Active Investment, Opportunities, Housing Market Recovers
Since we formed TBK Capital, we’ve had numerous enquiries from businesses that are past the start-up stage, are making sales, have a great relationship with their banker, but are unable to grow further.
Everybody said they’d stand behind me
When the game got rough
But the joke was on me
There was nobody even there to bluff
I’m going back to New York City
I do believe I’ve had enough
Bob Dylan – Just Like Tom Thumb’s Blues
Since we formed TBK Capital, we’ve had numerous enquiries from businesses that are past the start-up stage, are making sales, have a great relationship with their banker, but are unable to grow further.
The problem is that when they want a loan to expand and capitalise on the sweat and tears they have put in for so long, are told by their bank “I’m sorry we can’t help you now because you’ve run out of equity in your house. But come back in 3 years time and give us 3 years of accounts and we’d be happy to look at it then”.
These are businesses that need capital.
And often they need capital from an investor who can also provide “Active Participation”. This means someone who can - in addition to their investment:
- Provide Governance – via a board position; and/or
- take an active management role; and
- is a single investor (or part of group internally related – like staff, or externally related – like suppliers or similar businesses).
So Active Participation is not suitable for a group of unrelated people looking to take an investment in something like a fund, public listed company, or a syndicate. It is really more suited to investors who are experienced in business, have the money to do something, are sick of low interest returns, and want to become active in ways other than going to the gym, taking up yoga, or getting a new girl/boy friend.
And it provides the opportunity for small businesses to not only expand their operation but also to provide a “succession plan” or “exit strategy” for the founding shareholders as the business becomes more saleable, or an acquisition target for larger businesses.
These investment opportunities are quite different form other offers we have made where the issuer is looking for a number of “passive” investors - like the offer to participate in the purchase of the Trafalgar Square shopping centre.
Opportunities
Accordingly TBK Capital has made a commitment to bring investors and investment opportunities together and, as advised in the May issue under “Newsletter Options” CAPITAL COMMENT will now be published in two forms – News and Opportunities.
These investment opportunities are not “offers to the public”, are not advertised in the media, are sent only to subscribers, and participation is available only to people who qualify under the terms of the Securities Act. See some comments on those requirements here.
Coming up
At TBK Capital we see Active Participation as the future for business investment and growth.
So if you’re interested in this sort of investment give me a call or reply to this email and we’ll enter you on a preferential list. Or if you know of someone with a business that is looking for an Active Participant investor, then you might like to use the Send to Friend function at the top of this newsletter.
Anyway, here’s a preview of some examples of the Active Participation opportunities we’ll be sending out soon.
MedXcel
MedXcel Corporation is a business established in 2007 that manufactures and markets a unique medical device proven to be beneficial to those suffering from all forms of bone disease. The major market for the product is the growing elderly population – initially targeting New Zealand and Australia.
The design is based on the scientific studies and years of trials NASA had carried out aimed at preventing astronauts from suffering severe bone density deterioration, due to low gravitational forces on their body while on space missions.
MedXcel is looking for a new shareholder to take an active role in the day-to-day operation and management of the company. MedXcel is making a new issue of shares that would result in them owning around half the company. They would have a seat on the Board.
Teza
The Greenstone Drinks Company was formed to take advantage of the three consumer food and beverage megatrends: Health/Wellness, Natural, and Premium/Gourmet. The company’s first brand – Teza – is a premium iced tea product in 5 different flavours, blended with real fruit juices, was launched in New Zealand in 2008.
The business has enjoyed steady growth over the past 4 years, with an early and successful focus selling directly to cafes and restaurants. More recently, the company has contracted specialist distributors to broaden its market to customers like convenience stores, and Teza is now in all of the supermarket chains. Revenue has increased progressively year-on-year, with plenty of scope for future growth.
Greenstone Drinks is now looking for an active shareholder to help finance and direct its planned launch into the Australian market, and beyond.
