Please give a brief history of the company and, if applicable, group structure.
The Initial Asset Originator, Forge & Foster Investment Management Inc. has a 14+ year track record of successfully investing in commercial real estate in the Greater Toronto Area. The partners are made up of ex-Canadian Pension Plan Investment Board members including the former Managing Director and Head of Real Estate for the European Office.
The Sponsor, REIF Financial Investments Inc., is represented by Ben Ames, Chief Executive Officer at REIF. In a previous role, Ben Ames led acquisitions and dispositions of over $150M in real estate investments. He increased assets under management of his fund from $15M to $150M in 4 years. Ben has a B.Comm in Management Economics from the University of Guelph. The Sponsor is wholly-owned by Corl Financial Technologies Inc., an existing asset originator for a pool on Centrifuge.
How many full-time equivalent team members do you have and what do they do?
Forge & Foster has 24 team members. There are five partners, five asset managers, three marketing & leasing associates, three investor relations associates and eight analysts. REIF has three full-time team members. One financial officer, one executive officer and one analyst.
Have you sold equity? Are you venture funded, if so please describe the previous rounds, money invested, and lead investors.
Forge & Foster is owned solely by the five partners. No capital was raised and is funded by its own operations. REIF is a subsidiary of Corl Financial Technologies Inc. and has not raised any capital.
Is your business sustainably profitable or well funded with sufficient cash runway?
Forge & Foster is a sustainable and highly profitable operation. REIF is a newly formed entity, but is well funded by Corl.
Describe the asset collateral that you seek to finance.
With the Initial Asset Originator, the REIF Pool will help finance value-add commercial real estate projects with an average loan amount of $10,000,000 (ten million) for the 1st position product and $500,000 (five hundred thousand) for the 2nd position product. The 1st position product is for acquisition, equity takeout, and refinancing of commercial real estate loans. The 2nd position product is for renovations, development, or leasehold improvements of the properties. The property types are classified as “Commercial” and “Industrial” properties. The maximum Loan-to-Value (LTV) leverage to be considered for financing of the 1st position product is to be 70% of the asset value and the maximum LTV leverage to be considered for financing of the 2nd position product is to be 80% of asset value. The asset values will be verified by a third party. F&F conducts legal checks on the property titles, and ensures the registration is accurate and proper insurance is in place on all properties prior to financing. The term of the loans will be 12 and 24 months as determined on a case-by-case basis.
In the below example you can see what a REIF 1st or 2nd position loan would look like in the capital structure:
Acquisition & Development Structure Example
- Acquisition Price $ 9,500,000.00
- Closing Costs $ 500,000.00
- Development $ 800,000.00
- Carrying Costs $ 100,000.00
- Total Required $ 10,900,000.00
- 1st Position Loan - REIF/Other Financial Institution $ 7,500,000.00
- 2nd Position Loan - REIF/Other Financial Institution $ 900,000.00
- F&F Investor Capital $ 2,000,000.00
- F&F Capital $ 500,000.00
- Total Capital $ 10,900,000.00
Distributions & Waterfall
- Repay 1st Position Loan
- Repay 2nd Position Loan
- Return of Investor Capital
- 10% hurdle to Investors per annum
- F&F catch-up
- Remaining amount 50/50 split between F&F Investors and Forge & Foster
Describe your previous track record related to this business proposal.
About Forge & Foster
Forge & Foster was established in 2016 by brothers Mark and Joe Accardi. Since then, they have amassed over $200 million in assets under management with ~2,000,000 square footage across 40 commercial real estate properties. Forge & Foster deploys a value-add investment strategy towards commercial real estate by acquiring high-growth incoming-producing properties with targeted returns of 20%+ IRR over 3-5 year investment periods. Predominantly investing in Toronto, Canada and the surrounding area, Forge & Foster has an in-house team of 5 partners and 15 employees with capabilities in deal sourcing, asset management, financing, capital raising and property management. Forge & Foster also has an advisory board of 5 members.
REIF Financial Investments Inc. is a newly formed entity entirely owned by Corl Financial Technologies Inc. and designed to issue commercial real estate loans to mid-market private investment managers.
Corl Financial Technologies Inc. (“CFT”) is a financial technology company that operates a Lending-as-a-Service (“LaaS”) platform that collects private data on businesses and recommends financing decisions. Since 2016, Corl has helped government agencies and corporations effectively source and analyze financial data for financing over $100 million in business loans, and helped support dozens of businesses obtain growth capital without giving up ownership or control.
What is the average collateral asset size?
F&F will be financing value-add commercial real estate projects with an average loan amount of $10,000,000 (ten million CAD) for the 1st position product and $750,000 (seven hundred fifty thousand CAD) for the 2nd position product.
Describe the risk of the assets you are proposing. How do you evaluate and manage that risk?
In approving real estate loans, REIF employs a strict due diligence process and ensures the following are provided and understood:
- Property Value. REIF will rely on a 3rd party verification of property value.
- Loan to Value (LTV) not to exceed 80% of the asset for 2nd position loans and 70% for first position loans.
- Use of Funds. The Value-Add loans are only for activities that directly increase the value of the property. This restriction allows for take out financing at a higher value once a project is completed and allows the Issuer to monitor the deployment of funds effectively.
- Entity in Good Standing. Issuer to ensure current debts and obligations are in good standing and verification of no liens against the asset.
- Corporate Docs & Financials. Issuer ensures the ownership has sufficient financials to service the Value-Add Loan.
- Insurance. Adequate insurance for the project and insurance of the existing asset is required. Issuer is outlined as a Loss Payee on the file.
- Covenants. The Borrower shall not further encumber, charge or mortgage the asset without the Issuer’s written approval.
- Property Income. The Issuer will underwrite the existing income of the property and future income of the property to ensure 1. The originator can service the mortgage payments and 2. that the future income will yield a high enough value upon completion to pay out the Value-Add Loan.
Skin in the Game
There are numerous ways in which F&F and REIF will share risk and align incentives to ensure all parties are economically aligned to preserve and grow capital in the REIF Pool.
Firstly, REIF, the Sponsor, expects to launch the pool with 2 million Dai of committed private capital as a blended investment in the DROP and TIN. REIF also expects to make additional purchases of DROP and/or TIN to grow the size of the pool over time.
Secondly, F&F, the Initial Asset Originator, is committed to investing alongside the REIF Pool in all of the commercial real estate properties that F&F offers to the REIF Pool to finance. The anticipated F&F investment is a minimum 20% of the equity of each property. This investment is considered first-loss capital and will absorb any losses to protect the debt assets in the REIF Pool. This further aligns the incentives of F&F with the REIF Pool.
Furthermore, REIF and its affiliates are committed to acquiring a material portion of the senior and/or junior tranche of the pool offered by the Issuer, the specific proportion and amounts have still yet to be determined.
Please describe any conflicts of interest or potential conflicts of interest or any relationship that could compromise or be viewed to compromise the decision making of the company.
Ben Ames, Chief Executive Officer of REIF, is also a Partner and Chief Investment Officer at Forge & Foster.
Are there or have there been in the last 10 years, been any criminal, civil, regulatory or administrative proceedings against (i) the Company or any of its principals or (ii) the product in any similar such matters including reparations, arbitrations, and negotiated settlements? If so , please describe.
Are there any further disclosures that interested party should be aware of?