PORTLAND PRIVATE INCOME FUND

Transcription

1 PORTLAND PRIVATE INCOME FUND Private Commercial Mortgages and Private Commercial Loans OWNERS. OPERATORS. AND INVESTORS.

2 why portland we are owners, operators and investors I am a better investor because I am a businessman and a better businessman because I am an investor. Warren Buffett The difference between speculating and investing can be distilled down to one word, Understand. At Portland Investment Counsel we have a unique history dating back to 1986 of being Owners, Operators and Investors in excellent businesses globally. Our unique hands on operational experience in businesses across various sectors, allows us thoroughly to understand the businesses in which we invest. We know what makes a successful business and, as importantly, the underlying risks. Therefore, we measure and assess potential investments with incisive judgment. With Michael Lee- Chin s advisor roots going back to 1977, Portland Investment Counsel is committed to the principles of disciplined long term investing. Portland Investment Counsel Inc. and its predecessor AIC Limited has, for nearly three decades, invested in publicly traded equities and fixed income securities globally on behalf of retail and institutional clients. AIC Limited was acquired by Portland Holdings founder Michael Lee- Chin in At that time AIC had less than $1 million in assets under management. AIC then grew to become one of Canada s largest privately held mutual fund companies. This business was sold to Manulife in Today Portland Investment Counsel Inc. remains firmly committed to creating wealth for investors as an investment fund manager and exempt market dealer. Portland Private Equity L.P. serves as the General Partner and Investment Advisor for the AIC Caribbean Fund, a private equity fund whose investors include European Investment Bank, Export Development Canada, OPIC (an agency of the US Treasury), a Fortune 100 corporate pension fund and a prominent US Fund of Funds. Portland Holdings Inc. s group of companies investments include Portland Investment Counsel, Portland Private Equity, National Commercial Bank Jamaica Limited, Mandeville Private Client Inc., resort development and other real estate properties. WE ARE WE ARE OWNERS AND OPERATORS THUS WE ARE INSIGHTFUL INVESTORS owners... We are Owners therefore we think like owners and have lived the associated responsibilities. We have garnered a reputation for being a long-term shareholder and for taking significant positions in investee companies. Currently or in the past, Portland Holdings Inc. s group of companies has direct and/or controlling ownership of: Wealth Management - AIC Limited/Portland Investment Counsel - Berkshire TWC Financial Group - Portland Private Equity L.P. - Mandeville Private Client Inc. Banking - National Commercial Bank Jamaica Insurance - NCB Insurance Company Ports - Kingston Wharves Media - CVM Real Estate operators... As operators we have experience and understanding of the day-to-day challenges and opportunities facing industries/businesses. Our Portfolio Managers have operational experiences in many sectors including: Wealth Management Banking Insurance Ports Telecommunications Private Equity Infrastructure Retail Real Estate 2 insightful investors... We draw on our understanding and real world experience as owners and operators when making investments. Globally Across multiple sectors Public equities Fixed income Private equity 2

3 we have garnered a reputation for being a long-term shareholder and for taking significant positions in investee companies. Our philosophy revolves around the concept that if the needs of the high net worth investor are the same as the needs of successful institutions, the solutions for each should also be the same. We believe the investment needs of Canadian Pensioners and endowment funds are the same as those of our clients. Therefore we offer access to a range of traditional asset classes as well as access to private investing products leveraging our entrepreneurial judgment, international experience and institutional discipline. Consistent with this belief, we work with our clients to build portfolios that we believe will: Preserve capital Earn attractive returns Provide desired income Minimize taxes portland investment counsel s approach Public Equity Public Fixed Income Cash Private Equity Private Debt Direct Venture Capital Real Estate Infrastructure Resources CLIENT NEEDS Preserve Capital Liquidity Income Growth Tax Minimization our investment philosophy Similar to the leading pension fund and endowment fund managers (eg. Ontario Teachers Pension Plan, Canada Pension Plan, Yale Endowment), we focus on generating above average returns from the alternative investments category a category less subject to the whims of the market. Our investments are aligned with the following philosophy: 1. Own a few high-quality businesses, 2. that you thoroughly understand, Public Fixed Income 3. that are domiciled in strong, long-term growth industries, 4. that use other people s money, prudently, and Public Equity the standard approach 5. that are bought at attractive valuations and held as long as the company remains high quality and at a reasonable valuation. 3 Cash

