LBD3300 Advanced Real Estate
002 Real Estate Case Studies
Prepared for: LearnByDoing.ca
By: @ProfBruce
Date: September 2012
Create the Future
Professor Bruce Murray Firestone
B. Eng. (Civil), M. Eng.-Sci., Ph.D.
Founder Ottawa Senators, Ottawa Senators
Foundation and Scotiabank Place
Entrepreneurship Ambassador, Telfer School of
Management, University of Ottawa
Executive Director, Exploriem.org
Novelist, Quantum Entity Trilogy
Writer, Entrepreneurs Handbook II
Columnist, Ottawa Business Journal
Broker, Century 21 Explorer Realty
•Follow him on Twitter at @ProfBruce
•Read his blogs at www.EQJournal.org and
www.DramatisPersonae.org
•Current motto: “Making Each Day Count”
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Residual income from yr PB4L?
Minimal work?
Low management intensity?
Not really, unless you have several million
dollars in GICs or T-bills
Every biz, even PB4Ls, require some level of
care and attention
And it takes time to develop a great biz (7 to
12 years according to Sir Terence Matthews)
Terrace Investments Ltd (An Example of Bootstrap Capital)
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Bought from group set to retire
Asking price: $350k
First offer (October 1982): full price offer, rejected
Second offer (February 1983): full price offer (coldest day of the
year), accepted
$10k down, STB 5 years, 0 interest w/ principal pmts every yr
Fully paid off < 2 yrs
“Why should we sell to you, Bruce?”
“Because I’ll actually pay you and you trust me.”
“Where did you get to $10k?”
“I borrowed it!”
1025 Merivale Road (An Example of Trading Behaviour)
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Plaza part of the TIL package of assets, valued at $185,000
End of 25 year lease with IGA at $1.87 per s.f.
Seen as a huge problem—plaza soon to be100% vacant
Actually huge opportunity to BUY LOW/SELL HIGH (trade!)
Lipstick renovation with architect Barry Hobin: $120,000
Sub-divide space: $14.00 (Beckers), $6.85 (Active Components),
$5.00 (Martial Arts)
Sell for $1.1 million 18 months later
1025 Merivale Road
(An Example of
Trading Behaviour)
Bob Campeau (An Example of Stand Your Ground)
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TIL partner Admiralty Enterprises goes bankrupt
Campeau Corp buys 80 properties from Receiver including 5
TIL/Admiralty warehouses
TIL had right of 1st Refusal clause
Invoke rights
Campeau invokes “Principal of the Greater Good”
Bob Campeau (An Example of Stand Your Ground)
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Andrew Jacob: “What do you want for your half, Bruce?”
“$2.1 million.”
“But we’re getting Admiralty’s half for $400k!”
“Why don’t you want to be partners with the great Bob
Campeau?”
Larger, better capitalized partner can kill you
“He (or She) who has the Gold, rules,” Anon
Bob Campeau (An Example of Stand Your Ground)
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They can make $$$ by leasing space to tenants in bldgs they own
100%
Empty out 50/50 buildings
Then come to weaker partner and do them a ‘favour’
TIL might lose their ½ share for 0 or even negative dollars < 2 to
3 yrs out
Hard to argue for the ‘greater good’ when you are still getting your
interest for 43% than FMV
10 minutes < court hearing, “How much do you really want?”
“$2.1 million.”
5 minutes before: settlement for $2 million, cash
Brookstreet Resort and the Marshes Golf Club (An Example
of Trading Behaviour and Bootstrap Capital)
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Bought 62 acres of industrial land in 1994 for $365k
Tough recession
Industrial land in Kanata had gone down by 90% +
Actually huge opportunity to BUY LOW/SELL HIGH (trade!)
Two investors put up 100% of capital
Loaned Bruce the $$$ for his 1/3 interest at 8%, capitalized
Sold in 1997 to Sir Terence Matthews for $2.2 million
Investors each get $725k
Their IRR is 57% p.a.
