Investor Strategy Call – August 16th
Speaker1: [00:00:47] Hello, Eddie. I’m just getting set up, a few people are joining right now. Yeah, welcome. I think, is this going to be a couple of people here and not too many feel free to do anything to share? Just pop over your hand or send a message and I’ll get you speaking right away. All right, so we have Ali, who’s joining us as well. Yeah, I mean, obviously feel free to just send a message or raise your hand and I’ll get to you. Speaking right away, answering any questions or sharing any ideas. Hello, good afternoon.
Speaker2: [00:01:58] Thank you, me.
Speaker1: [00:02:00] Yes, a cancer. How are you doing today?
Speaker2: [00:02:03] Uh, good, good, good. It’s been a while. Sorry. Just been chaotic, I’ll say so. Nothing has really happened, except Dow taking three properties on contract in Edmonton. I was in Edmonton last week to have. So have side visit. So that’s what been keeping me busy actually in the last three weeks, completing the business plan for each of its assets, putting together the investment investment summary. The investments we’ve done that underwriting key assets, we’ve concluded that as well. So right now we have the operating mode. So we are ready the outreach now because we don’t do outreach because this is not a fun play right now. Yeah. So this asset by asset and you can’t really pitch where you don’t have as an asset and asset deal by deal. So we decided that we should conclude on that first before going to the starting outreach. So that’s what we’re keeping us busy. That’s why we’ve not been attending this. This call is in the last three or four weeks now, but we are ready now, we have started outreach, we’ve lined up some calls. Yeah, basically, I think some of those are giving us soft commitments, I think they are more energized now, but may say that, but we’ll see until the until we have the money in the bank. Nothing is guaranteed.
Speaker1: [00:04:08] Tell me about
Speaker2: [00:04:09] It. Yeah, so that’s what we at.
Speaker1: [00:04:12] Got it. Ok, awesome. Yeah. And obviously, like, yeah, obviously the calls are not. Nothing’s really required. Is this here to help? But yeah, so then the the outreach? Yeah. I mean, because it looks like based on the previous conversations, it looks like the the one by one acquisitions just tend to move faster than the fund because I’m curious your efforts on the your efforts on the Sendy. Are these projects underneath? Or is it? Is it a separate thing?
Speaker2: [00:04:42] No, it’s it’s it’s on that sandy. But it just said is going to be on a different entity, right? More or less to isolate each asset and asset risk and reward. So it’s not going to become good, like like the fund. So in this case, a deal by deal, asset by asset, you’re going to have a limited partnership for assets. So it’s still the same same structure, except that each asset is going to have the common LPIs or each asset is probably a common LP, so different LP. So if you, for instance, they need to invest in property and this is not interested in Property C or Property B. But say Reid is interested in Property B, so risk being A and B and W need to be just in A.. So that’s what the asset and deal by deal structure is going to be like, but each asset is going to have LP structure. Why? I said it will still be the DP on each asset.
Speaker1: [00:05:54] Yeah, OK. Got it’s so yeah, I’m assuming and we hired just in the side. We hired some new CFA is CFA contractors. Yeah, we’re getting people who are Kurtz’s really great and he’s he’s really he’s really young and he happens to be really grateful. We got some people that are certified. Yeah, but then you’re doing your focusing on outreach, right? And so I guess what is your current situation during reach in terms of like the details and how is the, you know, the contacts? And then how can we how can we get those types of contacts because we can walk through and try to sort through which types of what is really the hypothesis? And we can walk through everything and then we can get thousands of emails out, like, where are you at in the process here?
Speaker2: [00:06:41] Uh, I think we just concluded that the the. The investment zone with just over the weekend, so we’re at the point where we want to start our thinking, we’re looking for options, is it more or less like club deals? It’s not a typical syndication where you have like 10 20 people on the deal. We are doing club deals. We are looking for just about five five people. That’s right. Let’s say 250 K or 500 K or a million. It was just one investor that interested. We are open to that as well. For instance, on the on the on the 55 units now taking on that contract, that goes for about six point six point eight million on which we are right, we require equity of. Ok. Let me just check. I don’t want to mess the number of minutes. Okay, so on on that, for instance, you require equity of. Spoke to point to point to legacy two point three. Whereas the the the two deputies caused the number seven point seven point six, so force is on the equity that we really need to understand on that equity, that we need help when it comes to debt. As you know, debt is easier to get than equity.
