David William Beckingham
Dominion Lending Centres Commercial Capital Inc.
CMP: Congratulations, David. Now, why are so many brokers, despite the example you provide, reluctant to enter this potentially lucrative end of the business?
Beckingham: I believe most brokers are apprehensive about entering the commercial mortgage industry because it is complicated. To do well, the market requires that brokers possess a broad skill set, including experience with accounting, a good legal mind and a strong sales background. Experience with accounting is important because of the constant need to review and understand financial statements. Deep knowledge of contract, real estate and mortgage law is important because it is the backbone of every commercial mortgage transaction done. Finally, a strong sales background allows you to both acquire clients and then negotiate on their behalf. You can be a broker without this skill set, but having them gives you a huge advantage.
Another reason for some apprehension may be that the time required to develop a business in this industry is lengthy. For the reasons I’ve already talked about, it takes a long time to become a competent broker and the reality is that most young brokers don’t have the time or patience to survive the span of time needed to develop a solid income and network of business connections. At the minimum, with a strong background, it takes three to five years to earn a comfortable living on a commercial brokering income.
Lastly, I’d like to address the part of the question that pertains to the market being ‘potentially lucrative’. Make no mistake, there are lots of brokers out there struggling to survive as commercial mortgage brokers. The appeal of doing large deals leads to assumptions of an equally large income, but this is not always the case. The time between each deal can vary and for larger deals, it can be very long as it is much more difficult to fund each commercial loan. In order to be successful in commercial mortgages, you need a constant flow of commercial deals coming into the office in order to provide a broker with a decent income.
CMP: How have you thrived when others have struggled to attain these commercial deals?
Beckingham: People looking for a commercial mortgage lean toward doing business with a seasoned commercial mortgage professional. They invest enormous levels of time and money into commercial development and what they want in return is the certainty that project financing is handled ethically, professionally and on time. I suppose the answer is simple... I have worked very hard over the past 26 years to acquire industry knowledge and experience as a commercial mortgage broker which, in turn, has translated into a proven track record. This is appealing for borrowers.
This isn’t a formula, though. In some ways, it’s about character, work ethic and a never-say-never commitment to getting the deal done. It’s also influenced significantly by relationships... with lenders, developers and borrowers.
CMP: For this segment to grow, do you think more commercial brokers should mentor brokers interested in breaking in?
Beckingham: Yes. The only way to become a commercial mortgage broker, and for the commercial mortgage business to flourish, is through mentorship. When I was 21, I was mentored in the industry by a seasoned commercial broker who showed me the ropes. At that time, he had 20+ years in the business and this is how I got my start. It is a significant advantage to have several years of mentorship in the industry before working independently as a broker. Regrettably, the way the industry is currently set up, I believe there are limited opportunities for mentorship. Many experienced commercial mortgages have little time to mentor young professionals which at least in part, results in these young professionals leaving the industry before getting the experience they need to find success. The best formula for brokers wanting to get into the business is to work as an assistant to a senior commercial broker. The senior broker benefits from the support of an assistant and at the same time, the assistant earns experience in and exposure to the industry, and at the same time earns an income while working and learning.
CMP: How did 2012 compare to 2013? Were there more opportunities or fewer in commercial brokering?
Beckingham: For me, I was fortunate in 2013 to have several large transactions closing, which I normally don’t see and which resulted in a higher volume in business. In particular, I was fortunate to close a package of five shopping centres contained within one transaction and a package of 11 industrial buildings in a single transaction. These kinds of deals can make or break a commercial broker’s year.
In general however, 2013 was better than 2012 because more funds came into the marketplace and the availability of money increased. For example, the securitized mortgage industry continues to expand. Traditional avenues for financing, such as banks, credit unions and life companies expanded their lending programs and in addition to this, new securitzed mortgage funds established a stronger mortgage presence.
CMP: Many commercial brokers cite competition with the banks as constantly increasing. What do you do to set yourself apart and win as much business as possible?
Beckingham: I operate a service-oriented business. I don’t view banks as competition. Rather, I see them as a funding source. When I have a client who needs a commercial mortgage, I have two primary client needs to consider if finding the best deal possible: (1) the most cost-effective source of funds and (2) the place where my clients’ needs are best served. If that is the bank, then that’s where we’re going!
CMP: How much have tightened regulations affected your business?
Beckingham: Profoundly. Each and every year, the due diligence load associated with commercial mortgages increases. Tightening regulations have lengthened the time required to close a transaction, which, in turn, has increased work load and reduced incomes.
There is a silver lining, however. The increased regulation constraints has led to more borrowers needing the services of a broker because navigating the process of securing a commercial mortgage is a lot more difficult than it used to be.
CMP: What are some of the biggest obstacles brokers face with lenders?
Beckingham: In my view, there are two main obstacles with lenders. The first is the impact of increased regulations on mortgages being funded in Canada. This trend will never change however. Secondly, the availability of funds constantly ebbs and flows. One month, a particular lender will have exhausted their lending potential and then the next month, they will have a surplus of funds. It is in this ever-changing world of finance that opportunity exists for commercial mortgage brokers to prosper when they know the industry well and know where and when the money is available.
CMP: How has commercial brokering changed in the past few years?
Beckingham: More commercial brokers are affiliated with national firms. When I first entered the business, commercial brokers joined smaller, local firms. Now, the trend is for commercial brokers to join firms that run offices across the country because it provides them with a client base they would not otherwise have access to. Collectively, these national companies have large funding volumes and it is this volume that allows individual brokers access to more funding sources and lenders.
CMP: How do you see commercial brokering evolving?
Beckingham: Personally, I see the commercial brokerage industry expanding. More and more investment monies are flowing from the stock market into the commercial real estate market. This market transition will only increase the volume of business in the commercial real estate field because investors are increasingly interested in the security and stability of a real estate investment over a stock investment. This transition will only increase the need for commercial mortgages and commercial mortgage brokers alike.