Vancouver-based Trez Capital has grown into one of North America’s largest non-bank commercial mortgage lenders in only 25 years, funding more than 1,600 transactions totalling $13.5-billion since its inception in 1997.
As a pre-eminent diversified real estate investment firm, Trez Capital supports borrowers with custom financings for multi-family, industrial and office projects across Canada and the U.S., and manages approximately $4-billion in assets.
In addition to its Vancouver headquarters, the firm has offices in Toronto and Montreal in Canada, as well as U.S. offices in Dallas, Palm Beach, New York, Seattle, Atlanta and Los Angeles.
Founder Morley Greene, who grew up in Winnipeg’s north end and graduated from the University of Manitoba with a law degree, remains Trez Capital’s chairman and chief executive officer to this day. What opportunities did he see, what has accounted for the company’s growth, and what are the biggest lessons he has learned during the past quarter century in business?
Mr. Greene looked back on his legacy and ahead at the possibilities in the sector in a recent interview:
How did Trez Capital get its start?
I came to Vancouver in the 1990s after a successful career practising law. I wanted to do something else. A friend of mine said, ‘Morley, why don’t you start a mortgage company?’ So, I looked at the market, and there was a shortage of capital, especially in Edmonton, where I did my first deal. Then, I did another, then five, and all of a sudden, I had a business.
I could say I had some grand plan for Trez Capital to be the $4-billion company it is today, but there wasn’t. It happened by osmosis. For me, it was always about offering clients more.
What need did you identify that sparked your success?
I saw a hole in the market to lend on secure assets at a competitive rate. Today, there are hundreds of lenders. But in the 1990s, there were very few, and they were charging 30 per cent interest. We were happy to charge less.
How systematic were you in making loan decisions?
There was a lot of undisciplined lending in the market. When a borrower needed capital, the lender would go to outside sources to raise it. Trez Capital was among the first to create a mortgage fund, so we always had capital on hand to invest, making us nimble in the market.
We developed a system, a checklist, to issue loans following a disciplined approach to make sure there were no surprises. It was that institutional approach that has really turned out to be a strength of the company. We became a benchmark for the industry.
How has Trez Capital evolved over the years?
While we started with lending to developers, and still do, now we partner with developers on projects. More than anything, our reputation has grown. We’re seen as transparent and dependable. That’s an important and intangible part of the business: our investors and borrowers trust us.
What has been the biggest challenge Trez Capital faced in the past 25 years?
During the global financial crisis [of 2008], we didn’t know what tomorrow held. We stopped lending and focused on collecting our loans for about a year until we saw some daylight. I am really proud we maintained our distributions through the worst of times. But, with challenging times, there is also opportunity. For us, the opportunity at the time was in the U.S.
Over the past decade, you have focused on high-growth U.S. markets. How did you gauge the opportunities there?
The U.S. produces great yield, and there isn’t the same competition down there as in Canada. We had dipped our feet in the U.S. before 2008 and found a great partner. We had tussled back and forth on a deal years before, but reached a deal and became friends. He came to me in 2010 with an opportunity in Dallas. It struck me the city looked a lot like Edmonton in 1997. There was one main difference: within one hour of Dallas, there are 18-million people, and growth from what I could see was just starting.
We began lending when banks were not, which offered us the opportunity to get to know the market, borrowers and developers. Then we expanded.
What’s next for Trez Capital in the U.S.?
We had a lot of demand from Canadian investors not to just finance development; they want to invest in projects. So, we set up a new offering called Trez Capital Private Real Estate Fund Trust. This is a new opportunity to invest in ground-up development. It is a long-term hold fund that will produce development yields that most investors rarely have access to. It’s important to listen to the market and find opportunities for investors.
What does the future hold for Trez Capital?
With the pandemic, we didn’t know what to expect at first, but it hasn’t been as negative as predicted at the beginning of 2020. So, today, things look good. We have a strong team with talented individuals who always put our clients first. We will continue to source great projects that produce strong returns. That’s important because the perfume of a high yield never overcomes the stench of a bad investment.
The Trez Capital team is invested in every project. We don’t just finance multi-family projects or industrial buildings. We also help build homes, business headquarters, places to store memories and important artifacts from our families. We are investing in the future of our communities and I see that continuing for a long time.
What have you tried to keep in mind to avoid pitfalls?
You can’t get too far in front of your skis because you’re going to fall. When we make a loan, for example, we need to understand the exit. If we can’t understand that, we can’t make the loan. Our rigorous due-diligence process and our consistent approach to new opportunities has kept us investing in strong projects with trustworthy developers. We always take a conservative approach and weigh our risk. This has allowed us to maintain our reputation and to see it grow over all these years.
With everything that has changed over these 25 years, what has remained constant to guide you?
While we’re much more sophisticated in what we do with technology and everything else today, the basic principles of integrity and discipline never change. Be it the borrower or the investor, they have to know we do the right thing. I feel in my bones that if we stay focused on that, we should be around in another 25 years.
Advertising feature produced by Globe Content Studio with Trez Capital. The Globe’s editorial department was not involved.