New location: We officially moved into our new location at the end of September, and we are settling in nicely. There are still finishing touches to be completed over the next few weeks, but otherwise, we are fully operational and very happy with the warm and welcoming work environment that we have created. We were hoping to have a grand opening at the end of October, but unfortunately, that has been put on hold pending the aforementioned finishing touches. We are presently meeting clients here in the office, however, so if you would like to come in for a tour—and maybe a creamy cup of Lavazza coffee, we would be glad to show you around! We are conveniently located on the 7th floor of 251 Bank Street, at the corner of Bank and Cooper.
Multirez/Iroquois: We are proud to announce a new investment opportunity in Iroquois, Ontario!
The project will be a mixed-use building with 24 residential units and ground-floor commercial spaces located at 10783 Highway 2. The total budget for the project is $4,250,000. The initial raise of $285,000 to cover the land acquisition was subscribed in only 4 days! We will be looking to raise another $1,915,000 closer to 2024 when construction is scheduled to take place.
Multirez/UESC Truss: Investors can acquire an equity stake in United Edge Structural Components which is putting the finishing touches on a newly built manufacturing plant that manufactures structural wood component systems. Things continue to move along well; equipment is being installed and the assembly line is being tested. Over the summer, UESC hosted a highly successful employment fair and expects to be fully staffed as operations begin in November. Orders and reservations have already been received from area builders.
RRSP/TFSAs on sale: We have always been big believers in dollar cost averaging with one’s RRSP. It takes the guesswork out of things, lessens your long-term risk, and provides the greatest returns as compared to an end-of-year, lump-sum contribution. Case in point; an investor contributing $2,000 at the start of each month and earning a 5% return will end up almost $32,000 richer over twenty years than one who makes an annual, year-end deposit of $24,000. The moral of the story…the sooner, the better!
The same holds for lump-sum contributions as well, of course, and if that was not reason enough to make this year’s contribution early, here’s another one for public market investors: the markets are on sale! As of this writing, the S&P 500 is down over 20%. Whether that makes the market fairly valued or not is a topic of much debate, however, one thing is sure: the market is significantly discounted from where it was a year ago. Reach out to us at familyoffice@taag.ca to take advantage of this discounted market before RRSP season!
If you are one of the many Canadians who seek to find opportunities outside of publicly traded markets, we are happy to have that conversation as well. Private markets have continued to fulfill their mandate and have continued their steady performance throughout the year. Companies such as Newport (see our “Investment Offerings” section) continue to beat their benchmark owing to their strong private positions which act to counterbalance the downdraft in public markets. In the case of DaVinci, all three of their non-publicly traded funds are up double digits YTD, in some cases with a quarter of the market volatility!
Are you tired of hearing your advisor say, “It could be worse” or “You just need to ride it out”? We would be happy to speak to you about how the ultra-affluent achieves positive returns with the private markets. If you are already receiving income from registered assets (such as RRIFs), then this conversation is necessary.
In The News…
Seven strategies to save for education costs
Excerpts of an article from The Globe & Mail’s Tim Cestnik
RESP - A registered education savings plan is always a good idea when saving for an education. Why? The government will contribute free money (through) the Canada Education Savings Grant (CESG). If you start saving when a child is born and contribute $2,500 a year to an RESP, receive the CESGs, and earn 5 percent annually in the plan, you’ll have $93,500 in the plan when the child reaches age 18.
Life insurance policy - It’s possible to buy life insurance on the life of a child. If you buy a whole life, or universal life policy, you can accumulate investments on a tax-sheltered basis inside the policy, which can later be used to pay for an education…. For example, if you save $250 a month starting in the child’s first year, you can accumulate about $82,000 in cash value inside the policy by age 21, and also have about $600,000 in death benefits that would pay out if the child were to die.
For more information on whole life insurance and investment recommendations for education, please contact familyoffice@taag.ca.
Help your business owner client choose between salary and dividends
Excerpts of an article from Investment Executive Jamie Golombek
As a general rule of thumb, if the owner needs to withdraw funds from their corporation, perhaps to pay personal expenses, they should consider withdrawing salary to create RRSP contribution room. Receiving a salary of up to $171,000 in 2022 would create RRSP contribution room in 2023 of up to $30,780 (the 2023 maximum). If, on the other hand, they do not need to withdraw funds from their corporation, they may still wish to withdraw sufficient funds to maximize contributions to their TFSAs. The TFSA can provide a tax-free rate of return on investments. Finally, it may be worth reminding clients to consider leaving any remaining funds in their corporation to benefit from the significant tax deferral, which may provide more investment income in the long run than personal investing in non-registered plans.