Brookstreet Resort and the Marshes Golf Club (An Example
of Trading Behaviour and Bootstrap Capital)
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Bruce’s IRR?
Infinite
Sell for $1.1 million 18 months later
Why wld investors loan Bruce the $$$ to co-invest?
Asymmetric information + operational and sales experience
(Use IRR to calculate yr real returns: Cap rates are simply a ‘rule
of thumb’.
www.dramatispersonae.org/IRR/IRRPowerOf
LeverageGoalSetting.htm)
Stittsville Bungalow (An Example of Asymmetric
Information)
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REALTOR puts Seller and Buyer clients together
Not on MLS
Seller wants to sell with 0 showings
Seller wants to sell/lease back so his elderly parents-in-law can
remain in situ for up to 3 yrs
Sale is ‘handicapped ‘ as a result
Buyer is investor with limited budget
Buyer requires co-investors to complete
Co-investors want in on project because: purchase of home for
$40k < FMV, 3 yr leaseback at rent > FMV, Tenant pays all
utilities, stable/predictable cashflow, paydown of mortgage by
Tenant, increase in value over time, bungalows in increasing
demand
Stittsville Bungalow (An Example of Asymmetric
Information)
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2 x Dentists co-invest
They have money but no time
Managing partner has time but no money
Managing partner brings connections with REALTOR, property
management skills, the opportunity to buy below market and to
rent above market
Investor ROE: 6% cash-on-cash + 7% pay down of mortgage by
Tenant + 1.5% r.e. inflation (~4.5% on equity) + $40k from below
mkt purchase
Much better return that GICs (3.15% to 3.85%)
Managing partner gets 20% of the deal for ‘nothing’
Robertson Mews
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Bought 11 acres for $55k per acre
Purchased adjacent 1.7 acres for $225k
Bought 1.2 acres for $35k from Ontario
Put in sewers and water mains and services
for $850,000
Sold lands for singles, condos, towns and
high rise retirement home
Robertson Mews
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Traded off four Barry Hobin towns
‘Calling card’ for Robertson Mews
Robertson Mews
Spreadsheet: http://learnbydoing.ca/robertson-mews.xls
Sep-12
Robertson Mews
Parcel A
11
acres
$65,000
per acre
$715,000
Parcel B
1.7
acres
$161,764.71
per acre
$275,000
Parcel C
1.2
acres
$29,166.67
per acre
$35,000
13.9
acres
$73,741.01
per acre
$1,025,000
Total
Robertson Mews
Planning and Legal Costs
$125,000
Servicing Costs
$850,000
Misc
$85,000
Total
$1,060,000
Sub-Total
$2,085,000
Financing
Grand Total
9%
2
years
$375,300
$2,460,300
Robertson Mews
Serviced Land Sales
Gross Profit
13.9
acres
$315,000
per acre
$4,378,500
$1,918,200
Robertson Mews
Project IRR
0
($1,025,000)
1
($1,060,000)
2
$1,751,400
40%
3
$2,627,100
60%
IRR
42.6%
p.a.
Target
100%
p.a.
Brought to you by:
Thurston Drive/Auriga Drive Industrial Condos (An Example
of Build and Hold + Differentiated Value)
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Too many investors chasing ‘shopping plazas’ or ‘res duplexes,
triplexes, quads’
Buy product that others overlook/avoid the behemoths like
Banks/Pen Funds/Insurance Cos et al
Can purchase industrial condos in Ottawa from $165k to $350k+
Create some DV (Differentiated Value): e.g., add a mezzanine
with separate entrance
Can rent upper level separately from ground floor or both together
Thurston Drive/Auriga Drive Industrial Condos (An Example
of Build and Hold + Differentiated Value)
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Compare industrial condos with residential rentals:
INDUSTRIAL
5 yr leases (typ)
net/net/net leases
little investor competition
low vacancy rates
not too management intensive
few debt collection problems
no RTA– simple distrain
normal wear and tear
Tenants self reliant
RESIDENTIAL
1 yr lease (typ)
gross or semi gross
everyone wants in
low vacancy rates
medium amt of mgt requ’d
many debt collection probs
RTA– evictions difficult
mega damage possible
Tenants needy
Thurston Drive/Auriga Drive Industrial Condos (An Example
of Build and Hold + Differentiated Value)
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Investors inevitably ‘chicken out’ due to unfamiliarity with product
category
Only want to buy when 1st class tenants are in place on long term
leases and with 0 risk
But remember: buy whenever everyone else is selling and sell
whenever everyone else is buying/you make money in r.e. when
you buy not when you sell
Units become available because they are vacant– great
opportunity for you!
