PORTLAND PRIVATE INCOME FUND

PORTLAND PRIVATE INCOME FUND
Private Commercial Mortgages and Private Commercial Loans
OWNERS. OPERATORS. AND INVESTORS.
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
• Portland Investment Counsel Inc.
• Portland Private Equity L.P. serves as
and investing can be distilled down to
and its predecessor AIC Limited has,
the General Partner and Investment
one word, “Understand”. At Portland
for nearly three decades, invested
Advisor for the AIC Caribbean Fund,
Investment Counsel we have a unique
in publicly traded equities and fixed
a private equity fund whose investors
history dating back to 1986 of being
income securities globally on behalf
include European Investment Bank,
Owners, Operators and Investors in
of retail and institutional clients. AIC
Export Development Canada, OPIC (an
excellent businesses globally. Our unique
Limited was acquired by Portland
agency of the US Treasury), a Fortune
“hands on” operational experience
Holdings’ founder Michael Lee100 corporate pension fund and a
in businesses across various sectors,
Chin in 1986. At that time AIC had
prominent US Fund of Funds.
allows us thoroughly to understand
less than $1 million in assets under
• Portland Holdings Inc.’s group of
the businesses in which we invest.
management. AIC then grew to become
companies investments include
We know what makes a successful
one of Canada’s largest privately held
Portland Investment Counsel, Portland
business and, as importantly, the
mutual fund companies. This business
Private Equity, National Commercial
underlying risks. Therefore, we measure
was sold to Manulife in 2009. Today
Bank Jamaica Limited, Mandeville
and assess potential investments with
Portland Investment Counsel Inc.
Private Client Inc., resort development
incisive judgment. With Michael Leeremains firmly committed to creating
and other real estate properties.
Chin’s advisor roots going back to
wealth for investors as an investment
1977, Portland Investment Counsel
fund manager and exempt market
is committed to the principles of
dealer.
disciplined long term investing.
WE ARE
OWNERS
AND
WE ARE
OPERATORS
WE ARE
THUS
INSIGHTFUL
INVESTORS
owners...
operators...
insightful investors...
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.
As operators we have experience
and understanding of the day-to-day
challenges and opportunities facing
industries/businesses.
We draw on our understanding and
real world experience as owners and
operators when making investments.
Currently or in the past, Portland Holdings
Inc.’s group of companies has direct and/or
controlling ownership of:
Our Portfolio Managers have
operational experiences in many
sectors including:
• 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
•
•
•
•
•
•
•
•
•
Wealth Management
Banking
Insurance
Ports
Telecommunications
Private Equity
Infrastructure
Retail
Real Estate
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• Globally
• Across multiple sectors
• Public equities
• Fixed income
• Private equity
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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
Public Fixed
Income
Income
Public
Equity
Growth
Tax
Minimization
Cash
the standard approach
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,
3. that are domiciled in strong, long-term growth industries,
4. that use other people’s money, prudently, and
5. that are bought at attractive valuations and held as long as the company remains high quality and at a reasonable
valuation.
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P O RT L A N D P R I VAT E I N C O M E F U N D
fund facts
Offering
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.
Units:
$50 per unit initially, registered plan eligible
Minimum Investment:
$1,000 for Accredited Investors1; $150,000 all others. Minimum additional investments are $5002.
Investment Objective:
•
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.
Investment Strategy of
the Partnership
•
•
Targeted Distribution
•
8% annually based on the initial net asset value per unit of $50.00, anticipated to be fully funded and paid
monthly
Mortgage Administrator •
(“MarshallZehr”)
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.
Specialty Investment
Managers
Crown Capital Partners Inc. (“Crown Capital”) was founded in 2000 to manage private equity and mezzanine debt
investments.
•
investment style
Objectives:
•
Capital preservation.
•
Income and above average long-term returns with likely low
correlation to the stock market.
•
COMMERCIAL MORTGAGES
Primarily investing in a portfolio of private debt securities
across Canada.
COMMERCIAL LOANS
FUTURE OPPORTUNITIES
Keystone investments:
structure
•
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.
•
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.
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 / EBITDA3
- 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
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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;
•
ortgages are generally expected to be up to $30 million with the larger concentration being between $1.5 million and
M
$20 million, written for terms of 6 to 36 months;
•
ortgage investments will be secured by real property and comprise of land development, commercial, industrial and
M
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
•
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.
Capital Structure*
40%-50%
1
Senior Debt
Bank Financial
20%-30%
2
Secondary Debt
Crown Capital Partners
30%-40%
3
Equity Capital
Private Equity Funds
* Illustration of a typical borrower’s financing profile.
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P O RT L A N D P R I VAT E I N C O M E F U N D
•
Since 2005 MarshallZehr and its predecessors has been
a knowledge based lender to well established regional
developers.
•
MarshallZehr:
– 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.
– T
argets 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.
•
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.
– M
itigates 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.
•
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
$2.3MM
1st Mortgage
12 month term
Construction
Loan to Value
64.0%
Net Yield
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).
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Crown Capital Partners has made investments* in numerous
industries across a wide geography.
Investments by Industry 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, 2011.
Investments by Industry
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/EBITDA2
and more generally
less than 4.5xbDebt/EBITDA.
Investments y Industry 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 $25
million in any one transaction and is capable of financing
significantly larger transactions.
Consumer Products 8% Bri$
Agriculture 2% Telecommunica$ons 5% Sask
Manufacturing 17% Food Service 2% Retail 14% SoOware 7% Energy Services 15% Business Services 12% Investments by Geography Investments by Geography
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 $10 million and below. We believe this
will result in Energy a wide selection
2of
0% investment
Consumer Popportunities
roducts 8% and
higher than normal
returns.
Agriculture 2% Telecommunica$ons 5% Manufacturing 17% Food Service 2% Retail 14% Energy 20% SoOware 7% Bri$sh Columbia 11% Alberta 43% Saskatchewan 3% Ontario 24% Quebec 6% Mari$mes 11% United States 2% Energy Services 15% Business Services 12% Portfolio Managers - Crown Capital Partners
Christopher Johnson,
CFA - President and CEO
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 1997.
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.
Chris holds a Bachelor of Commerce (Honours) from the
University of Guelph and the Chartered Financial Analyst
designation.
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Que
Unit
Portfolio Managers - Portland
Chris Wain-Lowe,
BA, MBA
Executive Vice President
and Portfolio Manager
Dragos Berbecel,
B.Comm., M.Sc., MA, MBA, CFA
Investment Analyst
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.
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.
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 2002.
Dragos joined Portland Investment Counsel in 2008. 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 2009.
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.
Accredited Investor as per National Instrument 45-106-Prospectus Requirements and Exemptions
F or 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.
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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.:1-888-710-4242 • Fax: 1-866-722-4242 • www.portlandic.com • info@portlandic.com
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PIC12-0089-E(01/14)
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