For more information on tax-efficient investments suitable for corporate investment accounts, please contact familyoffice@taag.ca.
Alternative Investments Look Good to Advisors Amid Market Volatility
Excerpts of an article from Think Advisor’s Michael S. Fischer
Sixty-seven percent of survey respondents reported that they use alternative investment products today, up from 59% in the first quarter, and 52% of current users said they plan to increase usage over the next two years. The survey also found that diversification is the most common reason why advisors lean on these products, cited by 76%, followed by non-correlation with equity markets, cited by 69%. (Further)… 70% reported using alternatives such as real estate and real estate investment trusts….
For more information on alternative investments in general and private REITs in particular, please contact familyoffice@taag.ca.
Until next time,
The TAAG Family Office Team
Our Offerings
Private Placements
OCM Auto Financing Group (OCM)
OCM Auto Financing Group was established in 2013 to expand the under-developed, non-prime, auto financing marketplace on a national level. The business has now grown across Canada, is currently utilized by more than 100 dealerships, and continues to grow. OCM financing is available to car dealerships through the Dealertrack Network. What makes the business model so unique is the combination of loan structures & borrower profiles, and since inception OCM has provided above-average, double-digit returns with no loss of investor capital.
OCM 9.00% Secured Subordinated Debenture - Series 4
| Investment Type: | Debenture |
| Minimum Investment: | $25,000 |
| Distribution/unit ($): | $22.50 |
| Distribution paid: | Quarterly |
| DRIP: | Yes |
| Discount: | No |
| Minimum hold: | 3 years |
| Conversion Privilege (Holder): | N/A |
| Conversion Right (Corporation): | N/A |
| Eligibility: | Accredited only |
| Unit price | $1,000 |
| Distribution (%): | 9% p.a. |
| Tax treatment: | Interest |
| Registered eligibility: | Yes |
Q3 SOUNDBITE
October 31st brings us to the end of the first fiscal quarter for OCM. It has been an exceptional year, and we have hired three new team members to keep up with demand. The monthly volume of lending has increased almost threefold compared to this time three years ago! Given such an increase, we are often asked whether it is a result of a loosening of lending standards, however even with the exponential increase in demand, we have not seen any change in our loss ratio. In October alone, out of a staggering 2,300 new loan applications, only 130 were approved. As such, it has been OCM's best month to date, and we'd like to thank everyone who participated in helping us meet the additional demand. Total loans will likely top $40 million before the end of the calendar year!
Multirez is building a portfolio of sustainable communities in under-serviced towns and cities near major urban centres. Multirez is focused on creating value for tenants through the development and ownership of multi-residential, as well as mixed-use properties in select markets.
Q3 SOUNDBITES
Kingston: After several months of exclusive listing with NBN commercial real estate broker, a decision has been made to close on the property and list on MLS. The MLS listing is expected to reach a wider net of potential buyers, with the listing to begin in early January. With demand in the high density multi-residential space in great demand, we are hopeful for a sale in Q1 or Q2 of 2023. With the city taking on the cost of servicing of this property, hundreds of thousands of dollars will be saved and will benefit the bottom line.
Carleton Place: Presently under construction and the framing has been completed. Everything is proceeding according to plan.
Arnprior: The property will be ready for occupancy in December, and closing is expected in January or February.
With BnSellit's Marketplace software, short-term rental hosts can create an additional revenue stream by adding items to their properties that guests may buy or rent. More importantly, however, their Enterprise software provides multi-unit hotel operators with a platform to drive in-room and on-location commerce, as well as having full access to their Concierge Services with which guests can book tickets for local tours and attractions. Guests can access these services via strategically placed QR codes found in their room, at poolside, or around lounge areas. Public shares of BnSellit Technology Inc. are now trading on the Canadian Securities Exchange (CSE: BNSL).
BnSellit Technology 10% Convertible Debentures
| Investment Type: | Convertible Debenture |
| Minimum Investment: | $10,000 |
| Distribution/unit ($): | $8.33 |
| Distribution paid: | Monthly |
| DRIP: | No |
| Discount: | No |
| Minimum hold: | 18 months |
| Conversion Privilege (Holder): | At the holder's option, into Class A Shares at a conversion price of $0.25 per share. |
| Conversion Right (Corporation): | If prior to maturity, the average price of the Class A Shares on the CSE equals or exceeds $0.60 for 10 consecutive trading days, the Corporation may force conversion of all of the principal amount then outstanding of the Convertible Debentures at the Conversion Price ($0.25). |
| Eligibility: | Accredited only |
| Unit price | $1,000 |
| Distribution (%): | 10% p.a. |
| Tax treatment: | Interest |
| Registered eligibility: | Yes |
Q3 SOUNDBITE
BnSellit continues to expand at an exceptional pace with the most recent property being a 160-room hotel in Dubai which went live in October. While the scope of the contracts varies, their services are now used by every major hotel chain worldwide! With an ever-increasing demand—they have completed 8,000 installations out of over 22,000 letters of intent signed in the past year—BnSellit continues to maintain laser-like focus on converting signups to live installations. Naturally, such a robust pace of expansion comes with equally robust capital requirements, and with the continued volatility of public markets, they have decided to continue to offer the 10% convertible debenture to help meet their capital requirements. BnSellit continues to offer investors the opportunity to get in on the ground floor of an enterprise that has its sights fixed firmly on the penthouse!
