April 2021 – Hands on loan management


GPS is in the business of risk management.

In our February newsletter we wrote about our move to reduce risk for our retail investors by lowering our maximum LVRs (loan to value ratios) on our loans.

Decreasing LVRs for our retail investors means increasing their buffer should there be an adverse movement in the market, an escalation in project build costs or delays with local authorities etc.

Another area of risk where we are continually refining our processes is in our management of loans.

Always Retain Cost to Complete

One of the main ways GPS reviews the status of construction on our projects, other than inspecting the site ourselves, is through progress draws. A Quantity Surveyor (‘QS’) attends the construction site, usually monthly, and assesses the status of the project. GPS then releases funds to the borrower or builder in the form of a progress draw payment.

Generally, a QS is thought to value the building works completed to date. However, their real role for lenders, such as GPS, is to value the cost of works yet to be completed.

Progress draw payments by lenders to builders is not the value of work performed, but rather the total value of the works less the estimated costs to complete the project.

At all times we retain the ‘cost to complete’ for the project. This means that we retain, in the funded amount, sufficient monies to complete the construction work and achieve titles for the completed project.

Cost to complete is imperative as the value of incomplete projects is severely discounted due to the exigencies of construction and property development. If for any reason GPS needed to step in and finish a project, we retain the funds to do so.

GPS works with an expert panel of Quantity Surveyors. In order to be appointed to the GPS panel, a QS firm is thoroughly vetted by GPS, making sure they meet our specific criteria.

GPS has recognised this as an area in which we could strengthen our knowledge and expertise. This led to our decision to hire a new member of the GPS team, Rachael.

Welcome to the Team

Rachael has a Quantity Surveyor background and has worked in the industry for over 23 years. She will assist our Portfolio Managers not only with reviewing construction progress draws for current projects, but also by assessing new loans with additional knowledge and expertise.

A big welcome to the team, Rachael!

Lastly, thank you to all investors that continue to show interest in investing more funds with GPS.

New loans are coming through the pipeline and as soon as they require the funds, we will be able to make them available to investors. Additionally, it is our priority to first ensure funds returning from repaying GPS loans can be reinvested into new loans before we open up to new investment.

The best way to keep in touch with GPS, and to know when we are offering investment opportunities, is to subscribe to our mailing list. If you receive our monthly newsletters, you’re already subscribed!

If you have any friends or family that are also interested in investing, let them know they can subscribe on our website or pass on their details to be added to the list.

Richard Woodhead | Managing Director

Recent updates

View all updates

August 2023 – It’s go time!

There has been a lot of talk over the past couple...

Residential Construction – Where is it going?

We hear a lot in the news about the “Housing Crisis”,...