Buy in a recession– great fortunes are made in recessions
(Baron Rothschild in 1871): “Buy (real estate) when
there’s blood in the streets.”
Hawthorne Spreadsheet:
http://learnbydoing.ca/investment-break-down-lease-20-aug-2012-res-vs-industrial-2.xlsx
Hawthorne Industrial Condo's
Purchase Price
$ 240,000.00
Down Payment
$ 60,000.00
Legal Fees
$
850.00
Land Transfer Tax
$
2,400.00
1.00%
Closing Costs
$
3,600.00
1.50%
Total Costs on Closing
$ 66,850.00
25.00%
Hawthorne Spreadsheet
Mortgage
$ 180,000.00
Interest Rate
5.00%
Amortization
25
Payment
($1,052.26)
p.a.
years
Hawthorne Spreadsheet
Rental Rate
$
12.00
Size
Total Rent
/SF
1250
$ 15,000.00
SF
Hawthorne Spreadsheet
Estimated Operating Costs
Condo Fees
$
1.50
Operating Costs
$
4.00
Total
$
5.50
Administration Fee
$
0.83
15%
Property Management Fee
$
0.72
6%
Total Fees
$
1.55
Total Yearly Fees
$
1,931.25
Hawthorne Spreadsheet
Total Mortgage
$ (12,627.14)
Vacancy Allowance
$
(900.00)
Cash Flow
$
3,404.11
/annum
6.00%
/annum
Hawthorne Spreadsheet
Mortgage Paydown (5years)
$ 20,555.66
Real Estate Inflation
$ 31,537.97
Equity
$ 60,000.00
Cash Flow
$
Sub-Total
$ 115,497.74
Commissions
$ 14,934.59
5.50%
Closing Costs
$
1.50%
Total On Sale (5years)
$ 96,490.08
2.50%
3,404.11
4,073.07
p.a.
Hawthorne Spreadsheet
IRR
IRR
`
0
$ (66,850.00)
1
$
3,404.11
$
3,404.11
2
$
3,404.11
$
6,808.21
3
$
3,404.11
$ 10,212.32
4
$
3,404.11
$ 13,616.42
5
$ 96,490.08
$ 110,106.50
11.35%
Maple Leaf Design and Construction (An Example of
Bootstrapping)
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Bootstrapped their way to success
Source of capital (essentially supplier credit)
Friendly landowner provides options on land, basically at no cost
Owner gets paid by home buyer not Maple Leaf
Self Capitalize
-why?
-VC-funding is hard to get and takes a lot of time
-also, you may end up losing control of your business
-VC funded biz are just large biz w/ 0 revenues
-power comes from having real clients/real cashflow
-if you do go for financing and you do it at the mezzanine stage,
you’ll have more leverage
-Maple Leaf Design and Construction
Brain Saumure, B. Arch (CU and SOA)
Fred Carmosino, B. Com (Sprott)
-No serfdom for Brian: wanted to be his own boss
because he could create more interesting work for
himself than others could create for him
-Started with $0
Maple Leaf Design and Construction
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Option on lots
Sweat equity: summer in a trailer with plans, signs and
Agreements of Purchase and Sale
Pre-sell
Collected deposits
Now have $$$ in their bank account– impressed with a trust
Used homeowners credit scores to get construction financing
What is cheaper? Debt or Equity?
Debt.
What is cheaper than debt?
Bootstrap Capital (e.g.: Trade Credit,
Deposits,…)
They’re FREE!