4 PORTLAND PRIVATE INCOME FUND fund facts Offering Units: Portland Private Income Fund (the Fund ), offered in Canada under prospectus exemption, seeks to preserve wealth and generate income for investors by investing in Portland Private Income LP (the Partnership ) which primarily invests in a portfolio of private debt securities, either directly or through investment in other funds. $50 per unit initially, registered plan eligible Minimum Investment: $1,000 for Accredited Investors 1 ; $150,000 all others. Minimum additional investments are $ Investment Objective: Investment Strategy of the Partnership Targeted Distribution Mortgage Administrator ( MarshallZehr ) Specialty Investment Managers investment style Objectives: Capital preservation. Investment objective is to: preserve capital, and provide income and above average long-term returns. Invest primarily in a portfolio of private debt securities, either directly or indirectly through other funds, initially consisting of: Private commercial mortgages, administered by licensed mortgage administrators i.e., MarshallZehr Group Inc. Private commercial loans, which may be managed by specialty investment managers i.e., Crown Capital Partners Inc. Other debt securities. Investing in complementary income producing public securities to enhance liquidity. Leverage by borrowing up to 25% of the total assets of the Fund after giving effect to the borrowing. 8% annually based on the initial net asset value per unit of $50.00, anticipated to be fully funded and paid monthly MarshallZehr Group Inc. ( MarshallZehr ), founded in 2008, is a privately held real estate lending firm and licensed mortgage agent and a mortgage administrator (mortgage administration #11955) based in Waterloo, Ontario. Crown Capital Partners Inc. ( Crown Capital ) was founded in 2000 to manage private equity and mezzanine debt investments. Income and above average long-term returns with likely low correlation to the stock market. Primarily investing in a portfolio of private debt securities across Canada. Keystone investments: Private commercial mortgages administered by MarshallZehr. Private commercial loans managed by Crown Capital through its private debt funds and/or via preferential coinvestment opportunities. Investments are secured mortgages, loans and participating capital with covenants. Disciplined Investing: Private Commercial Mortgages: - Loan to value ratios generally <75% - Terms typically 6-36 months Secured Commercial Loans - Leverage generally less than 4.5x debt / EBITDA 3 - Terms typically 1 to 5 years with amortization (term loans 3-5 years, bridge loans less than 1 year) Diversification by size, borrower, geography and type 4 COMMERCIAL MORTGAGES structure COMMERCIAL LOANS FUTURE OPPORTUNITIES Portland Investment Counsel Inc., the Manager, will employ specialists who are prepared to co-invest, including mortgage administrators and speciality investment managers. The bulk of the assets are to be deployed in private income deals including private commercial mortgages and secured commercial loans. Allocation of invested capital is the responsibility of the Manager. The Manager may also manage liquidity by investing in complementary publicly listed securities (including royalty income trusts, preferred shares and business development companies). Prudent use of leverage, up to 25% of the total assets after giving effect to the borrowing.

5 Mortgage Investments Focus on Greater Toronto Area and other Ontario Urban Centres One of the keys to successful mortgage underwriting is knowing and understanding the real estate markets in which the properties are located. Together, the Greater Toronto Area and other Ontario urban centres contain a sizeable portion of Canada s population and a well diversified industry base. We intend to make mortgage investments on real property located primarily in the Greater Toronto Area, Kitchener-Waterloo, Southwestern Ontario and other Ontario urban centres, areas with which the officers of MarshallZehr are familiar due to their past lending experience. We also intend to diversify geographically by making mortgage investments on real property located in other areas of Canada and overseas where prevailing economic conditions are favourable and either MarshallZehr or Portland has relevant experience. MarshallZehr draws on its extensive business experience in the commercial finance and real estate industries to provide opportunistic yields by actively managing real estate investments selected for their strong returns and attractive risk profile; Each potential investment goes through a rigorous due diligence process that ensures the highest level of investment security, demonstrating strength in management, quality in the project, tangible security, an achievable business plan and delivery of anticipated exceptional risk adjusted returns; Mortgages are generally expected to be up to $30 million with the larger concentration being between $1.5 million and $20 million, written for terms of 6 to 36 months; Mortgage investments will be secured by real property and comprise of land development, commercial, industrial and residential projects; and The short term nature of lending in development and construction projects further reduces risk and much of the market uncertainty inherent in traditional term lending. Commercial Lending Investments 40%-50% Private capital markets are inherently inefficient as market information is not readily available and liquidity is limited; Leverage multiples for medium sized companies are at cyclical lows as banks are reluctant to lend, which leads to balance sheet capacity for companies to obtain secondary debt; Few secondary debt firms remain and the barriers to entry are high after a challenging credit cycle where only few firms remained successful; and The economy is stabilizing, yet the difficulty experienced by companies in obtaining senior debt creates a profitable opportunity for secondary debt deals managed by specialists. 5 Capital Structure* 20%-30% 30%-40% * Illustration of a typical borrower s financing profile Senior Debt Bank Financial Secondary Debt Crown Capital Partners Equity Capital Private Equity Funds

