As The Neilas Group exits all Toronto real estate investments, it is now time to turn the page and begin a new chapter.
Dimitrios (Jim) Neilas is a prominent real estate professional with two decades of experience in acquisitions, development, and financing within Toronto’s commercial and residential sectors.
He began his career in the Greater Toronto Area real estate market as vice president of financing of a mid-size property management company. In 2004, he founded the Neilas Group of Companies, an integrated group of companies focused on acquisition finance and development of commercial properties in Toronto.
From 2004 to 2017, Dimitrios (Jim) Neilas originated and funded 24 investments and successfully exited 21 of those investments with returns north of 11%. (spacing issue)
Neilas Inc. is a real estate development firm focused on the creation of quality boutique condos that feature distinctive designs and innovative urban development concepts. Today, we interviewed Dimitrios (Jim) Neilas about his experience in the real estate sector as well as his decision to move on to new horizons in Austin, Texas.
Q: You exited the Toronto real estate market – tell us about that.
Dimitrios (Jim) Neilas: It’s a story of the good, the bad and the ugly.
The good is that we originated over 20 investments from inception in 2004 and hit our target returns. We provided solid investments for almost 15 years.
The bad is that we had to exit because we had a Syndicated Mortgage Loan investor model. Other companies, namely Fortress, experienced acute financial trouble. Others followed. Our operation was solid because of the quality of assets, but liquidity dried up. Construction lenders were no longer willing to lend on any development that had small investors because smaller investors would cry foul if the project got into trouble. Senior lenders cited reputational concerns – they did not want to be involved in a retail investor dispute. So, we could not secure the proper construction debt to complete our projects. Once we realized we could not execute a critical liquidity event like construction financing, we decided to exit the market. We were no longer financeable.
The ugly is that we got caught up in the syndicated mortgage loan meltdown and had our own investor lawsuits to deal with. It was some of the worst litigation I have ever been part of, but we saw it through, and we settled with investors.
We were the only company operating in the Syndicated Mortgage Loan industry that was not put into regulatory receivership. We respectfully wound down our operation and did not leave a mess for someone else to clean up. We saw our obligations to investors through, for better or for worse.
Q: What was the most important thing to you when you decided to exit?
Dimitrios (Jim) Neilas: Reputation. When retail investment vehicles with small investors go sideways, there is always an underlying question about financial integrity and honesty. That’s what mattered most to me. In exiting these investments, we wanted to make it crystal clear, and on the record, that we managed these assets properly and responsibly and that there was not even an inkling, not a hint, of financial dishonesty. We went through a few forensic audits and one court-appointed officer that vetted our exit process, and there were no findings of dishonesty whatsoever. Not a single dollar was unaccounted for, and our process absolutely withstood the highest court scrutiny. That’s why I hung in there and saw this process through.
Q: What do you say to those people who still have doubts about your financial integrity?
Dimitrios (Jim) Neilas: Well, I’m sure there will always be rumblings in private, but if anyone were to question my financial honesty and integrity in public, they should make sure they have a litigator on call. We settled with investors and with the regulator, FSRA. If there were any issues of financial integrity, we would not have reached a settlement with over 1,500 investors.
Q: Overall, how did your investors perform?
Dimitrios (Jim) Neilas: The overwhelming majority of them made outstanding returns. We would tranche out mortgages into a first and second priority, similar to CMBS structures. Those in first priority performed extremely well. We also had different exits, with some investors exiting after the acquisition or after an event like successful rezoning when valuations were adjusted. A number of investors lost a portion of their principal, it’s true, but over our 15-year history, most investors realized great returns.
Q: So what’s next on the Horizon?
Dimitrios (Jim) Neilas: I think Toronto and Canada generally have become too real estate dependent, as industrial output seems to have flatlined over the last decade. Since 2015, Canada has hired more civil servants than the United States, which is ten times bigger, and the percentage of the labor force employed in the construction industry is scary – 17%, according to the latest data. This is a crash waiting to happen.
The U.S. can raise interest rates and hurt real estate –because they have unprecedented industrial growth – in Canada, it’s not that simple. I believe the BOC stopped rising because a crash in real estate would lead to a massive economic crash – most people’s wealth is dependent on real estate values. But this can only last so long. Something’s gotta give. When I look at the U.S., I see real industrial growth. Their tech sector, their E.V. market, and their manufacturing sectors are firing on all cylinders. They are a much more diverse economy and much more insulated from a downturn.
So, I have set my sights on developing commercial properties in the U.S. In particular, the growth in Texas has been nothing short of outstanding, and I do not see this growth ending any time soon. When corporate heavyweights like Tesla and Oracle call Texas their new home, it speaks volumes. The new Samsung chip plant in Austin alone is slated to cost over $20 billion. This is real economic growth – not just a bunch of house flippers and condo speculators.
We are looking forward to making a huge impact in the residential and commercial real estate sectors in Austin and hopefully beyond.
