ANDREW C. BENNETT
Nexus Investment Corporation
One size doesn’t fit all
Years as a commercial broker: 35
Loans closed in 2014: 25
Location: Richmond, BC
CMP: How did you get into the commercial space?
I’ve always been in the commercial space. Years ago when I was working in financial institutions, I was in the commercial space. As a result of company mergers and such, I didn’t particularly like the direction the new merged company was going, so a friend of mine and I went off and started Nexus.
CMP: What advice would you give to residential brokers who want to switch?
They have to do a lot of homework. One of the reasons we’re successful is that we work very closely with our investor clients. The relationships we have with them are multifaceted, and that’s only because they’ve developed over the length of time that they have. We do the complete underwriting. We do all of their annual reviews for each loan that we broker. We handle all of the renewals; we handle all of the assumptions. If there’s a problem with the loan, be it a fire insurance renewal or a delinquency problem, they call us first.
CMP: What’s the secret to building a successful business?
You have to really pay attention to what’s going on out there. A lot of people try to come into the commercial space and are not successful at it because they look at the commercial space in the same style of underwriting as they do a residential transaction. It’s all about cash flow when it comes to commercial properties. So it’s about paying attention to what is really going on and understanding what your investor lenders are looking from. Commercial business is different, from an apartment building to a shopping centre to a warehouse. All of those properties are underwritten differently. There are all these different factors, so the best thing to do is come to the realization that one size doesn’t fit all.
CMP: How about building new business?
We get a tremendous amount of referrals from other clients, because we try to take an approach with the client similar to the one we take with the investor – being something a little bit more than just giving you a mortgage. Anyone can give you a mortgage, and it will meet your conditions now. But it has to work for you in a year, five years, whatever. You have to know what’s going on with their company. Is their intention over the next few years to acquire similar properties? If so, maybe you want to go for a shorter term so they can refinance and pull some equity out of that property to buy more. You have to really get inside your client’s head and understand what that transaction’s about.
CMP: What’s the most important thing a commercial broker can do to grow his or her business?
Be professional. There’s a tremendous amount of people out there who are so focused on the transaction in front of them – going through hoops and trying anything.
You have to take the professional point of view of the bigger picture. Yes, you want to do the transaction … but be prepared to throw in the towel if you have to. You’re managing the expectations of a lot of people – the borrower, your investor. You’re managing your own expectations and those of the staff of the office. So you have a lot of competing forces pulling on you, and you have to make sure they’re all pulling in the same direction.
CMP: How can commercial brokerages continue to thrive in today’s market?
You have to become more than just a broker. You have to become a full-service operation. If you don’t do that, what are you doing? You have to bring value. You cannot become, for lack of a better description, a courier in a suit. You can’t just take the raw data someone has handed you and stick it on a letterhead and say, “Here’s the deal, what do you think of it?” You need to know what each of your investors’ underwriting criteria is. Some have a loan ceiling of $4 million. We also have investors who don’t even want to look at a loan unless it’s $10 million and up. We spend a lot of time with our investor clients. Because their needs change throughout the fiscal year, we spend a lot of time with them going back and forth to have a clear understanding of what they’re actually looking for. And as a result of that, our kill ratio is in the high 90s. Usually when I present a deal to an investor, it gets approved.
CMP: What trends have you noticed this year? Have you had to adapt your strategies to market conditions?
We’re an approved correspondent for [the Canada Mortgage and Housing Corporation]. In the commercial business, their underwriting is becoming very stringent.
We’ve had cases where loans we did with CMHC three years ago, we couldn’t do now. Their policies have tightened that much. That’s probably the biggest single thing, and that obviously only affects multifamily. Lenders are generally becoming a little more conservative, but that’s primarily because interest rates are so low.