Eddie Hobbs new Brendan Investments vehicle

[gonk]

There are people who borrowed to invest in Eircom and made money.

I did, and very happy I was too. Made 27% in two weeks. That was as near a certainty as you'll ever get in life - the flotation price had to be pitched below the likely short-term share price to ensure the success of the flotation. Those who, like me, got in and out quickly did very nicely.

But availing of the loan facility to invest in this fund would be like borrowing to invest in a company which in turn was going to borrow to invest in Eircom and which would not be able to sell its Eircom shares for ten years.

Not really a very useful comparison . . .

 

[Conan]

The principal of this product is reasonable. For those familiar with the risk issues it should be no problem. But setting the entry level at €5,000 seems extraordinary low.

But what amazes me is the charges. If the annual management charge is 1% of the gross asset value, that represents 4% on the net asset value (NAV), the actual amount invested. The typical market charge is circa 2% of NAV. So Eddie is charging twice as much as most competitors.

And a "success fee" of 20% in excess of 8% p.a. is outrageous.

Dare I suggest that if any other provider offered such a charging structure, Eddie would so far up the high moral mountain in condeming such that he would require an oxygen mask.

 

[HighFlier]

Quote :"Interesting to see how much of a response they get in the current market climate.Obviously they would have done a lot better a year ago."

I don't agree... there is still plenty money out there and it has to go somewhere.

Irish property.....No.

Equities........Roller Coaster at the moment.

Foreign Property -one off house -is possible but for many the different laws and the amount of snake oil salesmen out there is too much, also major evidence of overheating in some markets.

Deposit .....Guaranteed loss maker in real terms.

But overseas commercial still sanely priced but the small guy can't get a ticket to the game.

If I had a spare 100k tomorrow I'd give it a serious look but I would'nt borrow to do so.

 

[Guest112]

Like all these schemes, the guys setting it up want to take a highly disproportionate share of the profits and nothing at all of the potential loss. Given that the promoters are taking little or no risk themselves I think this litttle venture is an excellent one FOR THEM.........................

 

[HighFlier]

1.The brochure says that the directors will also be personal investors.

2.I dont buy the 4% argument. The management fee is 1% of the portfolio of properties. Management fees are generally related to the size and complexity of the assets under management and it dosen't matter how these assets are funded either leveraged loans or investor equity the management time is only proportional to the quantity of assets involved.

BTW before someone asks I have no relationship to either the investment or Eddie Hobbs.

 

[Guest112]

High Flyer

I think the point about the 4% is that the promoters are planning to pay themselves based on the amount of money they can borrow and NOT the performance or capital appreciation of the underlying assets.

For example if they receive 50million from the public through a share offer and borrow a further 150 million from the bank they will be paid 1% of 200 million. If they can convince the bank to lend them more, say 200 million they will be paid 1% of 250 million. So the more they can borrow the more they earn !!

If after one year the gross value of the assets crashes in value from 250 million to 200 million, they will still be taking out 1% of 200 million eventhough the shareholders funds have been wiped out.

Its incredible

 

[Conan]

HighFlier,
I dont have a problem with the annual management charge being a % of the GAV rather then the NAV. But 1% of the GAV (equivalent to 4% of the NAV) is just over the top.
I heard Eddie on some radio station yesterday and he said the Directors were only getting Director's fees of some €30,000 each. If the annual management charge is 1% of the target €1b GAV (€10m), then Eddie must have meant €30,000 a week each. Nice money if you can get it.

I await a critical review from our army of expert financial journalists!

 

[cerberos]

I am extremely disappointed in Eddie getting involved with type of vehicle.

His reputation will surely suffer in the long term.

Has he simply moved in to get rich quick mode and emulation those who he has criticised?

C

 

[diarmuidc]

His reputation will surely suffer in the long term.

But probably not his bank balance....

On the Last Word he claimed that the TV stuff was just on the side for him and his real job is an advisor. Fair enough although now his job as independent advisor has become a lot less credible.

 

[gonk]

I dont have a problem with the annual management charge being a % of the GAV rather then the NAV. But 1% of the GAV (equivalent to 4% of the NAV) is just over the top.

Compared to what? Annual fees of 0.75% to 1.00% of GAV are typical for this kind of fund. Brendan Investments' are on the high end of this scale, but I wouldn't agree they're over the top.

