Firm Capital celebrates 25 years of hard work and lasting relationships

Non-bank lender Firm Capital Mortgage Investment Corporation is celebrating 25 years in business, a corporate milestone that provides some well-earned satisfaction for Eli Dadouch, the company’s president and chief executive.
“Organizations are built on great people and we have a great senior management team here so am I surprised by our success? No,” he said. “We have hard, hard-working people, so we have earned it.
“The average person has been here many, many years. Success is derived from hard work, integrity and commitment to the industry and our people all have that.”
Firm Capital operates with service excellence and a pricing guarantee which calls for the company to issue a firm commitment within 24 hours of seeing a transaction as well as an interest guarantee to be 100 basis points cheaper than any non-bank lender and 50 basis points better on term loans.
2012 a solid year
The Toronto-based company, which provides loans for residential and commercial construction, bridge and conventional real estate finance, last year completed just over $515 million in new mortgage financings, down from $655 million the year before.
It is off to a strong start this year, with $210 million in the first quarter alone. That includes a $24-million bridge loan secured by three industrial buildings in Brampton and Brantford, Ont.; a $50.9-million first mortgage construction loan for a 196-unit condo building in Calgary; and a $20-million first mortgage land loan on 6.47 acres of high density residential condo lands in Toronto.
As a niche loan provider, First Capital “will follow wherever there is a shortfall of capital (and) we will fill those voids,” said Dadouch.
While the company has largely stayed the same over the past five years, what changes regularly is its mix of clients and the loans it offers.
“What changes is the area we focus on,” Dadouch said. “Some periods of time it can be large construction financings, sometimes it can be mid-sized public company financing, sometimes it is small home builders depending on what part of the cycle of the market you are in and what availability of capital is.
“We can move to different sectors of the space, towards where the needs are. The beauty of the business is that when the banks move out of a sector, there is opportunity. I think there is a lot of capital in Ontario so that is why we have been not as active in Ontario but there are other parts of Canada where you can do quite well.”
Though its clients differ, Firm Capital has made its reputation as a shrewd bridge lender.
“We specialize in bridge, short-term lending opportunities,” Dadouch said. “Twelve months . . . 18 months.”
Bank retreats have also recently opened up a new niche for Firm Capital, its president noted: “The banks have basically shut down in Ontario on construction financing.”
Blunt market assessments
Dadouch does not mince words when it comes to summing up the state of the industry.
“I think in Ontario the market is extremely overpriced,” he said. “I think that transactions are being done more on an arbitrage basis than a common-sense real estate basis. People are buying at low cap rates because they can finance at low interest rates.
“I think common-sense real estate has been put aside for the arbitrage of real estate which is playing the spread game between caps and interest rates.”
That overpriced state in Ontario is particularly acute in the multi-residential and high-rise sectors, he said.
So what will end the arbitrage transactions? An economic shock to the system of some sort, he said.
“It could be higher interest rates, it could be a lack of demand, it could be high unemployment, anything can give.
“But you can still make money here if you stick to real estate fundamentals. How do you make money in real estate? You buy assets that need to be turned around, that need to be repositioned, that are value-enhancing assets as opposed to value mature” investments.
First Capital has built a loan portfolio of nearly $900 million – with no defaults, Dadouch adds – by being extremely picky about its clients.
“Our success ratio is one in 20, we look at 20 to make one deal.”

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