leveraging first nations equity - michael bonshor
TRANSCRIPT
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Links to LearningDecember 2013
Leveraging First Nations Equity
Michael Bonshor, CMALeader, BC Aboriginal Consulting
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We acknowledge the traditional
Coast Salish Territory
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Discussion Topics
• About MNP• Issues and Overview• Equity Spectrum: Approaches• Case Study
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Founded in1945, MNP is now the 7th largest chartered accountancy and business advisory firm in Canada
MNP has 50 offices and 2,600 team members across
Canada
In BC, MNP has more than 450 staff located in 15 offices across the province
We serve more Aboriginal clients in
Canada than any other CA and advisory firm
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Strategic FocusPeople, Process, and
Structure
Our Working LensMNP Aboriginal Consulting
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ISSUES AND APPROACHES
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Inherent Rights Driven
• Treaty
• Accommodation– IBA’s
• Business and Economic Opportunities
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Increase in (Proposed) Economic Activity
• Oil & Gas: Northern BC• Forestry• Hydro• Shipbuilding
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Economic Self-Sufficiency
• Balancing growing community needs with decreasing funding from Fed/Prov . sources
• Increased need for Own Source Revenues
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Community Needs
• Young, growing population– Soon to reach working
age
• Community Services• Housing and
Infrastructure• Health
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Increased Need for Financing
Older...• AANDC• First Citizens Fund• Revenue Sharing
Agreements• Taxation• Land Leases
Newer…• FN Finance Authority• First Nations Equity
Fund• Coast Opportunity Fund• Cape Fund• Impact Benefit
Agreements – Equity
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Cape Fund
• $50 million private sector investment fund• Created to address economic disparity
between Aboriginal communities and mainstream society
• Funds available to mid-market opportunities with strong Aboriginal involvement
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First Nation Finance Authority
• Planning bond issue 2014• Will sell $100 - $150 Million of 10-year bonds• Were assigned an A3 issuer rating• Raising money to lend to First Nations for
capital projects• Rates similar to those given to municipalities
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Navajo Nation
• First Bond issuing in 2012• $120 million offering• Given an A rating• Will use funds to finance 50 projects– Convenience stores– Fast-food restaurants– Shopping centres– Offices and industrial complexes– Tourist centre
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Equity Spectrum
Personal Personal Assets/Cash Flow
Bankable Assets/Cash Flow
$100k to $1MM
$10MM
$20MMFr
iend
s &
Fam
ily
Vent
ure
Capi
tal
Priv
ate
Equi
ty
Ange
l Inv
esto
rs
Time
Money
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Equity Spectrum
PersonalBankable
Scale $
$100k to $1MM
$10MM
$20MMFr
iend
s &
Fam
ilyNew Start UpsSelf Financed
‘House’ Security$100k to $1MM Range
Nominal Share Value ($0.01)
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Equity Spectrum – First Nation Perspective
PersonalBankable
Scale $
$100k to $1MM
$10MM
$20MMFr
iend
s &
Fam
ily Money Issue!Security Issue
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Angel Investors
Personal PersonalBankable
Scale $
$100k to $1MM
$10MM
$20MMFr
iend
s &
Fam
ily
Ange
l In
vest
ors
Est. $0.10 Share Range‘Angels’ looking to seed a number of Co’sGenerally targeting to grow Co. From $1MM to $2MM rangeTarget High Growth Potential Opportunities
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Angel Investors – First Nation Perspective
Personal Personal Assets & Personal
Assets/Cash Flow
Bankable Assets/Cash Flow
Scale $
$100k to $1MM
$10MM
$20MMFr
iend
s &
Fam
ily
Ange
ls In
vest
ors -Initial Barriers a factor-FN Focus on Resource Sector-Ideas! ... not just trees...
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Venture Capital
Assets & Personal
Bankable
Scale $
$100k to $1MM
$10MM
$20MM
Frie
nds
& F
amily
Vent
ure
Capi
tal –
Ange
ls In
vest
ors
- Venture Capital Funds: E.g. Ventures West, Cape Fund- Fund Size $60MM to $100MM-$1MM - $5MM Range per Investment-Generally limit to 10% of fund per investment-Seeking High Growth Opportunities -Anticipate failures to offset
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Venture Capital – First Nation Perspective
Assets & Personal
Bankable
Scale $
$100k to $1MM
$10MM
$20MM
Frie
nds
& F
amily
Vent
ure
Capi
tal
Ange
l Inv
esto
rs
-Initial Barriers exist-VC expected returns and growth potential = 10 times invested-Access to high growth sector vs. resource based opportunities-VC’s need to understand risk level ; many FN opportunities have uncertain risk
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Investor Expectations
• Management Team: leadership, track record• Market Opportunity: Opps in large markets with
room for growth• Growth Potential: Profit/Value Growth• Technology: preference for first-of-a-kind new ideas
rather than common products• Exit Strategy: within 7-10 years; 10X investment
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Private Equity
Bankable Assets/Cash Flow
Scale $
$100k to $1MM
$10MM
$20MM
Priv
ate
Equi
ty
Funds in excess of $100 MME.g.. Tri-Corp Fund: $600MMWould invest $50MM-$60MM per investmentLooking for 33% returns rangeLower risk opportunitiesFocus on business capacity and cash flow
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Private Equity – First Nation Perspective
Bankable Assets/Cash Flow
Scale $
$100k to $1MM
$10MM
$20MM
Priv
ate
Equi
ty
Best fit for First Nations : return expectationsRequires Strong Corporate Governance Strong business modelCollective FN Opportunity?? Forestry or Fisheries?
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Equity Summary
• Challenges at FN Level: barriers to entry• Ideas, not just trees• Good governance the key• Need to create a healthy ‘Risk’ Model• Trust• Focus on building on strengths• Community Assets, Traditional Territory
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Case Study
Kwantlen First Nation – Seyem Qwantlen Business Group
Assertion of Aboriginal Rights/Title for Economic Development
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Kwantlen First Nation
• Kwantlen First Nation -Community Adoption-Leadership Assertion-Communication Plan
- Industry- Governments- First Nations
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Glover Property
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• Acquired through negotiation with BC• Located within City of Langley (off-reserve)• Initially not zoned, but commercial
development permitted • 3.815 acres• 2010 assessed value: $5.06 Million
Property Details
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With community input and feedback, Councilestablished development objectives:• Don’t sell the property; seek long term benefits• Establish Kwantlen business presence in Langley• Create employment and training opportunities
Project Background
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Moving Forward
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Key Terms:- 20 year term (SQLD option to renew for 10
years)- 40,000 sq. foot building at market rates- Lease payment based on value of land and
buildings
Dilawri – Seyem Qwantlen Lease
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• Started with Traditional Territory and assertion of Aboriginal title
• Created a good business governance model• Sound Risk Model – Partners understood risks• Strong Equity Position• Balance Debt Financed
Project Financing Highlights