Garret (00:00.11)

record or anything else but I'm gonna let you do your own intro so I'm just gonna basically say welcome so now it's Binny as or okay Binny as okay all right just give me a second here

August Biniaz - CpiCapital.ca (00:07.861)

Yes. Yeah, perfect. Exactly.

Garret (00:15.246)

August, welcome to my podcast.

August Biniaz - CpiCapital.ca (00:17.845)

Thanks for having me. Looking forward to this.

Garret (00:19.982)

Yeah, so have I, so have I. We've known each other for a few years here and I've been wanting to get you guys onto the podcast. Why don't we start by a little bit of your background and then we can get into what CPI is and syndications.

August Biniaz - CpiCapital.ca (00:33.749)

Absolutely. Yeah. My background is most of my professional career. I've been in real estate. I grew up in somewhat of a real estate family. My grandfather, my maternal grandfather was, you know, in real estate, real estate agent had his own brokerage. And so that somewhat got passed down to my mom. My mom was more in academia. And but I understood real estate. If real estate was a language, I understood it's particularly growing up in my household with my mom and my family.

I got into real estate by becoming a real estate agent, which is a path that many take. I wasn't really the best at being a real estate agent, but I saw the opportunities that were in real estate and I started doing small fix and flips as a real estate. I was a real estate, so I was buying it, selling the properties, and I saw that being very lucrative, but I was more hands -on on the actual contracting work.

hiring the trades, the suppliers and what have you. Eventually I started my own general contracting firm, started building single family homes and more on the luxury side. There was a boom within Vancouver over the last 20 years, which really helped the process as well. So I was building both spec and custom homes. Custom home is when you build a custom made home for an individual. Spec is when you're building it for yourself or your investors and you're selling it to the markets or you're speculating to sell it for a profit.

I did that for almost a decade, but I always wanted to scale, always wanted to do larger deals, bigger deals. And there was a deal that came across my desk. It was a land assembly, five single family homes that we could kind of put under contract and build 20 town homes. It was a deal somebody else had put under contract. They were flipping the contract to me. And when we were making money on the buy, they had some difficulty closing on the project. They had some financial.

difficulty. So put that deal under contract, went to a few partners and investors and started kind of, that was kind of my start into the real estate private equity space. At that time, I didn't even know what a GPLP structure was, how real estate private equity worked, how syndications worked. We just put together a corporation, we had shareholder agreements and specified for me bringing on the deal and

August Biniaz - CpiCapital.ca (02:59.349)

and sitting there as I was also an equity investor in the deal, but for bringing a deal and managing it in some level, I would get a percentage of the profits when the deal was built and sold. So I really fell in love with that model of finding the deal, bringing on the investors or partners, having some role as management and then there'd be performance -based compensation when the deal is completed. So I'll stop there because I don't wanna keep going and kind of that was the steps into getting into CPI.

Garret (03:27.79)

Yeah, no, I, you know, realtor, I was a realtor for a few years. I think it's an interesting profession, but walk me through what it's been like as a spec and luxury home builder. Like how long have you been, or had you been doing that in British Columbia?

August Biniaz - CpiCapital.ca (03:42.549)

I did it for close to a decade. It is somewhat of, you're at the focal point. So if you're building custom homes for a client, if the framer has built a wall not straight, if the painter didn't do a right job, the flooring is not perfect. There's nobody to blame. You can't say, hey, the flooring guy didn't do a perfect job here, it's his fault. The client is gonna say, no, I hired you to make sure that doesn't happen. So you had to focus, pretty difficult job, but it taught me a lot in my late 20s.

early 30s about project management, dealing with clients, dealing with huge amounts of capital coming in and going out for my investors. And I was riding a great market as well. The Vancouver market was growing hyperbolic for the last 20 years. So we did well on almost every project. And yeah, that was my really experience.

On the spec side, again, my first investor was my mom and that kind of taught me what do investors and partners look for, even if it's a smaller project. We're still talking about a few million dollars even as a smaller project home in Vancouver. But yeah, it was really the foundation for me in business, in real estate and dealing with investors, tradesmen, suppliers. So it taught me a lot.

Garret (05:03.022)

Okay, so you're using buzz terms that we've spoken about, or sorry, I've had my audience kind of learning as we go through the journey of this podcast, you know, capital investors, partners. I mean, typically from my, I guess I'll call it a limited vocabulary, you take a capital investor, maybe for a spec home, are you splitting some kind of profit with them? Are they funding the deal? What do those types of things look like?

August Biniaz - CpiCapital.ca (05:29.749)

Yeah, those early stages, it was really what was needed. In some cases, I couldn't get the mortgage on the property itself, so I would partner with someone who could secure the debt financing. So they would be a partner, they would also put some of their own money into the deal. We would buy something jointly and share the profits. So it was really project specific. It was deal by deal about what was their...

contribution and what was their compensation, how the profit share was there. So it was never a GPLP structure, which I'm more than happy to get into. It was more of a joint venture type of deal where, you know, most times both of our names were entitled.

Garret (06:08.174)

Okay, yeah, GPLP, you threw that out there. Why don't we sort of just define that and see where it takes us? What is a GPLP?