Skin Alive
Skin Alive is a New Zealand company formed in 2009 that manufactures and markets a new range of specialised sun protection skincare products designed for very specific individual outdoor activities - golfing, surfing and skiing.
It now has distributors in Europe and the United States and wishes to raise capital to consolidate its position in these existing export markets and expand into Japan, Canada and Australia.
Skin Alive is looking for an active shareholder with international sales and marketing experience to take up a new issue of shares in the company. The objective is to prepare the business for an international trade sale in 3 - 5 years time.
Frimley Village
Frimley Estate is a high quality residential estate in the middle of the re-zoned Lyndhurst block on the northern edge of Hastings. It commenced operations in 2005 and has now sold 121 sections. They are now about to construct an up-market Retirement Village where the occupants own their own unit titled villas.
A new company, Frimley Village, has been formed to purchase 3.2 Ha of the remaining land owned, finalise the consent to subdivide it into 67 titles, undertake the subdivision, and sell the titles. The owners of the titles will contract a separate entity to construct the villas.
This is a 2 – 3 year terminating investment; offering a high return from the sale of sections set aside for a strategically located retirement village. The management of the project is in hand so ideally they looking for a larger investor take a seat on the Board.
Housing Market Recovers
It started earlier this year - but really became apparent last month. The residential market is making a comeback.
Tony Alexander’s June BNZ-REINZ Residential Market Survey showed - for the first time in more than four years - solid evidence of conditions shifting toward a sellers market.
He said “Our survey this month has produced few major changes in readings which since the start of the year have been showing firming activity with rising interest from first home buyers.
“But two indicators do provide us with new information worth commenting on.
“The first is a jump in the net proportion of responding licensed real estate agents reporting that they are noticing more investors in the market. This measure is now at a record net 27% from 19% last month and 4% a year ago.
“Second, with the appearance of these extra buyers a record net 15% of agents this month reported that they feel buyers are more motivated than sellers.”
That optimism has been confirmed this week where Tony writes an excellent article on the market since 2005 entitled “Housing Cycle Firmly Upward”. It’s not long and well worth reading.
He says “Fears of house price falls have completely gone out the window as four years of delayed buyers have rushed into the market to be followed, accompanied and now (sorry young folks) led by the more cash rich investors. This frenzy of catch-up buying explains the articles in the NZ Herald in Auckland regarding aggressive bidding at auctions and people describing the easy tax free money they have made from purchasing a year ago and selling now. The balloon has gone up.”
And he finishes with the question everyone wants answered “How long will it take for the Auckland boom to spread to the regions?”
In the U.S. too?
We all know Europe is in a mess and who knows where house prices are headed there. For example, just look at the difference between the residential markets in London and Spain.
But I was interested to read an article by David Wessel in the Wall St Journal titled “The U.S. Housing Bust is Over”
“The housing market has turned - at last”, he reports. “The U.S. finally has moved beyond attention-grabbing predictions from housing ‘experts’ that housing is bottoming. The numbers are now convincing. Nearly seven years after the housing bubble burst, most indexes of house prices are bending up.”
Another article in Reuters called “In the U.S. housing market, recovery or Lost Decade?” is more cautious but worth reading as it shows how fragile an economic recovery becomes when house owners are drowning in debt.
They say “The worst U.S. housing crisis since the Great Depression has been declared over. But is it?
“What some of Wall Street's forecasts for a recovery may be underestimating are tectonic shifts in the U.S. economy that make the housing market a different place from a decade ago.
“Record levels of student debt, 15 years of flat incomes and the fact that nearly half of homeowners are effectively stranded in their houses look likely to weigh on prices into the indefinite future.”
Sound Familiar?
Cheers
JP
John Paine
TBK Capital Limited
Level 15, BDO Building
120 Albert Street
Auckland 1010, New Zealand
Phone +64 9 307 3257
Fax +64 9 309 4519
Mobile +64 21 902 901
Email john.paine@tbkcapital.co.nz