Speaker2: [00:08:20] So we’ve got equity, we’ve got debt providers lying about staying away because they are just waiting for multiples on the equity part. But we don’t want to wait when we close on the equity part to start approaching them or start a discussion. We are spending some feedback on the part that was done, of course, in terms of the pricing of the debt. So, you know, so what kind of structure, what kind of tend to we expect we’ll look at those different terms and different structure and see which ones make more sense in terms of return risk than return. But where we need help is on equity and equity rates, honestly. Thus, that’s where we need help. We’ve got soft commitment about, you know, soft commitment is not saving money in your bank account. So we don’t want people to actually serious about investing, you know, not people that just say for the sake of trying to not to offend nature or not to offend, though, I’m interested. But we do actually have interest that they want to invest in, and they want to ask real questions so that we can. You know that the level of seriousness?
Speaker1: [00:09:35] Yeah, people vote with their wallets, they don’t vote with their mouth, and yeah, all the time customers, investors, everything, OK, so then. Oh, we have another yeah, Abdul, feel free to chime in with. Meanwhile, just just ask the question, so then what’s the balance? Yeah, feel free to chime in. So OK. And. Yeah. So let’s let’s go back and forth if need it on. I’m just writing up like, who are the target? People get the people from our from all of our databases and everything. Get all of them. And then you mentioned you already have a VA, but we can, you know, we have ways of making sure that,
Speaker2: [00:10:18] You know, VA, we just used to be here for just about a month and at that point, just OK. It’s not what we’ve gotten from that VA. I think it was effective to a point, but but we want something more targeted. It wasn’t targeted. So one more or something more targeted, but just in was a template been sent to multiple people and just have people connecting with you, connecting with you and you try to have a conversation and they are not. Funny enough, I had a connection yesterday, and I said, OK, let’s have a chat and this individual saying what way? Why do I want to pitch him and saying that she came on the three have a child. Oh okay,
Speaker1: [00:11:10] This is this is from. So your VA was going on LinkedIn and and connecting you or what exactly was happening?
Speaker2: [00:11:17] Yeah. Oh, I think so. Yeah, OK. It wasn’t bad. I’ll tell you that it wasn’t wasn’t bad, but some individuals have this type to say a realistic point and you reach out to them and they start telling you something else, you know? Yes, it’s all right.
Speaker3: [00:11:38] So, yeah, I do. He goes, Yeah, I have a couple of good. You have a couple of questions. One is, are you doing a syndication or why are you doing a blind pool like a funnel one?
Speaker2: [00:11:50] No, no. It’s a syndication, except that it’s not, you know, typical 20 20 hour piece looking for less than 10 episodes.
Speaker3: [00:12:01] Ok, so who are you using? Who’s your lender?
Speaker2: [00:12:08] We’re actually talking to friends. We’re talking to is ISCI Capital. So does that. We’re talking to our BBC’s Wall.
Speaker3: [00:12:20] Okay, so my you know, if I may, a couple of suggestions, one is when you when you’re able to get some sort of commitment, let’s say you’re raising 10 million. And then you get you get you get a commitment. Of roughly 10 million, you need to go out and raise another 10 million because life happened where people are going to have multiple unforeseen circumstances, so you want to be able to have enough cushion. That’s one thing with syndication number two, I think often you may want to be a little bit more creative by going a different route in terms of the lending institution. So whereas when, when, when RBC or I see I see a capital, you’re going to be leveraging 75 percent LTV and then or 80 percent LTV, and you still have to raise 20 to 25 percent. There is a second day there is a secondary approach which I’ve done in the past, whereas working with some family office or other lenders, whereas they would provide. The 75 percent or 80 percent LTV, in addition to that, depending on the sponsor or the key principle on the team, they will provide another slice what they call preferred equity, whereas you don’t have to pay them 10 percent preferred, but you can bet you’d have a slice of 10 percent additional at six percent or seven percent. That that may or may not be secured like an unsecured line. So what it does is it allows you to allow you to maximize your approach, whereas you can have 90 percent funding and 80 percent to 90 percent funding and then 10 percent equity. Now the other thing that I’ve seen in the fund space, where has which I prefer once you have a fund, it’s pretty much guarantee because they commit to it.
