Eddie Hobbs new Brendan Investments vehicle

[Sunny]

Sorry one additional fact. The facility is 25K (min) requiring Net Investment assets of 250k and earnings of 8k plus pa. Loans from NIB 50k to 100k requires NIA of 500k and earnings of 100k plus. The process is of course regulated by IFSRA under the CPC. The speculation here has been made in the absence of these facts which show that the NIB borrowing is clearly targetted at those with strong balance sheets. Existing debt servicing will form part of the due diligence.

NIA excludes home etc and loans cannot exceed 10% max of it.

To be fair the loan facility was presented as open to all with no defining criteria hence the speculation. It certainly sounds better than was originally presented by the company but is that in response to criticism or was it always intended to be like that because I don't remember EH ever saying the facility was only availble to HNW individuals when the deal was first mentioned.

Glad to hear that it though

 

[DrMoriarty]

I see there's a thread on this product over on [broken link removed].

Seems to have disappeared?

 

[IHateTolkien]

Seems to have disappeared?

I wonder why. should bring you to Google's cached copy.

 

[IHateTolkien]

Nice to see Mantus answering some of the critics - this is useful information.

Some big questions remain unanswered: -

(1) Is there a comparable product out there with such a low threshold point (8% per year) at which the promoters start awarding themselves bonuses?

(2) If Brendan Investments are so committed to "transparency and openness" (their words) why do they not make it clear on their website and other promotional efforts that the product is not regulated by the Financial Regulator nor eligible for the Investor Compensation Scheme? Only the prospectus has been approved by the Financial Regulator.

(3) The informed posters on this thread have acknowledged from the start that the promoters have experience of commercial property investment. But if the public are being asked to trust that these gentlemen will earn a good return, is there any information available about how successful their previous ventures have been? It's one thing to have been involved with the business; have they achieved good returns for investors in it?

 

[Duke of Marmalade]

Mantus has clarified certain aspects and I am prepared to accept that it is at least on a par with similar schemes, not being an expert myself. I also withdraw my assumption that the external borrowings were targetted at the great unwashed.

Nonetheless, given EH's enormous credibility as a consumer champion I remiain strongly of the view that he has availed of the regulatory gap to aim way below his own espoused standards in transparency, specifically:

Gearing is exemplified as +20% = +80%, -20% = -80%, whereas I have shown that it should be presented as +100% Gearing Neutral, +125% Gearing kicker= 75% less 15% Performance Bonus i.e. 60%; +75% Gearing drag = -75% wiping out the growth on the ungeared vehicle.

References in the brochure to 12% - 16% on other schemes which are claimed to be inferior is irresponsible.

This is reinforced by statements in the Evening Herald that quadruple your money is on.

And Rainyday has confirmed that the roadshow is reaffirming these outlandish claims.

I stand by my asertion that expenses represent a Reduction in Yield of 6%, about 4 time life assurance norms and given EH's love affair with RIY I would have expected him to volunteer the information. I will accept Mantus assertion that an equivalent disclosure on other similar schemes would be even worse - but is that a justification?

 

[gonk]

Perception becomes reality in the absence of facts. There has been much comment on the thread that is inaccurate..

Indeed. Such as:

The comments about uncompetitive costs fail to stand the test of scrutinising the non-prominent costs of other syndicates, most of the costs of which are higher even though no Development projects are contained.Augusta, used earlier, by Gonk and others deducts about €3m of the €20m raised in rebated property selling agent commissions, in establishment fees and in marketing commissions.

As I have already pointed out, total up front costs for the 6th Augusta fund are €2.33m out of €20m equity. Where are you getting €3m from?

Also as stated above, apart from commissions, that €2.33m includes costs such as stamp duty, legal fees, surveyors fees and other professional advisors. Stamp duty alone accounts for €700k or 30% of the total. It is disingenuous in the extreme of you to imply that Brendan will not incur similar costs. Will Brendan not pay stamp duty on its property purchases? Will it not employ lawyers?

You are speculating when you say Brendan's costs will be lower - the information to support such a conclusion is nowhere to be found in the prospectus. One could just as easily argue that the Augusta fund is likely to have lower total costs for investors given its lower annual management fee and final bonus structure.

