Eddie Hobbs new Brendan Investments vehicle

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This fund only needs to return an overall growth rate of 2% from the total fund before the principles reward themselves
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If MichaelDes sees it like this how the heck is a poor "SMTM - must give up the fags" punter going to possibly understand the true nature of gearing.

I have explained it before but let's try again. The underlying investments have to perform at about 7% p.a. just to pay the interest and the geared up management charges. They will have to perform by about 7.5% for the bonus to kick in.

We can't argue both ways - that 8% IRR can be got by sleepwalking and yet this a bad investment.
 
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Harchibald said:
The underlying investments have to perform at about 7% p.a. just to pay the interest and the geared up managament charges. They will have to perform by about 9% for the bonus to kick in.

We can't argue both ways - that 8% IRR can be got by sleepwalking and yet this a bad investment.
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As I mention above, there is plenty of German commercial property yielding around 9% on the market. So if you loaded up on it, a gross 8% IRR would be achievable without even getting any capital growth in the property values. Of course taxes and other expenses would reduce this, but the point is it would take minimal capital growth - at or less than inflation - to bring the nett IRR over 8%.

Brendan Investments may in fact turn out to be a good investment. But there's no way performance fees of this level can be justified - the promoters are being greedy and helping themselves to too big a slice of the cake.
 
Hobbs yesterday on radio challenged the institutions to come up with a cheaper model involving Development and Investment.
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Friends First / F&C's Corinthian: -

  • 100% allocation for execution-only transactions.
  • 66% gearing.
  • Purchase and development of Superquinn sites
  • 5 year term so shorter lock-in period required than Brendan Investments.
  • Total annual management charge of 1.65% of Net Asset Value - Brendan's NAV is 4%.
  • Performance bonus of 15% doesn't kick in until the investors have achieved 10% per annum - a full 2% more to the investors than Brendan's 8% threshold for bonus.
Challenge met. Which radio station was Hobbs on? I'll give them a call.
 
Is anyone going to attend the presentation by Hobbs? I believe it's this Thursday in Citywest...there are others around the country
 
IHateTolkien said:
Friends First / F&C's Corinthian: -
  • 100% allocation for execution-only transactions.
  • 66% gearing.
  • Purchase and development of Superquinn sites
  • 5 year term so shorter lock-in period required than Brendan Investments.
  • Total annual management charge of 1.65% of Net Asset Value - Brendan's NAV is 4%.
  • Performance bonus of 15% doesn't kick in until the investors have achieved 10% per annum - a full 2% more to the investors than Brendan's 8% threshold for bonus.
Challenge met. Which radio station was Hobbs on? I'll give them a call.
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What's the minimum investment on the scheme above?
 
answer posted above
 
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This exchange is useful in getting at the facts but please let us deal with the facts.

  1. It has been stated that the development costs are external to teh 1% pa charge and it has been stated that this is in the prospectus. Please identify where this is stated because I cannot find it. if this is a genuine error well enough, if it is incorrect and deliberately so, it is another example of mis-information on this thread.
  2. It has been stated as a fact that the hibernian life European Residential fund has an annual fund management charge that is not on the gross fund value. This is, once again, incorrect. The lengthy PDF from Hibernian Life fully supports my earlier analysis. It is specifically stated taht teh fund management charge is on the gross fund which includes leveraging at minimum levels of 1.45% pa to 1.55% pa and that broker commission, which are material to this discussion, are on top, and can add another 1% pa.
  3. It is interesting to see that the Augusta fund is no longer being used for comparision purposes. It fails to deliver the result that some posters on this thread are glued to for reasons best known to themselves.
  4. The Corinthian fund is a false comparison as it is merely a wrapper unit linked package, i.e. accounting mechanism around one asset, i.e. one deal that has been bought from Superquinn and offloaded on policy holders as the Irish market peaks. The stategy of the Corinthian fund and its timing is poor, to put it mildly. To recommend Irish investors to invest 100% in Irish commercial and development property right now looks like extreme risk. It would be better if the Corinithian fund took in the cash and sought to enter the market after the current transition period is complete when prices would not be at such extreme levels and rental yields would not be as compressed. Why on earth do you thihk this deal is being mass distributred through the retail insurance market and not sold to a large investor? The answer is as plain as the nose on your face - a well informed large investor wouldn't touch it. This is a sorry comparison.
Please respond to the above facts.
 
It has been stated that the development costs are external to teh 1% pa charge and it has been stated that this is in the prospectus. Please identify where this is stated because I cannot find it. if this is a genuine error well enough, if it is incorrect and deliberately so, it is another example of mis-information on this thread.
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Mantus, Part 5, Section 2, Page 20

This sets out 7 bullets on where the money will be spent

1. Acquisition of properties
2. Development of real estate
3. Interest and admin costs
4. Development management expenses PLUS a fee to the management company of 1% of the assessed value of any Development
5. Payment of the management fees of 1% on investment properties
6. Costs of external advisors
7. Costs of the offer itself, estimated as a one off of 750K

Correct if my interpretation of (4) above is wrong, in which case it is a genuine error. I can assure AAM that the alternative motivations suggested by Mantus do not apply.