Speaker3: [00:14:27] They sign a document and they also they also want 10 percent of the initial amount they are committing to. The race with syndication is first come, first serve. So a couple of the things is you got to play the scarcity game. Hey, if you come in its first come, first serve, we’re filling up very quickly. We would like to reserve your soft commitment, but you need to wire. Ten percent of that soft commitment within five days. And by the way, here’s a document you can find who said, Hey, you’re committing to it. So to give him an ex, it’s an extra step. But because they are doing that, they are. They are a little bit more invested and they seem to take it more seriously. It’s always a pain to raise money for syndication, in my opinion. But but you just have to play the market marketing wizardry and sales in a sense by position yourself that, hey, you’re about to lose it on a great opportunity if you don’t act. Not me asking you for money because I can close. Yeah, right. So these are some of the stuff. But but as far as lending, always seek to have a maximum leverage. And if it does make sense, if you have a lender that can provide an extra, you know, five 10 percent preferred equity at six percent, that’s that’s better than trying to raise that initial five percent stretch to close the deal. And so, you know, and and I mean, if you want, we can talk about it online because I’ve worked with several institutions that can help with that and help you get through, including a family office in in Canada. That work with that can also be very beneficial.
Speaker2: [00:16:12] So but I’ll be happy to have that chat. Really, really love to have that chat.
Speaker3: [00:16:22] Yeah, send me an email, and I’ll, you know, either tomorrow or Thursday, we can set a time to discuss.
Speaker2: [00:16:29] Okay, I appreciate that. Thank you.
Speaker1: [00:16:31] That’s awesome. What type of LTV because we have Rachel Kent is one of our guys, but I don’t know. I mean, it fits within their parameters. It looks like if it’s like seven point something Canadian, so then what type of LTV are you looking for there? For the debt side? I know the debt side.
Speaker2: [00:16:49] Well, minimum of seven percent, that’s what we’re looking at.
Speaker1: [00:16:54] Yeah, I mean, original secret than that. You know, like I’m in
Speaker2: [00:17:01] That
Speaker1: [00:17:02] Original, they say that they’re cheaper than that, but they say it could be as low as so you may want to talk to them for that as well. Just I don’t know if that’s exactly what it will be. It’s just another option in the background there.
Speaker2: [00:17:15] Okay. Yeah.
Speaker3: [00:17:16] Okay, thanks. Yeah. Well, we are. We’re working, we’re working with them, as well as on a large, large, large, large creative financing and funding we’re structuring with them now. I know that the minimum debt is five million, maybe February 10 million. However, if you do work with them, you’re getting wholesales rate, meaning that you could be anywhere from the bottom floor at three and a half percent all the way up to whatever they charge for that particular debt. But but you’d have to talk to them specifically about how you know how you want to structure that. And but but they do. You know, I like I like what I see, and I like what I’m doing with that. What can I now doing with him now? However, what I was, what I would, what I would talk about is always that option. 70 percent LTV, in my opinion, is too low. You always try to get a minimum of 75. However, however, if you raise more equity, if you raise more equity, you should always take a lower LTV so that you so that you leverage a lower interest rate in order to bolster your return. Right. 60 percent LTV with a 50 percent 50 percent equity raise of the total purchase price. That’s great. Right. And 40 percent equity from the get go. So so that your return would be your IRR would be significantly, you know, either higher teams in the higher teams, if not 20 or more. And so and so if there is a lender or there is what they call a secondary lender or a preferred equity coming from the same lender, then it’s going to be it’s going to benefit the project as in your initial cash on cash returns, if that makes sense. You have a higher cash flow. You have a higher cash flow, somewhat steady and moderate IRR. But but but in the long run, you wouldn’t you wouldn’t be forced to refinance if that makes sense on a short term basis.
