David Noël: Welcome to the Manitoba Business Podcast, featuring interviews with business leaders and entrepreneurs based in our wonderful province. I’m David Noël.
I don’t think I’ve met anyone who discusses billions of dollars as casually as today’s guest. He’s worth listening to. A few years ago, he oversaw his employer’s expansion into Manitoba, and now he manages an office that is involved in many of our province’s most prominent real estate ventures. In our conversation, we get into the nuts and bolts of real estate financing, as well as how to approach expanding into a new market.
Before we get started, I’d like to repeat my usual quick reminder: if you enjoy this episode, please tell someone about the show. Our website is www.manitobabusinesspodcast.com
Without further ado, here is Chase Allen:
[to Chase] Chase, it’s great to meet you, thanks so much for taking the time.
Chase Allen: No problem.
David: Can we start by having you tell us a little bit about who you are and what you do?
Chase: Sure. I run an office in Manitoba called Canada ICI. We’re headquartered in Edmonton, and I moved out here in July of 2013 in order to start this office. And we finance commercial real estate, is really the long and short of it. But we’re a one-stop shop for commercial real estate, so we do construction debt, we do term debt, bridge debt, and then long-term take out as well.
And our company was started in 1993, actually by a Manitoban, Dale Cline, who’s from the Dauphin area. And he moved to Edmonton, which is why it’s headquartered in Edmonton. But anyways in 1993, we started as a traditional mortgage brokerage. So we basically take a lender and a borrower, and we place them together, and then we take a nominal fee in order to do that.
And we were structured that way until about 2005, when we started raising our own internal capital. So now we have just around $1 billion under administration, $200 million roughly in an internally managed mortgage investment corp, or a MIC, which is high-net-worth individuals. And then $800 million on behalf of about 12 different pension funds or so. And so we service that internally, and it’s completely discretionary, so we lend it out on behalf of those guys with our thoughts on what we’re gonna do with it, basically.
Chase: And so that’s been a huge growth platform for us, and we’re growing that quite aggressively right now. And so that was…
David: Do you still do the individual lender stuff, or is it all through the MIC now?
Chase: Yes, so we…it’s easy enough to think about it on dollar terms, so we do about $3.5 billion in annual volume, $1 billion of which we’ll do internally.
David: Those are fun numbers to say, aren’t they?
Chase: I guess they are, yeah. And then $2.5 billion will be still externally brokered out. So we still have about 125 different relationships across Canada.
Chase: So that’s what we do, that’s what I do.
David: Very cool. And so what’s the difference between what you guys do, and could someone who wanted to develop commercial real estate go to a bank and get the same kind of deal, or is it different?
Chase: Yeah, absolutely. We compete directly with banks, but then on the other side, they are some of our best clients and some of our best lenders, obviously.
David: Right, right.
Chase: So what I generally like to say is that, with the numbers I was talking about, doing $3.5 billion a year, we do some pretty high volume obviously, with a lot of lenders. So with RBC, for example, we might do $100 million or $200 million with them every year. So because of that, we have very good relationships with them, and we have direct lines to the right people, whereas someone might walk into a branch or might talk to their buddy who works there, but they’re not the right person to talk to about the commercial real estate deal.
In addition to the fact that we do such high volume with them, that we generally get some preferential pricing and know how to work some of the internal metrics, and so that’s why we will generally provide a better cost option or more flexible option from that same institution, than someone who’s doing $5 million a year in volume with them.
David: Right, so basically you offer…you’re kind of specializing, whereas if you go to a bank, they do everything and you guys are just laser-focused on everything.
Chase: Yeah, well and it’s kind of an economy of scale sort of thing, where we’ll do, like I said, $200 million with them, so they really value that relationship, so they treat us very well and we treat them very well. Versus someone who walks in off the street might only do, like I said, $5 million a year with them, so they’re probably going to give preferential treatment to us.
