The Creek, Vancouver, BC. credit: Concert Properties

“Some of the most critical work that is required when setting up your financing strategy is to ask some hard questions within your organization,” says Andrew Tong of Concert Properties. “These questions will help form your financing strategy and ultimately determine the risks you are willing to take.”

Such questions get to the heart of your attitude toward risk, reward, and resilience. For example, Tong asks, “Have you and your investors agreed on the level of risk to take for the potential reward?… Is the project significant to the financial outcome of the overall enterprise? … How much financial flexibility and strength do you and your investors have if the project is delayed, the market goes sour, or if interest rates change during construction?”

And the questions don’t stop there. When you go to market for a mortgage, you will need to evaluate lenders’ proposals, and part of that evaluation should include a consideration of the lender itself. Lenders are your partners in a project, and good partnerships are valuable.

“Does this lender have the same core values and business culture that you have?” asks Tong. “Core values and business culture impact strategic direction and influence management, decisions, and key business lines within an organization. If the core values and culture aren’t aligned between you and your financial partners, no matter how attractive the specific terms of the financing proposal are, it will be difficult to achieve a longstanding and prosperous relationship.”

Download Fall 2018

For more about the ins and outs of financing development projects, see Tong’s “Real Estate Financing” in the Fall 2018 edition of Input. Download Fall 2018

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