6 PORTLAND PRIVATE INCOME FUND Since 2005 MarshallZehr and its predecessors has been a knowledge based lender to well established regional developers. MarshallZehr: Targets transactions outside the real estate lending profile of traditional financial institutions, a niche that enables developers to profit on their projects where there is a need for quicker, smaller and shorter term financing than other lenders would consider. Mitigates downside risk by dealing mainly with real estate transactions where it has direct experience and with partners who have proven themselves over the long term. Focuses on dynamic high growth geographies/niches that may be outside the focus of other lenders. MarshallZehr services smaller, higher yielding loans, typically serviced only by private mortgage lenders. Since inception, MarshallZehr has averaged above 10% returns with no bad debt write-off or loss of principal. MarshallZehr has placed or currently administers nearly $300 million in mortgages via private and institutional capital. MarshallZehr currently anticipate administering a blend of traditional, higher yielding private capital mortgages (see table below) and larger volume institutional, lower yielding capital construction financing mortgages. Sample of MarshallZehr Private Transactions* Amount Position Term Type Loan to Value Net Yield $2.3MM 1st Mortgage 12 month term Construction 64.0% 10.20% $8.4MM 1st Mortgage 10 month term Construction 72.3% 13.00% $15.9MM 1st Mortgage 36 month term Construction 47.7% 9.35% $4.8MM 2nd Mortgage 12 month term Construction 74.7% 11.05% $4.0MM 1st Mortgage 12 month term Pre-development 23.8% 11.05% $2.1MM 2nd Mortgage 24 month term Construction 12.5% 12.75% $2.5MM 2nd Mortgage 30 month term Pre-development 18.1% 10.00% $8.5MM 1st Mortgage 24 month term Construction 56.3% 10.00% Mortgage Manager - Marshall Zehr Group inc. David Marshall, CIM Gregory Zehr David brings with him 20 years of experience in the financial services industry with experience in all aspects of business development, project leadership, due diligence and credit review. David s financial services experience includes mortgage origination commercial leasing, consumer finance, institutional portfolio management (sales and marketing) and vendor finance. David holds a B. A. from Wilfrid Laurier University and the Canadian Investment Manager (CIM) designation through the Canadian Securities Institute. David Marshall is a licensed Mortgage Agent licensed with the Financial Services Commission of Ontario (FSCO). Gregory brings 20 plus years of experience in business and real estate to MarshallZehr. His experience in both the United States and Canada includes building and selling businesses in addition to executive leadership roles. Greg s experience spans several industries including lending, insurance, real estate and international call centres. He has also owned and managed privately held investment and real estate development companies for over 20 years. Gregory holds a B.Sc. in marketing from Bentley College in Waltham, Ma. Gregory Zehr is a licensed Mortgage Agent licensed with the Financial Services Commission of Ontario (FSCO). 6

7 Crown Capital Partners Inc. ( Crown Capital ) is a specialty investment manager providing alternative debt financing for private equity backed and non-sponsored middle market transactions from offices in Toronto and Calgary. Crown Capital was founded in 2000 as a successor company of Crown Life Insurance Company and currently remains minority owned by its management partners. In 2011, Hesperian Capital Management Ltd. acquired a majority interest in Crown Capital on December 31, Crown Capital s team specializes in financing solutions featuring subordinated term and bridge loans for acquisitions, management buy-outs, growth financings and recapitalizations. By looking through to the true value of the underlying business, Crown Capital provides Canadian businesses with a level of leverage not quickly available from traditional financing sources - a maximum 5x Debt/EBITDA 2 and more generally less than 4.5x Debt/EBITDA. Crown Capital aspires to be a value added partner and work with a company s management team to ensure the optimal capital solution. Crown Capital typically invests $5 million to $25 million in any one transaction and is capable of financing significantly larger transactions. Crown Capital has only a few competitors remaining in the Canadian secondary debt marketplace of which most are not currently active. The majority of these competitors focus on investments that are $10 million and below. We believe this will result in a wide selection of investment opportunities and higher than normal returns. Christopher Johnson, CFA - President and CEO Crown Capital Partners has made investments* in numerous industries across a wide geography. Investments by Industry Energy 20% Consumer Products 8% Agriculture 2% Telecommunica$ons 5% Manufacturing 17% Food Service 2% Retail 14% SoOware 7% Energy Services 15% Business Services 12% Investments by Geography Bri$sh Columbia 11% Alberta 43% Saskatchewan 3% Ontario 24% Quebec 6% Mari$mes 11% United States 2% Portfolio Managers - Crown Capital Partners Brent Hughes, CFA - Executive Vice President Chris Johnson is the President and CEO of Crown Capital since its inception. Prior to joining Crown Capital in 2000, Chris was an Investment Manager for Crown Life Insurance Company. In this role, Chris was responsible for the investment management of Crown Life s equity and fixed income investments, asset liability management, and derivative management. Chris joined Crown Life in Chris holds a Bachelor of Commerce (Honours) from the University of Guelph and the Chartered Financial Analyst designation. Brent Hughes is the Executive Vice President of Crown Capital. Prior to joining Crown Capital in 2001, Brent was an Investment Analyst at Saskatchewan Opportunities Corporation. Brent holds a Bachelor of Commerce (Great Distinction) from the University of Saskatchewan, an M.Sc. in Finance from Concordia University, and the Chartered Financial Analyst designation. 7