August Biniaz - CpiCapital.ca (06:16.053)

GPLP really defines a vehicle that any type of venture could be structured within. So if you want to buy a pizza shop or if you want to buy a piece of real estate, you can buy it within a corporation. In the US, they use corporations, different type of corporations, or they got LLCs in the US. In Canada, we have usually just basically corporations.

you could buy in a corporation. Within that entity, you could have multiple partners who also have different roles and responsibilities. A GPLB structure is a vehicle which is known as a limited partnership. The idea in a limited partnership is that you have different types of partners within this partnership. So you have the limited partners who are usually the...

They help with the funding of the deal. So they help with the capital that the deal needs. In most cases, they are silent. They're passive investors. And they're called limited partners because they have limited liability. Their liability is maxed out at the amount of their investment. If there is litigation in the project or the project goes sideways, they're sheltered within this vehicle that there is.

No lawsuits or no losses above and beyond what they've invested will be incurred by them. The general partner within this structure is usually the skipper of the boat, is the person who manages and runs the deal and puts everything together. And the general partner has unlimited liability. So a lot of viewers might say, hey, that doesn't sound very good for the general partner. But usually what we do is we structure the general partnership in a corporation, which also

shelters the general partner individually. So if there is lawsuits or difficulty within the deal, the general partner is also has some level of, you know, is sheltered as well. So that's, and this vehicle is a great vehicle to use when you are raising capital, you know, from the members of the public, particularly people that you might not have, you know, pre -existing relationship with. You can put together a limited partnership.

August Biniaz - CpiCapital.ca (08:29.205)

and raise capital from investors for your particular project, which defines what their returns are going to be, what the business plan is, and how the profits are gonna be split up between the general partner and the limited partner. But yeah, I'll see if you have any other comments on that.

Garret (08:48.174)

Yeah, no, for sure. I'd love to follow up on that because again, for the purposes of education, putting it all together here, you talk about friends and family. I think my listeners know about the friends and family rule that you can get capital from them. But, and then for what they call the credited investor or more simply put people who have a little bit more savvy, they have the net worth to be able to freely invest in these types of things. Would you say that that's the typical

investor that would maybe come on as an LP as a limited partner.

August Biniaz - CpiCapital.ca (09:22.581)

yeah, great question. But let me back up a bit here. So it all starts with the venture. It all starts with a deal. If August is trying to build a home back in Vancouver, needs to bring on a joint venture partner and build a home, he doesn't need to, you know, create a limited partnership, which was costly and somewhat could be, you know, there's some level of sophistication to it. He can just put a corporation together and they can do the deal. But when August wants to buy a larger deal, which

then there's more sophistication to it where you need a limited partnership, then that structure is much better because it defines roles and responsibilities. Now that's on the side of vehicle and the structure needed to put these deals together. Now, when you're talking about securities compliance, that talks about the rules about raising money. Interesting enough, in Canada, anytime you create a corporation and you bring on a partner, you've already triggered security compliance.

but you automatically fall under the private issuer exemption, which is a non -reporting issuer exemption and doesn't require you to report anything. And it has its own rules and regulation, but as long as there is no serious fraud or unscrupulous activities, you're usually protected under that exemption. But when you go above and beyond that exemption, that's somewhat of an automatic exemption.

For example, I'll go over what the private issuer exemption entails. One is you can raise from friends, family, business associates, directors of that company or venture, and accredited investors. So in most cases, when you put together a corporation, you raise money from your business partner, you're automatically under that umbrella and you're fine. It also restricts you to 50 investors. So hey, if you want to put a deal together, you're not going to have more than

50 friends and family and business associates. So it caps you there. So that's under the private issuer exemption. But there's other exemptions that are available as well for someone looking to raise capital for a deal. This could be real estate or it could be any venture that's there, that's out there. So there are other exemptions, for example, the accredited investor exemption. So all the investors involved have to be accredited and we can define what a credit investor is. You have the...

August Biniaz - CpiCapital.ca (11:43.381)

offering memorandum exemption, which is more broad. A lot of funds use offering memorandum exemption. So there's multiple exemptions, there's crowdfunding exemption, which maxes you at I think 1 ,500 or 2 ,500 per investor. So there's all these exemptions. So the term exemption people always ask, exempt from what? We're exempt from what? You're exempt from having to go through an IPO and file a prospectus to raise capital because the way that

the Securities Commissions, both in Canada and the US, the way to see this idea of raising capital for a venture is you do it through going through initial public offering, through the stock market process, you have to file it as perspectives, which is very costly, cumbersome, and lengthy in time to get it going. But you say, hey, listen, I don't have time to, you tell the Securities Commissions, I don't have time to wait six months for this to be drafted and pay half a million dollars to lawyers. I just want to buy an apartment building.

or developer projects. So they're like, okay, fine, we'll let you use these exemptions that exist. So both in Canada and the US, there are these series of exemptions you can use to raise capital. But unfortunately, sometimes, you know, there's a confusion about the rules in the US, there's confusion about rules in Canada, and sometimes you hear something that's not allowed in the US and people confuse it in Canada. So yeah, we talked about the structure needed to put together to do a deal to do a venture, and then we discussed.

the compliance side of raising capital for that venture or the deal.

Garret (13:12.27)

Okay. So the size of the deal obviously would dictate the complexity from what I hear you saying at, you know, GPLP structure for what could be just a JV house flip is just way overkill, right? Like why would you go through the expense of lawyers and corporations and shareholders agreements? Let's talk about how big a deal could be or should be. You talked about 50 investors as a cap. I mean, if 50 investors have $50 ,000 and they pull that together, I don't want to say that's only

August Biniaz - CpiCapital.ca (13:24.597)

Exactly.

