5 Benefits of First Mortgage Investments for Sophisticated Investors

I'm delighted to introduce our first speaker for today, Peter Benson, CEO at Credit Connect Group.

Peter has over 25 years of experience in commercial real estate fund management and private lending.

And today he's going to talk about the five benefits of first mortgage investments for sophisticated investors.

Please join me in welcoming Peter.

Hi Angela, thanks for the introduction and I appreciate your time.

So I guess the purpose of today and talking to yourself and your audience is trying to explain to them what investing in private mortgages or private credit is.

So we hold a Credit Connect capital which holds an Australian financial services license.

It's been operating for 18 years and basically we operate what we call a contributory fund.

And what that basically means is we tell investors specifically your money will be lent, might be a property in Toorak, might be a property in Brisbane, might be a property in Sydney, where the property may be.

So investors know specifically where their money is being invested.

So it gives them the opportunity to undertake all their own due diligence.

Basically what a lot of people ask is how are you secure

How is my funds secured?

When do I get interest payments?

Which are all relevant and appropriate questions.

So first and foremost, all of our clients funds are actually secured via a first mortgage on a property.

So it's always secured.

And typically we're only lending to 65% of the value of the property.

So hypothetically, if you had a million dollar property and you're only lending to 65% of the value of the property, you're lending 650,000.

and that 650,000 is secured by a first mortgage on a property.

So that gives the investor A, their security, and B, the other side of the coin is, obviously investors are doing it for a reason and it's a return.

So Credit Connect Select Fund, actually in the calendar year for 2023, actually returned 9.4% for investors.

So what that basically means is once we have that mortgage registered on that borrower's property, obviously the borrower needs to meet an interest payment,

and borrowers meet monthly interest payments and all of our investors in our fund are paid on the 10th day of each month, which gives investors continual monthly income coming in off that secured first mortgage that they've actually invested in.

Basically, a lot of people ask, what are the benefits?

Why would I invest into a first mortgage with Credit Connect?

Why should I do it?

What are the risks?

Why is the borrower borrowing from

from a fund such as yourself, why aren't they borrowing from a bank, which are all valid questions.

And I'd just like to quickly give you a quick overview in terms of the benefits of your audience investing into our mortgage fund.

As I mentioned earlier, calendar year 23, average return for our investors was 9.4%.

So basically, as I mentioned earlier, all of our interest payments are paid on the 10th day of each month.

So what investors, if they do invest into our fund, will receive will be regular monthly income.

And as I mentioned, what our average return was for the calendar year last year.

Second point, all of our funds are secured.

As I mentioned earlier, all funds are secured via a first mortgage.

All properties are valued by panel valuers of ours.

So we obviously know and get appropriate valuation numbers.

So your funds are fully secured via a first mortgage on a property.

And returns, typically we're offering returns at the moment to nine, some cases 11, that's what I said, we don't often have returns of 11%.

As I mentioned earlier, our return 23 was 9.4%.

But typically we can get investors at this current time, returns from nine to 10% where their interest is paid to them each month on the 10th day of each month.

And capital preservation, obviously investors have a portfolio, I'm certainly not giving them financial planning advice.

and they might want to put part of their portfolio into a first mortgage, being the first time they've invested with us.

So basically, investing into a first mortgage gives them capital preservation in terms of getting regular monthly income off their investment that's secured on a first mortgage on a borrower's property.

And the fifth and final one I would suggest is transparency.

It's the big buzzword now.

If you invest into our loans, it's fully transparent, as I mentioned earlier.

We might have a property in Sydney, Melbourne or Brisbane and we provide our investor what we call a supplementary information, basically defined as a SIM.

And what that SIM does is tell the investors specifically your money is going into that Brisbane or that Sydney property.

So it's transparent, so it will tell them who the borrower is, what the interest rate is, who valued the property, what type of property it is, the loan term, the interest rate.

So it's a very transparent investment.

And again, it gives the investor the opportunity to undertake all of their own due diligence.

So that really is a summary, Angelina, of basically the five bullet points of investing into our Credit Connect Select Fund.

Thanks for your presentation, Peter.

