Eddie Hobbs new Brendan Investments vehicle

[Duke of Marmalade]

Sorry, first I'm no tax expert to be frank with you, but as a PLC it will be no different to any other PLC in the taxes it pays on profits. Most of these will arise outside of the Irish tax jurisdiction and I presume DTA's between EU countries will prevent double taxation. I'm not up on the forensics of UK, German and Portuguese tax so I'm reluctant to hazard the aggregate rate the PLC will pay. The MD, Vincent Regan is a tax expert which will help, former Tax Partner at Deloitte and Revenue Auditor.

Obviously before shareholders pay CGT, the PLC itself will have paid taxes but using offsets like interest on borrowings etc as offsets.

Gross Roll Up funds must pay tax on overseas earnings as you know, and the profit to policyholders is 23%. In some cases such as deemed "Offshore Funds" like overseas foreign companies established to invest in property I think the charge can be at 41%. But, once again I'm not qualified to give a definitive answer to your question.

Mantus I really have to raise my eyebrows at this "I'm just a country bumpkin and no tax expert" line

It was you who introduced this tax thing with a seemingly well informed comment on the arcane workings of gross roll up and 8 year deemed disposal. Upon reflection, you did totally misread the true tax comparisons between a company based collective investment scheme (like Brendan) and more conventional collectives. So I'll give you the benefit of the doubt and suppose you heard this 8 year tax point from someone promoting Brendan and you thought that sounded sexy. But if you are as ignorant in these matters as you purport you should not have introduced a point you did not fully understand.

Anyway, I have corrected the misunderstanding and for the record the position is as follows:

Life companies/UCITS etc.

No CGT, Corporation tax or income tax. Exit tax of 23% paid on punter's profits of which a down payment is required at the 8 year point. This is administered by the entity.

Some foreign witholding taxes may not be recoverable.

Brendan

Corporation tax ranging from 12.5% on trading gains through to 25% on Rental income gains - and of course only on the gain part I wasn't claiming that costs were not an offset. This is the key disadvantage. You state that such tax payments are obvious as this is a company - precisely my point, so you do very begrudgingly agree.

This is payable as soon as gains and income start to be generated and by the 8 year point, if the thing is doing any way well at all will have represented a more significant cash flow drag than the down payment of exit tax at most 2 years early.

Brendan may also suffer foreign witholding taxes.

Finally. I am sure that Brendan has much greater tax minds on board than you or even me but I am hoping you are not suggesting that means Brendan will be able to avoid the above tax disadvantage.

 

[Duke of Marmalade]

I attended the NIB roadshow in Dublin this evening - updates as follows;

- EH clearly stated that they intend to raise up to €250m and gear up to €1 billion

The Prospectus gives the flexibility to raise between 10M and 250M, which is some flexibility but consistent with the above statement.

The Brochure clearly states that the target is 50M and there is no reference to the 250M.

The Great Debate on this scheme is beginning to focus on some key questions of clarification. A major one is whether Brendan has already earmarked projects for the funds.

Experts such as Mantus and Gonk seem to at least agree that this is very important, as both seem to acknowledge that any long delay in sourcing projects could be quite detrimental. Property investment/development is not like buying stocks and shares, there is a long lead time in sourcing suitable projects.

Where they differ is that Gonk, quoting the prospectus and brochure, argues that no such specific projects exist. Mantus on the other hand, who appears closer to the scheme, assures us that specific projects are in hand.

So back to the opening quote. If the original target was 50M and they pull in 250M, how the heck can they have specific projects lined up for 5 times their target? Is that hotel on the Algarve going to be 5 times higher than planned?

A huge overshoot on target funding like that, whilst diluting some fixed costs, will nonetheless hang like a drag anchor on Brendan.

 

[Mantus]

Harchibald please take this in the humour its intended, but if a syndicated property scheme had no entry costs, was run for zero and managed by Aliens with time warp technology you'd still be an unconvinced pessimist. Gonk on the other had would be arguing for cheaper space travel while charging through the nose for passengers waiting in his lounge before take off.

German tax gains can be minimised through Luxco's which will be used by Brendan. Portugese tax can be equally minimised through Dutch companies. Brendan Invts will be using all available legal methods to minimise tax to the parent and obviously increasing the return to shareholders and directors.

 

[Duke of Marmalade]

Harchibald please take this in the humour its intended, but if a syndicated property scheme had no entry costs, was run for zero and managed by Aliens with time warp technology you'd still be an unconvinced pessimist. Gonk on the other had would be arguing for cheaper space travel while charging through the nose for passengers waiting in his lounge before take off.

German tax gains can be minimised through Luxco's which will be used by Brendan. Portugese tax can be equally minimised through Dutch companies. Brendan Invts will be using all available legal methods to minimise tax to the parent and obviously increasing the return to shareholders and directors.

Actually that's not a bad analogy there. Brendan's promise of chain letter type riches based on magic gearing mathematics is as unconvincing as the scifi version you depict.

