I am delighted to share the news that two highly respected financial services companies – Birch Hill Equity Partners Management and Brookfield Asset Management – have agreed to acquire the majority shares of First National. This announcement represents a new chapter for us as we seek to grow our platform, drive innovation and continue to deliver for you.
Best of all, Stephen Smith and Moray Tawse, our co-founders, will remain significant shareholders in First National, ensuring continuity of approach for the future. We expect this transaction to be finalized in the fourth quarter of this year. In the interim and post-closing of the transaction, it will be business as usual for you and us.
In that regard, and since we have now passed the halfway point in 2025, a year of competing narratives, it’s time for a First National perspective on the commercial lending environment and our outlook.
I say competing narratives because on the one hand, the Canadian economy (including employment) remains relatively robust, while on the other, cross-border tariffs (and threats of additional US trade actions against Canada) have been unsettling.
These divergent factors are playing out in real time but did not stop First National from fulfilling our Better Lending mission. During our recently completed second quarter, we financed a record $5.1 billion of commercial and multi-unit residential mortgages. It was our most productive quarter ever and with it, First National further advanced our status as the largest multi-unit property lender in the country, now with a mortgage book of $61.9 billion, up 16% from a year ago.
This latest performance builds on the strong results generated in the first quarter of 2025. It was also achieved even though it’s been a relatively quiet period for property trades and new construction. This is understandable given macroeconomic factors, and in the case of new construction, changes made to CMHC underwriting policies back in November of 2024. However, for First National, those factors have been more than offset by significant and broad-based demand, including for refinancing and renewals.
Before offering forward-looking comments, my sincere thanks to you and my First National colleagues for this success. I am particularly grateful for the assistance our Asset Management Group received this spring as they collected annual financial information on loan accounts. The timely receipt of this data by all clients is more important than ever.
Looking ahead: lower construction costs, higher LTCs
Piecing together a market and business outlook is never easy, especially in this economic environment, but on balance, we believe the next two quarters offer some interesting possibilities.
For those who have been waiting to put shovels in the ground, anecdotal evidence in Toronto and Vancouver suggests overall construction costs have come down by as much as 15% in recent months as building activity has slowed. This provides a window of opportunity.
Additionally, CMHC has now confirmed that it is prepared to underwrite at 85% loan to construction cost (subject to debt cover) for its Standard Rental Market program, a change from the 75% LTC level indicated in November 2024. Notwithstanding higher premiums recently enacted by the National Housing Agency, we believe the requirement for 15% equity in an insured construction deal should animate market activity. In fact, I believe CMHC’s Standard Rental Market program is well worth considering as it allows users, upon building completion, to get up to 100% of their construction costs covered without any rental achievement. That is very positive and consistent with our advocacy efforts.
Also supportive of activity is public policy; namely a desire by all levels of government to stimulate housing starts, and at the municipal level, consider changes that would reduce the development charge burden. In our role as your advocate, we encourage policymakers to continue these efforts and we are monitoring municipal incentives, market by market, on your behalf. The availability of the tax rebate on new purpose-built rental housing remains another helpful although time-bound incentive.
All things being equal, First National is prepared for an active and positive conclusion to 2025 with substantial liquidity and a diverse lending product portfolio – insured and conventional.
Opening new doors beyond multi-unit residential
Earlier this year, First National introduced a broker service for conventional lending in segments of the commercial property market beyond multi-unit residential. Having now successfully brokered significant deals and with a growing opportunity pipeline, we’re very pleased with market reception.
With this growth and potential, we are now in the market to add to our origination team. Should you know of an industry professional who is interested in joining First National, please let me know. While our core business remains multi-unit property lending, I believe other segments of the commercial market deserve competitive choice and we are pleased to enable it through this new service.
Bond yields, Rate Lock and terms
Since early June, bond yields have moved up by approximately 30 basis points. This type of movement can be mitigated with First National’s Early Rate Lock hedging program. If you are planning a financing later this year, I encourage you to speak to your First National advisor about this program since hedging interest rate risk is always a smart move.
I’ve commented in the past about the value of choosing 10 over 5-year mortgage terms. While we have an abundant supply of 5-year money, we remain convinced that 10-year terms make sense for cash-flowing assets that are likely to remain in your portfolio for the long term. A 10-year term also provides greater certainty and pushes out refinancing risk.
On call and on point for Better Lending
First National’s mission is to provide you with Better Lending. That means standing ready at all times to create financing solutions that work for you. Better Lending, as we define it, is not just the act of lending itself, it’s what happens before and after to responsively and expertly address your needs for market intelligence, benchmarking, independent analysis, advocacy, and loan lifecycle support.
Better Lending is our way of serving you and it’s something you can count on from First National throughout 2025 and well beyond.