8 Portfolio Managers - Portland Chris Wain-Lowe, BA, MBA Executive Vice President and Portfolio Manager Chris Wain-Lowe has 30 years of business management and global financial services experience living and working in four continents: Europe, Asia, Africa, North America as well as the Caribbean, which also embraced corporate experience in the energy, natural resources and utility industries. He was the Chief Executive Officer of Barclays business in Greece in 1994 and 1995, the Chief Executive Officer of Barclays South African operations in Botswana from August 1997 to September 2000 and thereafter the Chief Executive Officer of National Commercial Bank Jamaica Limited before joining Portland Investment Counsel in October Dragos Berbecel, B.Comm., M.Sc., MA, MBA, CFA Investment Analyst Dragos Berbecel has 5 years of investment experience and 10 years of experience as a marketing and sales executive working in Europe and North America. He played a leading role in starting up a new subsidiary for Syngenta, the largest global agribusiness, in a key European market. He was also instrumental in improving the performance metrics for a top North American industrial distribution company. Dragos joined Portland Investment Counsel in He holds an MBA degree from the University of Toronto, with a major in Finance. Dragos is a CFA charterholder and has been a member of CFA Society Toronto since Potential Risks While the Manager, MarshallZehr and Crown Capital exercise due diligence throughout the lending process, no guarantees can be given to offset a risk of loss and investors should consult with their financial advisor prior to investing in PPIF. The Manager believes that given the character of the private debt investments that are making up the majority of the Fund s holdings, the Fund has less exposure to market risk than a similar fund invested in publicly listed securities. The Manager believes the following risks are key to the Fund s performance: nature of investments, credit, interest rate, general economic and market conditions, liquidity, marketability and transferability of units. Please read the Risk Factors section in the Offering Memorandum for a more detailed description of all the relevant risks. 1 Accredited Investor as per National Instrument Prospectus Requirements and Exemptions 2 For investors who are not Accredited Investors, the additional investment must be in an amount that is not less than $500 if the investor initially acquired Units for an acquisition cost of not less than $150,000 and, at the time of the additional investment, the Units then held by the investor have an acquisition cost or a net asset value equal to at least $150,000, or another exemption is available. 3 Earnings Before Interest, Taxes, Depreciation and Amortization * For illustrative purposes only. These investments are not currently held by the Partnership. The PORTLAND PRIVATE INCOME FUND (the Fund ) is not publicly offered. It is only available under prospectus and other exemptions to investors who meet certain eligibility or minimum purchase requirements such as accredited investors. Information herein pertaining to the Fund is solely for the purpose of providing information and is not to be construed as a public offering in any jurisdiction of Canada. The offering of Units of the Fund is made pursuant to an Offering Memorandum and the information contained herein is a summary only and is qualified by the more detailed information in the Offering Memorandum. Portland Investment Counsel Inc. has not independently verified all the information and opinions given in this material. Accordingly, no representative or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this material. The following is a partial list of resources used for this publication: Information presented in this material should be considered for background information only and should not be construed as investment or financial advice. Please consult a Financial Advisor. Every effort has been made to ensure the utmost accuracy of the information provided. Information provided is believed to be reliable when published. All information is subject to modification from time to time without notice. Consent is required for any reproduction, in whole or in part, of this piece and/or of its images and concepts. PORTLAND INVESTMENT COUNSEL and the Clock Tower Design are trademarks of Portland Holdings Inc. and are used under license by Portland Investment Counsel Inc. Portland Investment Counsel Inc., 1375 Kerns Road, Suite 100, Burlington, Ontario L7P 4V7 Tel.: Fax: info@portlandic.com PIC E(01/14) 8