Launching a new commercial brokerage in a tough market proved a risk that paid off
Launching a new mortgage brokerage can be a challenging venture at the best of times – but the turbulent market and economic headwinds of the past 18 months have made the current climate an especially daunting one to establish a new business.
Still, Stephen Thomas (pictured) saw opportunity in that volatile environment, with the value of commercial mortgage brokers coming into sharp focus amid trying times for borrowers and lenders alike in the space.
The demand at play for mortgage advisors in the commercial space helped convince Thomas, already a seasoned broker, to launch TMG Black Capital through Halo Advisory in late 2021, with the brokerage announcing its full launch the following March.
Since then, it’s navigated a bumpy market with aplomb, coming away with the 2023 Canadian Mortgage Award for New Brokerage of the Year and continuing to scale upwards.
For Thomas, that success is a reflection of the vision he had in establishing the brokerage with the market firmly in the eye of the storm.
“We launched coming off the heels of the pandemic,” he told Canadian Mortgage Professional. “So what I experienced as a commercial mortgage broker was that I became completely oversubscribed, and just from serving the market need, I decided that I needed to grow and scale the company and go from a single agent to a brokerage because there was that much demand for our services.
“That was really the force driving that decision, just filling that market need when all businesses and commercial real estate assets were shut down, social distant operating procedures in place.”
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Identifying “tail risks” proved important step for new brokerage
Thomas, who serves as CEO and principal broker at Halo Advisory | TMG Black Capital, focused on building an industry-leading institution dedicated to the commercial space, knowing that difficult times – and so-called “tail risks” due to the pandemic – were ahead for that sector.
“What was really evident to me that in a growth market, anyone can get a commercial deal done,” he said, “but in a declining market, you would absolutely need a professional and there were just no professionals available.
“That was really a decision: ‘How do we address these tail risks? It’s bad now in the pandemic, but it’s going to get even worse two years after.’”
That was due in part to the fact that businesses across the commercial spectrum were securing “relief” through cheap credit during the pandemic, with the business credit availability program seeing some companies avail of millions of dollars in relief debt.
Those arrangements presented few issues in 2020 or 2021 – but as interest rates began to spike last year, the cost of servicing that debt also started to climb.
The value of existing relationships and experience
An invaluable asset to the brokerage in its early days was Thomas’s prior brokering experience, with his reputation in the industry as a commercial expert helping the company cultivate relationships and develop new connections.
“Our entire brokerage concept was built on partnerships and relationships,” he said. “So from the very start, we decided that… what we were going to do is sell transparency and advice in the commercial lending process, [which] is very fragmented and different to the residential.
“So from that, we definitely had to rely on our network and our contacts and our relationships to support the brokerage as we established and grew.”
The careful expansion of the brokerage’s network of contacts, Thomas said, has resulted in a “pure commercial lending environment” with specialists and experts dedicated to the space at every turn, whether lawyers, accountants, realtors or brokers.
“That’s what’s really helping us create that client experience that we feel got lost, especially in the pandemic.
“Doing commercial mortgages is always a difficult, stressful process, and what we try to do is provide that advice and transparency to create a client experience where often one gets lost in risk and stress.”
The launch of its direct-lending program in recent times has also helped the company provide a wider array of solutions to borrowers, Thomas said, especially with the cost of financing rising and available capital becoming increasingly hard to come by.
Ultimately, the experience of launching a brokerage during difficult times – and succeeding in a down market – is one that Thomas said would stand the company in good stead as the mortgage industry hopes for a rosier outlook in the coming years.
“Building trust is everything, and just having that experience and track record to support it in these difficult times when everyone is reviewing everything – [borrowers] have to make sure that they’re getting the value for the fees that they’re paying,” he said. “If we can weather this market, then the rest of it should be much easier.”
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