence. I work closely with Brian Kimmel. We chat all of the time about cap rate compression, recent pricing based on data and market trends. By comparing notes, I get a better sense of which markets are hot and which are cold in terms of locations and landlords.

Brian is also an excellent resource for financing intelligence. He is always willing to share his insight on the spectrum of financing (interest only, CMHC, conventional, CMBS) and what he’s seeing in terms of amortization and interest rates.

From your experience, how does First National deliver on the concept of being “more than a lender?”
WC: First National can structure very creative deals. We are a return-driven business. So the timing of the interest rate and size of the loan are important to us to maximize returns. Typically in the industry, many lenders like to do a packaged deal. There isn’t a lot of flexibility. But First National is more open.

We’ve done a few interest-only deals with First National. Many of the buildings that we buy are undercapitalized and aren’t generating great cash flow when we acquire them. However, once we complete the repositioning, the building’s cash flow improves significantly.

Interest only loans enable our strategy in two ways. First, those types of loans help us access equity for repositioning. Second, they reduce our cash outflow and drive a better Internal Rate of Return, which is a vital metric for our business.

What stands out to you about working with First National?
WC: Brian is really customer focused. He’s willing to listen, enthusiastic about helping, open to being creative and comfortable accommodating our needs. That flexibility makes us comfortable sharing our requirements and gives us the confidence that we have someone who truly wants to help us achieve our goals.

I also appreciate the vast knowledge that I can access, especially when it comes to CMHC. We recently did a CMHC deal, and Brian walked us through the process and rules step by step. He gave great suggestions and value-added advice about how to approach CMHC for the financing that we wanted. He proposed an excellent strategy, which helped us secure an attractive loan amount.