Garret (13:42.19)

What is that? 2 .5? But yeah, 2 .5 million and you're going for a $40 million deal. Well, that's not even your down payment. So speak to me about how the bigger deals then and how you start looking at things.

August Biniaz - CpiCapital.ca (13:43.413)

2 .5 million.

August Biniaz - CpiCapital.ca (13:56.373)

Yeah, exactly. So I mean, one of the creative ways you could do it is you could increase your minimum investment. So if you increase that minimum from 50 to 100, you're already sitting at, you know, $5 million. Yeah, there is definitely other exemptions that could be used. The most simplest one is the accredited investor exemption. So as long as you are raising from accredited investors, you then can raise from as many

investors as you like and for any amount you want. There's no cap on the amount or the number of investors. So that's probably the next exemption used. I mentioned earlier that a lot of funds out there use the offering memorandum exemption. The offering memorandum exemption is basically the prospectus light. You still have to file this lengthy document that talks about your business plan, your pitch deck, a lot of different information involved in the deal. And then you provide that to the investors. The investors have to have a read over it and then they can

they will invest in a deal after reviewing the offering memorandum. So those seem to be the common one, the private issuer exemption, very common obviously, the accredited investor exemption, and the offering memorandum exemption.

Garret (15:08.046)

Okay, wow. Well, you clearly know your stuff. Let's back out a little bit and talk about CPI. You told your story about a realtor, luxury home builder, wanted to look at bigger deals. How did CPI get formed?

August Biniaz - CpiCapital.ca (15:25.013)

Yeah, CPI really got formed after that project that I put together. You could call it a joint venture. And I was looking to do more of those projects, find the land, bring on the professionals that are involved, the architect, the GC, the marketing team, bring on the investors and develop ground up development projects within the Vancouver market. But when I was looking around, it was taking a long time for rezoning because a lot of times you have to go through a rezoning process to the process of getting

building permits, and then by the time you're completed construction, you might be in a totally different economic environment or a real estate cycle. So I saw a lot of developers were having difficulties because real estate is cyclical. And particularly in Canada, you have immigration, which is a big factor here. You also have government, which is intervening and it changes the economics of the deal very easily.

As I was educating myself more about this space and how to put deals together and how to all of the mechanics of this all works, that's when I realized about US investing, particularly investing in these multifamily properties, which was not a really super common investment process here in Canada. And I noticed that a lot of these investment firms in the US were buying already existing multifamily

properties are already existing, already cash flowing. They're a bit older, older vintage. They're going and doing some small renovations and they're increasing their rents, increasing the NOI and in turn, you know, increasing the profitability of the project and they're bringing on investors and they're able to get tremendous returns for them and their investors. And that was kind of the impetus for me to look across the border, look at these deals.

You know, this process of syndication where it's basically a project specific fund where you buy one property, you put it under contract, you put this vehicle together and you bring investors. And yeah, I spent a bit of time educating myself about the business model, how it worked. Eventually was ready to take the next step. And I brought in a few partners and we started CPI together and started looking at deals and how are we going to

August Biniaz - CpiCapital.ca (17:45.717)

be able to buy these large multifamily properties.

Garret (17:50.19)

Okay, that's amazing. What is a typical project size look for you guys right now?

August Biniaz - CpiCapital.ca (17:56.501)

Currently, yeah, the project size, I mean, with this current model, the multifamily syndication value add model where you're putting together a project specific fund and bringing on investors and you're looking to execute the business plan and then hopefully exit the deal in kind of that three to five years timeline, it only makes economic sense if you're more than 100 units or above because there is economies scale when you have 100 units above the cost of the property management really drops.

as the unit numbers go higher, staff costs, other costs, renovation costs drop. So it's much more profitable when you're looking at 100 plus doors. So our acquisition criteria currently is 100 plus door, a multifamily value at properties built in the 80s or newer. We'll look at older vintage if it makes sense. And there's way to

to get great returns for our investors. Our market that we're focused on is the Florida market, particularly Tampa, MSA, and Jacksonville. We were somewhat market agnostic. We were looking all across the Sun Belt, looking at Texas, Arizona, Nevada, North and South Carolina. And we have some deals. We've closed on some deals in those regions. But we felt that the time

The price per door in Florida, where the rents are at still today, we felt Florida has a much longer runway than these other regions. And we made a decision to be focused in Florida. I personally also moved here part -time now in Southwest Florida. And yeah, we're trying to continue and grow our footprint within the region.

Garret (19:51.694)

Okay, did you guys consider Canada at the beginning or did you really just want to focus down south and why?