Reverse out the work
-the Internet is the most important new invention of the last 50 years
-it is where electrification was at same stage, 20 yrs in
-create custom outputs from standard inputs (e.g. new age virtual home
builder)
-reverse out the work to customers and suppliers
-match making
-mass communicate at ~ no cost (Twitter, FB, blog, Skype, email, IM,
messaging,…)
-Crowd sourcing (voting on designs)
-user generated content by customers (and suppliers) e.g.: YouTube,
Twitter, FB, Reddit, Digg & Threadless (suppliers: artist community
submit t-shirt designs voted on by customers)
Virtual home builder:
-tried in 2000 to get home builders to do this
-very conservative industry
-put lots available and designs online in a
physics engine together w/ all
options/finishes
-allow everyone to use physics engine
-go online: choose lot, design, fit-up, finishes
(carpet, tile, kitchen cabinets, lighting
package, plumbing fixtures, etc.)
-put cash register online too
-consumer can see what granite or concrete
counter tops add to cost
-can fool around for 30+ hours
-then hit “submit” button
Homebuilders fear putting prices online – their
competitors might find out!
Ever heard of “Secret Shoppers?”
-Put CPM (schedules) online: let customers see
where their home is at and let suppliers see
too when they’re needed for Footing and
Foundation, framing, roofing, windows,
electrical, plumbing, insulation, dry wall,
paint, carpet, cabinets,…
-As more options are available, more users will visit the site, as
more users visit the site, more suppliers come onboard and you
have a virtuous cycle
-Now “Best Homes 4 U” is enjoying network effects
-Suddenly, the flow of cash could reverse direction w/ suppliers
becoming advertisers and sponsors
More about Best Homes 4 U:
-Allow lawyers access for e-closings
-Allow lenders access for e-funding
-Now if your WS attracts 10,000s of visitors,
you can get your suppliers and your
suppliers’ suppliers to pay for ads so more
people will buy higher-end products
(chandeliers, beveled mirrors, granite,
counter tops, home theatre,…)
-more options => more people => more options
=> more people…
-In a virtuous, self-reinforcing cycle (Google is
also an example of Network Effects)
-30+ hours in Design Centre with clients can
become just 60 minutes
-Imagine the productivity increase for
homebuilder sales staff, lawyers, mortgage
lenders, the GC, the foreman (Worst
problem? Homebuyer questions about when
this or that happens..), suppliers, trades,
subs, …
Also, customer satisfaction increases since:
a)
they get EXACTLY what they want,
b)
they feel they had a hand-in its creation
(like Aunt Jemima Pancake Mix: just add
eggs and milk).
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The folks who bring you this pancake mix
famously had an erroneous insight years ago—
they thought that by adding powdered eggs and
milk to their mix and eliminating the instructions
“Just add eggs and milk”, they could save the busy
consumer time and sell more product
It turned out that homemakers liked adding ‘real’
eggs and milk: first, they thought it was healthier
that powdered eggs and milk and, second, they
wanted to be involved in ‘making’ their kids’
breakfasts
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For most kids, you are what you do for them
By taking this away, sales went down not up
Best Homes 4 U, by involving the consumer in the
design of their own home are catering to a deep
seated need in humans to ‘buy-in’
This is a powerful lesson for tech—giving
consumers the power to customize products and
services is big business. For example, Dell is
currently using Threadless.com’s platform to allow
artists to submit and prospective customers to
select winning designs for laptop covers
Triole Street (An Example of BUY LOW/SELL HIGH)
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Streetscape is a mess
Crappy tenants/crappy building
stock
But… baseball home run
distance from St. Laurent
Shopping Centre
Visibility from Queensway
Bought 9 acres at $1 per s.f.
One yr later– offer for 50 cents!
“Oh, oh, I made a mistake!”
OJ reminds me: “BUY
LOW/SELL HIGH”
Why so hard to do?
Triole Street (An Example of BUY LOW/SELL HIGH)
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People can be sheep
“Is this dress/suit popular/in-style?”
Banks only lend when u don’t need the funds– i.e., they only lend to people
who don’t need the money!