Reverse Dealer is a Canadian technology company specializing in the automotive sector. The company’s mission is to redeem the industry by transforming the dealership's business model, and as a result, fundamentally changing the way consumers buy and sell used vehicles. They are achieving this vision through the launch of their first product “PURR”—the first-ever all-in-one online platform that unites private sellers, buyers, and dealerships in one place, where everybody wins.
This innovative technology is revolutionizing the way that vehicles are sold, providing a win for the seller to expand their market, the dealerships get to participate in a reasonable transaction cost as well as potential financing and ongoing maintenance of the vehicle, and the purchaser gets the benefit of the dealer services but at private sale prices. For a one-minute video visit the website.
| Minimum Investment: | $25,000—Current round of financing is 500K @ $2.25 per share. |
| Registered eligibility: | No, cash only |
| Eligibility: | Accredited only |
Q3 SOUNDBITE
Q3 has been a pivotable month for Purr. We have passed through the proof-of-concept stage and are now selling vehicles on the platform. The functionality and operations of the technology are working without incident. In November alone, we saw a 484% inventory increase on Purr.ca—from 53 to 207 vehicles.
The focus is now on dealership expansion and marketing. We are currently onboarding several dealerships including OEM brands such as Cadillac, GMC, Chevrolet, Ford, Buick, Subaru, Hyundai, Nissan, Volkswagen, Mazda, and Honda. We are in the process of hiring and training five(5) new Sales Representatives for a total of seven(7) and two(2) Support Staff to increase Purr’s footprint and dealer support in the Alberta and Ontario Markets.
Over the past year, we have seen the valuation of the business take our share price from $1.00 in March 2021 to a current-day valuation of $2.25 per share with an overall value of $25M. The current round of financing will raise $500K and cover operating expenses until next year at which time we anticipate the valuation could reach $5.00 per share.
Investment Funds
DaVinci actively manages four, customized portfolios that offer unique investment opportunities not generally accessible to the public; since their capital is pooled, they have access to many investments that carry minimum investment thresholds and would otherwise be out of reach for most clients. DaVinci combines traditional investments such as stocks and bonds with alternative investments such as real estate, private debt, private equity, and hedge funds. They offer consolidated reporting and real-time management. Senior PMs and Managing Directors have their personal wealth (excluding personal real estate) invested in DaVinci pooled funds and DaVinci sponsored direct deals.
DaVinci Alternative Hedge Strategy
| Minimum Investment: | $500,000 |
| Inception: | 2012 |
| Eligibility: | Accredited only |
| MER | 2% or less |
| Incentive | 20.0% |
| Hurdle | 6.0% |
| Return since inception: | 9.2% |
Q3 SOUNDBITE
The Alternative Hedge Strategy had a small positive return despite continued carnage in the traditional public markets. Global private real estate turned decisively defensive in Q3. Fundraising in the sector declined by 53% year over year to USD 33.8 billion. The private real estate markets will continue to be suppressed until investors believe we are reaching the end of the rate hikes. The situation around our Venezuelan sovereign debt investment continues to move forward in a positive manner. Gains came on the private debt side, driven by making whole fees on one of our litigation finance investments. The loan was paid off early, as the law firm was able to secure cheaper financing. A new loan was also funded to a public company in the gaming space and has very attractive terms, including a coupon of 11%, which should take our return to 15-16%.
Founded in 2011, Ewing Morris & Co. is an independent, alternative asset manager. Assets are approximately $450 million, focusing on inefficient/niche areas of the market in high yield, small caps, and the like. They have two principal strategies for their HNW clients—the Flexible Fixed Income Fund, focused on the high-yield credit of small/mid-cap companies, and the Small Cap Fund, focused on long-only, small-cap equities.
