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Helping finance the future of real estate for clients

Ask the experts: Simon Becker and Alec Heffernan

900 The East Mall
900 The East Mall in Etobicoke is a multifamily, pre-development financed project facilitated by Colliers Debt Advisory.

Colliers Debt Advisory Group is a cohesive team of commercial real estate finance professionals who source and structure market-leading debt facilities across all asset classes coast-to-coast on behalf of private, institutional and public landlords, and developers. 

Our expertise stems from deep rooted relationships with the key decision makers behind every financial institution across the country. We understand our lenders’ pressure points and the types of deals they target which enables us to go out to market to source and structure opportunities that meet their requirements. 

What differentiates Colliers’ Debt Advisory team from general lenders?

Colliers Debt Advisory brokers go straight to the source to pair our clients with the best capital for their project. Lenders are active in many segments, however Debt Advisory, along with our lending relationships, focus predominantly on commercial real estate finance. 

The lending landscape is constantly evolving and due to current economic conditions, we’re seeing lenders’ risk tolerance adjust accordingly. Frequent touch points with the lending community to discuss quality mortgage opportunities is how we continue to build and maintain our relationships. 

Our strategic relationships with the lending community allows us to matchmake quality borrowers and projects with the right source of capital. We then use that expertise to put together comprehensive loan applications tailored to the target audience, whether it be a pension fund, insurance company, bank, credit union, trust, non-bank lender, or private lender.

What client profiles typically use Colliers Debt Advisory services?

We’re all about relationships and enjoy working with groups from local landlords and developers to institutions and public REITs. With expertise in tailored finance and commercial real estate, we understand both sides of the relationship, mitigating risk and maximizing opportunity. Our team includes experts who specialize in specific asset classes. For example, Simon in Alberta is predominantly purpose-built-rental, residential condo, industrial, and retail; while Alec in Toronto is working mostly with residential condo construction, purpose built rental, and industrial projects. 

We’re active across all asset classes, both in construction and term financing, however lenders’ appetite continues to weigh more heavily on multifamily and industrial sectors and so naturally we’re very active in these spaces. We have seen considerable, recent growth in multifamily and industrial from investors reacting to industry factors like low-vacancy rates and availability.

We’re also seeing considerable amount of repurposing. For example, we’ve facilitated structured debt solutions for several office-to-residential conversions in Alberta and Ontario.

How have recent economic trends and policies impacted the Debt Advisory sector and its requirements within commercial real estate?

The recent upward movement of interest rates has caused challenges for many looking to finance new construction or refinance existing properties; the result being that borrowers must inject additional cash equity into their projects or bring additional mezzanine debt. We are also seeing complications on replacing construction debt with term debt upon completion of new developments, with shifting metrics from when deals were written versus when they are closing.

Lenders have been tightening their underwriting parameters particularly for conventional construction loans in anticipation of new regulations being implemented this year, namely Basel III, which we believe will entice new lenders to enter the CMHC landscape in 2023.

In most markets, the purpose-built rental space is somewhat insulated due to the various programs available through CMHC insured financing whereby, preferred interest rates and extended amortization improve loan metrics that allow for greater leverage. The lack of supply and increasing population through interprovincial migration and immigration has created an urgent need that supersedes the challenges of the current interest rate environment. Our office is very well versed and extremely active in this space, both for construction as well as permanent financing.  

Through communication, creative loan structuring, and our wide network, we have been able to resolve most of the frequently occurring issues for our clients. As a result of our volume and coast-to-coast network of experts, we can share our best practices and precedents to help all our clients navigate the current market.

Timing is everything, given the volatility in the bond market we want to pair our clients with lenders who can quickly execute, such that, we can mitigate against interest rate volatility.

How do you customize financing solutions for your clients?

Each client and transaction are different. We customize and tailor our presentations to address our clients’ wants and needs while addressing our lenders’ potential concerns by outlining the challenges and providing mitigants. 

Our approach is always rooted in understanding our lenders’ risk tolerance. We put an emphasis on upfront due diligence to ensure we clearly understand potential hurdles and can mitigate potential risks. 

Using our expertise in commercial real estate, we assess the property and our clients’ objectives to adequately pair them with lenders that are best potential partners. We are very transparent throughout the process and ensure all parties are aware of our approach to underwriting.

We have a vast lender network and understand their lending practices. Once we have a strategy that aligns to our client, we approach only viable lending partners to create a competitive situation and avoid blindly spamming the marketplace. Every loan package is specifically tailored to the right lending audience. Upon picking the right lender, we work with our clients to ensure a smooth closing.



Colliers

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