Banks lend when everyone else is lending and when the press is good
The reverse is also true
Investors invest when everyone else does and when the press is good
The reverse is also true
Pittsburgh investor buys 300 homes in 2008 for $350 each; everyone tells him he’s
crazy. Now makes his original investment back every 3 weeks.
Three victims of the Sept. 11, 2001 attacks meet in a stairwell & head down. Then
they run into another larger group who are heading up to await ‘helicopter rescue’. 2
join up because everyone else is going up. 1 defies conventional wisdom & goes
down thru the smoke and heat because he figured it out (wld take 2 days (!) to
evacuate everybody by helicopter) and he didn’t panic. He was the only 1 to survive.
He made it out w/ < 5 mins to spare.
Triole Street (An Example of BUY LOW/SELL HIGH)
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Two years later sold 4 acres to Car Dealership for $8 per sq. ft.
And 5 acres to Roofing Company for $12 per sq. ft.
Mont Cascade and Pro Slide
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Rick Hunter, former Canadian Ski Team
Member
Retires after injury
Buys a ski hill
Mostly on credit and a bit of savings
Loses an atrocious amount year 1
Sitting on the hill in Spring of that year– what
to do?
Mont Cascade and Pro Slide
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Family to support
Debt to repay
Bankruptcy facing him
Looks at hill/looks at lake/looks at hill again
Eureka!
Mont Cascade and Pro Slide
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Buy two straight plastic tubes from
manufacturer in Rigaud, Québec on (yet
more) credit
Buys a couple of pumps on (still more) credit
One shack for women’s change room/another
for men’s
Reuse parking and food services and toilets
from ski hill
30,000 people show up that summer and give
Rick $13 to use his waterslides
Mont Cascade and Pro Slide
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Saved!
Asks Rigaud manufacturer: “How about a
tube with a bend in it?”
“No we don’t do that.”
“Why not?”
“We do it that way because that’s the way it’s
always been done.”
Rick hires first engineer to design a
waterslide with a curve in it
Non trivial problem of g-force calculations
Mont Cascade and Pro Slide
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One day a Disney
executive hears about
this
Rick gets the contract
for Splash Mountain
Pro Slide is born
World leader in custom
design, engineering
and manufacturing of
fiberglass water rides
Wilderness Tours and Mount
Pakenham
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Joe Kowalski from Philly falls in love with
Algonquin Park
Decides to be an outfitter– taking visitors on
canoe trips
First summer is a disaster– turns out no one
wants a guide
But he learns that there are force 4 rapids on
the Ottawa River that no one had traversed in
over
a century
Wilderness Tours and Mount
Pakenham
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Joe and his pal Robbie Rosenberger scout
out the territory
Joe sees BIG OPPORTUNITY
Less than 90 minutes away is a market of
800,000 outdoorsy people with lots of
disposable income
Next Spring, he and Robbie ask a farmer for
permission to set in to the river on his
property
They launch Wilderness Tours with two rafts–
Robbie in one and Joe in the other
Wilderness Tours and Mount
Pakenham
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100s then 1,000s of people show up
Problem– while the rapids are terrific, the ride
is short
Joe embraces programming: swimming the
rapids/one channel for adventurous
paddlers/another for families who want to
bring kids/bungee jumping/kayaking/
mountain biking/rock climbing/volleyball/
horseshoes/paddle tennis/basketball/
soccer/ball hockey/lawn chess/softball
Joe starts to buy land
Joe starts to build a town
Wilderness Tours and Mount
Pakenham
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4,000+ acres owned
by WT
Both sides of River
(Québec and
Ontario)
No development
permitted (other
than WT)
Problem– how to
keep good staff in
seasonal biz?
Wilderness Tours and Mount
Pakenham
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Buy Mount Pakenham– winter time staff
reallocation
Another problem– smallest vertical anywhere
in the region
Turn Mount Pakenham into largest ski school
anywhere– safety becomes their competitive
advantage
Schools show up what ever the weather
More programming?