August Biniaz - CpiCapital.ca (19:57.877)

Yeah, the business model, unfortunately, it's more difficult to execute in Canada. You don't have the growth metrics that the US has. US has obviously immigration, but it has also interstate migration. American people are very, they're somewhat, you know, in a way that they're, I don't want to call it transient, but they do move a lot. So, you know, they live in Texas for a few years, they live in Florida, they live in a different state. So you notice, and that's from talking to

a lot of friends and associates, not only anecdotal, but also the data proves that Americans move a lot, particularly on what their economic situation is as well. So we saw those growth numbers in the Sunbelt cities, for example, Florida. And that's a huge part of investing. The other part of it is business friendly and landlord friendly rules that the government puts into place. There is no rent control in Florida.

for example, is very business friendly. The process of eviction is expedited if there is need for it. A lot of tax advantages as well that exists in the US that doesn't exist in Canada. For example, the 1031 exchange or the tax deferral that you could do on real estate owned by yourself or your corporation. Yeah, I mean, also the horror stories from the current investors in Canada were

their business model is basically coming up with creative ways how they can kick out a tenant who's been living in a certain building forever and they're paying these nominal rent amounts, which doesn't make economic sense. And in my opinion, I've actually wrote an article on rent control and we've had a few, a couple of experts talking about this on our podcast, but rent, in our opinion, rent, in my humble opinion, rent control actually is counterproductive to

housing and real estate, because what it does it is that if the rents are not increasing, at least at a rate of inflation, for example, California has it at the rate of inflation that, you know, even though that they're very, you know, they're very tenant friendly state, they still have it at a rate of inflation. You know, where the inflation was, but if the rents are not increasing, the landlord is not going to put money back into the building.

August Biniaz - CpiCapital.ca (22:20.501)

and you're not going to have that competition between properties. So the quality is going to drop and you're going to have, you know, a worse living situation. So yeah, those were really some of our reasons why we picked U .S. over Canada.

Garret (22:34.894)

Yeah, just my remarks on rent control. I would agree with you here in Manitoba. You know, the government controls the rent control, obviously in units for apartment blocks. I won't get into the definitions of it, but it's typically been like one, one and a half, 2%. And right after COVID, they made it the max. So most people don't realize the regulations and the maximum that the government could ever do anything. There is only 3%. When's the last time you ever saw inflation at 3 %?

And everybody knows that the groceries are going up by what 18, 20, 25%. And you're right. Now, what is the incentive for A, development, but B, even capital improvements and extending the economic life of these buildings. So I'd like to maybe have you walk me through or walk us through what a typical deal looks like in terms of identifying something, putting...

you know, the beginnings of a syndication together and then maybe how the investors, like, what are you giving them? What are they offering? You know, what does that look like for time periods?

August Biniaz - CpiCapital.ca (23:44.053)

Yeah, absolutely. It all starts our acquisition criteria and the feasibility of any deal starts with the investor returns, investor economics we're trying to achieve. And that really is constituted where the market is at. If investors can invest in low risk type of treasury or bonds and they're getting, you know, higher single digit numbers currently, I think they can get around 5 % on a treasury, which is a near

guaranteed return, for them to take the risk and invest in an alternative investment or a boutique investment firm, they have to be making at least 15 % average annualized returns with some level of hurdle or preferred returns that at least, you know, assures them that they're going to hit that return before their partner, general partner participates in the profits. So it starts from there. So if you're trying to achieve between 15 and 20 % returns and then

You have your business plan, you have your acquisition criteria, you have your asset class that you wanna focus on. So in our case, it's multifamily value add within certain markets of Florida. So we have our acquisition team that's out there connecting with all the top brokers. You can get those records from CoStar, who are the top performing brokers within a certain market. And we make the connections, have discussions with them.

Go and meet them, wine and dine them, bring them on our podcast to grow that relationship so we can get not only the on market deals, but also off market deals, but also get some information about the deals before they hit the market. That's a big help to us as well because we can have a head start. So that's about building relationships and how our acquisition department kind of gets the deal full coming in. We have a robust process where we do it back at a napkin.

back out of the envelope underwriting on a deal to see if the numbers make sense, if it matches our buy box, and then it moves down the process within our software. So then the deals that need to be fully underwritten, we underwrite those deals fully. And then the next step is sending an LOI. So the LOI processes, people usually are involved in single family. In commercial real estate, there's this step prior to going into full on.

August Biniaz - CpiCapital.ca (26:07.509)

PSA, Purchase and Sale Agreement, is sending a letter of intent. So you prepare a letter of intent, you send it to the broker who is representing the seller, and then they gather all the letters of intent, and they usually give you another round of, you know, another attempt saying that, hey, a few of you have been selected to come to the best and final round, and then what you do is you, you know, you try...

Try your best and final offer. So we go back and look at our numbers, see if we can increase the numbers, try to get some feedback from the broker where the offers are sitting at and sharpen our pencil. We go back in then and try to make the best offer. The highest offer doesn't always win. It's also who the team is, how has been their reputation, have they closed on deals? Do they have any other deals in that region optically or do they at least come across as a strong team to the seller? If you Google their executives names, do they even exist online?

And that's, you know, let's say then you were awarded the deal. So when usually when you're awarded a deal, the next step is to draft a PSA, the Purchase and Sale Agreement, which then allows you to have 30 days of due diligence plus 30 days of closing in most cases. Sometimes that can get an additional 30 days. In these cases, it could be 90 days in total, but it's usually that 60 days. So as soon as we were in that phase, not some of our larger investors, if it's institutional type of investors, we've already let them know that

hey, this is looking pretty good. We're probably gonna go into PSA. So they already know ahead of the time, but our retail investors, as soon as we're under contract, we go ahead and package up the deal, put it into a, you know, a pitch deck investor presentation with all the information that they wanna need, do our own market research about different types of reports, crime reports and.

rent growth reports, all types of reports that we gather and then we package it up, send it to the investors so they can review the deal. We then have a webinar where all our investors can come in and we basically pitch the deal to them and the investment is then open for investment and investors then come in and make their investments. And while all that is taking place, we're also completing our due diligence, making sure that everything's going fine at the property. We go in and walk the units.