I don't really know whether the above are standard for the genre or not. Other commentators seem more aghast at the performance bonus.

What I do know is that all the above taken together would amount in life insurance regulatory parlance to a RIY of at least 4% due to the AMC alone but possibly 6% in total - and that is enormous! - are these geared property structures really that sexy to justify such large expense leakage?
 
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Harchibald said:
If MichaelDes sees it like this how the heck is a poor "SMTM - must give up the fags" punter going to possibly understand the true nature of gearing.

I have explained it before but let's try again. The underlying investments have to perform at about 7% p.a. just to pay the interest and the geared up management charges. They will have to perform by about 7.5% for the bonus to kick in.

We can't argue both ways - that 8% IRR can be got by sleepwalking and yet this a bad investment.
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The math’s is near right - it’s an overall 2.5% return excl. costs or personal leverage - when compounded. What is the SMTM Acronym - I guess "show me the money". But............however bogged down people are about the math of the product and how it’s portrayed as a deception or not, what do people think of the critical mass i.e. property area's to invest - Germany, Portugal, UK and Ireland.

I have expressed my views in a lengthy enough rant but would be interested in other people’s opinion? This is where the product will have to deliver after all. By the way - I'm just an investor across many aspects and not aligned with anything to do with this or within financial industry. By the way, last bit of your thread - 100% return on monies for me in 10 years would be considered poor performance.
 
Mantus,

It has been stated as a fact that the hibernian life European Residential fund has an annual fund management charge that is not on the gross fund value. This is, once again, incorrect. The lengthy PDF from Hibernian Life fully supports my earlier analysis. It is specifically stated taht teh fund management charge is on the gross fund which includes leveraging at minimum levels of 1.45% pa to 1.55% pa and that broker commission, which are material to this discussion, are on top, and can add another 1% pa.
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My apologies. You were referring to the Hibernian Residential fund and I to the Hibernian European Commercial fund. My mistake for not spotting this earlier.

The Hibernian European Commercial Property fund has an annual management charge that starts at 1.4% depending on the product. Broker commission can be added to this but a broker should only add trailer commission if ongoing service is being provided, so the correct comparison is the annual management charge excluding ongoing broker commission.

In relation to Point 4 of your last post, the challenge was "...to come up with a cheaper model involving Development and Investment..." I have demonstrated that the FF/F&C Corinthian fund achieves this, but rather than admit defeat, you choose to shift the goalposts by criticising the investment strategy. Maybe Brendan's choice of investments will prove better over the next 10 years; maybe F&C's will - that's not the point. As challenged, the FF / F&C model is cheaper. Challenge met.
 
Declaration of possible conflict of interest. I am a life, pensions and mortgage broker. Lump sum investments form a part of my business but less than 10% of turnover so I have no fear of Brendan Investments from a personal standpoint. Even if Brendan Investments achieve their highest target of €250M invested, it will have no effect on my business, which largely revolves around providing services to an existing client-bank.
 
Mantus said:
It is interesting to see that the Augusta fund is no longer being used for comparision purposes. It fails to deliver the result that some posters on this thread are glued to for reasons best known to themselves.
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The fact I'm not repeating the points I already made several times about the comparison between Augusta and Brendan doesn't mean I don't stand over them.

I'm not a cheerleader for Augusta and I don't recommend anyone invests with them without doing their own research - I just used them as an example I am familiar with.

At least with the Augusta fund, because the project specifics are detailed in advance they are able to provide full figures for the acquisition and set up costs you describe. The Brendan fund will incur similar costs in addition to the 1% p.a. management fee as Harchibald has pointed out in the excerpt from the prospectus - but at this point they are not quantified so no prospective investor can know what they will end up as.

I would, however, defy you to identify any other Irish geared property fund apart from the Brendan fund which is open to the general public and that has a final success fee as high as 20% and levies it on a final performance figure as low as 8% p.a.

For the record, I have no connection with the financial services industry and have no conflict of interest. It makes no difference to me if anyone invests with Brendan, Augusta or any other fund.
 
The IIR IS 8 pa net of all costs of course as is the nature of IIR including bank debt repayment over the period. The IIR is therefore based on the cash down from investors ie equity.

The annual charges from Hibernians Residential fund range 1.45 to 2.55 depending on who sells it to you. Commission of 3 to 4 percent is also paid.

The Augusta fund charges 3 million in upfront fees on equity of 20. By this measure 250m would be charged 37.5 million upfront. This loss is huge to investors in this arrangement.

The Brendan offer aligns the interest of the investors with the mgt. The bonus pays zero at IIR of 8 as you know. The alignment of interests is a crucial point. If the equity grows at 10.IIR the investors get 9.6 and the mgt 0.4. If it grows 20.0 the investors get 17.6 and the mgt 2.4. The mgt focus consequently is to get the biggest possible profits from robust management of all projects - unlike other schemes that take out huge sums in upfront costs ie Augusta or in so called success fees for turning over assets.

