PrivateInvest is a private commerical non-bank financier specialising in the Australian real estate sector.

About PrivateInvest Our Investment Funds

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This episode of PrivateInvest TALK covers:

PrivateInvest Select Mortgage Fund

Investment strategy

Target return

Distributions

Management fees

Welcome to PrivateInvest TALK your update and insight into how our investment funds operate and the opportunities in the private debt market in Australia. 

Mark, the PrivateInvest Select Mortgage Fund, I wonder if you could talk me through that?

The PrivateInvest Select Mortgage Fund is an unregistered unit trust in Australia, offered to wholesale and sophisticated investors.  

It differs from the PrivateInvest First Mortgage Fund in that it is a Fund that issues different classes of units for single loans.  

Each of those Loans has their own class a unit which isolates the risk and the income to that Loan, as opposed to being in a pooled fund. 

What is the investment strategy?

The strategy is to invest into the Australian real estate sector, just like the PrivateInvest First Mortgage Fund, in what we call the ‘unloved sector’ of $3-20 million.  

We believe this area is where the banks or the bigger institutional investors don’t want to invest.  

The Fund targets a different asset class whether it is industrial, commercial or residential. 

What is the target return for the Fund?

That can vary with each Loan, as Loans come through and they are structured up that we issue a Loan Memorandum to our Investors and that target return can differ with the risk, and the profile of that Loan like residual stock loans where you’re investing in real estate which could be as low as 6-7% post fees and expenses to Investors.  

Site finance could be 10% post fees and expenses, so it does vary on the different risk profiles of the Loans. 

Loans for property investment, development, construction and site finance PrivateInvest

How long is my investment for?

Unlike like the pooled Fund, you are investing in the term of the Loan. Investors need to decide to invest on that loan term.  

If the Loan term is for 15 months, Investors’ money is returned after that period – when that Loan matures. 

How often are cash distributions paid?

Varies again with the Loansgenerally in monthly or quarterly basis but some Loans could be capitalised to the end.

We tend to like Loans that are monthly distribution to our Investors. 

With those distributions, can I reinvest?

Not in the PrivateInvest Select Mortgage Fundthe reason is, it is for a single Loan as opposed to reinvesting your distributions into the pooled Fund (PrivateInvest First Mortgage Fund). 

What management fees are charged?

Varies again with the Loan, but as an indication it is usually 2% of the total loan facility charged to the Manager.  

There is usually about 0.25 of the total funds in the Fund that is paid through the Trustee, our independent compliance and governance oversight, and there may be some expense recoveries. 

This is stepped out in the Loan Memorandum of the Loan.  

So, there are two documents:

The Information Memorandum which covers the PrivateInvest Select Mortgage Fund in its entirety and then each individual loan issues a Loan Memorandum that provides all the details around the Loan, quality of the borrower, the type of asset valuations etc. 

Do these fees affect my return?

No, because the fees that we quote in the target returns that we quote are net fees and expenses. 

Mark, what is the minimum investment into the fund?

Minimum investment is $100,000.  

Investors should have a look at the online application process on our website as it steps through the process. 

Investors can choose to invest at a higher level, but $100,000 is the minimum investment. 

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How do I assess my fees and return?

Investors can obtain an Information memorandum for the PrivateInvest Select Mortgage Fund that details the compliance and the governance in the broad-based range of the fees.  

Because it is single Loans in one unit trust isolated from the other Loans, the fees and charges are charged in the Loan.  

A Loan Memorandum details the qualifications of the borrower, the type of asset, what we are doing and importantly, all the fees and charges that are charged to that Loan so then an Investor is assessing it on a net return basis. 

Mark, you mentioned that the investment is only for wholesale and professional investors.

How do I know if I am one of these?

Best thing to do is if you are already online on our website go to the Investor Center Page and it steps out what you must do to qualify for a wholesale and professional Investor.

Generally, you’ll need an Accountant Certificate, but it is very important that you do qualify under ASIC guidelines.

Investors can call one of our Investor Relations team members on 1300 2 INVEST (1300 2 468 378) and they are happy to step through the process and make sure you are qualified.

Mark, what happens if a Loan were to default?

“I think that is what sets us apart from the mainstream banks”

We haven’t had any defaults across our two Funds to date, but it would be naive to say to any investor or make a statement ‘that you never have default’. 

I think the first thing to mitigate a risk of default is to ensure adequate due diligence on the Loans – that you’re really crossing across all aspects of the Loan and to make sure that it qualifies as a good Loan and the strength of the borrower and the underlying asset. 

However, something may change through the term of the Loan that becomes a material issue for a borrower.

Our first step is to roll our sleeves up and step in. I think that is what sets us apart from the mainstream banks and the bigger banks in that we are prepared to work it out, and if you are online, you can have a look at the credentials of our Board and our Management team and the technical skills for our ability to assist a Borrower in working through a stressful situation.

The other side of that it has the best outcome for our Investors because we are preserving the capital and their returns. 

It sounds like it gives investors a lot of confidence.

Well, there is no joy in just issuing a default notice to somebody and then just letting them lose what their investment is too, because the borrowers work very hard to create that asset. 

Mark, what information do I get when I invest in the fund?

Transparency and communication are very important for investors so they can be across all aspects of their investment.

The Fund has numerous Loans at any given time within the Fund, so it is good to for the Investors to be across where they are geographically placed, the asset types etc. We currently produce a quarterly newsletter called ‘News & Insights’ and this covers both Funds and the performance and the distribution.   

For details around their financial aspect, Investors can go online and access the Registry Services, our external agency where they can view their distributions, their statements and all investment information.

The Fund is moving from quarterly distributions to monthly distributions and ‘News & Insights’ will be done monthly from 1 July 2021.  

 The more that we can keep our investors informed, the better we provide a good service. 

Well, that’s helpful thanks so much Mark.

Thank you, Pia. 

Thank you for watching PrivateInvest TALK.