Benefits of investing in a pooled mortgage fund in 2023

The next speaker is Mark Greenberg from Lambert Capital.

Mark is a chartered accountant with over 30 years experience in accounting, general management, banking, property, and direct private lending.

The objective of the Lambert Capital Property Credit Fund is to provide investors with strong risk-adjusted returns via loans for property investments and development.

The fund lends to quality residential and commercial projects with loans from three to $20 million secured by registered mortgages over property.

Mark is going to talk about benefits of investing in poor mortgage fund in 2023.

Welcome to the stage.

Hi there, hopefully everybody can hear me.

Today's presentation, obviously, as everyone has said, we've got disclaimers there.

This is for wholesale investors.

The presentation was previously called benefits of land with capital property credit fund and we've pivoted to

make it the benefits of investing in a full mortgage fund in 2023.

So hopefully we can make it a bit more specific to the topic for today.

The team itself, headed by myself, we've got a very experienced investment committee.

Both members of the investment committee, Bronson and Jack, have also invested through their respective family offices, $20 million each into the fund.

So we're very heavily

invested in the fund alongside our unit holders and we've got plenty of skin in the game.

Just moving through.

This slide may have a lot of words in it.

Looks like I've put it together on the train on the way in from

Malton Station to Collins Street today.

The benefits of investing in a full mortgage fund, who this type of investment is for, and it may be suited to you if you like boring, safe, secure, conservative certainty, no surprises.

We're not looking to do anything other than our target at seven or 10%, which we've exceeded.

It's not like investing in crypto or shares that can go up or down.

It's pretty boring stuff, but we're more about protecting the capital and making sure that we're consistent with our returns.

Slow, steady, 100% backed by property.

Independent valuations up to 70% LVR, but most of the portfolio now is actually skewed to lower risk.

Some people have asked us, how do we know if the valuation will be realised?

We're very heavily focused on townhouses, blocks of land which have underlying land value.

We always look for pre-sales to support the valuation and most of our loans have deck cover to support these via pre-sales.

We've recently focused on only leading to existing clients or repeat customers.

So that's very important to us to make sure that our portfolio, that we know who our borrowers are, doing extensive due diligence on builders, civil works, construction companies, and our developers.

And unlike the banks, when the RBA cash rate rises, our borrowers pay us more and we pass that straight through to our unit holders, they benefit as well.

And importantly, liquidity, we've got 15 to 20 loans in the portfolio at any one time.

We've just had a few repay, so it's actually a bit lower than that.

And we've got very maturity dates from settlements coming through for our individual townhouses or land lots as they settle through.

So the Lambeth Capital Property Credit Fund, as I said earlier, we've been in business now.

on a contributory and syndicated basis for probably the last 13, 14 years.

This particular fund was established a couple of years back, currently sitting at 65% LVR or lower, reducing on the portfolio.

We invest in a pool of assets, the current year to date returns still sitting at around 10%.

Most of our investors are high net worth individuals or

Wealthy family offices, we've got a few BOW top 30 members actually as investors in the fund.

The average size of our loans are five to $15 million.

The current average is about probably six to seven at the moment.

Loan devaluation ratios, we're trying to target probably 60 to 65 in this current environment.

Interest rates that we're charging to our borrowers are between eight to 12% and the average term probably 12 to 18 months.

Importantly, security is over residential commercial developments or investment property.

We have focused more on stock and land subdivisions, residual stock and land subdivisions and townhouses because of the ability to stage those particular developments.

We're very focused on Melbourne and Victoria, but we've also wanted to diversify the portfolio.

We've got a few sites in regional Victoria, New South Wales and Queensland, and also throughout major Australian cities, including in Hobart.

The fund itself, initial fund size, $100 million, which we've now done over more than $100 million in lending so far to date.

Minimum subscription, $100,000.

The management fees are very low at only 0.5% of the loan portfolio value.

There's no additional performance fees on top.

The distributions originally were gonna be six monthly, half yearly, and we've gone to quarterly distributions.

