First National Financial LP

Moray Tawse's key takeaways from the RealCapital Conference

  • First National Financial LP

Moray Tawse tells it like it is at the RealCAPITAL conference.

On February 28, 2023, First National’s co-founder and Executive Vice President Moray Tawse joined other industry leaders in a roundtable discussion at the RealCAPITAL Conference in Toronto. Here are some of Moray’s key observations as a lender on the front lines in 2023.

Individual commercial loan amounts have grown substantially in Canada. When First National started 35 years ago, a very large commercial mortgage was $20 million. In the past two months, First National issued three funding commitments between $200 million and $250 million each – which is indicative of today’s asset values. 

It is concerning that the amount of competitive term capital in the system has not increased to accommodate large loan amounts. This could be an issue in future years for borrowers planning substantial projects in markets where real estate is highly valued.

As a securitizer, First National uses the Canada Mortgage Bond for most of its term financing. During the early years of COVID about $5 billion of 5-year bonds and $4 billion of 10-year bonds are issued per quarter of which the Bank of Canada took a part in support of the Canadian economy. The current capacity of the CMB program is roughly around $35 billion per annum and yet there is substantially more demand than ever for this finite amount. Limited CMB capacity may lead to a shortage of CMHC funds available.

If there is a shortage of capital available in the coming years, the key for borrowers will be strong relationships with their lenders. In a time of scarcity, lenders will naturally gravitate to clients they know best and trust most. 

Lenders also favour large loans rather than smaller ones because of the cost of regulations and compliance requirements relative to revenue generated. As a result of the regulatory burden imposed by government, it’s important for borrowers to be on time with compliance document submission.

First National’s interest rate spreads – which are based on the Canada Mortgage Bond – have remained relatively constant over the past year. 

Looking ahead three years, it’s possible that inflation will remain elevated. If it does not recede, the yield curve would normalize to feature higher long-term interest rates, which would not be a favourable outcome for those in real estate.

First National originates about one in every four CMHC multi-residential mortgages in Canada. In total, First National originated about $10 billion in commercial mortgages in 2022, the majority of that comprised of CMHC-insured term and construction loans. The company also provides balance sheet bridge lending across various asset classes.

By employing specialist teams, First National helps borrowers qualify for the very best loan amounts and lowest possible insurance premiums. The company’s knowledge of CMHC programs for multi-unit residential including student housing has been developed over years and is a point of difference for clients. 

If you interested in our lending programs, and/or hearing more about our perspectives on the market, please contact your First National advisor.