Where they really stand out though, is the "performance" fee. This is what the brochure says:

It is common practice among property funds/syndicates for the promoters to earn a performance bonus on achieving certain high returns for its investors. Brendan Investments has set the rate of 8% per annum as its hurdle rate, which means that a performance bonus will only be paid if its investors receive a minimum annual return in excess of 8% per annum over the investment period. The performance bonus is calculated at 20% of the profits above the 8% per annum hurdle rate.​

The purpose of linking the 8% hurdle rate with the performance bonus is to focus the Company’s Management Team on high performance for exceptional asset management and cost control, rewarding investors and their team accordingly.​

While it is common practice to have performance-related fees, I've never come across a geared property fund with such an absurdly low bonus threshold. 8% p.a. is not a "high" return, for a geared fund. It's actually pretty poor when you consider the extra risk gearing entails for the investor. If they meet their target of returns in excess of 16% p.a., they will net another €22.5m plus in fees.​

By the way, the intention is to raise €50m and borrow €150m - so the target GAV is €200m, not €1bn.​

 

[ClubMan]

But probably not his bank balance....

On the Last Word he claimed that the TV stuff was just on the side for him and his real job is an advisor. Fair enough although now his job as independent advisor has become a lot less credible.

Some might argue that this happened back when he was pushing Cape Verde property investments (without divulging any vested interest/conflict of interest?) on a chat show a good while ago?

 

[dunkamania]

I heard Eddie on some radio station yesterday and he said the Directors were only getting Director's fees of some €30,000 each. If the annual management charge is 1% of the target €1b GAV (€10m), then Eddie must have meant €30,000 a week each.

You might be confusing the Directors with the Fund Manager.The Fund Manager would be the main beneficiary of the management fee,while Directors recieve fixed payments.

 

[Sunny]

I am surprised at the timing of this deal. With the problems in the market, it won't be easy to raise cheap bank financing which is essential. There is even an article in the FT today about changing sentiment in the commercial market in the UK and that the effects could last for years. Also German growth that they speak so strongly about in the brochure is slowing down. Also I don't share the funds enthusiasim for Algarve invesment properties and holiday homes.

 

[Daddy]

Philipps: Anything to add on what Jim Power had to say on it.

Would'nt be too favourable I'd say based on what he said about Eddie Hobbs at a seminar I attended a couple of years back and I d'ont believe they get on anyway.

TV Show - Cape Verde the place to go per Eddie (maybe it is but Eddie has'nt mentioned it much since he was seen as having an involvement in some way with a company promoting CV at the time). Damaged his reputation at the time.

Late Late Show - buried the hatchet with Pat - massive audience to air his investments - self interest here.

 

[gonk]

Philipps: Anything to add on what Jim Power had to say on it.

Would'nt be too favourable I'd say based on what he said about Eddie Hobbs at a seminar I attended a couple of years back and I d'ont believe they get on anyway.

In fairness to Eddie, it should be borne in mind that Jim Power works for Friends First, who would be major competitors in the area of geared property investment funds.

 

[Daddy]

True but Eddie was'nt personally into Geared Property Investments funds
at the time I attended couple of years back.

Definitely on what you say c'ant imagine Jim being 'Friendly' to Eddie on this
investment scheme.

 

[LDFerguson]

You might be confusing the Directors with the Fund Manager.The Fund Manager would be the main beneficiary of the management fee,while Directors recieve fixed payments.

Have a look at Section 8 on page 23 of the [broken link removed].

 

[Oran Man]

I note that one of the Brendan Investments team is Richard Fitzgerald of the Oran Group. Can first-time Askaboutmoney poster Oran Man who posted the above this morning confirm if he has any connection with Brendan Investments?

LD Ferguson,
I can confirm that Oran Man has absolutely no connection to the Oran Group. I'm merely from Oranmore and am really only starting out on this property investment lark.

 

[czechmate]

Czechmate says "there is a fee of 4% per annum on what you put in."
can you tell me where you read that and maybe link to it as I cant seem to find it. Thanks J

page 22 of the prospectus: Details the 1% p.a. fee of gross asset value going to the 'property management company'. They don't tell you what this is in terms of the net asset value (i.e. the amount you put in), but as they are borrowing 3 times for every 1 you put in, that makes it about 4% per annum of the amount you put in.

 

[czechmate]

Compared to what? Annual fees of 0.75% to 1.00% of GAV are typical for this kind of fund. Brendan Investments' are on the high end of this scale, but I wouldn't agree they're over the top.

Is the comparison not versus what fund managers would normally charge you to invest your money. Isn't that normally about the 1% p.a. mark? I can't see what extra skill and judgement is merited by another 3% p.a. gone out the door. If it's typical for this kind of fund, I think any investor would have to ask why they would pay anyone 4% p.a. to invest their money. Buying properties and taking out loans to fund that isn't exactly rocket science. If it is typical then it smells a bit like a gravy train for people who set up these funds (and a big problem for anyone who invests in these in the future if the veted returns don't materialise)?