Speaker2: [00:19:35] Yeah, makes sense. Makes absolute sense. Yeah, I’m actually considering the preferred equity of law part of the call I’m having with people tomorrow because, you know, providing preferred equity is not something that’s really, really common in Canada compared to the U.S.. Well, but.
Speaker3: [00:20:01] Yeah. But even even even if it’s not from the lender in Canada, if you have an investor, you can bring in as the preferred equity, say, Hey, OK, well what? I’m paying out 10 percent. I’m going to have an LPA with you, create a separate class of shares and offer that investor 12 percent. But this is going to bring in, let’s say, 20, 30 percent, 40 percent of the initial equity raised so that you’re in it so that you’re in a better position. Whereas whereas that that investor become, you know, what they call your anchor investor, then you can also leverage your capital to get more money from the bank. The bank would absolutely love that because of the ability of your balance sheet as. As the sponsor and the investor as part of the partnership. And so that way you’ll find your preferred equity would come in and if depending on the bank you talk to you here in the U.S., if you work with the National Bank, such as Bank of America or Chase, they don’t allow secondary note on the on the loan. However, there are ways you can also do that to an LPA. So what they call a. Uh, lead arrangement, debt instrument. And they would they would love. They would love to do that because they just get the fee and arrange the loan. But they don’t own it. So that’s that’s that’s the that’s all the what they call that verbiage or term leveraging that so that you always have a specific term for it. Yeah. Your capital step. Yeah. The way you talk about your capital stack, that’s the way the bank is going to respond in terms of how you formulate your capital stack.
Speaker2: [00:21:54] Okay, that’s it. Thank you so much. I’ll send you an email so that we have more time.
Speaker3: [00:22:06] Yeah. Oh, absolutely.
Speaker1: [00:22:11] Yeah, no, that’s amazing, just Inter membership exchange. So then adding on my side, like, I guess the core competency, I guess my corner of the universe where I can speak to is mainly, yeah, just targeting. So tell you what, we can get you over. Just the same process that we only know is getting over a hypothesis on if you can, we’ll do some exchange on this project. We’re doing hypothesis on who are the types of people were going to laser target. Yeah. And then then if you, you know, as you begin to campaign, yeah, then we can simply, you know, we can have it. So I know that you have some ideas and so on, but we can have it so that we can actually track like what the hell is going on so that we know who’s saying yes, who’s saying no and where it’s moving, so to speak. So we walk through all this and we try to we’ll take the lead and fill in some of this out based on what we know. But the more the better, and then we’ll get madder. He’s on this call. He’ll be here next week to provide some of his insights on this transaction that he’s worked on.
Speaker2: [00:23:14] So, okay, I appreciate that. Thank you.
Speaker1: [00:23:18] Yeah. No worries. No worries.
Speaker2: [00:23:20] I think I’ll share with your team as well the investment summary. So there’s any feedback they on to provide that maybe there’s something we’re missing or maybe everything seem okay just to have some feedback. It’s always good to have feedback.
Speaker1: [00:23:37] Oh, absolutely. Yeah, it’s critical. So then, yeah, this keeps going, going, going.
Speaker2: [00:23:40] So thank you guys.
