Mortgage Architects/Radius to Change Hands

PacificNegotiations are underway for Pacific Mortgage Group (PMG) to be sold.

The company owns Mortgage Architects, one of the largest mortgage brokerages in the country, as well as the lender Radius Financial. Radius was ranked 15th in broker channel market share, according to D+H, with 0.9% of the market.

PMG founder Alex Haditaghi officially announced the sale-in-progress to employees and brokers today. In an email to the company, he said:

“…This moment is bittersweet for me as I am officially announcing to you that it is my intention to exit the business and retire as Chairman and Founder of Pacific Mortgage Group to pursue other life ambitions.”

Alex Haditaghi
Alex Haditaghi

“I am proud of everything we have achieved. We have grown from a small business in a tiny Richmond Hill house, to a company that originates nearly $8 billion in mortgages annually, [has] $2.5 billion in mortgage assets under administration [and has] hundreds of locations coast to coast.”

“When we acquired Mortgage Architects and MyNext (Radius’s predecessor), the company was 45 days away from being bankrupt and was losing approximately $275,000 per month.” (Editor’s note: Now the company is making seven-figure annual profits.)

“Ron Swift, Robert Hyde, Gary Cilevitz, Dong Lee, Albert Collu, George Zhang, Pierre Martin, Luisa Simonetti, Karen Fogel, Meini Ickert, Joe Fakhri, Suzanna Stefanec and the rest of this incredible management team will be staying on board to ensure that the company will continue its tremendous story of success.”

The sale process began earlier this summer and the company expects it to be completed this fall, possibly as early as October. The names of the potential buyer(s) are not being disclosed but the company is actively in talks, having engaged an investment banker to advise on the sale.

Ron Swift
Ron Swift

The deal would create a liquidity event for all PMG shareholders, many of which include original Mortgage Architects brokers from 2006 when the company started. Apart from that, Radius Financial CEO Ron Swift notes that, “We expect no change from how we operate today, including the brand, management and business model.”

“When I bought this business, within days of closing the deal, both Deutsche Bank and Macquarie Bank—our only two funders—notified us that they are out of market,” Haditaghi recalls. “[Some of the] management team wanted to shut down MyNext and just focus on the brokerage. It was a very hard-fought battle but I insisted on keeping the staff and paying salaries for months even though we had no product to sell. It was the best decision ever.”

Radius-FinancialThe company also took another risk that was very difficult at the time. “I remember having a fight with [certain management and brokers] when I decided to open Radius to outside brokers. It was the toughest one week of my life in the mortgage industry,” Haditaghi says.

But that’s all water under the bridge and the future carries new possibilities, he says. “I believe Mortgage Architects and Radius still have their best days ahead.”

Sidebar: In related news, the company has applied to be a direct mortgage-backed securities (MBS) issuer. Haditaghi hopes for approval “within 3045 days.” The buyer gains a company with a valuable Canada Mortgage Bond (CMB) allocation. Government-backed CMBs are virtually the cheapest source of mortgage funding. Radius is also well positioned to seek CMB seller status in the future. Albeit, being a CMB seller would require a buyer with deep pockets due to the program’s capital requirements and complexity.

  1. Interesting, the good news is Alex will no longer be in the mortgage brokerage business, the bad news in the event of a sale, it is really never a dead certainty what the final outcome will be for a really great group of people at these respective organizations. Here’s hoping is all works out successfully for Ron, Albert and all the other talented folks who worked relentlessly to make these businesses a success.

  2. It has been a long and winding road since the early MyNext days. Good to hear there is a glimmer of light at the end of the tunnel. A lot of good people invested their savings and sweat in this company. They deserve to sell at a profit.

  3. HCG announces purchase of Radius/Ma in a cash + share deal. Radius/MA will continue to operate independently but will now be backed by deeper pockets. HCG acquires a reputable delivery channel; it intends to fold its “A’ business into Radius so it can now concentrate on its very profitable “B” business.

    In other breaking news, Donald Trump has won the Presidential election by a landslide victory. Oil prices are now in the sub $20 mark setting off more upheaval in the Russian and Chinese markets.

    Truly great people at MA…good luck!

  4. @WhatdoIknow, I hear the same thing about Home Capital Group. I hear they are the leading bidder for the Radius/MA. It would make lots of sense for them to buy Radius and MA. Great brokers, good business with Radius, it would be a win-win for everyone. I actually think this would make more sense for HCG than buying CFF.

