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Focus On Atlantic Canada

  • First National Financial LP

First National is a leading commercial mortgage lender in Atlantic Canada, home to a variety of dynamic communities including Halifax, the region’s largest city with a population of over 414,000. In this interview, Jody Comeau, Assistant VP, Commercial Financing, talks about the state of the regional economy, prospects for the commercial real estate market and how our Company strives to go beyond lending to serve the community.

Jody, how long has First National served Atlantic Canada?

We’ve had a presence in the commercial market for 22 years and we’ve been a single-family lender in Atlantic Canada for over 12 years. In fact, First National asked me to start the residential operation here. I built it up to about half a billion dollars of funding annually and then switched to commercial a couple of years ago.

Why did you make the switch?

Residential is a great business but the answer is I saw an opportunity to take our commercial business to the next level by providing responsive service. In the early years, our commercial operation did a lot of work with national borrowers active in Atlantic Canada but not so much with local and regional property owners and developers: the people who have 30 or 40 years of experience right here in the community.  Lending in the Maritimes is all personal and by taking on the commercial operation, I’ve been given the chance to make those deep, local connections that are so critical to service and to uncovering lending opportunities.

Let’s talk about that opportunity. How big is it?

My territory covers all of Atlantic Canada, an area with a combined population of over 2.3 million people. I’m based in Halifax and by virtue of this city’s size, a lot of my clients operate here. Halifax is one of Canada’s fastest growing cities and a hub for the technology sector. As a result, the employment picture, particularly in that sector, is solid, we’ve got a very dynamic multi-unit residential market and there is a good level of commercial construction.  That said, we are also actively engaged in all of the  Maritime provinces which have their own dynamism and in some cases, challenges due to what’s gone on in energy production.

What’s driving the purpose-build multi-unit apartment sector?

The fact that this is not a condo market. Let me explain. Unlike Toronto or Vancouver, single family homes here are more affordable. So condo ownership is not seen as a replacement for, or stepping stone to home ownership. We also don’t see broad swings in real estate prices as in other cities. So absent a large condo market, apartment rentals are the favoured housing stock for either lifestyle reasons or for cost. Apartments don’t come with condo fees and the same tax burdens so again, the economics favour rentals.

You mentioned lifestyle reasons for apartment living. Can you expand?

Sure, Nova Scotia has a large baby-boom cohort and when those folks choose to downsize, they are often moving into purpose built rentals. I reviewed a CMHC presentation recently. It projected that the baby-boom generation here would double by 2030. For the next decade plus, that stat tells me the multi-unit rental sector will continue to be strong and growing.

What about migration and immigration?

What we’re seeing is that job creation is not occurring in smaller communities: jobs are being formed in the larger population centres. So we’re experiencing strong net migration, particularly of young people from rural Nova Scotia moving to Halifax in search of work. So while the population of Nova Scotia is not growing significantly, Halifax is growing and that’s where all the apartment buildings are. We’re also experiencing some immigration, but the numbers of new Canadians coming here are infinitesimal compared to what you experience in other Canadian cities.

How many apartment units are typically added to the Halifax stock every year?

Probably about 2,000. But because there are no condos being added, it feels like a heavy sway. It’s also good for First National because we do a lot of apartment business, both new apartment construction and funding for renovations. Quite a bit of the apartment stock here is old and it’s changing hands to second or third generation owners who have plans to upgrade and refurbish.

What’s happening with vacancy rates?

Despite new construction, vacancies are low because of the trends I mentioned, particularly the move by baby boomers into rental properties. Halifax is also a huge university town so again the need for rental properties, although there isn’t much purpose-built rental for that segment. There are apartments with students representing a good portion of the tenants, but nothing like you might see in places like London, Ontario. Our universities are also spread out geographically, rather than clustered, so it doesn’t support really large-scale apartment complexes catering to students only.

How cyclical are the markets you serve?

Halifax not so much but we have seen it in cities such as Moncton. About seven or eight years ago, Moncton was attracting all sorts of call centres from other provinces and that created a spike in employment and brought a lot development. Apartment vacancy went from about 4% to 10% within a year. That brought construction to a halt, and we’ve seen a steady decline in vacancies since as the situation corrected itself. By contrast, Halifax has not experienced swings like this.