Now, that being said, there’s some companies out there that do massive, massive amounts of business. And so in certain respects, they would be the same as us. And so when it comes to that, we then just let them go to their direct relationship and then we compete against them with the rest of the market. And generally speaking in the past, the reason why Dale Cline, who started our company, has been so successful is the relationships that we have that are so valuable to us are generally ones that don’t have origination arms. And what I say by origination arms is salespeople.
Chase: So pension funds and life insurance companies will have one or two national representatives.
Chase: Whereas we have 40 professionals across the country doing this, and so we basically act as their origination arm. So someone from a pension fund headquartered in Vancouver is not going to be on the ground in Winnipeg looking for deals.
David: Right, right.
Chase: So we will then go and look for them, and because they have such a low cost…or I’ll say lean structure, where they have one guy running the entire country. That’s his salary, and that’s about all the costs they have, versus someone like RBC who has such a massive network of people that they have to support. So generally speaking, pension funds and life insurance companies have very thin pricing. So better pricing than the bank. So even when a large developer or a large client has a direct relationship with RBC, we can find better pricing in the pension fund and life insurance company world.
David: Interesting, interesting. I can see how that’s an interesting relationship with the banks. On the one hand, you depend on them and on the other hand you got to compete with them.
Chase: Yeah, and they’re very, very good people, and we do a lot of business with all of them. But our world is a competitive world so…
David: For sure.
Chase: …sometimes you win, sometimes you lose.
David: All right, what about you, Chase? What is your background? How did you get into all this?
Chase: Well I went to the University of Lethbridge in Alberta, and I played volleyball at Cramkune University before that. But anyways, went to the University of Lethbridge and there’s a night campus in Edmonton. So I did that and worked during the day, just because I’ve always had an entrepreneurial-style spirit, so I operated a few companies, things like that. And then I did a co-op term through the University of Lethbridge, and ended up in downtown Edmonton in a job with a company I won’t mention, because I hated it. So I spent as much time out of the office as I possibly could, and just connecting with people.
Chase: And so, I ended up running into a bunch of people who were in commercial real estate, and long story short, ended up in the brokerage world because at the end of my co-op term, I was done university, and I emailed a guy that I had met and I said, “Hey look, I hate what I’m doing now. I don’t know if you have any spots open.” And it was 2008, so there was no spots open, anywhere. Jobs were very, very hard to come by.
David: Yeah, especially in real estate I would imagine.
Chase: Yeah, exactly. So I kind of took a chance and just emailed the guy out of the blue, and said, “Hey, we met one time like four months ago, what do you think?” And he’s like, “Yeah, I think we might have a spot.” So, I ended up starting with them January 1st, 2009. And they are the company I worked for…I worked there for four years, but they are a direct competitor of Canada ICI.
Chase: And I moved to Canada ICI for the reasons that I was talking about earlier, and the fact that we manage our own money, and it’s a quite, quite awesome company, for lack of a better word.
Chase: We’ve been growing very, very fast, and we have a really great group of guys that works with us, all young and very ambitious. So it’s a very cool company to work for, and that’s why I moved over. So, that’s kind of the short story of how I got into what we do now.
David: How big is the company now? How many employees?
Chase: About 80 employees, and so that is between our origination arm, which is what I work for. So I guess I should start…we have three groups. So we have sector, MIC, which is our Mortgage Investment Corp, and that’s a separate company, and there’s about eight people working there, and Dale Cline, our president, runs that company.
Chase: And then we have the group that I work for, which is origination, and there’s about 30 or so employees in that group. Both between managing directors, like myself, there’s Brent Magnan in Toronto, Brandon Conton in Edmonton, Doug Miller in Calgary, and then there’s analysts and associates and things like that. And then the third group is asset management. So that’s where the pension fund-style money is, and they liaise on it with sector MIC, and we actually manage sector MIC’s money as well. And that group has about, I don’t know, probably five people who actually are facing with us. And then the rest, the other 30 are all asset management staff in terms of accounting, finance, mortgage administration, things like that.
David: Gotcha. And so, how are the assets under management different from the MIC?
Chase: They’re not really.
Chase: The MIC would fall inside of the assets under management.
