Your company’s commercial real estate might be a lot more valuable than you think
Few people understand the value of teamwork more than Rayanne Gagnon. As a reliable stay-at-home defender for the University of Alberta’s women’s hockey powerhouse, Gagnon not only helped propel the Pandas to two national university championships, but was also a key player on Team Canada’s 2009 World University Games gold-medal team.
“There’s definitely a lot of intangible skills that most student athletes possess. You learn good interpersonal skills and how to work as a team,” Gagnon says.
Today, 13 years after a career-changing call to join CWB once the buzzer sounded on her university hockey career, Gagnon is a seasoned commercial lending expert and Assistant Vice President of Business Development at CWB. Her focus: unlocking opportunities that position her clients’ businesses for growth.
Gagnon works directly with her commercial clients as a trusted teammate and partner, finding creative solutions for them and leveraging expertise from across CWB to help them achieve their objectives.
“I like to listen and find out what the story is and what my clients' goals are,” Gagnon says. “A lot of the time, things get flushed out organically through conversation, and different opportunities can come up.”
Accessing a surprising amount of capital
One often overlooked opportunity that Gagnon sees for a growing number of commercial clients is the owner-occupied mortgage. Depending on the situation, an owner-occupied mortgage could allow a company to access up to 90% of the value of their property, extend the amortization period of the loan to 30 years, or allow a business to take advantage of up to 12 months of interest-only payments.
An owner-occupied property can be a retail store, an office building, a manufacturing facility or just about any good-quality commercial property – as long as the business that owns the real estate also conducts business in that same building. In many cases, companies that occupy more than 50% of the leasable area of a property can take advantage of owner-occupied financing. If a business doesn't occupy more than 50% of the property, but is responsible for contributing greater than 50% of the property’s rental income, it can also take advantage of owner-occupied financing. This can include scenarios where a holding company is the owner of the property and the operating company is the tenant.
“A lot of our clients are surprised we can offer such significant upside when we share the benefits of an owner-occupied mortgage,” Gagnon says.
“The biggest benefit that most people are surprised about is the increased amount of capital they can access.”
A financial tool for growing businesses
Gagnon recently met with one of her clients in the building and construction industry to review their needs over the coming year. The business is experiencing a significant amount of growth and is now planning to launch a new division, all of which requires more capital. “What came out of that conversation is that the company would be a good fit to access additional capital from their property to help them finance the growth of their new division,” Gagnon explains.
“By accessing up to 90% of the value of the property, this client was able to leverage up to an additional $750,000 to help grow their business, which is quite significant.”
Just about any business, from retail operations to manufacturing, can take advantage of an owner-occupied mortgage. Last year, for example, Gagnon helped a retail client located in a large urban centre qualify for an owner-occupied mortgage with a 30-year amortization, instead of a 25-year amortization, which freed up an additional $2,000 of cash per month.
Another CWB client, a manufacturer that was experiencing tremendous growth, was in the process of aggregating all its operations from several existing buildings into one brand new facility. Recognizing that a move like this is not only capital intensive but also time consuming, Gagnon and the team at CWB recommended an owner-occupied mortgage with an interest-only period. In this case, the client paid only the interest on the loan for 12 months, giving the business time to prepare the new site for operations without incurring the full weight of a mortgage payment.
Unique businesses make for unique combinations of benefits
“Every business has a unique situation, and when it comes to owner-occupied mortgages, it means finding a unique combination of benefits that sets them up to achieve their goals,” stresses Gagnon.
“For one client, it may mean accessing 80% of the property’s value on a 30-year amortization and no interest-only period. For another, it might look like 75% of the value, a 30-year amortization and a 6-month, interest-only period. We look at each scenario case-by-case so it makes sense for the client.”
“That said, many of the clients I speak with could benefit from this type of financing. Of course, every business situation has its own opportunities and challenges, but being able to offer tools like owner-occupied mortgages can help our clients succeed.”