Has real estate market stability attracted outside investment?

Yes, and as cap rates continue to compress in cities like Toronto, we’re seeing more interest from national players. It’s also more affordable, on a relative basis, to acquire and develop land here, so that is a major plus.

What are typical cap rates in Halifax?

On new high-rise construction, we’re seeing apartments trading at around 5% or 5.25%. On a financing basis, the same new construction would be as low as 5% on the best buildings but perhaps more like 5.25% or 5.75% for average new builds.

Do you do both conventional and CMHC lending in Atlantic Canada?

First National is the largest CMHC commercial lender in Atlantic Canada. But to answer your question directly, yes we do both types of lending. Probably 60% of our activity is CMHC and 40% is conventional and within that conventional mix, we have some new construction loans that will eventually convert to CMHC and some bridge loans on property acquisitions that will eventually convert to CMHC. In terms of asset types, about 85% of our lending activity is multi-unit and 15% is comprised of other commercial types such as mixed use. Our specialty is definitely purpose-built multi-unit.

How much of a focus do you put on new construction lending?

Plenty. Our new construction lending segment is growing quickly and that’s being supported by new CMHC affordability programs. We’re winning business with clients because of those programs, where in past we would have only secured their term loan business.

What’s the average size of commercial loans you do?

Average size is just under $12 million for CMHC loans and just under $6 million for conventional. But believe me, we do many smaller deals in the $2 million range and are absolutely open for business and competitive at all levels.

What do you bring to borrowers as far as service is concerned?

We have First National’s best team of analysts working here. I may get some argument on that point from my colleagues in other parts of Canada, but I truly believe it. Our Senior Analyst has more than 20 years of experience and her skills are complemented by two other analysts who are absolutely top-notch. An analyst’s role is to assess a borrower’s portfolio, their financials, their operating plans and risks and from all of that information to develop an investment theory that forms the basis of strategies that we share with the borrower. Analysts don’t get a lot of stage time, but their work sets the course for our client relationships. I can tell a client we’re better, but if the homework we’ve done isn’t right, and the offer we make isn’t competitive, there won’t be a relationship, there won’t be an opportunity to showcase all of our service differences.

Is there one recent customer example that you could share that best illustrates the service you provide?

Absolutely, I would point to our partnership with Louie Lawen of Dexel Developments, the development, design and construction side of The Lawen Group. Louie and his family are highly experienced, well- respected members of the Halifax real estate market. They are focused on providing world-class amenities in their rental facilities and on constructing buildings that are very efficient so that operating costs can be lowered without sacrificing quality. We took the time to understand their vision, and the substance of their development plans, and as a result, the structure and presentation we gave was unlike anything he received from our competitors. Without getting too detailed, we were able to save Louie a significant amount of time and money on his most recent development and reduce risk.

So a satisfied client?

I’ll let Louie answer that question. I asked him to put his thoughts on paper and this is what he wrote: “Our First National team offers us the most competitive rates, the best service and highly professional advice. We worked with First National on our largest financing to date, which was a takeout construction loan on a 214-unit building. First National’s experience with CMHC is unprecedented. The financing specialists at First National know how to navigate through the government regulations and bureaucracy, removing the barrier of rigorous negotiation. And because of the way that we are structured – we have no investors or exterior forms of funding – financing and reinvesting back in the business are critical to our success and bottom line.” I think that says it all.

You spoke about some of the economic and population drivers of opportunity in your markets. What about the opportunity to build your market share?

There are many local and regional property owners and developers who don’t know us yet, families who haven’t experienced First National’s approach. So reaching out, letting them know we are here locally and ready to do business differently is our pathway to more growth and market share.

First National prides itself on being more than just a lender.

That’s right. We are eager to find the best solution for our clients. We don’t just settle for cookie-cutter answers or off-the-shelf products. We run with the belief that it has to be right for the borrower, or  it isn’t right. We try to do for all clients what we did for Louie. In turn, our clients are very kind to us. They are quick with introductions and are our best advocates.

Any final thoughts?

Atlantic Canada is my home and it’s a great place to do business if you do it the East Coast way. Keep it simple, do what you say you are going to do, don’t create surprises, just deliver.


You can reach Jody at or 902.222.2236.