BIG North Capital emerged late last year in a manner unlike almost any other investment company. Its 177 founding shareholders came together as the result of their involvement with bankruptcy protection proceedings for investments they were at risk of losing.

“Everyday people who are investors, like you and me, invested in either promissory notes or in first-position mortgages through a local brokerage,” BIG North vice-president of business development Rob Morrell told RENX. 

“That brokerage was then working with companies who were buying residential homes, renovating, renting them and refinancing. This real estate scheme worked quite well for quite a number of years, until interest rates went way up and home values came down.

“Suddenly investors were looking for their money back for a variety of reasons, so the entire scheme collapsed. Hundreds of investors were left scrambling as all of these assets went into a CCAA (Companies' Creditors Arrangement Act) proceeding.”

Numerous lawsuits were triggered and there’s an ongoing fraud investigation by the Ontario Provincial Police Economic Crime and Corruption Unit: Anti-Racket branch. 

Creating something positive from a negative situation

“When individuals typically go into CCAA proceedings, the only winners are the lawyers and accountants who run these processes,” Morrell said.

Not this time. A solution was found through the formation of a syndicate of investors that would allow all of the houses to be used as equity for loans in order to pay legal and startup fees.

“It ended up being an option where you could potentially recoup your losses and eventually grow,” Morrell explained.

Markham, Ont.-based BIG North has formed a mutual fund trust and partnered with Avenue Property Management Services to manage a residential real estate portfolio in the Northern Ontario communities of Timmins, Sudbury, Kirkland Lake and Sault Ste. Marie. It will generate resources for a series of private equity investments.

Under the direction of strategic advisor Bull Market Private Equity Group, BIG North president Dan Uszynski and an eight-person board of directors, the private equity firm plans to leverage it’s $44-million, 189-property portfolio to create an investment fund with the goal of restoring the financial health of its shareholders.

“We've come from a place where many shareholders volunteered hundreds and hundreds of hours to get this company off the ground,” Morrell said. “All of our shareholders have skin in the game and we believe that's our greatest asset, whether it's from access to capital, expertise or just confidence in the organization.”

Renovating and renting BIG North’s units

The approximately 300 rental units in the mutual fund trust range from high-quality tenanted houses to empty structures at risk of being demolished. None of BIG North’s shareholders live in the units. 

There are 96 vacant units being inspected and renovation plans will be created to enable them to be put up for rent.

“We estimate that within the first 60 days we will be able to open up 40 of those units for rent in those communities and we have the balance of the year to work on and renovate the balance,” Morrell said.

The first rent rolls arrived in January, which Morrell said will give BIG North a better understanding of its cash flows and more specifics about each property.

BIG North Investment Portfolio

In addition to BIG North Real Estate Trust, the BIG North Investment Portfolio is being developed to deliver annual returns while maintaining a focus on capital preservation. 

It will utilize investment strategies focused on:

• agriculture;
• real estate;
• asset-backed, risk-managed debt instruments for businesses in need; and
• debt/equity hybrid structures that blend collateral debt positions and equity-based risk-premium placements.

BIG North will continue to invest in residential rental units and, perhaps, commercial assets farther down the road. Development isn’t a consideration at this point as the company prefers to deal with existing physical assets as part of its risk management strategy.

“We have a pipeline of opportunities that are under the direction of Bull Market Capital and we're doing due diligence on each of those opportunities,” Morrell noted. “We're very close on one, and we have six or seven other opportunities that are active in our pipeline today. 

“One area of specialty that we believe we have is in working with people who have distressed assets that are going into CCAA proceedings. As a result of the real estate empire collapse that we were investors in, there are dozens of other properties and many other investors who are still going through the process. 

“There’s an opportunity for us to step in and offer those people and those groups an opportunity to participate in BIG North. Hopefully, when we're successful, we'll be able to restore some of their financial health as well.”

BIG North isn’t seeking new investors at this point, but Morrell said that could change in the future.