 

[Mantus]

Brendan's summary is par for the course. Readers should be advised that Brendan is notoriously negative on overseas property and cannot claim to be balanced. The summary, once again, confirms the worst parts of AAM. It is factually wrong in parts eg Directors expertise, on tax and on the data on life funds like the Hibernian Fund which is geared. It is a truly bad piece of analysis coming from someone with an accountancy qualification.

Just as well that tens of thousands of property investors don't read AAM. Pure junk Brendan you should seriously consider deleting your summary because, left as it is, it is damaging to your credibility.

 

[gonk]

Brendan's summary is par for the course . . . It is factually wrong in parts eg . . . on the data on life funds like the Hibernian Fund which is geared.

Your tirade is par for the course, as is your faulty grasp of the facts.

Check out this presentation from Hibernian's website on the Hibernian European Commercial Property Fund, specifically page 21 on the fund structure, which clearly states "No Gearing".

[broken link removed]

Mantus, your posts are becoming so outlandish, I can't help wondering if you're connected with one of Brendan's competitors and are posting here to try to sabotage them.

 

[Duke of Marmalade]

Mantus,

You are fond of implying that contributors who disagree with you are anonymous cowards with agendas. When our esteemed Leader makes similar comments your reaction is to accuse him of defamation. That is a double standard, hiding behind anonymity to make personal accusations against someone who does not have that protection. Please edit your post and correct this unacceptable behaviour.

It is a courageous contribution from our Leader, which I hope will cause the likes of Jane, Bill and Jill to maybe consider just for a tad that Himself is not infallible. Niall, where are you? Chance to steal a march.

On the other facts which you keep repeating I will make a last attempt at refutation.

There is no way Brendan has projects in hand for 5 times the amount targetted in the brochure, whatever about the target itself.

The tax thing isn't a very big deal, but it was you who raised it in the first place with some smart ass point which you have since admitted you didn't fully understand. You have admitted that this plc does bear extra corporation and income taxes which would not be present in a life vehicle. The various Luxco structures are to minimise double taxation, but they cannot reduce the Irish taxation of Brendan.

No one is suggesting a life wrapper of a plc. That would be an extra layer of cost and would negate the life taxation advantage. The alternative to a plc is to use a life assurance policy as the primary vehicle. The costs of administering this vehicle are replacing the costs of administering a plc, they are not in addition.

 

[Mantus]

Archie, I'm at the end of the line to. I am perfectly correct to harshly criticise Brendan's summary. It remains deeply flawed and is largely based on comparing an ungeared unit-linked policy to a geared plc. It is utter rubbish. Quoted property plc's the world over have gearing like 75 percent, its how the business works. Even CRH has debt equity ratio currently of 56 percent and its a mature large cap.

Gearing of 75 percent is standard to commercial property globally. Brendan's summary is deeply flawed and sensationalist on this point.

There is a pipeline. Brendan claims none.

Given these facts, and facts they are I am right to suggest that the summary is damaging to the reputation of the directors and by definition is defamatory if knowing these facts Brendan deliberately posted his summary

 

[Brendan Burgess]

I hope everyone appreciates the difficulties we have as moderators.

Here we have one person, new to Askaboutmoney, posting under 2 or 3 different names.

They say that they have no conflict of interest, but I for one, am suspicious.

They make a few valid points, but cloaked in all sorts of nonsense and they avoid dealing with direct criticisms.

They are offensive to other posters.

So what do we do? Do we allow him to continue to rant on and so detract from this thread?

Do we delete his more offensive comments? Next thing we will be accused of deleting posts and banning users we don't agree with.

The moderators have taken the decision to allow him continue in this thread, but he will not be allowed to destroy the summary thread.

We have taken this decision because he is the only person to publicly support this product on Askaboutmoney. And we welcome balanced comment.

But please all remember this, when you next see someone accusing the moderators of deleting a post or banning a user because we disagree with his views.

Brendan
Administrator

 

[Duke of Marmalade]

Hmmm

On gearing, it is true that plc's and property syndicates use it as a matter of course and I have stated that non recourse borrowing from banks is definitely a good thing.

A normal plc would not see it so much as gearing but as efficient financing. It would be inefficient to expect shareholders to finance all the fixed assets of a company. Borrow cheaply on the back of secured assets leaving shareholder capital backing the residual entrepreneurial risk.

What I object to in the Brendan brochure is that bank financing, rather than being taken for granted as part of the efficient financial mangement of any company, is presented as some sort of alchemist's money multipler trick.

We are all agreed that companies like CRH are highly "geared" yet life companies still only illustrate returns of 6% on these assets.

Somehow, with Brendan it is being suggested that the magic of gearing allows us to talk of returns ranging from 12% to 37%.:mad:

 

[Duke of Marmalade]

I am responding to an interesting link to a Bill Tyson article in the Summary thread but I don't want to clutter that thread.