As for the constant reference to development projects, whilst I will accept that that these have the potential to deliver higher returns, the flip-side of that is that they carry a higher risk, compared to say, buying an office block with a sitting blue chip tenant. The development component can certainly be characterised as a positive feature, but it is not an unalloyed benefit to investors.

In addition these vehicles are compelled to pay the Revenue 23% of gains on their properties on the 8th anniversary. In the absence of liquidity this means borrowing by the fund. In design terms it means that syndicates will restrict terms to less than 8 years, a term which many believe is too short to weather cyclical downturns.
The Brendan model as a Plc avoids this tax charge . . .

But gains in the Brendan fund are subject to CGT, currently at 20% - it's not as though they're tax free. And there is no such thing as a free lunch - the 20% rate arises from the fact that the Brendan fund is unregulated and investors will not have recourse to IFSRA and the Financial Services Ombudsman if they have an issue with their investment. (Incidentally, the Augusta fund is structured so gains are taxed at the lower 20% rate too. The same issue with regulation applies to it.)

its cost model best aligns shareholder and director interests.

I beg to differ. As I have stated ad nauseam the bonus structure is heavily biased towards the directors. Once again (and other readers can draw their own conclusions from your failure to answer the question so far), what other geared property fund levies a performance fee as high as 20% on gains over a threshold as low as 8% p.a.?

There is direct cost recovery capped at a flat 750k clearly explained.

It is not "capped" at €750k - the prospectus clearly states this is an estimate. Presumably, now that the aim appears to be to raise five times as much in shareholders funds as the prospectus states, this figure will rise in proportion.

 

[Duke of Marmalade]

Mantus,

Here's a fact about taxation.

Brendan pays taxes internally at rates ranging from 12.5% on trading profits to 25% on rental income plus possibly foreign witholding taxes (which given the nature of the beast might be high).

(How do I know? Appendix 2 of the Prospectus)

Punters pay 20% CGT on their profits, so in total punters pay taxes ranging from 30% to 40%.

Life products pay 23% precisely because they do not pay internal taxes except again possibly some foreign witholding taxes (ever hear of Gross Roll Up?) .

After 8 years a gross roll up fund will already be well ahead in liquidity terms compared to an internally taxed fund so even this point doesn't stack up.

Mantus I will give you the benefit of the doubt that you never reached Appendix 2 of the Prospectus for these facts are not at all apparent in the Brochure. I do hope the promoters are not suggesting any tax advantages here, anybody any sightings of such misrepresentation?

As a passing comment the Prospectus is a highly professional document with no hyperbole or misleading representations. Unfortunately it will be absolutely incomprehensible to the average SMTM punter. The Brochure is meant to address that deficiency but as I have explained elsewhere this latter is a deply flawed document.

 

[bramasole]

Could somebody please summarize the advantages and disadvantages of this investment based on all the comment so far? thanks v. much

 

[ClubMan]

Could somebody please summarize the advantages and disadvantages of this investment based on all the comment so far? thanks v. much

I think that there is a key post summarising the pros and cons in the works so stay tuned.

 

[bramasole]

thanks, will do

 

[MichaelDes]

I'll have a go before the official version is out.

Harchibald

Seems a realistic summary. As they said on Catch Me If You Can. "I Concur, Do You Concur"?

 

[Mantus]

This is fun. What should the fee charging structure be to manage the assets and produce profits using proper professional services? You are starting from the belief that all syndicated property schemes are a rip off so design a notional one, properly costed and report back. Your model must deliver acceptable quality of mgt to investors and make a profit to be credible. You decide the optimum vehicle to deliver transparency and you decide the markets, the marketing and the strategy of your notional vehicle.


(BTW Gross roll up Irish funds are no longer so and must pay out 23% to the Revenue on the 8th anniversary. Gross roll up funds are fully liable to tax outside of Ireland and only exempt here. The 23% pay out is not an offset against tax paid in other countries even if there is a DTA).

 

[simplyjoe]

Harchibald and Mantus - Lads - excellent writing. Where are you on all the other great topics being discussed. We could do with your analysis on other subjects. Whats so special about this subject? Any vested interests to suddenly make you come alive?

 

[IHateTolkien]

What should the fee charging structure be ...

How about raising the bar on the promoters' bonus from the very low 8% to at least 10% for starters?