Speaker1: [00:23:44] Sure. All right, so we have Ali Abdullah, Richard Adeola Yeah, obviously, yeah, the point is just to if anyone has any particular questions about the process and so on, feel free to chime in. You know, Richard Reid is here as well. Welcome. Richard Richard is one of our associates who he has a lot of great by site relationships as well. This put this back on the screen. Yeah, so I’m just going to be right here on standby. Anyone have any further points of discussion questions, insights this raising a quick raise your hand or send a message and we’ll get you on it. And obviously, no one has to speak, but we’ll leave it for around a couple of minutes and then if nothing, we can close. But I guess adding since we’re here, would you? Would it make sense to, I guess, just go over that now to look at who are some targets stats we can start to approach? In terms of the yeah, yeah, I think we might as well just look at it now. Right. And so I think it all starts. I think it all starts at the hypothesis is get this pulled up right here. Just a second while I turn us into a dark. Ok, so then yeah, so I mean, this one, would you say it’s junior debts and private equity because I think you mentioned junior debts as well. I don’t know if you get someone in a second position, but.
Speaker2: [00:26:25] Or is it just private? Yeah, I think it’s a bit more private equity and family offices. High net worth individuals. I think those are those will be a preferred.
Speaker1: [00:26:43] Got it. So then the location, would this be so where do you think the locations would be here? I mean, Edmonton or
Speaker2: [00:26:52] Yeah, I think I think Canada, General Edmonton, Canada in general, I think I think most, most, most U.S. investors want to stay in the US. Yeah, I said it’s a big transaction. So. And then you have probably talked about maybe European investors that may want to invest in Canada well, but I don’t I don’t see a lot of U.S. investors coming to Canada, so that would just be a waste of time.
Speaker1: [00:27:27] Yes, exactly, exactly. So then OK, so then we’re saying, OK, private equity, why do we believe this is just anything? And. And I say that. Well, we’ve already said this here. So, yeah, this may be the same year as of this year. Why do we believe? Well, I mean, I think I think we believe the family offices and high net worth. Is it because of the deal size? Because like, I mean to
Speaker2: [00:27:57] Me primarily because of the deal size, that’s because of the deal sites
Speaker1: [00:28:02] Guarded and criteria would be what does that mean? Just we’re talking.
Speaker2: [00:28:07] We’re talking about cash flow. Yeah, cash flowing.
Speaker1: [00:28:13] Yes. You’re not a new development.
Speaker2: [00:28:15] That’s not not not new development. So we’re into cash flow as soon as we have foreign investors immediately. But that’s the value of our strategy.
Speaker1: [00:28:27] Exactly. Got it. And so, I mean, sometimes there are some people that like to work with agents, but I mean, like, I mean, do you think that’s relevant here? I think it’s better to look directly to them to know.
Speaker2: [00:28:43] Yeah, well, it is. If I’m risen was built, this fence is under the hood. Maybe it might make sense to to to work with this agency because the president could be president, and some were even asking me for more than 50 K. I don’t know if you I don’t ask for introductions. I mean, it just so. Well, I just say it’s not ideal for right now. Yes, that’s if you’re working with a consultant that’s looking at the end. Not that. Probably it’s going to be success based. You know, my interest in having this discussion? Got it.
Speaker1: [00:29:28] One associate. You may want to look at associations, too, because they have some, they have some of these associations that these these people are a part of, such as
Speaker2: [00:29:43] Private private counsel, something that can be private investment company. You also have another private investment.
Speaker1: [00:29:57] Yeah. And then they have the I don’t know if the PC may may be good as well. There’s some people that just pick up deals from PCMA and then they just sell. You just know people. They would say, no, they wouldn’t directly do it. But then they made it into people. Private capital markets, capital markets, inspiration for deals like this, I think. Ok, yeah. So then I mean, generally like. And. And so what we’ll do now, we’re going to train matter, and the point is really we’ll get the we’re still adding to this and yeah, we’ll make it look pretty later on, but we just have Google Sheets. Nothing magic right now. Um, yeah, so we’ll just go through here. Send you some more context that we have that that fits, but the point really is like saying, Hey. I mean, if you really want to go crazy with this, you can really say, Hey, I don’t know how many visas you have, but we can you can get them to get trained by all of this. They can report.
Speaker2: [00:31:08] I don’t at this point, I don’t have any visa. We don’t have any visas. So I like to work. Would it be, you know?