David: I see, okay.
Chase: So, if you think about it, kind of like a…
David: Oh, it’s like you were saying before, you have some individual lenders still, and then you also have the MIC that is composed of high-net-worth individuals and you put it together.
Chase: Exactly right. So we have asset management, which is a $200 million MIC, and an $800 million group of pension funds. And then outside of that is straight brokerage clients, and we have about 120 or so across Canada that are banks, and other MICs and things like that.
David: Cool, okay. And how does that work day-to-day then for you, for example, what do you actually do all day?
Chase: What do I do all day? Well, I’m on the origination side so it’s my job to get deals in the door. So I meet with clients, talk with clients, and try to fund deals, so…
David: And clients, just to be clear, that includes both lenders and borrowers, is that right?
Chase: Yes, so what I do is I try to find borrowers that have transactions, and try to pair them with lenders. And so we have, like I said, about 30, 40 individuals across Canada that foster relationships with our lenders, including our internal asset management group. So every day, you phone some guys and you talk with them, and see what they’re doing in the market and that type of thing, to keep the relationship alive, and know what they’re doing. So that’s the one side. And that’s just ongoing, everyone’s doing that.
And then we have update calls every few weeks, so guys across the country get an update of what a guy in Toronto is doing and that type of thing. And then the majority of my business though, is dealing with existing borrowers, so guys who are developers, or guys who own real estate, or guys who want to buy real estate.
Chase: And so my job almost predominately is to go out and find a guy who’s developing a condo in Osbourne, or go and find a guy who owns an apartment building in Saint Fintel, or go and find a guy who’s developing a retail strip center in North Winnipeg. And so I find those guys, I sit down with them, I have a very similar conversation that we’re having right now, and I talk to them about why we have a benefit over other over direct competitors of ours, and then why we have a benefit over your direct relationship with RBC.
And I tell them the internal managed deal that I just talked about, and I basically say that we’re kind of a one-stop-shop. So we can do your development that you’re working on right now, and then we can take out that construction later, and then we can also go and do your condo development that is next year. And we can do varying degrees of aggressive lending with that. So we can do no pre-sales, no pre-leasing and then we can also do fully stabilized retail centers at rock-bottom pricing and everything in between.
So, it’s my job to tell them why we have a benefit, and you can come to us and source the market, or you can go to one lender, probably want to source the market. So then they give me the information, we put it into our underwriting group here in Winnipeg, which is six people, and then we go out and we try to find a loan for that deal.
David: Gotcha. And so, what’s the actual structure of the loan? Say if someone defaults on the loan, do you guys eat any of that or is your lender basically just up a creek?
Chase: Well, I guess that’s two different questions in one. One structure for a loan, that is completely dependent on the deal. I mean, if it’s a construction loan, we might do 75% loan-to-cost, or we might do 85% loan-to-cost. It depends on what the borrower wants, it depends on what the lender is available to, or able to provide. So that’s kind of one separate issue. But as far as defaulting on loans, if you are…if we have placed a loan internally with our asset management group, then our asset management group would handle any foreclosure. We’re fairly proud to say that there has never been a single loan loss in our entire…
David: Wow, wow.
Chase: …history. So that’s pretty huge to be able to say.
David: That is pretty huge, yeah.
Chase: But I would say that it would operate the same as any other lender, in that you would get notice of default, and things like that, and then you’d go into foreclosure, if it got that far along. But I would still be, and our team here would very much be intimately involved if we did place that loan. And then the same situation if we externally broker it, and there’s a default, then we would be intimately involved in it, because obviously we’ve placed the mortgage, we know the client most likely better than the lender because we’ve been dealing with them longer. And so we will be trying to help out as much as possible, we’re not just going to leave it.
David: Right, right, right.
Chase: Because that wouldn’t do very much for the relationship with the lender, obviously.
David: Sure, yeah, interesting. You mentioned keeping up relations with all the various clients, and one thing that sort of jumps to my mind immediately with that is how, tactically or operationally, how are you tracking…? Because I imagine that you guys probably have hundreds, possibly each, hundreds of people that you talk to. So is that…are you using just a CRM system, keeping lots of notes in there, or how does it look?