  5. @jim and @diceman…u guys probably didn’t read the breaking news about Trump being president LOL….

    who knows? it would be a coup for DLC for sure…hands down and it would be accretive to earnings if they can make the cultures mesh.

    HCG would be cool…it would multiply their delivery channel….or maybe CWB! let the games begin!

  6. I had a flashback to Alex and Mortgage Brokers.com, talk to those ” investors”!? Ron is saying what many MA Principals are thinking.

  7. DLC buying another company… Would be a disaster for the industry. We already have to deal with a certain person’s ego and bragging, imagine how intolerable it would be if this happened.

    1. Hate him all u want for being bombastic…the industry needs someone colorful like that and at least you know what you are getting.

    2. I just love it when anonymous haters who have never built anything significant in their lives trash successful innovators because they don’t like their personality. Maybe your personality sucks a s s too. Who cares? The important question is, what have you done lately to make our industry better?

  8. Pretty sure that CMBs are issued by Canada Housing Trust. Are you talking about being a CMB contributor? That requires no additional capital requirements.

  9. Hello Jimbo,

    This is the industry vernacular. “CMB Issuer” status allows a lender to sell mortgages “directly” (often with the help of a separate “counterparty”) to CMHC for sale in its Canada Mortgage Bond program. This privilege entails a number of additional requirements on top of the requirements for being a CMHC approved lender. Ultimately though, it is Canada Housing Trust that issues (sells) Canada Mortgage Bonds to investors.

    Here is some more information on the process: http://www.mbsia.ca/sites/default/files/Introduction-to-the-CMB-Borrowing-Program.pdf

    1. I think you missed my point. There is no difference between MBS Issuer and a CMB Issuer (to use your vernacular). To be a CHT swap counterparty there are greater requirements but i don’t think that is what you are talking about. Especially since you include CMB allocation in your sidebar. To list both as separate things that Radius is planning to achieve is misleading and inaccurate.

      1. Hello Jimbo,

        Radius has applied to be a direct issuer of MBS (commonly known as an MBS Issuer). An approved lender can *also* apply to be a direct seller into the CMB program. This is related to, but nonetheless distinct from, being an MBS issuer.

        Note, this information comes directly from the company itself so they’d be your best resource if you need further clarification.

        Thanks

  10. As to the quality of people there are some super talented people in management but also some expensive dead weight.

    Who in their right mind would buy this company, in this market?

    Is it a last ditch effort by shareholders
    to cashout before the wheels fall off?

    1. Every company has its warts. However, your generalizations completely defies logic. What wheels are falling off? Or maybe those are the loose screws in your head you are hearing.

  11. I can tell you that DLC is not even a leading bidder. There are few bigger players on the table with higher offers than DLC including 2 big private equity firms. The rumor of Home Capital Group is accurate, the other 2 bidders are Paradigm and MCAP. Both are in there with big cash offers.

    Alex’s main reason of sale is his health issues including his battle with cancer. He should be very proud, he has built a great and successful business at such a young age. Both Radius and MA make tons of cash, nicely run organization. Ron Swift is a class acts. There are no dead weights in that organization.

    There are lots of people in this industry who are jealous of successful and smart Entrepreneurs like Alex. He has accomplished more in last 10 years than most people in a lifetime in our mortgage industry.

  12. It will be interesting to see if the Pacific is sold as one entity or sold as two pieces. I am absolutely sure there is strong interest from several bidders from both sides of the industry; the lending side and the brokerage side. I would agree that Alex has accomplished many things in the mortgage industry in the last 10 years but I am dead certain of this, some people like Gary and Colin built businesses by consistently helping those they were associated with to make money as they grew their own businesses and others screwed some people blue. History will be the judge.

  13. @RonButler please tell me how Colin Dryer or Gary Maurice have helped people around them to make money? Both Colin and Gary own their businesses (they might have 1-2 investors). None of the DLC or Verico brokers have any ownership in those companies. All those brokers are working to build Gary’s and Colin’s businesses. When Gary decides to sell DLC to a bank or take it public, who will see the upside? When Colin sold part of his company to B2B who saw the benefits and the cash?

