First National Financial LP®

Borrower Perspectives: Scott Bearss, Partner and VP Finance - Elevate Development Corporation

  • First National Financial LP
With developments dating back to 2010, Elevate was formalized in 2014 in Vancouver, British Columbia. The Elevate Development Corporation builds quality residential, commercial and mixed-use projects from the ground up. The Group has also been successful resurrecting under-performing assets/properties for retention into its own mixed-use real estate portfolio. The company’s expertise includes real estate development, planning, banking, deal structure and accounting.  The lean, highly professional and passionate team stewards projects from inception to completion, with an eye for excellence, hidden value, community impact and optimum returns. In his role, Scott Bearss (along with co-owner, Gord MacPherson) oversees Elevate’s day-to-day operations, including strategic direction, team management, property sourcing, financing and property management. Scott is a seasoned corporate, commercial and real estate financier, with more than two decades of experience in the industry. 

We spoke to Scott about his perspectives on how the pandemic has impacted the industry, Elevate’s vision for growth, the company’s priorities heading for 2022/2023 and why he finds First National’s integrity and openness empowering.

Q: As life and business have normalized with the pandemic, what do you feel are the biggest industry impacts?

SB: It has become clear that hybrid work arrangements will continue. Owners, managers and companies need longer-term game plans to handle a permanent change in office and living landscapes. As a result, we see more benefit in building/finding mixed-use developments with heavier residential content in jurisdictions where people want to live, not necessarily close to where they work. We think there is going to be continued de-urbanization, as companies (and employee expectations) move from a time-driven model (9-5 standard work day) to a task-driven model (list of tasks to be managed by employees). For example, within a 40-kilometer ferry ride of Vancouver is some of the most beautiful terrain in the world. People can chose to move away from the city hustle to a slower lifestyle, without compromising their opportunities to work for big companies. Ultimately, proximity to where people want to play is trumping being close to the office. In response to that trend, we have adjusted our focus on (arguable) secondary markets. Once considered local/accessible retreats or vacation spots, people are now considering relocating, so they can prioritize lifestyle. 

We also believe that there is a healthy immigration backlog that will impact the Ontario and BC markets in the coming years. This injection of families and workers into major cities coupled with some likely ‘revenge’ spending more than two years of lockdowns will keep housing prices buoyant -- even in the face of continued interest rate hikes by the Bank of Canada to ease inflationary pressure. Our belief in high housing demand and prices makes renting a more attractive, affordable and pragmatic option for many people and families. We see immigration, pricing, employee habits, supply chain and interest rates as the key drivers of our future plans.    

Q: What changes have you seen in your business/market, and how are you adapting?

SB: Commercial will remain a material component of our business, especially in secondary markets. Food or grocery-anchored plazas performed well during COVID. Those assets proved resilient and able to survive in persistently stormy weather. 

The supply chain has also changed significantly. Materials, trades and many processes used to be automatic – like securing insurance on your project a day or two before closing or ordering kitchen appliances. Those processes now take a month or more, if available at all. We have introduced dedicated, weekly supply chain meetings to manage the flow of materials to and from our sites. The change in timelines and availability of ‘pieces,’ if not managed properly, can set off an expensive domino effect that can severely impact margin and project delivery. It will be nearly impossible to avoid some bumps and bruises. Minimizing them is the challenge.  

Q: What is your vision for growth? Have you modified it based on the pandemic? How so?

SB: Our business runs in two primary lanes – income-producing real estate and ‘greenfield’ development. Given the rising interest rate environment and the unpredictable supply chain climate, we have paused some start dates of our greenfield sites. Instead, we’ve shifted focus onto existing assets that are under-performing but have high potential in a post-pandemic environment. We have been fortunate to secure certain assets that can benefit from an infusion of well-placed capital to optimize their neighborhood relevance and offer healthy ongoing cash flow for our group.   

While we have shifted focus somewhat to secondary markets, we retain a close eye on the city as well. It’s always nice to build and add value in your own backyard. It just has to make sense.  

We have also educated ourselves on neighboring provinces/cities and acquired aligned assets/properties in Alberta that we believe are poised to exit the pandemic successfully.   