Chase: No, we don’t use a CRM system like salesforce.com, or anything like that.
David: Right, right, nothing like that.
Chase: No, we…it’s basically emails and cell phones is all we really do.
Chase: But I will say that we’re very relationship-based, so I would say that almost every one of our clients we would qualify as friends, almost.
Chase: Some guys, some clients who might be listening to this might not agree with that, but I would say that every one of our clients we know in a very intimate way. And what I mean by that is that, they’re guys that I talk to on a regular basis, and people that I care about, both personally and business-wise. So we’re not like a turn-and-burn style deal. Residential mortgage brokers a little bit more like that, not to insult those guys, obviously.
David: Sure, yeah.
Chase: They’re very, a lot of them are very good at what they do and they’re very necessary, but…
David: I guess the volume of relationships needs to be higher for that.
Chase: Yeah, they’re doing 700 loans a year, whereas we’re doing 50 or 60.
David: Okay, I see. So it is actually possible to keep that all in your head, in terms of the people, right? I’m just thinking, from a sales background where you’re cold calling a bunch of people or whatever. Or not even cold calling, but refreshing relationships with, say hundreds of people at once. It gets really tough to keep all that in your head…
David: …whereas if you’re dealing with 50 or 60, then that’s more manageable.
Chase: Yeah, and it’s easy to think about…think about the city of Winnipeg. How many houses are there, and how many buildings are there? It’s probably 10 to 1.
Chase: Right? So residentially, you’re kind of a…it’s all about volume, it’s a volume game then. If you’re in the commercial side, it’s more about quality. Are you sitting down with a guy, are you talking to him or her often enough to stay relevant, and do you know what your lenders are doing at any given time to be able to provide the best service to those guys?
So that’s one of the biggest things that Canada ICI provides in being the largest brokerage in Canada, is we do a ton of volume. We’re the largest third-party originators of CMHC money as well, which means that we don’t actually provide CMHC money directly, but we broker the most of it. So by doing that, we know what the lending market is doing at any given time probably the best, we have the best pulse of the market.
So when I sit down with a guy, I can say, “Hey look, I’ve done 60 transactions in the last 12 months.” Since we’ve gotten to Winnipeg, for example, we’ve done about $800 million through this office, $400 million of which would be in Winnipeg alone, the rest we still broker in Alberta and Saskatchewan because of my relationships there. So by sitting down with guys and saying that we have done this much volume, it speaks a lot to our ability to know what is going on in the market at any given time, because I placed four loans last week.
David: Right, right.
Chase: Three loans the week before, that type of thing. Versus a guy who is a broker, but says, “Yeah, you know, I did 10 deals last year.” It’s like, “Well do you really know what the status of the market is, then?”
David: What are the challenges facing you guys in the near term?
Chase: Well, we’re headquartered in Alberta, so I don’t think I need to say much more than that, than to say what challenges we are dealing with.
David: Fair enough.
Chase: Also, obviously resource-rich economies like Alberta and Saskatchewan are providing a lot of challenges. Deals in Alberta are a lot harder to get across the finish line. So I would say in those markets, and Canada is a whole…the economic situation here isn’t fantastic right now, so I think those are the biggest headwinds.
That being said, Winnipeg had an article on the weekend that was absolutely fantastic, and it’s basically the reason why we are here, is that it’s an incredibly stable market, and we wanted to have our internal capital given access to this market back in 2013, even though Alberta was hotter than a pistol at that time. We wanted to get the capital out here, not that we foresaw anything happening, but Winnipeg is just a fantastic place to invest because it is so stable. There is no boom, but there is no bust.
David: Right, right.
Chase: Which I think was almost one of the titles of that article. So, I think that in Winnipeg specifically, headwinds aren’t really economic headwinds that we have to deal with, it’s more so competition among other brokerages here and other lenders here that have direct lending relationships that are quite strong. So those are probably the biggest ones that we have to deal with specifically to Manitoba.
