March 31, 2021
A Letter from Trez Capital’s Chief Operating Officer
In the first quarter of 2021, we saw encouraging signs in North America of burgeoning recovery from the pandemic. This came from the acceleration of vaccine distributions, global economic policies remaining generally supportive of capital markets and a relatively optimistic market outlook. That said, reports of virus variants spreading in certain parts of Canada and the world means that there needs to be continued vigilance in monitoring infection rates and observing physical distancing protocols, at least in the near future. Furthermore, many economists and analysts have raised concerns about inflation. A combination of financial stimulus, low interest rates, and a potential future spike in growth and spending may result in some overheating of major economies and a decrease in real spending power.
Still, concerns that the economy might grow too fast is a welcome change from where we were at the start of the pandemic, and shows how much progress we’ve made over the last 12 months. Recent signs of economic improvement include credit markets opening up on both sides of the border, providing increased market confidence and liquidity. Since the beginning of 2021, our team continues to see high-quality financing opportunities that meet our risk criteria and strong momentum in our origination pipeline, which continues to trend towards pre-pandemic levels. Real estate markets continue to hold strong in the geographic areas that we lend into and we are excited about our prospects for this year.
Ensuring robust, sustainable yields in dynamic markets
The opening up of credit markets, growing investor confidence and increasing market liquidity are positive signs for the economy as a whole. But they can also pose headwinds to private lenders, like Trez Capital, in the form of increased competition in the lending market, especially the residential market where Trez Capital has focused its investments. In particular, as we headed into early 2021, we saw intensifying competition among lenders, which
placed downward pressure on credit spreads. This combined with low short-term rates has driven yields lower. When we look at our pipeline, we are seeing sustained lower interest rates on new investments in the near term.
We have always stated that we will never stretch for yield at the expense of unnecessary risk. As the factors that affect yield exert influence on each other, Trez Capital will continue to adjust to the market in order to provide stability to our investors.
A focus on risk management, liquidity, stability
Our loan portfolios overall have remained strong throughout the pandemic. We entered 2020 positioned in carefully selected investments that would be resilient to economic disruption, a decision that continues to benefit our investors. Our diversified portfolios of mortgages in both Canada and the U.S. have continued to generate value for our investors. Residential markets have been relatively stable during recent bouts of economic uncertainty, and are poised for future gains should immigration and travel increase as pandemic conditions subside. We continue to find loan opportunities that meet our investment criteria in both single- and multi-family residential properties, especially in the affordable and middle-market spaces. We are watching other asset classes carefully and we will also continue to pursue lending opportunities with strong merits, specifically industrial.
Further economic rebounds should be supported by increased vaccine access worldwide, strong fiscal stimulus and monetary support, and the prospect of stronger trade with a rebounding U.S. economy. As restrictions ease, a more balanced recovery should help to close the gap in the non-residential commercial real estate market performance.
Our rigorous, results-oriented and risk-managed approach has served our investors well through some of the most trying times in recent history. We continue to apply our disciplined loan selection process when investing in tomorrow’s opportunities, and I wish to thank all our investors for their continued support and trust.
Chief Operating Officer
To read the full Investment Update – Trez Capital Investment Update — First Quarter 2021
About Trez Capital
Founded in 1997, Trez Capital is a diversified real estate investment firm and preeminent provider of commercial real estate debt financing solutions in Canada and the United States. Trez offers private and institutional investors strategies to invest in a variety of opportunistic, fully secured, high-yield mortgage investment funds, and provides property developers and owners with quick approvals on flexible short- to mid-term financing.
With offices in Vancouver, Toronto, Dallas and Palm Beach, Trez Capital has over $3.9 billion in assets under management and has funded over 1,500 transactions totaling more than $12.5 billion since inception.