A lot has happened in the last few years! It therefore seemed like an appropriate time to review the strategic plan of GPS.
While a lot was considered, the Board of GPS could not see any reason to deviate too far from the business model which has worked so well for us for so many years. It remains a matter of looking after our investors and borrowers (clients). With some tight management, the rest should look after itself.
There is however always room to do better, so the process did identify some operational improvements which can be made and that GPS will now work to put in place.
The Strategic discussions focused on distribution rates, funds under management and the future structure of GPS.
First point was in regards to distribution rates, and the priority is to maintain good lending practice and continue to not lose any capital. Distribution rates will increase when it is safe to do so. GPS is not driven by yield, we consider that to be unsafe. It is more about a satisfactory risk/reward balance.
In regards to Funds under Management, there will be continuing growth. This is inevitable from the increased building costs and sale prices of completed product. Loan sizes will have to increase if we want to maintain our sustainable number of loans. So in order to remain at the comfortable level we like, we will need more funds under management.
The discussion on required funds under management took me back to earlier days of GPS lending when our core product was “10 packs” around Bulimba. An average loan size was around $3M or an exposure of ~$300K per unit. At the time the units were selling for around $500K.
Due to changes in density regulations, the old 10 pack is now at least a 14 pack and more likely to be around 20 units per development. Sale prices of completed product have also grown. Try buying a recently completed unit within walking distance of Oxford St, Bulimba for $500K these days!
Another item that was discussed in detail were my plans, as unfortunatley I am all too often reminded that I am not getting any younger.
Many years ago, I put in place the GPS Next Generation Program. This involved hiring people, either while they were studying or who had recently graduated from university, into GPS and training them our way. This program included my daughter, Marnie, who started at the bottom by doing the scanning when we moved to digital filing!
I have taken great pride in being part of their development and seeing their growth in maturity, skills, and confidence. They are now reaching the age I was when I first started GPS! Marnie is now a Senior Portfolio Manager, has developed a repeat borrower base and is involved in the management of the business.
This team will be the future of GPS.
Don’t expect me to bow out anytime soon though. While I will slow down, I still enjoy most of the work. The key is to keep me engaged in doing what I like to do, namely sourcing and managing good quality deals. This is where I add the most value to GPS, and it is what the GPS investors want from me.
Several years ago, GPS hit the milestone of being able to say, “invest with us” rather than “invest in us”. While this may appear, at first glance, to be a matter of semantics it was very important for me. It demonstrates the confidence everyone at GPS has in GPS. The Woodhead family has reinvested a lot of profits back into GPS over the years and is now a significant investor at GPS.
I, along with the Woodhead family and the GPS team, look forward to investing “with you” for many years to come. We have a lot of confidence in the GPS model, and will enjoy working together for many years to come.
-Richard Woodhead and Family