Add snow board park
Add tubing for non-skiers/boarders
Wilderness Tours and Mount
Pakenham
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Further expansions– jet boat business in
Lachine and Niagara Falls
Another problem– smallest vertical anywhere
in the region
Turn Mount Pakenham into largest ski school
anywhere– safety becomes their competitive
advantage
Schools show up what ever the weather
More programming—snow board park/tubing
for non-skiers/boarders
Now selling fractional ownership for
Presqu’ile
Wilderness Tours and Mount
Pakenham– Lessons Learned?
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Entrepreneurs would rather ask for
forgiveness than beg for permission
Start with nothing/bootstrap your way to
success/make a profit/cash is King
See and seize opportunities where others fail
to go
Outcompete your competitors
Be innovative and creative
Turn problems into opportunities– your
biggest weakness becomes your greatest
strength
Villager Home Corporation (An Example of Build and Hold)
Villager Home Corporation (An Example of Build and Hold)
Villager Home Corporation (An Example of Build and Hold)
Villager Home Corporation (An Example of Build and Hold)
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Santa Cruz, California, circa 1969
Big house/little house—1011 and ½ Seabright Avenue (Bruce and
his girlfriend)
“Old” Lady—wants company, security + the little house provides
her with extra income
Carry plans with me for 25+ yrs
Steve Silver et al lobby Ottawa to legalize in-home suites
Mayor Chiarelli does this (< he loses election)
Legal everywhere in Ottawa (except for Rockcliffe Park!)
Fast solution to homeless problem/affordable housing/keeping
seniors in neighborhood instead of in vertical warehouses
Extra income for homeowner
Villager Home Corporation (An Example of Build and Hold)
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CMHC provides up to $25k for conversions (forgivable loan)
Bring gray market apartments up to bldg code.
Fire separated/sound separated and smell separated units
Flexible housing stock: 2 families, 1 family with extended family,
kids returning with kids, student housing, elder housing, 1 single
family home
Add one door (or remove it) to make these changes
Half level down/half level up (like Scotiabank Place!)
Villager Home Corporation (An Example of Build and Hold)
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Tax advantages: interest on mortgage for rental portion now tax
deductible
Principal residence still not subject to capital gains tax provided
renovations are within existing building envelope
Forced savings from paying off mortgage
People with less capital can afford a home
Live in your own home for less than $600 per month
Renters pay part of your mortgage for you—wealth effect
All increase in value goes to equity holder
Villager Home Corporation (An Example of Build and Hold)
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ABSOLUTE FAILURE!
People don’t want to be Landlords
People can afford (or think they can afford) more housing on their
own*
Low interest rate environment– means why should people hassle
w/ Tenants
Construction risk—cost overruns and delays are killers
YOU ARE NOT THE MARKET!
THE MARKET IS RIGHT EVEN WHEN IT’S WRONG!
(* Imagine the average home price in Vancouver is now > $1 million.
Now imagine being able to ‘rent’ $1 million from a Bank on a variable
rate mortgage for, say, 2.15% p.a. or just $1,791.67 per month!)
Blue Heron Corporation (An Example of Build and Hold)
Blue Heron Corporation (An Example of Build and Hold)
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CO and CC biz—overrun by large scale players
Their cost of capital: less than 1.5% (Banks, Pen Funds,
Insurance Cos, REITS, Publicly traded r.e. firms)
Our COC: 8 to 12%
That’s like competing in the 100 metre dash but giving up a lead
of 80 metres at the start line!
Go under the market (and over the market– Ottawa Sens + SBP)
Mini-offices (Terrace Corporate Centres & Exploriem.org) + ministorage
Blue Heron Corporation (An Example of Build and Hold)
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15 acres of industrial land in Kanata North
Cost to construct sheds: $35 per s.f.
Rents are $12 per s.f. per year gross +/Not too management intensive
Lots of competition
Our competitive advantage—built a duplex on site where
Manager lives + month-to-month leases
Retired person
Provides security/leases units
Free rent and other benefits
Blue Heron Corporation (An Example of Build and Hold)
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Kanata wanted BHSC to fence and gate with razor wire entire site
Part of Village
We never fenced it but did put in a gate
Gate never closed!