    I am a MA broker/shareholder. I can proudly say that I am part owner of a great brokerage and mortgage lender. I love what Alex, Ron, Albert and the rest of the Pacific team has accomplished. Five years ago I was in the meeting when Bob Ord told us we were 60 days away from being bankrupt. As a shareholder we were all worried that our money was gone. To his credit, Alex and the rest of his team stopped the gravy train, cut costs and made Pacific what it is today.

    I am a very happy broker. I get great service, great compensation, great support and I am part of the best brokers in the industry. I couldn’t ask for a better company to be part of.

    1. Interesting.

      @RonB…does your brokers own part of your company? Didn’t your brokers/workers help you build your business?

      Gary and Colin have helped people make money, albeit in a different manner…i.e. via splits/turn key model or whatever incentives they offer for you to join them. However, I’m not certain if their brokers own part of their company.

      Alex, by the sounds of it, has provided the vehicle for the brokers under the MA umbrella to own part of the company. That is commendable.

      What is interesting is the drama between Ron and Alex (none of our business). I believe, whatever it is, had no place in this discussion.

  14. Very unlike me to chime into these types of exchanges because I generally view them as empty discussions based on little fact but I felt compelled to do so this time around. First off, thank you to those posting very positive remarks about me personally and the rest of our great executive group at Pacific. I also applaud those that had the courtesy to expose their names instead of shrouding behind anonymity. We’ve worked hard these past number of years to create a solid body of work and we are quite proud of what we have accomplished at Pacific. We’re only viewing this process as another step towards our long term successful journey with a group of brokers we could not be prouder of. As for the comments abound here I’d like to say this – I’ve had the opportunity of getting to know Colin and Gary a little bit over the past few years and while they are competitors I think diminishing their contributions is unfair and misguided. They, along with ours in our industry, have helped this wonderful industry (broker channel in particular) prosper and we should embrace and applaud that regardless of what your personal views are about personalities and approaches. In terms of Alex, I see lots of derogatory comments being muddied about but you cannot deny that he had a major role in allowing MA to continue onward and upward opposed to the bleaker path MA could have taken years back. Alex’s decision to step away is yet another step towards allowing our executive group to continue our story of growth and success. We’re behind Alex as partners to help his transition and we’re thankful to him for allowing us to take the next big leap forward for our company.
    While there may be lots of speculation as to who will be the purchaser of this company I can say with certainty that it’s nothing more than pure speculation at this time.

    Until then lets continue to be reminded that we are all working together to put mortgage brokers on the map with Canadian consumers. That’s an endeavour we can all share as partners regardless of what company we stand for

  15. “Until then lets continue to be reminded that we are all working together to put mortgage brokers on the map with Canadian consumers. That’s an endeavor we can all share as partners regardless of what company we stand for”

    Thank you Albert for this comment – this is the common goal we should all be working towards, not bashing other companies, models, and people.

    Having worked with both MA and Verico, and having many good friends that work with DLC, I can say with certainty that all three are great companies, with great people, and yes different models, but it takes all kinds my friends.

  16. I like Albert, always discount anonymous disparaging comments as they typically devalue any conversation. The MA/Radius sale is interesting. Typically when a process is being run and a business is being shopped it is very confidential until the process is complete and the sale is imminent. In this case the MA exec and advisors decided to get out in front of it and let their staff, agents, owners and Industry know in advance to avoid any speculation and to be forthright with their team members and investors.I applaud them for this transparency.

    From Albert’s comments, the new buyer is getting a great management team that wants to stay and are dedicated to our space. The MA Group is a great bunch of people, many of whom I know personally and any new buyer will be happy with their purchase. My business partner always reminds that Royal LePage was sold twice during his 16 years as a franchise owner and each time the company became stronger and tremendous value was added.

    As to those negative, disparaging, nasty comments that are always part of any post, they should be of little consequence or concern to the recipients. Whether you are a young hotshot, a new upstart kicking ass, someone who nobody thought you would make it, the number one agent in your marketplace, or the owner of a company that has grown really fast, you become a target to those others that are jealous, unhappy and have the “I AM A VICTIM MENTALITY”.

    I, like many others I am sure, are looking at MA and would be thrilled to own such a great company provided the economics made sense. Alex is moving on for a bunch of personal reasons which I believe includes focusing on creating a family life. He came here as a new immigrant and built a great business and that should be congratulated.

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