COMITÉ PERMANENT DES FINANCES
EVIDENCE
[Recorded by Electronic Apparatus]
Thursday, October 22, 1998
Mr. Arni C. Thorsteinson (President and Chief Executive Officer, Shelter Canadian Properties Limited): Thank you, Mr. Chairman.
My name is Arni Thorsteinson. I am president and chief executive officer of Shelter Canadian Properties Limited. I hold the chartered financial analyst designation, and I've been involved in corporate financial activities for over 30 years.
Our company is headquartered in Winnipeg and has been since its inception in 1971. Our company is a medium-sized family-owned real estate development and management company operating in Canada and the United States. We have developed and managed 110 rental apartments, condominiums, hotels, office buildings, shopping centres, industrial buildings, and even a water pipeline. We employ over 600 people in the operation of these properties.
However, I want to point out that my personal roots are deep in rural Saskatchewan. I was born in Rosetown, where I own our family farm, which has been cultivated by four generations since it was homesteaded by my grandparents 113 years ago. In fact, it's in Mr. Nystrom's stomping grounds in the Wynyard district.
I'm pleased to be able to provide you with our views on the MacKay report. In my opinion, it is a thoughtful and important document, and I agree with its broad direction to competition in the financial services market and the development of world-class and world-scale financial institutions in Canada.
Our support for much larger Canadian financial institutions that would result from the two proposed mergers reflects our company's experience as a buyer of corporate financial services. As a multi-branch real estate operation in Canada and the U.S., with 110 projects, low-cost and effective electronic cash collection and management systems are essential to our business. In our opinion, it's likely that only a very large financial institution with a North American network can provide what we require in a cash management system. Currently it doesn't exist in the fashion we require. Theoretically, much bigger Canadian banks can justify the investment in technology to develop these services and to expand into a network throughout the U.S.
As you are very well aware, our market is becoming North American rather than Canadian, and Canadian companies suffer without full access to the U.S. systems.
Much more important to mid-size real estate companies than the cash management system, of course, is an adequate supply of mortgage and other investment capital. It is our firm conviction that big banks are the best source of capital for companies like ours. Our experience shows the big financial institutions have consistently been able to provide us with lower rates of interest; have demonstrated a much higher tolerance for risk in financing new projects; have the personnel and resources to be much more innovative in developing alternative types and terms of loans and finance; have much more sophisticated lending personnel that can specialize in specific types of businesses; and the big financial institutions in Canada are the only ones that can provide transnational lending for companies like us in the United States and Mexico.
Canadian real estate companies have historically been very active and successful in the United States, and one of the reasons is because of the support from the Canadian banks in financing the activities in the United States. The U.S. banks have traditionally been reluctant to finance Canadian companies because of the differences in law and corporate residence.
Finally, in the inevitable circumstances where loans need modification and restructuring, the big banks have proven to be much more flexible and accommodating in working with customers that have difficulties. So for those six reasons, our experience has been the big financial institutions, the Canadian banks, have been very important and instrumental in our success.
In terms of consumer choice and competition, the combination of four of our biggest banks into two is potentially concerning. However, with appropriate deregulation, as recommended by the MacKay report, I believe there will be a rapid evolution of new, specialized financial institutions. In short, I see the best of both worlds for corporate borrowers such as ourselves. We will have two big world-scale banks, plus an expansion of boutique and specialized lenders. There will be much greater choice and competition for borrowers like ourselves.
Finally, I believe the two mergers present an opportunity to secure important long-term commitments of service and loanability to rural Canada and small business respectively. Under the terms, commitments and covenants the MacKay report indicates could be attached to big bank merger approval, rural branch service and small business lending would be secured at a level much in excess of the current situation. In effect, the merger covenants could protect rural Canada and small business against any diminution of the services currently available, and more importantly enhance the lending available to small business.
Mr. Chairman, I hope my comments have been helpful to the deliberations of your committee. I look forward to any questions you may have.
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