As Executive Vice President, Commercial Mortgages, Jeremy Wedgbury is responsible for First National’s market-leading commercial mortgage business. In this interview, we ask him to share his perspectives on the Company’s commercial mortgage growth strategies and future opportunities.
Tell us first about yourself.
I’ve been with First National since 2004 so over 14 years and prior to that I served at Manulife Financial and Merrill Lynch Financial. So my career is commercial real estate: it’s been my home for close to three decades. In terms of school, I attended Wilfrid Laurier University and the University of British Columbia where I studied Urban Land Economics.
You joined First National having served some very large commercial mortgage lenders.
Correct, but one of the facts that surprises a lot of people in the industry is that First National is the single largest commercial mortgage lender in Canada with, at last count, over $35 billion of commercial mortgages under management. Including renewals, we originated almost $7 billion of commercial loans in 2017.
What’s First National`s share of the commercial market?
Market data are hard to come by, but most of the estimates I’ve read from market participants suggest about $50 billion of commercial mortgage transactions occur annually in Canada. Using that number, First National has the leading share at around 12%. I recently attended a commercial real estate conference in New York and while just about every participant knew First National, they were shocked by our scale and growth. I don’t think they expected a non-bank lender to be as large.
What factors have driven First National’s leadership and the high rate of origination growth?
I would say there have been two catalysts. The first is a First National factor and it’s the entrepreneurial delivery of service. As entrepreneurs at heart, we are hard wired to respond to opportunity quickly, take smart risks and think big. This non-institutional lending approach really sets us apart and enables us to see challenges as opportunities to evolve or to set new precedents. We’ve shaped our processes so that the turnaround times from request to funding are extremely fast by industry standards and borrowers really appreciate it. To achieve that, we’ve aligned ourselves with dozens of funding partners, including life insurance companies, pension funds and banks that trust in our process to identify and scrutinize proposals and develop mortgage structures that address their capital deployment needs. By having a large funding network plus our own capital, and the drive and systems to succeed, we typically close transactions faster than anyone in the industry.
What’s the second catalyst?
It’s somewhat related but during the 2008 credit crisis, a number of sources of capital left the market. When that happened, some of the largest real estate companies in Canada went looking for new sources of liquidity and they found First National, which, at the time had just become an NHA MBS issuer with capital to place. That was a tipping point for our business, and after the credit crisis ended, those borrowers chose to stay with us rather than returning to their old lenders because they liked our service and responsiveness. Without naming names, one of those customers now has about a half billion-dollar portfolio with us; before the credit crisis, all of their business was with other lenders.
How do you keep this entrepreneurial spirit working as a much larger business?
It’s really part of the DNA of our organization. First National was founded by two entrepreneurs who are still leading us today and their attitude is infectious. We’ve also kept our organization flat so that complex decisions can be made quickly and accountability is never diluted. We get to the point of execution quickly so that solutions are timely. It’s also possible to be entrepreneurial when your team is well tenured and ours is across origination, underwriting, credit, funding and AML.
When you look to the future, what are your business goals?
Clearly, we want to maintain our service advantage as we grow, that’s our first objective. That means, for example, hiring professionals who share our passion for finding appropriate financial solutions for borrowers and funding partners and doing so expediently. As an example in 2018 we added Michael Williams to lead our Quebec team. We also operate with a number of financial goals for ourselves, such as growing our conventional book. We’ve made great headway on this front over the past four years. We also want commercial to become a bigger contributor to First National’s overall earnings.
Since you joined First National, commercial operations have experienced massive growth. Is it possible to do more?
That`s certainly our intention.