Now, why would a sophisticated investor choose to invest with CCG?

Well, basically, there's a lot.

We were just talking about this before, that private credit now seems to be the

The buzzword in the marketplace, everyone's wanting to get into private credit.

Very, very simply, if the audience has money in a term deposit, maybe the CBA or whatever banking institution it may be, they're probably getting maybe 3 or 4% on their money.

I've actually seen commentary recently where banks are proposing to reduce term deposit rates.

But very, very simplistic terms, that money that they've got deposited with the bank, all the bank is doing is lending that to a borrower where the money is secured, borrowers mortgage on the property.

So that's what we bring to the table are borrowing or lending opportunities for investors to go into, which are fully vetted and approved and obviously managed by ourselves.

So that gives sophisticated investors a fully managed fund to go into, which is a transparent opportunity where they know that their money is being invested and obviously getting

a decent rate of return.

How can first mortgage investments help to reduce the overall volatility of an investor's investment portfolio?

Well, as I mentioned earlier, the key with us is you're given the opportunity to undertake all of your own due diligence.

So first and foremost, you will be given information or if you want to ask questions, we will give you the information and the tools you need to undertake all of your own due diligence.

So first and foremost, you're going to receive regular monthly income.

That's one of the benefits.

So on the 10th day of each month, the interest payment, whatever loan you've agreed to invest into, that interest payment would be paid to you.

Typically at the moment, as I said earlier, it's between nine or 10%.

And basically the second option that I would suggest in regards to your investment portfolio and what mortgages offer, it's a conservative investment, as I mentioned earlier.

my some of your audience may have bought houses way back, I don't know, 10, 20, 30 years ago.

So basically, when you borrow from a bank, a bank will typically lend to 90% to the value of the property and as the borrower needs a 10% deposit.

Our philosophy is a little bit different to banks where we bought where we want equity in the property.

So we're only lending to 65% to the value of the property.

And that which we deem is a conservative investment for our audience to invest into.

Another key point for investing with us, your funds secured, as I mentioned earlier, it's secured, borrow first mortgage.

I'm not saying I'm a genius or a financial genius or whatever, but I really don't know of any stronger form of security, probably except a bank guarantee, where a first mortgage is as strong a security as you can get.

So basically all of our investors, their funds will be secured, borrow first mortgage over the borrower's property.

It's a step in one of the other points.

It's a stable asset class.

Obviously, some of your audience will invest in crypto, some of your audience will invest in shares, negative gearing.

Private credit is a very unknown sector at the moment.

I don't see it that way because I've obviously been doing this for 30 years myself, but it is an unknown sector at the moment.

And I think it just should be an asset class which investors need to consider seriously about putting their money, some of their monies into our lending opportunities or into our expo.

Credit Connect Select Fund.

Basically another key point that I would suggest in the investment portfolio, most of our loans are only on a shorter duration.

And what I mean by shorter duration, look, we do have loans for six months, it's very rare, but typically our loans are for 12 months to 18 months.

And the reason we do that is we don't want our investors monies in there for two years or three years or five years,

because we don't know what interest rates are doing.

The commentary at the moment is rates may drop.

So typically we own what our clients funds in there for 12 to 18 months because of the volatility in respect to where interest rates may or may not go.

One thing we do have is an exit.

Another key investment portfolio is at some point the borrower has to repay

pay the loan.

So there's an exit in terms of the investors investment for them.

That exit might come from a refinance from the borrower.

The borrower might sell the property.

He might distribute the property through family members.

So there's always an exit there, which again will repay the investors funds.

And it's probably the final point I would probably suggest in terms of investors or your audience, they're putting credit or product credit into their investment portfolio.

is the diversification across property types.

We basically lend on residential properties, we lend on commercial properties, we lend on vacant land, we lend on industrial, we do construction loans.

So there's a number of loan types that we actually do, whether your audience can actually diversify in regards to what type of investment they actually specifically want to do.

So they're really the key points I would suggest for an investment portfolio for your audience.

Angelina and I hoping I've sort of answered your questions.

Thanks, Peter.

Speak to you later.

Bye bye.