In mid-March, First National’s commercial team retreated to home offices across the country to do their part to stop the spread of COVID-19. Now, more than a month later, we touch base with the members of our origination teams to see how they are coping with the pandemic and what type of work they are doing for clients. These Words of Wisdom come from Jody Comeau, Assistant Vice President, Commercial Financing at First National in Halifax. Jody spoke to us from home on April 21, 2020.
How are the Maritimes coping with the pandemic so far?
To be honest, it’s been overshadowed by the tragedy in Portapique. But whether it’s Nova Scotia or really anywhere in Atlantic Canada, my conversations about COVID-19 with clients and colleagues are pretty much the same. There is anxiety over the health implications and concern over the economic impact and how long it will last. But at the same time, business is still being transacted, new apartment buildings are still being planned and built and First National is still lending every day. It’s definitely not business as usual, but it’s not far off.
How is your team managing through this period?
Our team seems to be holding up really well and keeping positive spirits. Lisa McFarlane has always worked from home so less of an adjustment except for the fact that all three of her kids are also home. Jennifer Horne is also performing a dual role in childcare and business analytics and making it look easy. Jenn has a three-year old daughter who likes to visit mom in her home office even when the door is closed. But having periodically worked from home in the past, Jenn has her systems down pat and is working with two monitors and a printer. Both Lisa and Jenn are staying strong, optimistic and very productive and I think that’s because of our pipeline of work. Lots to do for clients for sure.
How are you coping with the lockdown?
I’m taking it in stride. Anyone who knows me knows I’m not great at standing still. I’m not built to work at a desk. I like to be out visiting clients and planning and strategizing with them. It has been an adjustment to resort to phone calls or text messages to connect. Sometimes I call from my basement and sometimes from my bedroom and oftentimes I just walk around the house on the phone. It doesn’t really matter, I just want to say in touch with clients, make sure they are staying well and see if they need any assistance.
What are clients telling you in those conversations?
Our conversations invariably turn to a discussion of property performance. We talk about whether their properties are performing better than they thought, worse than they thought or about the same. From those initial calls in late March, I was optimistic about April 1st rent collections. April 1st came and went and that optimism was well founded. My enthusiasm and energy comes from talking to our borrowers and while it’s hard to forecast what will happen come May 1st, I’m hopeful for them.
What sort of support are you offering borrowers?
We have a number of liquidity tools at the ready and we’re here to offer advice and benchmarking.
By liquidity tools, what do you mean?
We continue to offer both insured and conventional funding, bridge financing and construction loans. Our product scope is a little more limited than normal and spreads have gotten wider, but our funding model, access to CMHC and deep institutional partnerships are making a meaningful difference. Let’s put it this way: I have not had to turn away a borrower because of lack of liquidity. I’m not sure how many lenders can say that at this point.
What do you mean by advice and benchmarking?
We’ve tried to make it clear that we are a partner our clients can count on through the duration of the lockdown and beyond. While we don’t have all the answers, we pledge to work through every situation as it arises. In terms of advice, clients are sometimes curious about how other owners and landlords are coping with the lockdown and dealing with tenants who are having financial difficulties. We’re in a good position to share stories, ideas and best practices because we have a large network of borrowers that we observe. As a blanket observation, I would say those landlords who are experiencing the best performance from their properties are the ones who are communicating the most often with their tenants. The advice we provide also comes from the insights we have into market conditions, activity levels and capital market trends.
Most of your portfolio is multi-family. How is that asset class performing?
It feels like it’s been the property type that’s been the least affected compared to say commercial or retail. In past recessions that’s always been the case. In my market here, many of the tenants in our clients’ buildings are retirees on fixed incomes so that adds a lot of stability to the rental base. I have a client with a thousand units that has not received a single call from a tenant asking for rent relief. I think there is also a lot to be said in praise of the skill of the apartment property owners and landlords we work with. I’m really impressed with what they are doing to manage their apartments and care for their tenants. A ‘we’re-in-this-together’ attitude is widespread.
You mentioned that clients are still working on construction projects.
That’s right, construction is still very active here. I think one thing that’s been impressive is how quickly our borrowers have adapted to the new normal and how flexible the construction trades have been in developing workarounds. It’s not easy to layer people into a construction site in a way that maintains physical distancing. What we’re seeing is tradespeople taking different shifts to keep everyone safe and the project moving forward. Some trades are going in on weekends to get work done. The manpower on any given site at any given time is less than normal but that’s just because work is being spread out over more hours of the week. I’m told that the best teams have probably only lost a week so far and are confident that they have perfected their systems so they can make up that time. It’s an incredible effort and it’s being done safely with more safety inspectors on site.
Have equity takeouts become more prevalent lately among your clients?
To strengthen their cash positions to withstand COVID 19, no. But clients are always looking at new opportunities and recycling their capital to position for a purchase or development. Most of my business is refinancing and that’s as active as ever.
Has economic uncertainty stopped properties from coming to market?
Not in our market, no. That said, Atlantic Canada is more of a build-and-hold market and that hasn’t changed.
Are you seeing any signs that conditions are stabilizing?
It’s premature to talk about stabilization. We’ll have to wait a couple of months. But one thing I can say is that leasing activity is still strong in the multi-family sector. Clients tell me that even though they now resort to virtual showings and virtual tenant interviews, demand has not stopped, and deposits keep coming in. Don’t forget we still have a raging housing issue here. CMHC stats from last year showed apartment vacancy at 1% in Halifax so we are still in major need of more housing. So I’m optimistic.
I am quite impressed with how well First National has adjusted to this situation and maintained lending activity. Because capital availability and pricing is volatile, we are working in overdrive to make sure our borrowers are not affected by closing deals as quickly as we can. I think that comment applies equally across our company but here in Halifax, I know Lisa and Jenn are working night and day to be there for our borrowers and to honour our commitments to them.
Jody Comeau is safely, securely and productively working at home but you can reach him at email@example.com or any member of the First National commercial team at 1.866.298.0929.