Prior to the pandemic, we leaned more heavily on purebred commercial. The pandemic has triggered an adjustment into more mixed-use activities (and arguably higher residential/rental footprints).   

Q: As you look at the rest of 2022 and beyond, what are your priorities?

SB: As a result of the hazy forecast on interest rates (75bps to 1.5%), we are looking closely at our financing terms and renewals. We believe the dust will settle and normalize within 18-24 months, so our rate and term decisions are based on that. We started locking in to longer terms last year (5-10 years) but that is getting less attractive now that rates have caught up. As a precaution, it has been a valuable exercise to revalue our income producing assets to see how they perform when interest rates increase by 1%-2%. That exercise has resulted in some interesting decisions.  

Despite a foggier crystal ball, we do see opportunity to grow and continue to press forward (albeit more selectively). Our screening process is more robust to determine the best allocation of capital and which assets/projects are a better fit for the changes in habits and flow of people/capital. It has been fun to expand the geographical boundaries we felt defined our market pre-pandemic. We see this expansion as a necessary survival tactic moving forward.  

Q: How is First National supporting you in your vision for growth beyond financing?

SB: We are never in a race to the bottom. The financier, trade or consultant with the lowest tender package doesn’t always win the business. We want to align ourselves with people of similar vintage who share a similar approach to life.  When it’s time to play, we play. When it’s time to put our heads down, they’re down. We also believe that friendships and business relationships can work beautifully if based on a foundation of honesty and shared frequencies.  In 15 years from now, ideally, we will be running alongside the same people and partners that see the world, humanity, family, humor, balance and development in the same way we do. Russ Syme, Paul Steckler and Alison Larson are those kind of people. They have brought a valuable balance of knowledge, empathy, humility and pragmatism that we really enjoy. When we have something serious to discuss, it’s discussed candidly. When it’s time for a laugh and glass of wine, we pop the cork.  

When we first met them in August 2020 , our project looked very different from what it has become. Our anchor tenant’s business was impacted significantly by COVID shutdowns, ultimately leading to a joint decision pivot the project entirely.  
Russ and Paul were tasteful, eloquent and empathetic in their follow up with us. Since inception, Paul, Russ and the First National team have kept their commitments, never over-promised anything and offered proactive value/suggestions at every turn. They know which goal posts can be flexed and which ones are fixed in place. When doing these projects, the level of commitment from both parties is significant. First National has felt like a true linemate on this project and has an equal voice at the table when we are making decisions.  And let’s face it, we like them as people.  

Q: Can you describe your first deal with First National? What stood out to you about the experience?

SB: The test of character is measured by how well someone operates when seas get rough. Losing an anchor tenant on a project of this size could have been met with a wide range of reactions. Paul and Russ reacted like complete pros and stood in lock step as the site was subdivided, re-zoned, re-anchored and broken up into three separate sub-projects.  We find it valuable and refreshing to work with partners that we can share any/all information with -- good, bad or indifferent -- with no filter and without concern of a knee jerk reaction. First National is that team. Russ and Paul have had their sleeves rolled up, phones on and willingness to work towards a ‘yes’ rather than starting from a ‘no.’ We have great respect for them as people and as professionals. 

Q: How does your First National advisor empower you in achieving your goals?

SB: Russ and Paul’s professional resumes speak for themselves. It’s more about who they are as people. When our group holds discussions with First National, there is no difference in tone, content or filter from the discussions we have internally as owners. It’s a clear and open exchange, even when the content is challenging. Trust, integrity and openness are necessary and powerful in a relationship, especially on a project/loan this size.   

Q: What do you value about your relationship with First National?

SB: I know the word gets thrown around a lot – but our relationship does feel like partnership, and there is an authentic connection between our teams. We share a core interest in and commitment to the success of this project. 

We often talk about our own team, First National, our build partner (Yorkbuilt) and the consultant team as the four legs of the table. All four need to be steady.    It’s difficult to measure mutual respect and chemistry on paper, but you can certainly feel it when you have it.   

Q: Any final thoughts?

SB: For every project, we are intentional about our partners and how we show up for each other. First National has showed up with an elusive mix of grace and content. Our partnership will endure without a doubt. Russ, Paul and Alison are professional, pragmatic and likeable. Onward and upward.