David: How did you start out establishing the relationships here? I imagine that moving into a new province comes with some challenges, how did you establish a foothold?
Chase: Dale had previously brokered here when he was with a company called Morguard back in the 80s and early 90s before he started his own company. So he had really strong relationships with a number of large, large institutional-style guys here. So that was huge, and then the other thing was just coming here and just establishing relationships with the right people. So one of the guys who’s been fantastic for us is Sandy Shindleman, who actually referred you to me.
David: Yep, yep.
Chase: So he’s been awesome in terms of getting us in front of other people. And that’s really the…I think to penetrate any market, is you need to come in and make some good relationships with the people who are well connected. And we’ve been fortunate enough to be able to do that, and fortunate enough that guys have been able to understand the value that we provide, or can provide, and then are confident enough to give our names out, like Sandy had done. And so a lot of those, a lot of the reason why we are successful is because of guys that have done that for us, so we’ve been very fortunate.
David: In those kind of situations, guys like Sandy, I don’t want to put Sandy on the spotlight necessarily, but guys like that. Was that due to preexisting relationships, or was that, you picked up the phone one day and, “Hey, I’m Canada…” like how did it work?
Chase: Well, I would love to say I just picked up the phone, but that’s not the case with Sandy. Dale and Sandy have a very good relationship that goes back a number of years, so…
Chase: So that was that particular one. But there have been a number, that may be upset if I mention them, so I won’t. But there have been a number of guys, where you just pick up the phone and call, and they are fantastic people. Like I said, your clients almost become your friends, and they’ve been fantastic people just to know as a person. So you get along with them really well, and then they end up liking you, and then when they’re…when something comes up about financing, they mention your name.
And so what we found is that when we got here, it was big for us to just cold call people and go to established relationships and foster those. And with the first six months, we’re a little bit slow, like they would be in any market, but then ultimately, what you have happen is you find out that all these people are referring you all this stuff because you’ve done a good job for them. And then you end up drowning in deals.
There was a colloquialism that was said by my previous boss who said, “When you get into brokerage, you’re going to find out that you’re kind of like, walking along a shoreline, and you’re dying of thirst. But if you do all the right things, and you treat people well, and you make it a win-win for them, so not take more fees than you’re due, and that type of thing where it’s a win-lose. You make it a win-win and make sure that everyone enjoys dealing with you. Ultimately, what you’re going to find is that the tide comes in and you’re drowning.” You’re no longer thirsty, kind of idea.
Chase: So that’s the mentality that Canada ICI has had, which is what drew me to the company in the first place.
Chase: And that’s kind of the mentality that I think I’ve had through my life, and more so now with Canada ICI, is that win-win type of mentality, and treating people well. And I think that that’s been a key to our success here.
David: Interesting. Okay, I have two more, two-and-a-half more questions…
David: …that I try to ask every guest. Are you a reader? And if so, what kind of books do you enjoy, and what kind of books do you recommend to the listeners?
Chase: Yes, I am a reader. I would like to say I’m a voracious reader. My goal every year, New Year’s resolution, is to read 52 books a year, about a book a week.
Chase: And just like if you asked someone if they go to the gym, and they say, “Yeah, I go five times a week,” but they actually probably go one. I try to read 52 a week, but like everything in my life, I do track it. So last year, I actually probably only got like 30 books or something like that.
David: Sure, that’s not bad though.
Chase: Yeah, not bad, not bad. So I love reading, and recommendations for readers, I’ll do two recommendations. So I am…I’m a flip-flopper when it comes to reading, I read stuff that’s intensely interesting to me, which is generally either fantasy or…
Chase: …action. And then I read a business book following that, and I kind of just flip back and forth. So my number one recommendation is the Jack Reacher series, I don’t know if you’ve read that.
David: I have not read it, but I think my Dad actually read it. He liked it a lot.
Chase: It is so cool, man! It’s just really, really cool. Anyway, that’s kind of a…not really a lot of benefit necessarily in reading that other than just reading.
