Links to LearningDecember 2013

Leveraging First Nations Equity

Michael Bonshor, CMALeader, BC Aboriginal Consulting

We acknowledge the traditional

Coast Salish Territory

Discussion Topics

• About MNP• Issues and Overview• Equity Spectrum: Approaches• Case Study

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

Strategic FocusPeople, Process, and

Structure

Our Working LensMNP Aboriginal Consulting

ISSUES AND APPROACHES

Inherent Rights Driven

• Treaty

• Accommodation– IBA’s

• Business and Economic Opportunities

Increase in (Proposed) Economic Activity

• Oil & Gas: Northern BC• Forestry• Hydro• Shipbuilding

Economic Self-Sufficiency

• Balancing growing community needs with decreasing funding from Fed/Prov . sources

• Increased need for Own Source Revenues

Community Needs

• Young, growing population– Soon to reach working

age

• Community Services• Housing and

Infrastructure• Health

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

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

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

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

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

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)

Equity Spectrum – First Nation Perspective

PersonalBankable

Scale $

$100k to $1MM

$10MM

$20MMFr

iend

s &

Fam

ily Money Issue!Security Issue

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

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...

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

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

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

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

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?

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

Case Study

Kwantlen First Nation – Seyem Qwantlen Business Group

Assertion of Aboriginal Rights/Title for Economic Development

Kwantlen First Nation

• Kwantlen First Nation -Community Adoption-Leadership Assertion-Communication Plan

- Industry- Governments- First Nations

Glover Property

• 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

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

Moving Forward

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

• 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

Thank you for your time!

Michael BonshorLeader, BC Aboriginal ConsultingMNPMichael.Bonshor@mnp.ca 778.374.2128