The annual 1.0 covers all property mgt costs but not third party costs like construction, naturally. The biggest cost will be sourcing and assessing development projects. Developers spend much of their expertise in multiple project examination before settling on one.

Thanks for the continued exchange on the facts.
 
MichaelDes said:
The math’s is near right - it’s an overall 2.5% return excl. costs or personal leverage - when compounded. What is the SMTM Acronym - I guess "show me the money". But............however bogged down people are about the math of the product and how it’s portrayed as a deception or not, what do people think of the critical mass i.e. property area's to invest - Germany, Portugal, UK and Ireland.

I think that a debate about the merits (or demerits) of launching a geared property fund at this stake in the global economic and credit cycles would untimately be fairly futile. Think about this product from another perspective, if you wanted to raise cash from (dare I say it unsophisticated) retail investors, what asset class would appear to be the most attractive to them at the moment? The answer undoubtedly is still property and will remain the case for another 12 months or so I suspect.
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MichaelDes said:
But............however bogged down people are about the math of the product and how it’s portrayed as a deception or not, what do people think of the critical mass i.e. property area's to invest - Germany, Portugal, UK and Ireland.
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I agree that this seems to be getting ignored amid all the debate about charges and performance fees. I personally think the performance fee is too big but the main reason I won't be investing in the product is that I don't think the timing is right for a leveraged property fund.

I would have thought that a large part of the funds performance will depend on a) getting bank finance and b) at attractive rates. Now I am not sure if they have financing in place but I would imagine that if they don't that it won't be easy to obtain considering banks are hoarding money to build up their own balance sheets and if they do get it, at what terms? Interbank rates are extremely high and above the ECB base rate so what financing cost would be attached to funding a leveraged property fund?

I also don't share the rosy economic outlook for Germany and I wouldn't touch commercial property in the UK with a bargepole. Banks are laying people off left right and centre and retailers are beginning to announce profit warnings as the effects of the rate hikes are only beginning to hit consumer spending. They are expecting a tough Xmas. Portugal like Spain I feel has seen overdevelopment of residential holiday homes etc.

Everyone has to make their own mind up. I just hope ordinary investors have enough sense not to borrow and add leverage onto leverage which for me is the worst aspect of this fund.
 
I think that a debate about the merits (or demerits) of launching a geared property fund at this stake in the global economic and credit cycles would untimately be fairly futile....if you wanted to raise cash from retail investors.. answer undoubtedly is still property and will remain the case for another 12 months or so I suspect.[/quote]

You are missing the point.....I believe the best means of achieving wealth is through property and have myself a few such commercial leveraged investments. I think that as explained in my earlier comments both UK and Ireland for growth look like dogs, Germany is exciting and apart for cars going round a race track once a year in Portugal - I don't know if this is enough to sustain - or does Portugal have sub prime problems same as South of France and Spain that have yet to malign further. Maybe I'm a bear on three of their choice markets but would like convincing otherwise?

Referring to previous correspondents, although I've mentioned about the IRR etc - I do not think the company are wrong to do so. Who is their right mind with as little as €5k could organise such a scheme for themselves? It is a capitalist system last time I checked, and if these people make money for investors then they deserve to be rewarded. Financial houses and banks through their equity products with high initial commissions and exorbitant fees have been screwing investors for years - with many of its products at best matching inflation over their investment term.
 
Sunny

I won't be investing in the product is that I don't think the timing is right for a leveraged property fund.

You are on the money there. The London Interbank Offered Rates or (LIBOR) have gone through the roof and notwithstanding the banks pouring money into the markets, has not helped dampen things. Banks mistrust each other so what chance have investment funds looking to finance at this stage. The rate hit 6.8% the highest since the last crisis in 1998, other money markets must be in a similiar fix. Making money it seems is just going to get harder - the good old days of easy finance maybe at a close.​
 
I agree about the outside leverage. This is suitable only for HNW investors. NIB will need to satisfy its responsibilities under the Consumer Protection Code from IFSRA so that the advice is suitable to the client. My guess is that NIB is targeting its upper end clientbase and using Brendan to get its brand out since the Danske takeover. It is also regulated by the Danish Central Bank afaik.

It's down to your subjective judgement. It will be 60% exposed to Germany so that is the kernal I think. The development projects are Portugal tourism and the UK. The prospectus does not limit the Directors and any other country can be entered is my reading.
 
The annual charges from Hibernians Residential fund range 1.45 to 2.55 depending on who sells it to you. Commission of 3 to 4 percent is also paid.
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Mantus I clarified already - I was talking about the Hibernian European Commercial Property Fund. On this product, the AMC is from 1.4% and this is 1.4% of the invested amount, as the fund isn't geared. With gearing the AMC on the Brendan Investments product is 4% of the invested amount per year.

If you buy this product from a discount broker on an execution-only basis, you'll get the 3 or 4% commission reduced or waived. There's plenty of discount brokers mentioned on this very website. As Brendan Investments only sell on an execution-only basis (i.e. no advice) it's only proper that you should compare charges with alternative products also on an execution-only basis.
 
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