David: No, no. There’s definitely a benefit to reading fiction, I think people should read more.
Chase: I agree. So anyway, Jack Reacher is fantastic. I’m done…I finished the series, which is 21 books in 6 months, because I just couldn’t put the books down. So that would be my one fun read. And then number two in terms of business reads, I’ve read a few over the years. My favorite one, and probably the best for people in general…I guess will be, I’m going to give two recommendations. So one, just for personal well-being and personal wealth and things like that, “Think and Grow Rich” by Napoleon Hill is fantastic.
Chase: Number two, complete interest, and I think it’s a very cool read is “Freakonomics,” which is…
David: Yeah, that is a good one.
Chase: …an age-old book that I’m sure everyone knows. And I’m going to throw one last one in there, but one of the ones that helped me hugely, and I actually did take the course as well, and I would say if you’re ever looking into getting into sales or networking, or anything, or public speaking or anything like that, it’s a must read, is Dale Carnegie’s “How to Win Friends and Influence People.” And I would highly recommend the course as well, I took that…
Chase: …I think it was fantastic.
David: Interesting, cool. Yeah, I’ve certainly read the book and heard lots of recommendations for the book, but never heard about the course. Cool. Final question, are there any people that…either people that you’ve known personally or people that you maybe observed from a distance who you would consider mentors or who have influenced your approach to business?
Chase: Yeah, I think Dale Klein, the guy who runs our company, is one of my biggest mentors. The guy that I worked for previously was a fantastic person but when I met Dale, I saw a guy that I wanted to be. And so I was just like, “I’ve got to work for this guy.” And I don’t think that happens often…
David: No, it doesn’t.
Chase: …for people. And so I was very lucky to be able to walk into this interview. It was the third or fourth or whatever it was, and I finally met Dale, and I left…I actually walked into the interview thinking about not accepting, and staying with my previous company. And I was actually 80/20, and that’s not a lie. And I walked in, and halfway through the interview, Brandon Codd, who was also there, who’s the Managing Director in Edmonton, said, “What is your percentage of joining Canada ICI?” And when I walked in, I was 80/20 going to say no, and I said on the spot, I was like, “Probably 80% that I’m going to join,” because I went. And it was a very short…and Dale is kind of a celebrity, I guess, in the finance world. No one has heard of him outside of the finance world, so it’s not like he’s….
David: I was just going to say, that is a weird kind of celebrity.
Chase: It’s not like he’s a celebrity analyst.
David: Fair enough.
Chase: But in terms of in Edmonton he’s a very big name, and in Canada he’s a very big name when it comes to financing. And so I had known about him, but I had never met him, and when I met him, I was just like, “I want to work for this guy, and I want to learn from him.”
Chase: So he’s probably the one that I have met. Of course, I mean my parents are fantastic and I’ve wanted to emulate them for my entire life. So of the people I’ve met, probably those people. One from a distance is probably one that everyone says, but Warren Buffet is amazing in what he’s done, and I think the biggest thing for me for him is how he’s been able to be successful but also keep a very good relationship with his family. And I think that that is, that’s a really important thing for me. And I’ve always grown up thinking that you can do both, you can be successful and you can have a successful family as well. And I think a lot of people assume that you just can’t, and so I very much don’t agree with that side.
And I like Warren Buffet and I like Bill Gates because they are able to be incredibly successful, and at the same time, keep very close ties with their family. Warren Buffet’s “Snowball,” the book that he wrote, is a fantastic book. I should have recommended that one, I guess. But I listen to it on repeat. I read it, and then I bought the audio book, and I listened to it on repeat probably 10 times, because when I was in Edmonton, I used to drive to Calgary for business all the time. And so I just had it on…it was the only thing that played in my car for probably a year. And so I learned about his life inside and out, and how much of that is true or not, that type of thing who knows? But I feel like I got to know him almost, so I would say he’s probably a mentor of mine as well.
David: Very cool. Well Chase, thanks so much for taking the time.
Chase: Yeah, no problem.