Founded in 1992 in Leamington, Ontario, Piroli Group started in general contracting (under the name of Piroli Construction) but has evolved into a multi-faceted development group. Family run and invested in the vibrancy and growth of Southwestern Ontario, Piroli Group has completed 270 projects to date spanning residential, commercial and municipal.
We spoke to Rob about how he’s adapting to the current economic climate, why steady growth is so important and how First National has supported him in his vision of investing in the Southwestern Ontario market.
Q: In the current economic climate, how do you feel the industry has changed?
RP: It’s a challenging time to build. Inflation is still quite high. Construction costs have stayed high and keep rising. Interest rates are staying flat for the time being. All those economic factors affect financing because, in general, projects have become 10 – 15% more costly than just the year before. As interest rates started to rise, competition also became fiercer. There are now a lot of people out there trying to get deals done and secure CMHC financing. Underwriters have had to sharpen their pencils, and some financial organizations made promises they couldn’t deliver on. Those more inexperienced players end up having to rework deals because they aren’t viable for CMHC.
Q: What changes have you seen in your business/market, and how are you adapting?
RP: Apartments are still renting, but not as quickly as they once did. We are adapting in a few ways. First, we are expanding our target demographic beyond baby boomers and the aging population to include young urban professionals. With the cost of housing and interest rates, these young people need to rent for a few years while saving for a home. Diversifying this way is working, and we’re supporting the needs of the market. The change in strategy is also affecting how we’re building. For example, we have to increase our parking ratio from 1.25 parking spaces per unit to 1.5 to accommodate younger renters who often have two cars. Our sales remain stable, and we are pressing forward.
Q: What is your vision for growth? Have you modified it based on the current economic conditions? How so?
RP: Although there is a large demand for housing, we are going to hold steady at building one building per year. For me right now, I envision our growth trajectory at a 35 degree angle. Smart and steady. There is volatility in the market that remains unsolved, especially in terms of financing. We are a company that finances projects, fills them within a year and operates them. With the absence of any sound strategy from the Federal Government to protect developers like me who need a solid financial foundation, I have to remain vigilant and cautious. Right now, we’re financing buildings at just under five per cent. That’s a tragic difference from where it was three years ago when we were financing buildings at just under two per cent. In projects of our size, that’s multi millions of dollars.
Q: As you consider 2024 and beyond, what are your priorities?
RP: I am dedicated to staying in the Southwestern Ontario market. We are not going to be aggressive or move quickly in the next two to three years. We may possibly purchase some good land that we can rezone when times get a bit better. There is too much volatility in the market, and we won’t over expense ourselves. I also believe that the government and CMHC need to do more to help the industry. We need low-rate money to build and keep construction costs in check, so rental housing doesn’t outprice itself. Every level of government is introducing small initiatives, but it’s not the kick in the pants the industry really needs. If you want more apartments to address the housing crisis, you have to make it easier for people to build through grants. The government needs to do more to create a big incentive for housing.
Q: How is First National supporting you in your vision for growth beyond financing?
RP: When we built our first building in Windsor, we were pioneers. And we have stayed consistent with our vision of investing in Southwestern Ontario because we believe it is an undiscovered golden gem. Our approach hasn’t wavered. We build mid-rise rental apartments with good amenities. Our build and construction phase is manageable with an average timeframe of 16 months (compared to the typical three years). When I started working with Jim Foote at First National, CMHC wasn’t familiar with our area, so our valuations weren’t favourable. Jim helped to push the limits with CMHC and is still doing that. He also shares a lot of data and insight from other similar type secondary markets, so we really understand what rents are achievable. First National has been and continues to be a great partner of ours in promoting development in Southwestern Ontario.
Q: What stands out to you about working with First National?
RP: Jim’s approach is always, “How can we help Piroli? We need to do this for him. We need to listen to him.” My expertise and credibility as the builder and owner are always respected. I communicated two key cash flow priorities to Jim – funding HST short term and keeping sub-trades happy by paying them on time. Jim was instrumental in establishing a program specific to me to address those priorities. I have gotten the financing I’ve needed for my projects to be viable, which has been the key to our success. My sub-trades get paid on time, which eliminates cost/time overruns, liens on the properties and lawsuits. I can focus on what matters most to my business – building great buildings and servicing my residents.
Q: How does your First National advisor support you in achieving your goals?
RP: Jim represents Piroli in the same way he would represent bigger developers. We are treated the same way, regardless of size. I know he gives me the same consideration and time. He always goes to bat for me. Jim treats our projects like they are his own. He’s passionate about things getting done on time and achieving the best result. We have become personal friends, and I can say with full confidence that Jim is excellent at what he does and goes all in with his clients. He is a great asset to First National.
Q: What do you value about First National’s approach?
RP: First National’s approach is very similar to mine. There isn’t this urgency to go out and grab all the business. First National is discerning. The team there wants good partners and creates relationships for ongoing banking. And you get so much more than financing. You get consulting too. Jim shares so much advice and connects me into First National’s network of professionals that have been vetted and have track record. At First National, you’re a person, not a number. It’s why I like working with First National so much.
Q: What do you believe motivates First National within your relationship and within its overall business?
RP: We share a similar vision of steady growth. First National has been very successful with growing really good accounts while mitigating volatility. That approach inspires me in my business. Seeing First National’s strength and endurance gives me both confidence in our partnership and motivation to stay the course and trust the process.
Q: If you could share one piece of wisdom with your peers right now, what would it be?
RP: We have been successful in the past 10 years because we have stayed true to the notion that steady growth is good growth. We don’t bite off more than we can chew. That approach has helped us rides the waves of the economy. In this business, patience is truly a virtue. Be patient with your company. It takes time to grow into success, but the rewards do come. Staying committed to steady growth has helped me achieve the goals I set out for myself and for the company.