Ewing Morris Flexible Fixed Income Fund LP
| Minimum Investment: | $100,000 |
| Inception: | 2016 |
| Eligibility: | Accredited only |
| MER | 0.75% |
| Incentive | 20.0% |
| Hurdle | 5.0% |
| Return since inception: | 5.0% |
Q3 SOUNDBITE
In the third quarter of 2022, the Fund returned +0.6%, compared with our high yield and investment grade corporate bond benchmark returns of -2.9% and -0.4%. Our outperformance in the third quarter is owing to its larger proportion of investments tied to lower-risk, shorter-term credit investments, investments in technology-based convertible bonds, and most importantly, positive investment-specific developments. We are pleased to report that market return expectations are strong. Thanks to pessimistic perceptions, yields in the market have spiked and have approached 10%. From these levels, the market has an excellent history of future returns over subsequent periods.
Ewing Morris Small Cap Fund LP
| Minimum Investment: | $100,000 |
| Inception: | 2015 |
| Eligibility: | Accredited only |
| MER | 0.75% |
| Incentive | 50.0% |
| Hurdle | 8.0% |
| Return since inception: | 10.4% |
Q3 SOUNDBITE
The third quarter proved to be another difficult quarter for most risk asset classes. The Small Cap Fund was down 6.8%. In challenging times, however, the best companies get stronger, improving their competitive position. Examples of fundamental value creation from our company’s most recent quarterly earnings reports: Focus Financial Partners posted 15% organic growth, Uni-select acquired Maslack Supply, and Primaris repurchased 1.5% of o/s shares. In aggregate, the portfolio trades at less than 14x FCF, a meaningful discount to the broader market, these same companies have grown twice as fast as the market over the past five years.
Giverny Capital Asset Management
The cornerstone of Giverny’s promise to their clients is that they are all in the same boat since all investors are participating in the Rochon Global Portfolio, the personal portfolio managed by François Rochon himself since its inception in 1993. Although Giverny itself was founded in 1998, the portfolio has delivered close to a 15% compound annual return over the last 29 years. François Rochon has been referred to as the Warren Buffett of the North. He focuses on high-quality companies that have sustainable competitive advantages and invests with conviction so that the Top 10 holdings typically account for about 60% of the portfolio.
Giverny Rochon Global Portfolio
| Minimum Investment: | $100,000 |
| Inception: | 1993 |
| Eligibility: | All investors |
| MER | 1.5% |
| Incentive | N/A |
| Hurdle | N/A |
| Return since inception: | 15.7% (as of Dec. 31, 2021) |
Q3 SOUNDBITE
The year continues to be challenging. For the quarter ended September 30, 2022, the Giverny Capital Asset Management model portfolio declined by 4.64%, compared to a decline of 4.88% for the benchmark S&P 500. So, while our quarterly performance was in line with the market, the year remains a disappointment and we confess to some surprise at the way this year has unfolded. As an owner of a concentrated portfolio of market-leading businesses, we thought we would fare reasonably well in a severe downturn, as capital might flee speculative stocks in favor of sounder businesses. Instead, it gravitated to oil, utilities, and consumer staples, ostensible safe havens in inflationary times. Presently, the twenty-six stocks we own generate higher ROE than the Index, yet with this year’s declines, the forward PE multiple on our portfolio is now equal to the S&P 500. The market seems to be saying that our companies will not grow in the future the way they have in the past. We beg to differ and remain focused on earnings growth because, over time, stock prices invariably follow earnings performance.
Newport, who also manages the Lonsdale portfolios, is a discretionary money manager. This allows them to react to market conditions and adjust as needed. Newport mitigates the risk of volatility and has been 60% better than the market median, while also capturing an average of 95% of the upside. Portfolios are rebalanced weekly and invested internationally in public markets, private debt, and infrastructure. Clients can be confident that investments are made in their best interest, since all the investment committee’s personal assets (excluding real estate) are with Newport right alongside clients, and the partners own most of the equity in the firm. Newport operates using five pooled funds, of which clients own a mix depending on their risk tolerance.
Newport / Lonsdale Portfolios
| Minimum Investment: | $200,000 |
| Inception | 2001 |
| Eligibility: | All investors |
| MER | 2% or less |
| Incentive | N/A |
| Hurdle | N/A |
Q3 SOUNDBITE
While Newport is not immune from market turbulence, simply put, we have more ways to protect and grow your wealth. Our third quarter performance provides a real-time example. After an early summer rally, the S&P 500 sold off more than 9% in September the worst month for the Index since the pandemic-related sell-off in March 2020. Despite this, all five of Newport’s mandates posted positive results in the third quarter. With a 35% weighting in institutional private investments, we showcased our ability to generate growth and income that is largely uncorrelated to the public markets. While we remain defensively positioned, we will continue to be active from an investment standpoint. As our comfort levels rise, our willingness to deploy capital into oversold opportunities will increase.
Published by TAAG Corporation
© 2022 TAAG Corporation
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