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Q&A

Adam Farber

Private lending continues to grow

Private equity lender and director of US operations CORWIN MORTGAGE CAPITAL

Years in the industry 15 Favourite part of working in the mortgage industry “It allows me the opportunity to assist people, often in times of need. We are able to service a segment of the market that is overlooked by traditional institutions”

How are things in the private lending space right now? The space has been extremely robust over the last 12 months. As banks are tightening their lending criteria, it has created a large segment for private lenders. We are continuing to see a steady increase in demand from borrowers.

Are any challenges presenting themselves right now? I would have to say the biggest challenge facing the industry is the amount of competition and, as a result, the massive inflows of capital into the space. It is quite logical – in a low-interest-rate environment, investors are starving for yield. Investors are unable to find yield in the bond market; therefore, it attracts ‘mom-and-pop capital.’ Investors see value in high-single-digit returns secured by quality real estate.

So how do you compete in an increasingly crowded field? At Corwin, we pride ourselves on having competitive rates with the lowest lender fees. Our ability to fund a deal on an expedited basis also sets us apart.

What’s the outlook for the future of private lending? We believe there will be continued expansion in the market. The federal government continues to implement

Toronto MIC appoints a new board member

The Mortgage Company of Canada [MCC], a leading investment corporation that offers single-family residential mortgages for clients in the Greater Toronto Area, has announced the appointment of James Garcelon to its board of directors. Garcelon, a chartered financial analyst, brings with him 20 years of experience in capital markets. He is currently a portfolio manager with Shaunessy Investment Counsel, and he previously held senior positions at National Bank Financial and HSBC Securities.

additional mortgage rules, which potentially distance people further from institutional lenders. The Canadian real estate market has strong fundamentals, and we are extremely optimistic about future growth in the space.

Are there any greater economic trends particularly affecting the space right now? Further to my point on challenges presented to us, with the low-interest-rate environment causing massive inflows of investment capital, it would be important to note, with less regulation than your traditional investment vehicles – stocks, bonds, mutual funds, etc. – investors’ due diligence has never been more important. At Corwin, we pride ourselves on being able to present our investors with deals that have been fairly priced. We’re also seeing a little bit of a rise in Canadian borrowing for vacation properties in the United States, particularly South Florida. We had a lot of Canadians purchase property during the economic downturn in the United States, and they’ve seen their properties, in some cases, double in value. As well, the Canadian currency has been devalued. So just on the currency alone, people are making 40% or 50%. Say you bought your property in South Florida in 2011, and the Canadian dollar was worth six cents more than the American dollar. Now the Canadian dollar is worth about 45 cents less than the American dollar, so just on the exchange alone, there’s a lot of equity. So a lot of people, we find, are cashing out or extracting equity.

Shadow banking on the rise in the US

Stanford University professor Arvind Krishnamurthy told the American Economic Association’s annual conference that some lending activity in the US already has migrated to less-regulated sectors as the Fed and other authorities have made it more expensive for banks to do business by requiring them to hold more capital. Williams noted, however, that banks have backed away from more speculative leveraged deals after the regulators introduced guidelines in 2013 to curb excessive risk-taking in the market.

Real estate investors confident for 2016

According to a recent Colliers International survey of more than 600 investors, including REITs, private equity firms and institutions with a collective US$1.5 trillion in real estate assets, sentiment remains optimistic; more than half of those polled expect property assets to increase in 2016. The US is the favoured market, but global gateway cities are also on the shopping list. The most popular investment types were offices, followed by industrial space, developments and shopping centres.

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