August Biniaz - CpiCapital.ca (28:29.013)

You know, get all the different quotes for renovations, for insurance, for, you know, some materials we want to use, what is going to be our plan here at all time, you know, digging to see if there is any information that we want, you know, we want to kind of gather up from the current owner and the current people on the property that are there, the property manager, the leasing agent. And then the 30 days DD is up, usually our

Our deposit goes hard. It's called hard money. It goes hard. It's a US term that's used. And then now we're in the last 30 days to close the deal. And we go through the process of getting our debt, finalizing the equity raise, and close on the deal.

Garret (29:15.822)

Wow, so DD, due diligence, okay. No, very, very comprehensive. Thank you very much for that. I mean, my mind's kind of swirling around in all the different things, but you know, let's dive into the investor, what it looks like from their perspective, because obviously they may or may not have a relationship with you, you call retail investors, but you have a track record, you have a good group. Obviously you do a lot of due diligence, very process oriented.

When a retail investor looks at this, it's not even technically closed yet. So you're asking for somebody to be interested to the point of potentially thinking about committing to the deal. Should it go through if your due diligence pans out? Is that correct?

August Biniaz - CpiCapital.ca (30:03.285)

Exactly, exactly. So in that early stages as investors are transferring funds and signing the subscription agreement and all the legal docs, there is a possibility that we might find something in the due diligence process and the deal might collapse, at which time the investors will all get 100 % of their equity back. Very common in the industry. And it's something that we try to work on it as soon as possible. So by the time they're offering docs are ready,

and we're sending it to our investors to sign and transfer funds, we've already conducted most of the DD because even though we have 30 days for DD, we try to do everything within the first week or two. And brokers try their best to provide as much information as possible because they know if we find something while doing due diligence, as long as it's not catastrophic and is a deal killer, we're gonna go back to the seller and do a retrade. So we're gonna say, hey, we find some, you know.

damaged drainage pipes. So this is going to be 50 ,000 to fix it. Here's our code. We need that to be reduced. Or in the case of our current property that we have under contract, we noticed that there were some flooring damages in some of the units and we went back to the seller. It wasn't even a retrade. We just specify it to the seller and show them with pictures of their own property currently. And they came back and they give us more than what's needed to fix those flooring issues that there was in some of the units.

Garret (31:28.718)

Okay, so again, due diligence processes, checklists. You mentioned the term underwriting, but then you just kind of said the word computer. Can you kind of go into that in the context of how much homework really goes into underwriting a deal?

August Biniaz - CpiCapital.ca (31:44.981)

There's a lot of work that goes into it. Yes. Yes. Absolutely. Our director of acquisitions, Paul Hopkins, he's also obviously our analyst as well. So he's built a model for these types of multifamily value -add deals. That's our focus. So the model is, if you want to visualize it, it's basically a...

Garret (31:47.694)

Well, we don't have to do it for two hours. I know that Paul would probably come on and do that, but just like, you know, high level stuff.

August Biniaz - CpiCapital.ca (32:08.181)

super complicated Excel model where you're inputting a lot of information that you're gathering from the seller and the broker, you're inputting information that is available on the market and in your research and you're inputting information that's more assumptions of where you believe things are gonna be at. For example, your rent growth. And you do that also with some analysis as well because there's reports out there. But aside from that, you need to kind of do your own research as well. You put all that information in and then you put in the purchase price, you put in

how much debt you're bringing on your LTV on the loan and how much equity you're bringing on. And then it spits out basically what the LP, the limited partner economics are going to be in this deal. And you check that, see if that makes sense for the deal. But keep in mind, prior to doing a full on underwriting that we just discussed, which is very complicated, we're doing the back of the napkin or back of the envelope to see if the numbers initially even make sense for us to bother taking these next steps.

There's a lot of steps that come before doing a full underwriting or even getting to that DD phase or LOI phase or PSA phase.

Garret (33:17.838)

No, if I could compare it to MySpace, you know, being, you know, smaller properties, three plexes, four plexes, that type of thing. Obviously you're looking at a real estate listing, you know, you see the pro forma, there's this much rent, this is what the utilities are, these are expenses, this is what my mortgage would be if I get it for this price. Yes, this deal makes sense. That's back of the napkin. But for underwriting, I mean, in speaking to Paul the other day, I mean, he's looking at vacancy rates.

potential vacancy rates and you know, inflow and outflow of population, different retail sectors that might be coming in and out. Like you guys seem to be checking almost everything possible.

August Biniaz - CpiCapital.ca (33:56.277)

Absolutely, absolutely. You know, it's very complicated and that's what you want from an investment firm to have their own infrastructure to be able to, you know, underwrite, analyze and acquire these properties. So it's just not shooting in the dark.

Garret (34:14.254)

Okay, you mentioned the runway being about, you know, three years, a little bit like that. I know that there's ground up developments that sometimes go five years. Is there a reason why you're, from what I understand, you're basically repositioning the asset and then selling it for the benefit of your investors? What about long -term buy and hold? Is that something that happens with these syndications?