A couple of points.

EH is quoted as making that ridiculous assertion that to say the management charge on Brendan is 4% is equivalent to saying stamp duty on mortgagors is 100%. Strange that's exactly what Riddler (banned) also said. Do I really have to spell out the nonsense of that analogy?

I also see the statement that this is more tax efficient than a life vehicle. Not sure whether he was quoting Liam D.F. but I think it was part of Bill's commentary. But Bill didn't get that from nowhere? I hope I have already shown that if anything there is a tax disadvantage with the plc. But who is prompting Bill with the misleading info? Jayz, I really have to get to one of these roadshows, with a tape recorder of course.

 

[gonk]

The Tyson article ends with a fairly detailed section on the risks of borrowing to invest in the fund.

But one thing that no media report which I've seen picks up on is the tax inefficiency of borrowing to invest in this.

One major attraction of borrowing for direct investment in property as an individual is that it's possible to get tax relief on interest paid against rental income.

In this case, it is possible to make a loss after interest and still owe tax. Because there is no tax relief available on borrowings to invest in the Brendan fund, your gross gains must be 25% higher than your interest bill just to break even.

For example, you make a gross gain of €125. CGT at 20% reduces this to €100. If the interest bill on the money you borrowed is greater than €100, you lose. This could be even more of an issue by the time the investment matures. There is no guarantee that capital gains tax will still be at the 20% rate in ten years time. Some parties, such as Labour and the Greens have mooted increases in this rate in the recent past. If it went back to the 40% rate, those who borrow to invest in this could be badly stung for tax on purely notional gains.

 

[Duke of Marmalade]

Gonk, that's a good point on the political vulnerability of the CGT rate. All Irish tax rates are low by international standards, but the CGT rate is definitely the most politically vulnerable. The Corpo rate of 12.5% is fairly safe as otherwise it's bye bye Ireland inc. The income tax rate and therefore the exit tax rate on life products is the political non raisable, but CGT, not at all sure I would bet on this staying so low for 10 years. On the other hand EH is one of Paddy Power's favourites to be next presi so maybe that will be a protection.

Anyway we don't want to over egg this tax inefficiency thing. But it really is galling when we see the likes of a good journo like Bill Tyson regurgitating the Mantus falsehood that Brendan has tax advantages.:mad:

 

[gonk]

Gonk, that's a good point on the political vulnerability of the CGT rate.

In fairness, all forms of investment are subject to risk from changes in tax law.

What makes this a particularly serious hostage to fortune is the existing tax inefficiency combined with the ten year term, in which it is certain there will be at least two elections and changes of government.

 

[RainyDay]

Gonk, that's a good point on the political vulnerability of the CGT rate. All Irish tax rates are low by international standards, but the CGT rate is definitely the most politically vulnerable. The Corpo rate of 12.5% is fairly safe as otherwise it's bye bye Ireland inc. The income tax rate and therefore the exit tax rate on life products is the political non raisable, but CGT, not at all sure I would bet on this staying so low for 10 years.

In fairness, EH pointed out the specific political risk of possible future increases in the CGT rate at the Dublin presentation which I attended.

 

[Duke of Marmalade]

is a good article.

I particularly like the following line "...whole sorry mountain of debt built on cheap money and rising asset prices, especially property...".

The article refers to those other chain letters, the CFDs which are also becoming unstuck. I tell you the party is over.

Brendan is the final excess of an orgy which is going badly wrong - the little guy being invited in by the pied piper.

Amazingly there are those who will seek to argue that these events are very positive for Brendan - just the right time to go buying. Maybe But the right time to go borrowing?

 

[Brendan Burgess]

Harchibald

Brendan is the final excess of an orgy which is going badly wrong - the little guy being invited in by the pied piper.

Hopefully, you are referring to Brendan Plc here Otherwise, I have missed out on something which sounds very exciting.


Brendan

 

[Brendan Burgess]

I have just seen the TV ad and Eddie announces that the "prospectus is approved by the Financial Regulator and the Irish Stock Exchange".

I think it would be far more meaningful to say "This is an unregulated investment".

Brendan

 

[Sarsfield]

I have just seen the TV ad and Eddie announces that the "prospectus is approved by the Financial Regulator and the Irish Stock Exchange".

I think it would be far more meaningful to say "This is an unregulated investment".

Brendan

But it was advertised by Honest Eddie. What could possibly go wrong?

And the regulator says the brochure is nice

 

[Jimbob2]

Have to agree with the above.

I saw the ad last night and heard Hobbsey say 'the prospectus is approved by the financial regulator'. But (open to correction) doesn't it come at the end of him telling you all about where the properties will be bought and what type of properties will be in the portfolio.

I think it would be very easy for your average joe with €5,000 to invest to make the assumption that the fund itself has been approved by the financial regulator and I strongly suspect that this is the very reason why the statement is in the ad.