ALTERNATIVE SOURCES OF CAPITAL: SMALLER BANKS, PRIVATE EQUITY, CREDIT UNIONS AND FOREIGN BANKS Sample transactions
Acquisition financing Loan Amount: $15,300,000 ($93/sf) Property Type: 465,000sf Class A office building Occupancy: Fully occupied, single tenant with one year remaining on lease Location: Montreal, Qc Term: 2 years Amortization: Interest only Loan-to-purchase: 92.5% 2
Challenges Tight timeline to close (Dec. 31 st ) Pending vacancy High leverage (>75%) Solutions / Mitigants Property acquired well below replacement cost ($100/sf) Stabilized value well above purchase + lease-up/carrying costs Structured transaction (A/B) Cash sweep during remaining term of lease Experienced owner / Strong sponsorship Exit strategy: lease-up of property (24 month timeline) and refinance with long term debt. 3
Bridge/construction financing Loan Amount: $19,000,000 ($105,000/unit) Property Type: retirement residence; conversion from long term health care to independent living Occupancy: < 50% Location: Montreal, Qc Term: 2 years Amortization: Interest only LTC: 82% LTV: 70% 4
Challenges existing CMHC debt challenged history with previous ownership group current lender does not provide construction financing not a ground-up construction; conversion program; determination of equity high vacancy Solutions / Mitigants acquired 50% of existing 1 st mortgage provided 2 nd ranking construction financing on a pari-passu basis with existing lender and serviced construction component Experienced owner / operator Strong sponsorship Exit strategy: upon completion of the conversion program and lease-up of the property, refinance on either conventional or insured basis 5
EQUITABLE BANK COMPANY OVERVIEW Equitable Bank is the 9 th largest independent Schedule I bank servicing clients coast to coast with offices in Vancouver, Calgary, Toronto and Montreal. Founded in 1972 initially as a trust company, it is publicly traded with a market cap of $1.2B and over $17B in assets under management with over 500 employees Primarily focused in 3 areas of business: single family lending, commercial mortgage lending and deposit services which also includes a new digital banking platform launched in 2016 LENDING PROGRAM STRENGHTS Strength is in shorter term, asset repositioning transactions Ability to structure and participate in complex transactions with partners providing a one-stop-shop solution for borrowers and provide financing beyond the traditional 75% LTV levels Open to sub-debt with the right lender/partner as well as participation in loan syndications whether on an A/B structure or on a pari-passu basis Commercial Finance Group (CFG) program covers most standard asset classes including multi-res, retail, office, industrial, retirement, self storage, student housing, condo inventory and land. LENDING PROGRAM LIMITATIONS Pricing on term financing remains somewhat wide of the market for standard asset class products Cannot provide secondary financing Current policy restricts financing on hospitality product Limited land bucket as well as interest-only financing 6
EQUITABLE BANK COMPETITIVE ADVANTAGE Smaller bank, more nimble hence the ability to execute quickly Balance sheet lender with significant room to grow the portfolio Open to work with other lenders on loan syndications and complex transactions OPPORTUNITIES IN 2017 Without the capital markets opening up, lenders are constantly having to manage individual borrower limits which will require either selling down some of the risk and/or syndication of new facilities Government regulators intervention to slow some heated markets in single family could result in added opportunities for purpose built rental product 7