August Biniaz - CpiCapital.ca (34:38.453)

It is, that's definitely a strategy as well. Legacy asset type of strategy where you buy something, you execute the business plan, and then you refi, paying back all your investors, their initial equity or close to it, or more than their initial equity, but then they stay in the deal as a partner long -term and they receive the cashflow. So that is a strategy also used.

most investors that I've ever dealt with and the most feedback I get in this space is investors want to see a capital event. They want to see, they want to know when they're getting their money back. So if you're like, Hey, this is a long -term partnership. It does create some anxiety for investors. They want to be able to be liquid at some point eventually. So yeah, that kind of three to five, three to seven years is usually that

timeline that investors are more comfortable with, I would say more three to five. But yeah, the idea is exactly what you mentioned is you buy a property, you exceed the business plan, you make it perform better, and then you exit it if the time makes sense. Again, in these types of partnerships, which is a limited partnership, the GP makes all the decisions. So if the GP sees that, hey,

We said we were going to sell this deal in three years, but the market has really slowed down. We're still cash flowing. We're doing great. Our debt is totally fine. Maybe it makes sense to keep it for another year, hoping for the market to turn and turn around. So it takes that kind of impulse approach away as well, where you can jump online and sell a stock because you heard something bad about it. And then later on, you're like, hey, I wish we were going to sell. That takes that element out of it when it comes to these types of deals where you have a whole team looking after when to exit and so on.

Garret (36:33.55)

Very interesting. US syndications, the first thing that comes to my mind and probably questions from my audience, if there's any appetite out there to invest in one of your future projects, what does it look like for a Canadian to invest in a US syndication?

August Biniaz - CpiCapital.ca (36:50.581)

Yeah, great question. So what does it look like? So it really depends on the firm that the investor is investing with. You know, a lot of investors are looking to get exposure to US real estate, particularly US multifamily, which has been one of the best performing asset classes over the last 25 years, beating the S &P 500, sitting right below industrial, which is, you know, is the top performing asset class within.

commercial real estate, multifamilies right below that. So a lot of Canadian investors want to have exposure, particularly with a lot of gurus and the grand cardones of the world kind of being the stewards of this asset class. So the Canadians want to have exposure. So they could do that sometimes through REITs or what have you that have some US exposure, but the numbers are nominal, the type of returns that we get on those. So these syndication are a perfect product. The kind of issue that comes up is when Canadians invest with

US based firms who have no knowledge, expertise or experience when it comes to cross border, particularly taxation. They're just there trying to stay compliant on their side. So as long as they follow US rules, the advice to Canadians by these groups is usually create a US Corp and invest through your US Corp. A lot of Canadians hire a lawyer on the US side, create a Corp and invest through their Corp in these syndications unaware that US Corps

as far as the CRA Canada Revenue Agency, any type of profits made from the Corp is gonna be first taxed on the US side by the IRS. And then when those funds come back to Canada, the taxes paid on the US side are not gonna be recognized by CRA. So the investor gets double taxed and they could pay up to 70 or 80 % of their profits in taxes. That has been the biggest pain point and feedback.

from Canadian investors we've spoken to over the last five years investing directly with US syndicators. Sometimes even US syndicators say that they understand the process, but the truth of the fact is they don't. Even with our securities attorneys and our legal team and accounting team on the US side, we would be rest assured that this process worked. They've done it before. We would bring it to our cross -border tax lawyer and he would say, no, that's incorrect. What they're saying is 100 % incorrect.

August Biniaz - CpiCapital.ca (39:10.549)

even though it's coming from a US CPA and a US lawyer's mouth, it was 100 % incorrect. So we have our Canadian CPA firm that works for us. We have our US CPA and then we have a cross border tax lawyer who actually puts the whole structure and drafts a memorandum for us for that part. So that's one aspect of Canadians investing in these US syndications. But what CPI has done is really optimize and expedite and

simplify the process of investing. So the Canadian investors who invest with us, they don't have to file US taxes or have any deals, dealings with the IRS. They don't have to create any US corpse or anything as such. The Canadian investors will be able to investing in a Canadian entity, in a Canadian fund. That Canadian fund will invest into a US fund that owns the property. And when I say fund, fund is just any vehicle that raises money and owns a deal. So a limited partnership is basically a fund.

as well that owns one property. So they invest in the Canadian fund, which invests in the US fund, and they're relieved from having to file US taxes or having any deals with IRS.

Garret (40:23.918)

Wow, let's dig into that a little bit more because it sounds it's complicated, but you simplified it because you guys are Canadians and you know you have an objective to be able to make sure that your investors are not being double taxed. Can you explain that again a little bit? So you've got a fund here that invests in the fund down there. Is that to simplify it?

August Biniaz - CpiCapital.ca (40:48.501)

Yeah, exactly. So you have a fund in the US that owns the property that fund in the US also houses the US investors, the US limited partners, and provides the LP limited partner economics to those US investors pro rata relative to how much they've invested in the deal. This Canadian investor comes in who happens to be a Canadian fund, which houses all the Canadian investors and participates in the US fund as just another investor.

So instead of it being a $100 ,000 check coming in as a single retail US investor, this Canadian fund comes in with $5 million into the fund, for example, just using an example. And it doesn't get diluted in any way. It gets its exact pro rata share of the partnership. It doesn't lose any rights or ownership stakes. It's very clean. When it comes to filing taxes,

and the relief from dealing with the IRS, what we have decided is that the partnership or the entity in Canada files the taxes on behalf of the investors in the US. So it pays the US taxes on behalf of the Canadian investors. And then we can provide the Canadian investors each individually with a T5013 that specifies how much taxes they have pro rata paid to the US government.

because of the vehicles that we use and the legal team, the accounting team that we have, those taxes paid on the US side are recognized by the CRA and they're not paying double tax. And what happens is relative to their personal income, they say, hey, I invested this amount, this is the profits I've made, and this is the taxes I've paid.

personal tax rate is higher than that amount. In most cases it is, and what they're paying, we're paying usually around 26 % taxes on the US side. Most people pay more than that in Canada. So then you pay the difference between that 26 % and whatever your tax bracket is in Canada.

