The Colusa Indian Tribe, the Rincon Indian Tribe, which owns Harrah’s Resort and Casino in Valley Center, California, and the Wells Fargo Community Development Corporation have formed First Nations Capital Partners, a $25 million (€17 million) private equity fund.
“I am aware of several Indian tribes with direct investment platforms,” said Wells Fargo CDC president Bob Taylor. “But, to the best of my knowledge, this is the first commingled, multi-tribe private equity fund.”
Gaming has been good for us, but it’s a one-trick pony.
Wells Fargo CDC, a subsidiary of Wells Fargo bank, began looking at the possibility of raising a fund like First Nations in August 2006 when the firm’s Native American Banking Group came to the CDC in response to demand for private equity as a source of diversification, according to Taylor.
“Gaming has been good for us, but it’s a one-trick pony,” Rincon chairman Vernon Wright said in a statement. “That’s why we’ve made economic diversification one of our top priorities”.
The private equity fund may not produce as much revenue as the casino, Rincon finance committee member Steven Stallings said, but it is an “opportunity to acquire some businesses over the long run that will contribute to the economic wellbeing of the tribe”.
The three lead investors committed $5 million each. Other Indian tribes and nations are expected to commit $1 million to $5 million each and four to six high net worth individuals and family offices will commit a maximum of $250,000 each.
The fund will be managed by John Upshur of one-man private equity shop iAdmiral Capital, which is looking to add one additional investment professional, said Taylor. Upshur has a track record of equity investing in small businesses.
First Nations aims to make eight to 10 investments of $2 million to $3 million each in businesses with earnings before interest between $1 million and $50 million.
The fund will largely target 11 Western states, according to Taylor, in order for John Upshur to have easy access to management.
Investments will span diverse sectors but will avoid financial services and technology. Across sectors and in line with Wells Fargo CDC’s mandate, “[the fund] hopes to help create or retain jobs in small businesses and help the companies grow the employment base in terms of retirement plans, 401Ks, health coverage and the like”, said Taylor.
These are companies “begging for private equity”, Stallings added.
The Rincon Band of Luiseno Indians of Valley Center, California own Harrah’s Resort and Casino near San Diego, which is part of Harrah’s Entertainment. TPG's and Apollo Capital Management's $30 billion buyout of Harrah’s Entertainment recently fell through due to turmoil in the debt markets.
The Colusa Indian Community Council is the governing body of the Cachil Dehe Band of Wintun Indians which owns and operates the Colusa Casino Resort near Sacramento, as well as farms.