The global pandemic tested the real estate market in ways never before imagined. While conditions in the North American residential and commercial real estate markets varied widely from the effects of the pandemic, one thing remained common: change at an unprecedented pace.
As short-term challenges from restrictions and lockdowns materialized, businesses had to react and adapt quickly to be successful – a model, Trez Capital is built on. Trez Capital specializes in offering debt financing and equity solutions for unique real estate projects across Canada and the U.S. The organization is dedicated to understanding the details of each real estate project they invest in or lend to, and with this comes the understanding that the velocity of capital for the right project matters.
“When I look back on this unprecedented year, one thing is certain: what it took to secure a transaction in Q3 of 2020 is entirely different than what it takes today,” said Eric Horie, Senior Vice President, Head of Origination, Canada at Trez Capital. “Our business model at Trez Capital was already set up for success, and we were prepared to adapt as quickly as the market changed. We’re known for our rigorous due diligence process and thanks to our in-depth local market knowledge, we’ve been able to continue to move our business forward during these changing times.”
Central to the company’s criteria for selecting a lending or investment opportunity is to focus on markets with a growing population, a higher-than-average GDP and job growth. The pandemic caused turbulence across these areas, but Trez Capital hasn’t wavered. The pandemic has renewed the organization’s confidence in the markets it operates in, while opening the door to new areas of opportunity.
“In our 23-year history, we’ve funded more than 1,500 transactions in excess of $12 billion. In 2020 we made new loan commitments of approximately $1.3 billion and received new requests daily, keeping our pipeline of opportunities full,” says Horie. “As we look ahead and evaluate future development projects, we’ll continue to approach each one as a true partnership with our borrowers. We’ll continue to tailor loan agreements to the unique characteristics of the project, and get our clients’ projects up and running quickly.”
In the U.S., Trez Capital has traditionally focused on fast-growing markets like Texas , Florida and the Pacific Northwest where GDP growth is above average, wages continue to rise and the demand for single and multi-family homes remains strong, driven in part by population growth.
In Canada, Horie sees similar patterns of growth in certain markets and change to certain asset classes that are attractive for a debt lender, such as:
– Rising demand for mixed-use industrial. With work-from-home mandates and many Canadian firms evaluating space needs and deferring new leasing plans, office demand declined in 2020. In strong contrast, however, is the continued demand for industrial space, partially due to the growth in online sales over the past year. In Surrey, British Columbia, Trez Capital recently financed a 16-unit multi-tenant project with a unique mix of industrial and office space, catering to the needs of businesses growing during and post pandemic. Another recent project reveals a similar trend: a suburban office building project in Richmond, British Columbia will see its surplus parking area transformed to infill industrial space, offering flexibility for tenants to adapt their space based on the changing preferences of employees and customers. The proximity of both projects to Vancouver is ideal for businesses needing to expand.
– Rising demand for single family houses in key markets. The U.S. is seeing rapid migration to warmer climates, not only because of the pandemic but because many of these southern locations offer lower state income tax for large corporations and for individuals. While this trend is not as prevalent in the Canadian market, a single-family home development soon-to-be funded by Trez Capital in Langford, British Columbia, a suburban community on Vancouver Island, suggests Canadian workers are also seeking alternatives to big city living and are moving to communities for lifestyle and lower cost-of-living considerations as working from home has presented new attractive options.
– Condo development in secondary markets. The residential condo market may have cooled at the beginning of the pandemic, but it’s heating up again, especially in markets outside the downtown cores. Pre-pandemic, a nearly two-hour commute didn’t make sense to most, but with more work-from-home flexibility, there’s appetite for multi-family residences in markets previously considered bedroom communities to major urban centres which are now growing into their own. For example, Trez Capital is pursuing multi-family construction loan opportunities in cities further North and West of Toronto, Ontario than it previously would have considered.
“There’s no one-size-fits-all approach in our business and the opportunities are different in every geographic location where we operate,” said Horie. “The pandemic changed market dynamics, but the one thing that stayed constant is how we apply our rigorous risk management approach to give our clients a safe and consistent borrowing experience, while offering peace of mind during this uncertain time. Building trust is at the centre of everything we do at Trez Capital, and we look forward to continuing to build that trust with current and future investors.”