Garret (43:03.694)

Well, it pays to use experts. One of the questions I was going to ask is the do's and don'ts of syndications. I think we've covered a lot of it there. Can you think of any other things that you've seen, not to name names with competitors or other horror stories that you've heard of when people are forming these syndications?

August Biniaz - CpiCapital.ca (43:23.125)

Absolutely. Now keep in mind syndications are anytime a general partner or is also known as a sponsor who comes and puts a deal together, puts a limited partnership in most cases together and raises money from investors using different exemptions that exist. Now it could be for different business models. It could be for a development deal. A lot of times I've seen these development deals that are being syndicated as well. So it all goes back to the investors, you know,

What is their goal? It goes back to the investor's goal. What is their investment thesis? Do they want to invest in a legacy asset where they're investing long -term? You know, they're hoping for a refi at some point. Do they like investing in development projects? What do they believe in? What's the business model they personally believe in? Do they understand that business model a bit? You know, when do they want to get their funds back? Are they looking for cashflow? In most development deals, for example, there's no cashflow. So the IRR is

always lower than cash flowing deals, the internal rate of return. So it starts with the investor, but overall, what you want to look at when you're looking to invest with a group, you want to look at track record, you want to look at transparency, you want to make sure that you can get on a call with their executive team. Have they ever lost money? Have they ever done capital calls? You also want to see if they're using intermediaries.

For example, in our case in Canada, we've elected to use an exempt market dealer, a third party who's licensed by the securities commissions across the country in each province to sell our securities. So they conduct background checks on each of our executive team members. They do their, it's also known as KYP, Know Your Product, to see if you're a right firm. They also do extensive due diligence on our deal to see if the deal makes sense, if our underwriting model numbers make sense.

And then they do KYC on each of one of our investors, which is know your client to see the suitability of the investor for this investment that we have. So we elected to take that extra step. So there's more sets of eyes scrutinizing our deal. But overall, my advice to investors would be initially go by the business model or the type of real estate investing that you believe in. And then the next step is locating the right team who's going to assist.

August Biniaz - CpiCapital.ca (45:45.941)

to execute the business man to the best of their ability. So when you've covered those two steps is you just go through your interview process with these groups and you look at their transparency, see their knowledge, their expertise, their experience. It doesn't necessarily have to be a firm that's been around for decades. I've seen groups like, you know, they've been around for a long time and that billions of dollars in transaction, they've lost money, you know, of their investors. You can see that even with Blackstone, it's not only experience, it's also the level of care and attention.

that this sponsor is willing to give to investors. Sometimes finding a group in that perfect growth phase is where you wanna be because they don't have tons of deals, you're not just another number. They give the white glove treatment to their investors. But yeah, that's kind of the brief advice I can give to investors having an understanding of the firm and going in and asking hard questions from the investment firm. And if you're getting any type of pushback or any type of opaqueness,

It's a, and your gut feeling tells you otherwise, you should probably walk away.

Garret (46:48.11)

Yeah, I was gonna ask you about worst case scenarios. You mentioned Blackstone. I think everybody can kind of go there. At CPI, I mean, nobody has a crystal ball, but what would you say that you guys do in trying to avoid the worst case scenarios?

August Biniaz - CpiCapital.ca (47:05.589)

Frankly, one of the main items that affects our business is interest rates. And anytime I talk to a seasoned real estate investor, there's a lot of gray hairs. They always talk about debt is the most dangerous part of this business. If you're over levered, that could cause problems. And we see that everywhere, right, is the debt. So we're very cautious when it comes to the type of debt we put on our assets. And also is about

it's about the enthusiasm to want to do deals. For example, prior to going under contract a couple of months ago, we hadn't done a deal in 24 months. We were not pencils down. We were still looking at deals, still underwriting deals, but it wasn't making economic sense while the fed was increasing rates for us to go in and, and, put a deal under contract. We were still in an increasing interest rate environment. So yeah, you have to look at.

Macro, you have to look at micro. You have to see what markets you want to be in. What's the property type you want to invest in? Is there any hyper supply that could be coming in that market? Is there any reasons that people might be moving out of that market? Is there a diverse economic drivers within the market figuring all of that out? Make sure you have your team and all the service providers you need to execute the business plan and then make sure you have the right debt on the property. For example, on this deal, we elected to choose

an agency lender, which is Fannie Mae or Freddie Mac, which is the equivalent of CMHC in the US, and they give you better rates as long as you qualify. So we got a fixed interest only five year agency debt, and we were able to lock it in at 5 .6%, which we underwrote at 6%. So that's 400 basis points that we were, or rather 40 basis points that we were able to reduce the amount there. And yeah, so.

What CPI does is not doing deals just on the basis of trying to get deals done. Number one. Number two is be very careful about the type of debt we're putting on the deal. Number three is be very careful with the markets we want to invest in. Make sure that the markets have a long runway and having all of our team members there to execute the business plan and make sure everything is done correctly when it comes to our in -house asset manager, our property management firm and other service providers.

