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Development financing continues despite COVID-19: Canada ICI

Canada ICI Capital Corporation was established by Dale Klein in 1993 as a boutique mortgage origi...

IMAGE: ICI Canada arranged the financing for MOD Developments' 55C condominium development. (Courtesy ICI Canada)

ICI Canada arranged the financing for MOD Developments’ 55C Residences condominium development. (Courtesy ICI Canada)

Canada ICI Capital Corporation was established by Dale Klein in 1993 as a boutique mortgage origination firm and has since been involved with funding transactions worth more than $20 billion.

However, it wasn’t until very recently that it had to broker a major loan in the midst of an economic shutdown fuelled by government actions aimed at curtailing the spread of the COVID-19 virus.

Canada ICI announced earlier this month it had successfully arranged a $288-million construction loan for MOD Developments Inc.’s 48-storey, 541-suite 55C Residences condominium project in Toronto’s upscale Yorkville neighbourhood.

“The loan had been in the works since late 2019; however nothing was binding prior to the pandemic hitting in early March,” said Canada ICI director of mortgage origination Jonah Brown, who arranged and led the transaction with colleague Aaron Sun from its Toronto office.

“As such, the loan was committed, signed and funded during the first month of the government-mandated lockdown.”

The loan-arrangement process

The construction loan was led by a major Canadian life insurance company and includes a syndicate of five institutional lenders.

“We saw lender sentiment start shifting in early March and liquidity in the market retrench shortly thereafter,” Brown told RENX.

“Although all parties wanted to proceed with the loan, we were working with credit committees that had quickly pivoted towards a defensive posture.”

Brown said the number of lenders in the market diminished and those that remained active reduced their appetite for risk and the maximum size of their loans. Canada ICI successfully pushed each lender involved in the deal to take on its maximum allowable loan.

“As with most loans, and certainly ones of this magnitude, at least some portion of the negotiations would (normally) take place in person,” said Brown.

“With the mandated lockdown in place, absolutely everything was done virtually, which posted a new set of challenges to the process which we hadn’t navigated in the past.”

Doing business during a pandemic

IMAGE: Dale Klein is the founder, president and CEO of ICI Canada. (Courtesy ICI)

Dale Klein is the founder, president and CEO of ICI Canada. (Courtesy ICI)

Klein, Canada ICI’s president and chief executive officer, told RENX the company had robust information technology infrastructure pre-pandemic. That helped it segregate its servicing and funding groups into separate locations in mid-March and shift its origination team to a work-from-home structure in order to create redundancy throughout the organization.

“Although the pandemic has temporarily changed the way that we’ve worked, and has presented a different set of risks and challenges, our strategy hasn’t changed for either our origination team or asset management team who are still focused on relationships, communication and transparency in our approach with all of the organization’s stakeholders,” said Klein.

While the way Canada ICI does business has changed to adapt to the unprecedented circumstances, that business hasn’t slowed. Klein said the mortgage origination teams in each of its five offices have been extremely busy and the pipeline of active opportunities has remained consistent with pre-COVID-19 levels.

“We’ve been very selective on the timing of which loan opportunities are presented to our mortgage investors to allow the market to recalibrate as more data points come in.”

Canada ICI’s mortgage asset management wing has been kept busy with its more than 25 mortgage investor clients. Team members have been evaluating portfolios and retesting original assumptions against current conditions.

“Although several mortgage deferral requests were made at the beginning of the pandemic, the vast majority of our loans have performed very well and we have been required to grant far less loan deferral requests than originally anticipated,” said Klein.

“We’ll continue to monitor the portfolio closely, but have also been pleased with how the portfolio has performed.”

Canada ICI projects and future growth

Canada ICI is one of the country’s leading commercial real estate finance firms, originating and funding in excess of $4.5 billion annually in commercial mortgages through offices in Toronto, Ottawa, Calgary, Edmonton and Winnipeg.

Projects Canada ICI has been involved with include:

* Lumen at South Pointe, a 148-unit rental townhouse complex in Winnipeg;

* the 21-storey, 195-unit Glasshouse Condos building, which includes retail on the main level, in downtown Winnipeg;

* Enbridge Centre, a 25-storey office building in downtown Edmonton;

* J22, a mixed-use development with 207 rental units built above a 60,000-square-foot commercial podium on Edmonton’s Jasper Avenue;

* Edmonton’s 279,000-square-foot CN Tower office building;

* and Barron Building, a 130,000-square-foot office and retail space in downtown Calgary.

“We hope to be announcing the expansion into two potential markets by Q4 of 2020 and deepening the bench in the markets that we currently operate in,” said Klein.

“The dislocation of markets has de-commoditized mortgage capital for both borrowers and mortgage investors and there will be much more of a need for high-quality advisory for borrowers and access to high-quality mortgage investments for investors.”