Zero vandalism/theft (so far!)
Blue Heron Corporation (An Example of Build and Hold)
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92% to 96% occupancy (can never actually get to 100%)
Bought lands for $92,500
Rezoned
‘Old fashioned’ rural development: mom/dad/family in front with
the factory/warehouse/workshop/farm/barns/storage in back
Sold for $1.1 million
Presidential Executive Travel Apartments (An Example of
Build and Hold)
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16 condos—Holland Cross and Robertson Mews
Ground floor access
Lockboxes—self admittance at all hours
Furnished units
Telephone, cable, basic kitchen foodstuffs, etc ready to go
Cleaning service—extra charge/profit centre
Apartment rents: $1,200 monthly (1990s)
PETA rents $3,000 monthly (1990s)
Used for Sens players/trades
Presidential Executive Travel Apartments (An Example of
Build and Hold)
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Not too management intensive
High quality tenants—paid by tech cos/few problems with
collections
Limited competition
Developed long term relationships with HR managers at local
firms
Simple exit strategy– MLS.ca
Leases were 30 days to 90 days—more sales required than
typical one year res leases
No significant damage to units
Ottawa Senators (An Example of Bootstrap Finance)
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Terrace gets $18 per s.f. for its
office space/five years later it’s
$6
What to do?
What does Toronto have that
Ottawa doesn’t have?
A zoo/Princess of Wales
Theatre/ Wonderland/NHL Team
Conversation w/ Cyril Leeder
and Randy Sexton
Bring Back the Senators
Ottawa Senators (An Example of Bootstrap Finance)
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Cyril asks how much will it cost?
$35 million (est. based on NBA)
Actual NHL ask?
$50 million USD
Randy says let’s go for it
Cyril asks how will we pay for it?
Bootstrap capital, that’s how
Ottawa Senators (An Example of Bootstrap Finance)
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Buy 600 acres at $12,500 per acre
Put a NHL team and NHL-calibre building in the middle of it
Drive up the value of the land to $112,500 per acre
Keep 100 acres for Scotiabank Place and parking lot
Sell extra 500 acres for a profit of $100k per acre or $50 million!
NHL franchise cost = ZERO!
Ottawa Senators (An Example of Bootstrap Finance)
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Also get 32 Original Corporate Sponsors at $15k each
And 500 Corporate Sponsors at $500 each
Sell 15,000 PRNs at $25 each
Raise $1,105,000 to help with bid
As Al Davis once said: “Just win, baby.”
If u want a short, pleasant annual meeting w/ yr Bank, make a
profit every year, no excuses.
Terrace Investments Ltd
 St. Laurent Blvd and the Queensway
 Bank Street and the Queensway
 Moodie Drive and the Queensway
 Eagleson Road and the Queensway
 Palladium Drive and the Queensway
 March Road and the Queensway
Is there a pattern here?
Conclusion Part 1
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When something isn’t working, do something new
Learn from your competitors
Commitment is important: “YOU’LL NEVER, EVER GET A
FRANCHISE IN … OTTAWA”
You can bootstrap big projects
Even Fortune 50 companies do that (Disney and the Anaheim
Ducks 4 example)
Sponsorship can apply to many industries and is a form of
Bootstrap Capital
Keep your core competencies in house– outsource the rest
If you are profitable, you will get financing not the other way round
Entrepreneurs make their own rules
Conclusion Part 2
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Entrepreneurship takes guts
Sweat equity is important
Creativity and innovation are key
Sometimes you need to trade to get ‘table stakes’
Avoid competing directly with behemoths
Try to add some differentiated value to your PB4L
Be trustworthy
Surround yourself with a competent, trusted team–
REALTOR/MORTGAGE BROKER/LAWYER/MENTOR/ETC.
The harder u work, the luckier u get
Let 100 opportunities go by but when the right one comes along,
strike!
MAKE A PROFIT!