Speaker1: [00:31:18] Got it. There are a few of them, like Scream, Scream has one that I mean, it’s just two dollars an hour, but then he charges like five hundred to get started. Then there’s another one that’s I think this is the one that we want is fifty dollars per month. Five hours per week. And then they charge two hundred to get started. Those ones, we’ve already trained for all this well before. Yeah, but before we get into that, we’ll send you some just some things and say, Hey, you know, let’s start here. And then and then, yeah, the way to get the VA’s same process here is just going to markets. And beginning the campaign and then boom, this is the first guy here. Yeah, so these first guys, if you can just submit this, yeah, they’re already trained and ready to go and then they can they can start following.
Speaker2: [00:32:13] So look, I’ll do it on the bus.
Speaker1: [00:32:17] All right. Cool, cool. So look out for an email from me and then we’ll take it from there.
Speaker2: [00:32:22] All right, thank you. Thank you, Nancy.
Speaker1: [00:32:24] No worries. All right. So. So Ali and Kenneth and Richard Abdul, yeah, just the sustained standby standpipe, any more ideas, thoughts, questions. Just. Oh, and one more thing to here yet, so once let’s try to get this one done and then let’s try to arrange for an in-person visit because the more the more the merrier. If we get these these products over the line and the more success. Absolutely. Yeah. It won’t happen overnight. But you know, let’s see what we can do.
Speaker2: [00:33:18] So, yeah, I’m very I’m very bullish and very optimistic about this. This property was taken on a contract once that once we closed on those, then we can focus on the fund itself at that point in time.
Speaker1: [00:33:34] Yeah. And I think I mean, I think it will help him quote unquote track record whatever that means like anyone. Yeah, yeah. I had this question. I had this question before somebody was working on raising two hundred and fifty million. They say, Oh, can I use your system? And then he said, what will be easier to fund or the one by one and the same thing?
Speaker2: [00:33:54] So. So. All right. So there’s a there’s another that says that in the proper market, I’m not talking about going to save on food in the proper market. There are several there are several ways to get to the market, right? You know, you don’t have one entry coming from any from west, from the east, from the south, you get to the market. So at this point, Falls gets in to get where we want to get to. It might be that we need to do some, you know, asset by asset deal. Then we go back to the fund. I mean, those are looking for trouble. I mean, you can see something that on the management already. So I think so. That’s why we’re focusing on closing this and we believe that we can do this. We can easily close on this once that it’s done. Give us more momentum and more story to the fund raise for the fund.
Speaker1: [00:35:06] Definitely agree. And one thing to know also agree with Abdullah’s point on on the scarcity factor and saying that, Oh, we already have these people and so on, because even the people that that waste your time, there’s still a useful because when we used to do our friends at another investment bank, like we used to make this fake scarcity, and there’s this book by somebody called Daniel Priestly. It’s called oversubscribed. And so I spoke to Daniel Priestley about his book. I mean, he’s done hundreds of millions in sales for events company in U.K. and so the way he did it to create like used to create all the kinds of scarcity triggers and saying, Oh, we can only serve this at so and so many people at so and so time, and he would turn people away. And I think when you have like, I think it’s when you’re not scared to turn people away, then increases your your the value of what you’re offering because I mean, that’s what we do for like the investors in the buy side where we can and then even the customers like even prospects that join raises are calm. We say, Oh, you know, we were only offering this for so and so time, and then we just turn people away because it just sells better.
Speaker2: [00:36:16] So sells better. Yeah, absolutely. Yeah.
Speaker1: [00:36:23] All right. So I think this anyone wants to chime in, but I think I think like there doesn’t seem to be much else to say. Correct me if I’m wrong, but if not in just like 10 seconds, we’ll close the call, but feel free to chime in if I’m wrong and then take it from there. It’s. All right. That looks like it looks like that’s all for today. All right, everyone. So thank you so much for your time and we’ll get over the next steps to the people we communicate to and then we look forward to helping you raise capital.
Speaker2: [00:37:10] Thank you. Thank you. Thank you.
Speaker1: [00:37:11] No worries, no worries. Cheers. See you, everyone, says buying.