August Biniaz - CpiCapital.ca (49:29.237)

Thanks for watching.

Garret (49:31.214)

Yeah, it sounds like, I mean, you talk about underwriting, so that's predicting or doing the deal and the numbers at 6 % and then you come in under that, that's just being cautious instead of optimistic and not painting the very best pictures so that you can attract investors, right? I think that's responsible. As we wrap up here, August, I was gonna ask what trends or future opportunities do you see in the space and what are you guys most excited about taking advantage of?

August Biniaz - CpiCapital.ca (49:58.325)

Trends and future opportunities, I see the US becoming more and more a renters nation, not only because of demographics, not only because of income and other issues. I also see it as a lot of Americans, a lot of this new generation, they'd rather be renters than homeowners. This idea of being a renter, these generations are not like the Baby Boomer generation, for example, or

other generations where home ownership is a big part and buying home is also a lot more difficult. So I think with rental properties in the US, particularly multifamily in these high growth markets within the US where a lot of people are moving to, I think there's a huge demand and the demand will continue being there long -term. And you can also follow, for example, we talked about Blackstone.

Blackstone had those difficulties with office space, but on the multifamily side, they've done tremendously well. Blackstone started out as a &A and private equity shop, but now they have a larger allocation to real estate that they do with &A. So, following even the institutions, you can see that multifamily is where a lot of people are investing and a lot of institution and other groups.

So yeah, I'm very bullish on multifamily, very bullish on Florida, particularly Miami as a result of Miami becoming that next business hub. There's so many people moving to Miami alone and Florida. One of the biggest pain points of Miami for high income earners and executives is schooling. There's just not enough schools for all these new people that are coming in, not enough, you know, these.

academic institutions for their kids to go in school. That's the biggest pain point that people have. It's not housing or other factors. And then you have the trickle down effect when it comes to Miami. As Miami becomes more and more of this huge business hub, then all these other cities like Tampa, Southwest Florida, are gonna have that ripple effect for people wanting to move to these other cities and what have you as well. So.

August Biniaz - CpiCapital.ca (52:17.557)

very bullish on multifamily, very bullish on Florida, Tampa, all the other areas. Another thing I wanna kind of plant a seed in your viewers and listeners' minds is also this other asset class that falls under the multifamily in some ways is BTRSFR, built to rent single -family rental, which is basically single -family communities.

where a developer comes in, builds it for the purpose of rent, not for the purpose of sale, which is somewhat unusual, for example, in Canada, because the rent to value ratios doesn't really make sense. I see a big growth in that space as well, because in a built to rent community, again, that's for maybe a little bit more of a different demographic, it's not workforce, but it's a level above that is when people have decent income, they don't want to live in an apartment with somebody above them.

Next to them, they want to live in a single family home with a garage. They want to be in a community of other renters. They're not renting a single family home with everybody else as the owner. So they're the only renter in that community. So I think these built to rent single family rental is also going to be, I'm very bullish on that asset class as well, long -term as more and more Americans become renters, even called renters by choice. A lot of Americans are becoming renters by choice. They have the money to buy, but they're rather...

Garret (53:38.894)

Yes.

August Biniaz - CpiCapital.ca (53:41.173)

because they're not sure they're gonna stay there forever. So yeah.

Garret (53:45.998)

That's an interesting asset class. I mean, I've heard of it, but I mean, to purposely build an entire community, I could see a real need for that. I mean, even in my own management company, I have a lot of people who are purpose, purposely renting, but what is the stock, at least up here in Manitoba? Either you're going into somebody's dream home that they're temporarily out, but then there's always that threat of somebody coming back, right? Or,

you're trying to rent a house that's 40, 50, 60 years old and that doesn't match what you want or where you want to be. So I agree. I think that could definitely be the future.

August Biniaz - CpiCapital.ca (54:22.517)

Exactly. Exactly.

Garret (54:24.622)

So I'm gonna end this podcast with the question I always ask all my guests and I wanna hear what you have to say. So this is the investing to win podcast. How do you define success and what does winning look like for you?

August Biniaz - CpiCapital.ca (54:38.453)

Great question. Success, in my opinion, is achieving above your attainable goal. So whatever was your attainable goal, if you're able to achieve above and beyond that, that's in my opinion success. Success can be measured in a lot of different ways as well, right? So if you're giving back and you're helping a lot of people, success doesn't have to only be, you know,

in monetary value. It could be also how many people you're helping, how many people you're adding value to. So yeah, but I think personally, on a personal level, if you want to feel that you're successful is going above and beyond an attainable goal you've had and that you've achieved success. And your follow -up question was, how do you know, what was it, winnings?

Garret (55:33.614)

What does winning look like for you?

August Biniaz - CpiCapital.ca (55:35.253)

winning. I mean, winning is really on the personality type as well. I think I have one of those personalities that always wants to do better and always wants to build more and always wants to gain more and always wants to increase the bar and set the bar higher. So yeah, I mean, I don't have a kind of a end all.

winning goal. It's more about continuing progress personally on a personal level, on the company level, on the given backside of helping others and so on. So winning is, yeah, yeah.

Garret (56:21.326)

Okay, no, that's great. Well, thanks so much for what ended up being almost like a masterclass on US syndication. I learned a ton and I'd like to thank you for spending the last hour with me.

August Biniaz - CpiCapital.ca (56:32.309)

Of course, my pleasure.

Garret (56:34.766)

Okay, thank you.