Financial, Legal, & Realty

Interview with Alexis Assadi on Property Financing

Alexis Assadi is a Vancouver-based entrepreneur. He is the Chief Executive Officer of Pacific Income Capital Corporation, a firm that provides growth funding to business owners and real estate operators across North America. He also operates various other private financing companies, which focus on similar projects.

Although he now resides in Canada, Alexis Assadi was born in Switzerland and has lived in Thailand, Hong Kong, Australia and the United States. He studied political science at the University of British Columbia, from which he graduated with a B.A. in 2010.

In addition to running his businesses, Alexis Assadi enjoys reading about and discussing politics and international affairs. As well, he frequently watches historical documentaries and educational films about outer space. When he isn’t doing either of those, he spends as much time as possible with his family, friends and dog, Luna.

How did you get involved in the real estate financing space?

Basically, by accident. Years ago, I gave a small loan to a friend, who offered to repay me with interest. At that point, it occurred to me that you can make money doing that. Of course, lending is one of the oldest businesses in the world. I just never thought I could get into it.

Since I’m quite plugged in to Vancouver’s entrepreneurial community, I would often get pitched on investments. So, that turned into plenty of opportunities to lend to business ventures and real estate deals. Things just started to grow from there.

You’ve talked in the past about only lending to growth projects, rather than trying to save companies. Why is that?

Two reasons. First, I prefer to be part of a growth story. I’d like to see my capital used for expansion, such as hiring people or acquiring properties. That’s just my personal choice.

Second, I think it’s a way to manage risk. A growing company may be more likely to repay its creditors and investors. I’d rather avoid adding risk to my investments by getting in bed with a struggling business. It’s easier to lend to firm with plenty of income producing assets that continues to expand.

Do you do personal loans?

No, for several reasons. To begin with, I don’t find it interesting. After that, I think it would be riskier than what I’m used to. And finally, even if I was interested in the industry, I doubt that I could compete in it. There are so many massive companies in the market; I would probably be squeezed out pretty quickly!

Some people view lending as high-risk. How do you respond to that?

Well, they are right. But anything can be risky if you aren’t careful.

My experience, at least with real estate lending, is that you can find a nexus between low risk and strong returns. However, my interpretation of risk may be different than someone else’s. For instance, I don’t personally need much liquidity in my portfolio, so I don’t factor that into the equation. However, someone who wants to be able to withdraw their capital at a moment’s notice may feel differently.

I’ve been doing real estate lending since 2013 and I have yet to suffer a default, let alone a loss. But I’m diligent and careful, and I don’t make rash decisions. I always let the numbers govern my choices. To be honest, I find it easier than trading stocks or even taking an equity position in a property. You can never eliminate all risk. But I’ve found this manner of investing to be the best for me.

How do you manage interest rate risk?

Interest rate risk is one of the main hazards that lenders face. I usually handle it in one, sometimes two, ways.

First, I might issue loans with a floating interest rate that follows a major index, like the Bank of Canada overnight rate or the US Federal Reserve’s prime rate. Those institutions play an important role in prevailing interest rates.

Second, I’ll issue short-term loans that range from a few months to a few years. When those loans mature and the capital comes home, I can then lend it out at the appropriate rate. If the borrower requires an extension, I’ll might adjust the rate if prevailing rates have changed.

Do you have any advice to those who want to become real estate financiers?

Make sure you know your numbers and ratios, like the loan-to-value of the deal. Take your time, do your research carefully and be thorough. And make sure there’s a clear exit strategy.

How about to borrowers?

Business lenders understand that companies can run into financial trouble. There are ups and downs in the market – we get that. If you’re going to be late with a payment or even miss it, let the lender know in advance. Don’t bury your head in the sand and hope that it won’t be noticed.

I’ve not really had this issue, personally. However, I know other lenders who will take a borrower’s silence in the worst possible way. They will assume that the project is in trouble and will then recall the loan. That can be disastrous. It can lead to legal action, foreclosures and bankruptcies; not to mention the stress and anxiety of dealing with it all.

You will be better off telling the lender ahead of time, even if it’s just in a short email. Don’t put your company and your livelihood at risk.

Why would an entrepreneur go to you instead of a bank?

There can be any number of reasons. First, my team and I can be faster than a bank. We are small and are able to do due diligence without going through layers of management and bureaucracy. Sometimes a deal comes around that cannot wait. Entrepreneurs value speed and efficiency.

Second, we can be creative. A bank may not like complex deals. They will often view them as risky. We like a good challenge.

Third, we can be refinanced with bank money. We are often a short-term solution until the bank’s capital comes in.

What’s next for Alexis Assadi?

Right now, I’m focused on building Pacific Income. It’s been a big undertaking for me and I’m proud of the company thus far. We just need to keep pushing forward.

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Jan Hines

A startup nerd and compulsive writer, Jan provides streamline information on the hottest trends and news.

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