First National Financial LP®

Russell Syme’s Key Takeaways From Today’s Western Canada Apartment Investment Conference

  • First National Financial LP

Western Canadian property owners and developers gathered virtually on April 13, 2021 for Canadian Real Estate Forums’ Western Canada Apartment Investment Conference. During the expert panel discussion Thinking Outside The Box: The Next Steps With New Built Rental - From Concept To Delivery To Lease-Up, First National's Russ Syme, Assistant Vice President, Commercial Financing, offered several insights.   

First National, Canada’s largest apartment lender, originated $9.1 billion of new multi-unit mortgages last year – a record, despite the pandemic – and this encompassed financings in major and secondary markets nationwide and throughout Western Canada.

Some of the ways we fund apartment developments include CMHC Standard Market and CMHC Flex programs, conventional construction and term loans, bridge loans and second mortgages.

Our 30+ years of lending experience demonstrates that it is important to start planning apartment debt financings as early as possible since the choice of how to fund a project is critical to overall success.

Starting early allows alternative financing programs to be compared and thoroughly evaluated based on a host of factors including IRR, interest rate risk and borrowing cost.

For a recent 5-storey, 128-unit apartment project in a smaller B.C. market, we were engaged when the borrower had proformas and was just entering discussions with the city for building permission.

On this project, we assessed and presented three options: a CMHC Flex-B program with an affordable rental unit component, the CMHC Market program and a Conventional construction loanthe CMHC RCFI product was not considered because it did not fit the borrower’s needs.

The borrower agreed to provide discounted rents on 10% of the units – benefitting the community – and, in exchange, the City provided the borrower with a discount on municipal fees.

Based on First National’s evaluation, the CMHC-Flex B program proved to be superior to the CMHC Standard Market loan – even though CMHC premiums of 3.75% were the same in both cases – as the owner only had to put in 5% equity versus 25% equity on a CMHC Standard Market program and 20-25% on a conventional construction loan.

Interest rate savings on the CMHC-Flex B loan was approximately 1% versus a conventional loan, an attractive boost to the project’s economics.

One of the key advantages of the Flex-B construction loan was it provided the owner the ability to convert the construction loan to a term loan at occupancy – without a lease up requirement – which mitigated interest-rate risk and reduced pressure to find and vet tenants.

With a team of 66 originators and underwriters, First National does this type of analysis every day to ensure apartment owners get the loan that best fits their needs from concept to delivery to lease up and for the long term.

Interested in learning more about why borrowing from First National is a better alternative, please contact your First National advisor today.