I note that Mantus seems unwilling or unable to answer my three burning questions here.

 

[kaplan]

As an audience member this has been great fun and good value as I got to watch two plays at the same time.

On the one hand I watched a tribunal of inquiry between an excellent witness and aggressive questioners. The harangues were particularly enjoyable. I’m looking forward to the official summary. Great ending with the gauntlet thrown down by Mantus. I do hope there is a second act.

The second performance was like an internet version of the valley of squinting windows with its bar stool craw thumpery and begrudgery. Although I felt it was a tad overacted it none the less shows that spirit of Garradrimna is being re-invigorated for the internet age. As a one act play it has run its course though.

 

[bramasole]

thanks for summary,
I attended the citywest roadshow this evening, there was about 40 people in the room. excitement wasn't in the air I have to say. few questions asked.

 

[Mantus]

Good to hear that there is no excitment. The previous night at Raddisson during the match and hosted by NIB there was 230 I'm told. No surprise that its website is very busy given the scale of publicity. To be accurate, the promoters cannot be accused of hype and risks are explained at length but the media reaction is a different matter and certainly can be criticised for inaccurate and misleading headlines and copy.

Was the presentation professional or razzle dazzle?

 

[Sunny]

Good to hear that there is no excitment. The previous night at Raddisson during the match and hosted by NIB there was 230 I'm told. No surprise that its website is very busy given the scale of publicity. To be accurate, the promoters cannot be accused of hype and risks are explained at length but the media reaction is a different matter and certainly can be criticised for inaccurate and misleading headlines and copy.

Was the presentation professional or razzle dazzle?

Mantus, do you have any links to NIB?? Not accusing you but you do mention them on another thread

 

[Duke of Marmalade]

This is fun. What should the fee charging structure be to manage the assets and produce profits using proper professional services? You are starting from the belief that all syndicated property schemes are a rip off so design a notional one, properly costed and report back. Your model must deliver acceptable quality of mgt to investors and make a profit to be credible. You decide the optimum vehicle to deliver transparency and you decide the markets, the marketing and the strategy of your notional vehicle.


(BTW Gross roll up Irish funds are no longer so and must pay out 23% to the Revenue on the 8th anniversary. Gross roll up funds are fully liable to tax outside of Ireland and only exempt here. The 23% pay out is not an offset against tax paid in other countries even if there is a DTA).

Mantus, please, you know you got the tax thing wrong Please agree that the overall tax rate for investors in Brendan is between 30% and 40% PLUS any foreign witholding taxes, this latter being a disadvantage also shared by life funds.

On your first point, I think I have to agree. These are expensive. It would also be expensive to launch a project to explore for gold on the Moon. What has happened here is that a few of these have paid off (on paper) because of the quite unique conditions of falling interest rates and soaring property values.

People seem to think that geared property is a no brainer, borrow cheap money to the hilt from the banks buy properties which can only go one way - truly money from America. So what, if property investment is expensive, what with stamp duty and a whole heap of professional costs, the gearing formula ensures that these costs will be swampled.

Sorry, that easy money for everybody - banks, managers, promoters, advisors, the taxman and punters - just isn't sustainable. The party is over. As always the fat cats got the cream and the poor unwashed are going to be left with sour milk.

 

[gonk]

To be accurate, the promoters cannot be accused of hype

To be accurate, they certainly can.

Firstly, for their repeated claims that their fees and charges are substantially lower than their competitors, when the most anyone can say is that in some areas they are lower (entry charges), in some areas they are higher (annual management fee and final bonus), and in other areas nobody knows (property acquisition costs, legal & professional advice, etc.) because the prospectus doesn't quantify these costs.

Secondly, for their claims as to the likely returns on investment. The brochure by implication claims that Brendan will do better than other funds which project returns of 12% to 16% p.a. - there is no specific information on any projects nor any assumptions underlying these expectations.

Lastly, Eddie Hobbs allowed himself to be quoted in a front page article in the Evening Herald claiming in the opening sentence "he could quadruple investments for members of the public" and the article was then reproduced on the Brendan Investments website. (They have clearly thought better of this as it has since been removed following adverse comment in other papers.)

If all of the above doesn't amount to "hype" - not to mention the blanket media coverage obtained in the week or two after the product's launch as a result of Hobbs's involvement - I don't know what does.