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It can be challenging for developers who are based overseas, with no track record in Canada, to finance their initial Canadian project.iStockPhoto / Getty Images

Romspen Investment Corporation finds unique solutions for financing developers

As an experienced real estate developer, Stefano Guizzetti says that one of the biggest challenges his company faces is, literally, taking its project to the bank.

“Purchasing land and assembling it as a site is not necessarily bankable,” says Guizzetti, co-founder and managing director of G Group Development, based in Thornhill, Ont.

“When we’re assembling a site and are months away from putting all the pieces together, banks will only want to lend based on us owning the whole site already. If we don’t own it yet, it can’t be done and we need to finance elsewhere,” he explains.

G Group turns instead to a non-bank commercial/industrial mortgage lender – a specialty firm with experience in dealing within the sensitive timeframes that commercial developers often require to put a project together.

“We work with a firm called Romspen. We find they understand our business. They don’t simply write a cheque, they work with us almost as partners as we develop a project,” Guizzetti says.

Romspen Investment Corporation has grown into one of Canada’s largest private mortgage lending funds, with more than $3-billion in assets under management.

“We have been in the lending business for 55 years and during that time have evolved from making $1-million loans to financing large complex construction development projects from between $10-million and $250-million,” says Blake Cassidy, Romspen’s managing partner.

“We’ve been a financing partner to the G Group for over a decade, involving multiple properties.”

“We have completed hundreds of construction and development deals, and each one is unique,” adds Cassidy. “We come into the picture because developers are often in circumstances that banks don’t always understand or have the ability to respond to.

“For example, many experienced developers are based overseas with no track record in Canada, so they often find it challenging to secure institutional financing for their initial Canadian project,” he explains. “Romspen can take a more dispassionate view. Is it the right kind of asset, the right kind of vision, the right kind of sponsor? If a deal makes sense, we can look for ways to fund it.”

Developers are often in circumstances that banks don’t always understand or have the ability to respond to.

Blake Cassidy, Managing Partner, Romspen

When it comes to structuring deals, the company is very innovative, thinks outside the box and goes beyond just checking boxes, he says, with the ability to look objectively at lending opportunities in asset classes that may be passed over, such as the hospitality sector.

For example, Romspen recently closed a deal for a large hotel in South Florida.

“It’s a gem, but other lenders couldn’t touch it due to pandemic related strain in their hospitality portfolios,” says Cassidy. “Even when a project like this looks attractive, banks are handcuffed by their strict lending parameters and their existing exposure to underperforming hotel/resort loans currently on their books.”

Because the company doesn’t work under the same lending constraints, it can focus on the true value of this type of opportunity, he points out.

A private mortgage lender is also able to excel in secondary and tertiary real estate markets.

According to Cassidy, everybody looks at Toronto, Montreal and Vancouver, but there are opportunities in smaller markets that are overlooked by institutional lenders.

“Borrowers from all avenues require capital. Romspen sources opportunities that match our lending criteria and fall within our risk tolerance level,” he says.

“The fact that we fund the whole loan without needing financial partners allows us to act rapidly and definitively. We don’t follow the herd but seek out best-in-class unique opportunities.”

While Romspen is constantly on the lookout for new lending prospects, Cassidy takes particular pleasure in working with repeat customers, such as the G Group.

“Borrowers come back to Romspen because we offer highly flexible, customizable mortgage loans,” he says. “We are able to knock down barriers and provide access to capital, taking pride in watching a small builder become a big builder.”

There are other promising commercial real estate areas that have suffered from the pandemic or are undergoing economic transition.

“Think distressed asset classes such as big box stores, think changing retail environments, think obsolete office buildings that are prime for redevelopment,” Cassidy says.

Romspen is also an investment vehicle for pension plans, endowments, foundations, family offices, and high-net-worth individuals.

“Whether they be borrowers or investors, it’s all about helping our clients safely and predictably accomplish their objectives,” he says. “What I’ve learned over the years is that we’re not just in the lending business, we’re very much in the service business.”

Advertising feature produced by Globe Content Studio with Romspen. The Globe’s editorial department was not involved.