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UDI Quebec Hosts 3rd Continuing Education Session on Real Estate Asset Management
On March 16, 2009, UDI Quebec hosted its third continuing education breakfast session at the Mount Stephen Club in Montreal. The topic was Real Estate Asset Management – Rigorous Loan Management: a new reality in the financing business.
The moderators of the session were Andrée Roy, Senior Director, International Division at OTERA Capital – CDP Real Estate Group, and George Semine, Vice-Preisdent, Investment, Lending and Advisory Services at Avison Young Quebec. The three panellists were Louis-Martin Dubé, a Partner at Fasken Martineau, Marc Lapointe, Vice-President, Risk and Operations at GE Capital – Real Estate, and Line Payette, Senior Manager, Real Estate Commecial Financial Services at the Royal Bank of Canada.
The discussion focused on one main theme: how have lending practices, rules and regulations been affected by the economic situation? The moderators asked the panellists several questions surrounding this theme and engaged them in a wide-ranging discussion.
The general consensus amongst the panellists is that practices remain largely unchanged, although some regulations have become more rigorous.
With regards to loan management and risk ratings, Marc Lapointe and Line Payette said that both of their organizations use Moody’s and that few adjustments were made due to the weak economy of 2009.
“Our methodology has not changed,” said Lapointe. “Although it should be noted that ratings in today’s economy are much lower which has resulted in a shrinking of the credit box and a triggering of an additional requirement for pricing,” he concluded.
“Loans to construction companies and developers are slightly different, as the company, its competitors, the market and its overall strategic direction is analyzed. However, there is very little wiggle room and much less leniency when the risk ratings are low,” Payette pointed out.
Lapointe and Payette also commented on the nature of inspections and if they’ve changed as a result of economical conditions.
“The inspection process has not changed much. Inspections are done every two years and are quite thorough, unless there is a specific reason to do one sooner. Following the inspection, a report is put together,” Payette said. “However, it should be noted that all of this was done before the recent crisis as well. The only thing that’s really changed is that perhaps our follow-up process has become a little more detailed,” she said.
At GE, with a gigantic real estate portfolio of 12,000 properties worldwide, only properties worth $10M or more are inspected, said Lapointe. However, Lapointe said that annual checks were always performed and that the follow-up process has become more rigorous.
“Sometimes we’ll do follow-ups on a quarterly basis, depending on the nature of the project,” he said. “Our inspections though are typically just brief visits, just to ensure that the properties are in proper shape,” said Lapointe.
Louis-Martin Dubé said that annual inspections are very important.
“It’s very important for the lender. We’ll collect whatever information available to us, be it financial information or information about the physical condition of the property itself, and use it to get a broad macro-economical understanding of the situation,” he said. “Basically, knowing your macro-economical situation, having an intimate understanding of your portfolio and engaging in follow-up exercises is your best approach,” Dubé concluded.
The next UDI session entitled “Real Estate Marketing in 2010: Tools and Trends” will take place on April 13, 2009 at the Mount Stephen Club. For more information and to register, please go to:
http://www.iduquebec.com/evenements/gestion_actif_2010/seance4.pdf
Article by: William Jegher
William Jegher is President of Wika Consulting, a consulting company specializing in facilities management and real estate benchmarking, communications and consulting. Contact him at wjegher@wikaconsulting.com
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