From Richard Woodhead, GPS Investment Fund Limited Managing Director
Building on last month’s update where I spoke to the upcoming GPS loan pipeline, I wanted to shed some light on an element of our loan selection process which I believe directly impacts our investors, i.e. “what constitutes a GPS loan, and how do we categorise them?”
The first category is what I call our “core loans”, which form the backbone of our portfolio. These are residential development loans typically ranging from $5 million to $15 million, offered to repeat borrowers with whom we have an established track record. To qualify as a core loan, the borrower must have a proven history of successful collaborations with GPS.
The second category encompasses loans smaller than our core loans (or ”smaller loans”, as I call them), valued at less than $5 million. These may involve either repeat borrowers undertaking smaller-scale projects or newly referred borrowers entering our network. Smaller loans play a vital role in refreshing our borrower base and enhancing the diversity of our offerings.
The third category includes “larger loans” exceeding $15 million. We will only offer these loans to platinum-grade borrowers, who are multiple repeat clients with a demonstrated ability to execute complex projects. GPS co-invests in these larger loans alongside other lenders to manage and mitigate risk. Maintaining a steady flow of these loans is critical, as they serve as valuable liquidity tools.
The final category is what I refer to as “other loans”. These typically involve smaller construction or industrial projects backed by repeat borrowers. Supporting our known network with these additional projects is essential for fostering loyalty and strengthening long-term relationships.
So, with a target of 12 loans in six months, I have prioritised the 20 most promising prospects to pursue based on their likelihood of settlement, with the count final being: 8 “core loans”, 6 “smaller loans”, 5 ”larger loans”, and 1 “other loan”.
I am pleased with these numbers, as they reflect a balanced and diversified pipeline that we need to strive to. Of course, amongst this, some loans may not proceed as planned, while others may push out. To maintain our average loan size, it is imperative to secure a consistent volume of smaller loans each month. Similarly, the regular inclusion of larger loans is essential to provide liquidity and stabilise our portfolio.
I am confident that with cohesive direction and pipeline priorities set out amongst our Portfolio Management team, we will meet our targets and, as a result, sustain a consistent flow of high quality offerings for our investor base to select from throughout the year.
