General News

March 2015 – General News

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General News

Thank you for the very positive feedback to our last newsletter. It is truly appreciated and inspirational.

The only negative feedback I received was that I am being too pessimistic about the future economy. The converse is true. I am very positive about the property market for GPS type product in South-East Queensland.

The explanation is that you, the investors, engage me to be a glass-half-empty type of person as that is what you need to be to be a good money lender.

Identifying risks, having plans of action and never taking your eye off the exits is all part of what it takes.

Rollovers in the GPS Invest Select Fund are currently running at in excess of 100% with investors contributing additional amounts.
This vote of confidence is truly appreciated.

Below is a photo of the latest addition to GPS. It is used to conduct site inspections. Perception is important. It is extraordinary how much more open people are to you on building sites when you turn up in a ute wearing a well-worn pair of safety boots and have a hardhat and high-vis vest
available.

Over the years I have learnt that you can find out quite a lot about how a  project is travelling from the people on the tools.

ute

GPS Invest Access Fund

I have received requests for quite some time for GPS to introduce a form of Cash Management Product. This has increased following the last cut in official interest rates, there being no end in sight for low interest rates and the banks not really competing for cash.

There are a number of issues which I have previously discussed which include:

Withdrawal Rights
Following GFC the rules changed for operating “liquid” mortgage funds. You can no longer advertise a short withdrawal period (ie. A few days) and then put in the fine print that you have a longer period (ie. 12 months) to repay the investment (RG 45.159). I also have an ethical issue with such conduct.

The rules make it logistically impossible to have withdrawal periods of less than one month for non-liquid mortgage funds.

Cash Holding
The rules provide that to run a “liquid” mortgage fund then 80% of assets must be held as cash or equivalence. There is a legal proposition that you can satisfy the requirements by being able to sell mortgages within the withdrawal periods set out in the fine print. I am a ‘rules up front and get on with it’ type of person and will not develop a product based on a legal interpretation.

If you only have 20% of the fund working it would not be a competitive product.

Administration
There is no point in opening a mortgage fund if the operational costs exceed the achievable margin, or if the mortgage fund does not achieve a viable size.

My current view is that GPS has now achieved the maturity necessary to run such a fund. The fund would both respond to investor needs and put another tool in the GPS toolbox to assist us to maintain tight control over the overall funding cash flow. The Fund would probably operate as follows:

  • Target interest rate of approx. 4.75%.
  • Cash holdings and monthly loan maturities to be around one third of the fund assets so there is a reasonable amount to meet withdrawal requests.
  • Monthly withdrawal rights.
  • The fund to invest in GPS sourced and managed loans along with other GPS funds and our co-funding partners.
  • All investments to have an exit strategy with a reasonable expectation to be fully recoverable within 6 months from the date of investment.
  • Operation of the Fund to be as “online” as is possible.

Bruce and I invite your feedback on this proposed GPS Invest Access Fund.

Enquiries from your friends, family and business acquaintances will also be welcomed.

Brisbane Housing Market Continues to Grow

Recent economic data shows that the Brisbane housing market is continuing with sound growth unlike the concerning growth levels in Sydney and, to a lesser degree, Melbourne.

The interesting figure is the spike in development applications for Brisbane. There most certainly has been a spike in the number of applications for finance which I have seen across my desk in 2015. There has been a corresponding increase in the number of applications which have been declined. The major reason for declining applications is that people are paying too much for the land or they have not achieved viable development approvals.

Finance is also now harder to secure in Brisbane from pre GFC times.

I do not believe that the increased number of development approvals issued will convert to any substantial increase in the number of commencements of projects.

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