And then from March this year, we'll also now move to monthly distributions.

So that's also a benefit to our investors.

The target return, as we said, was seven or 10%, but we've luckily been able to exceed that in this current environment.

I don't see that reducing at the moment.

We have external trustee, which adds additional comfort to investors.

We use external legal advice, external valuers, QS, our financials and our distributions and our share registry all monitored by picture partners externally as well.

So just in terms of the current portfolio, we've touched on most of this before.

I guess the important points to note are the IRR on most of the deals in the fund is now above 10%.

There's a good spread of transactions.

We've got a couple of deals coming up now that are

we would call bank quality type deals.

Again, all these new loans into the funder at above 10%.

And we think in this current environment, secured lending at 10% plus is a low risk investment.

As we said earlier, we've got a strong debt cover from pre-sales that gives us some good exit.

The geographical concentration we can see below there, mostly in Victoria, a bit in New South Wales and Tasmania, which is actually reducing at the moment as the loan gets repaid.

And we're about to do a couple of deals in Queensland, New South Wales, which will increase our exposure to those states.

type of property, mostly in landside divisions, townhouses, some in apartments and some in residual stock.

Importantly, again, all the new loans coming into our fund are to existing borrowers or well-known to us at lower LVRs than the actual average in the fund and at higher returns than current deals in the fund.

Just some examples there of some current deals that were funded and obviously there's a good spread there.

I just put in some lower, smaller loans and some bigger loans that Brookfield loan was just actually repaid in full with only one out of over 149 that were booked into settled in settle.

So trying to be a very strong market currently for land in Victoria.

We've got some, this one here is a residual stock line where 16 out of 16 have been sold and that should settle in April.

We're very hands-on.

There's some side photos of us as we go out for our monthly inspections.

It's a apartment development in Oakley East, and that's a townhouse development with a basement in Hyatt here in Victoria.

Due diligence process, we're seeing a lot of deals coming in at the moment, and obviously we can't fund every deal that comes in, but that's good for our investors that we're able to pick and choose the deals that we think are ready for us to fund.

In terms of the way we mitigate the risk, as we said, we need to make sure our borrowers have a proven track record, have sufficient net assets and income to support the development.

Builders must show they're able to deliver on time and on budget.

And we do a lot of due diligence, checking through their financials and work in progress.

Obviously the security itself, we wanna make sure that it's a good property.

You need to make sure that we're lending at appropriate loan to valuation ratios and use current market where as we said, we've tried to reduce our exposure and reduce the LVRs and importantly to find exit.

So that's probably the bottom line is to make sure we've got sufficient deck coverage through pre-sales to get us out at the end.

Again, in terms of the transaction process, we have an independent investment committee.

Also, everything goes via our external trustee and all of our valuations, QS, legal zones, externally.

We're tending now not to focus on dealer buyer brokers, as you said, trying to focus on existing clients and repeat business.

We talked about our due diligence process, the approval process, and then probably most importantly is the active loan management ongoing, which is attending site visits, getting monthly reports, everything's funded on a cost to complete basis.

Yeah, and then, and during the last couple of years, it's been very important to keep in constant contact with our developers onsite.

is probably the last slide coming up here, but in terms of the benefits investing in a pre-mortgage fund, as you can see, obviously the cash rate has increased over the last couple of years.

And in turn, the lending rates have also increased in proportion.

And most of our deals, as we've said, have been linked to the cash rate.

So therefore our returns are increasing to our investors.

Probably the most important point to notice here is that we've always priced at sort of that eight to 12% per annum for first mortgages.

And we've delivered that nine to 10% per annum for the last 10 plus years.

Importantly, we had no losses on any of our first mortgage investments over that period of time.

I think I've got the one minute warning, so I think I'd better finish up now, but thank you very much for listening.

As we said, if you have any further inquiries, please contact us either in our office in Collin Street or via that phone number or email mark at lambertcapital.com.au.

Thank you very much.

Thank you, Mark.