GPS has been operating in a low interest environment for some time. Real estate developer margins are being squeezed from all directions and there is a general slowing of the residential development industry.
GPS is confident in the future of our niche loan market being affordable real estate located in the better suburbs with established infrastructure. GPS has gained a wealth of knowledge and contacts over the last 25 years which allows us to sort “the wheat from the chaff”. This is how we have maintained our current high distribution rates.
Several other factors that have assisted with this are:
The good news is that the loans we are working on in loan pipeline will support maintaining current distribution rates in the near term. However, we are under pressure to offer quality borrowers better interest rates to secure and keep their business. As you know, GPS enjoys support from several repeat borrowers who provide us with solid projects from new and further stages.
For us, it is all about quality. GPS will not prejudice loan quality to push for higher returns.
GPS can only offer healthy distribution rates for our investors when we are successful in negotiating competitive interest rates and terms for experienced borrowers embarking on profitable and saleable projects.
Modelling by Bruce and me shows that the possible scenario would be a reduction in distribution rates to approximately 7.50% for the GPS Invest Select Fund and 8.00% for the GPS Invest Pooled Fund before the end of this year. We have further work to do in this regard and will, of course keep you informed.
We are committed to absorbing part of the pain. We have a vested interest in the success of GPS, as many staff, management, and their family and friends are investors with GPS.
Unlike the banks, we do not adjust distribution rates purely to increase profit.
Our priority is and will always be to look after our current investors rather than grow too big and lose the personal touch.
As always, thank you for your continued support.