Apologies, long post.
Hello everyone,
It looks to me like most folks here haven’t noticed MOOSE’s latest iteration of their business plan. A new brochure was posted about a month ago along with their updates to their petition to the GIC.
Unfortunately I can’t link directly to the document as it’s part of a zip file. The zip file is
here. The name of the document is “MOOSE_PropertyValueInvestor_PRESS_2019-01-17.pdf”
In summary, MOOSE now wants to generate finances internally rather than relying on external capital investments. It now hopes to start by selling 12 station licenses along 100km of track at a little over $1M per license. Using the revenue generated by selling station licenses it will stand up a project office and promote a future train service. As a result of the promotion of a future service, they expect property values to go up in anticipation and from that value increase they would then fund the capital expenditures required to start the service.
Some comments on the brochure:
It states that: “It does not require capital market investors that may be detached from the interests of passengers and property owners.” To me this is another way of stating that they have not had any success in attracting investors over the past 8 years.
MOOSE expects station owners to pay a portion of the value increase on “
all properties…regardless of their relationship to the licensee.” This means that if a station owner only controlled half of the assets within the assessed zone, they would still have to pay fees based on all of the properties. If you’re giving more than 50% of the increase to MOOSE, and you control 50% or less of the property, you could easily end up owing MOOSE more than you take in. Note that MOOSE believes they could take up to 90% of any increases if required.
The brochure states that the first $3M in income generated from license fees would go to pay off MOOSE members for work that they have done. However, if my memory is correct, as little as 2 years ago they only claimed $500K in work done. Considering that most of the actual work that was done on the business plan was completed before 2016 I find that a huge increase. In the last two years the bulk of the effort I have seen from MOOSE has been Joseph Potvin and his input into the various legal issues. Regardless, the first three licensees would get nothing for their money since MOOSE would simply put that money in their own pockets. Only after that would any additional output be created.
If you do the math in reverse, it appears that MOOSE believes that they can control $8B (yes, BILLION) worth of property transactions around these 12 stations. This is what would be required to generate the sums they are talking about ($2B at 25%, $1B at 12%, etc). This is not property value, this is the value of transactions in a year. Considering that sales happen on average every 20 years, lease contracts come up for renewal every few years, and we still have rent control on existing residential units, this would require an astronomical amount of property to be under the control of station owners.
MOOSE has very high expectations. Despite stating that “well established” projects in metropolitan areas generate 10-15% increases in property values, they expect to get up to 25% purely on the suggestion that service would arrive in the future ( because they are so good at selecting station locations). 12% is considered ‘modest’.
The business plan creates a chicken-egg scenario. MOOSE expects to generate revenue from station fees in order to fund the creation of the network, but can’t charge station fees until it can provide a service. Station owners only pay fees for service to be provided 2 months in the future, therefore I don’t see how MOOSE could ever collect revenues unless they can stand up their train service in less than 2 months.
To summarize the financial aspects, MOOSE expects to raise $500M based on a $15M initial investment in a single year. And they somehow manage to describe this as "low risk" for anyone who would decide to invest in a station license.
If you look at the list of Consortium members at the end of the brochure, there are now two fewer members than there were in their
2018 brochure. The missing members include Michael Lachappelle (Business Model Fulcrum) and Michael Richardson (Sandelmen Software Works). I can only assume that these individuals have removed themselves from the Consortium. This is significant in my mind considering that Lachappelle and Richardson are two of the initial members of the MOOSE Consortium (
2015) and Richardson went back to the original MOOSE back in
2010.
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Edit:
One other interesting tidbit from the brochure. If you look at the map of the rail lines on page 4 you will see a new line that goes out to Mississippi Mills and a number of spurs off of the lines on the Quebec side.
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