Equity-One featured its “deliberately-simple” model which joins commercial borrowers with investors.
Borrowers enjoy accessing flexible funding with investors enjoying higher returns, control and security.
Niomie Varady presented the Equity-One offering at the Worrell’s Victoria Conference with the complete speech re-printed here;
Today I will introduce Equity-One, share our business model and discuss our typical clients. Equity-One was established over 20 years ago and we became a managed investment fund 13 years ago. We have over $300 million in funds under management. We have a deliberately simple model – joining our commercial borrowers with our investors.
Let’s look at the borrowers. We lend to commercial borrowers offering one-to-five years terms that are interest only with the flexibility of repaying after 3 months with no penalty. The availability of credit, or lack of, is a constantly evolving thing. We are seeing borrowers that only until recently would have been “bankable”.
They have transacted on good assets, and have previously enjoyed good relationships with their banks, only now to find themselves needing a second option. I am sure you have seen some of your clients provide everything required by the bank and for some inexplicable reason the bank doesn’t want to transact. Banks they are hot when they are hot and they are not when they are not.
There has been much commentary about this situation at the moment, and the royal commission has added extra drama as recently seen, but lack of available bank credit is not a recent phenomenon. We have noticed a marked increase in quality borrowers seeking respite from the banks since late 2015.
The 4 types of borrowers typically affected are:
- Non-resident applicants;
- Cash out loans on residual stock;
- Land banking; and
As our approach and principals around lending and investment do not change due to market conditions, that is, we seek quality transactions in both bull or bear markets and are still eager to engage in transactions to assist quality borrowers. We have not yet seen an abatement of quality applications.
We specialise in quick turnarounds for borrowers. We are typically the phone call a broker makes when the banks have not responded. Brokers know, we can offer quick solutions and settle within a week of their application. This gives the borrower peace of mind and also has the flexibility of full repayment after just three months with no penalty.
Whilst mortgages are for commercial use, we are happy to transact on residential houses, flats, factories, retails stores in all capital cities and major towns, offering typically up to 65-to-70% LVR. Our view on the non-bank lending landscape is that it won’t change in the short term. Both sides of politics will seek to capitalise on the Royal Commission, and adopt most, if not all of its recommendations. Watch this space.
Moving onto investors. Our investors are generally seeking better performance than bank deposits. Who isn’t right?
All our loans are 100% investor funded, meaning the fund has absolutely no gearing. Some of our clients have been with us since inception and because we are a retail fund we have investors with as little as $5,000 and some in excess of $15 million with us. An Investor typically receives anywhere between 7-9% per annum depending on the property and LVR. This is paid monthly in advance directly into their nominated bank account or our Cash Management Account.
We all like being able to make our own choices, don’t we?
Well our model gives the investor the choice to make the decision whether to invest in a specific mortgage secured by a specific property. We are not a debenture or unitised fund, meaning the investors are directly connected to the underlying asset. There can be multiple investors in a mortgage or it can be funded entirely by one person. Investors are directly linked on the first mortgage but to protect the investor’s privacy, Equity-One appears on the title as the authorised custodian. Some investors who intend to be the sole contributor to a mortgage can choose to be nominated on the title.
All our investors are referrals. Our investors are predominantly retirees who understand property, like property but don’t want to buy property. Investors look to us to diversify their investment portfolio or superannuation fund enjoying monthly income. We accommodate investors as individuals, companies, trusts or superannuation funds offering the same attractive benefits.
Our model is deliberately simple in that our investors are directly linked to the mortgage they approve themselves. Our simple approach is seen by our investors as a safe harbour which resonates with Worrell’s theme of today – Thrive and Survive. Throughout the Global Financial Crisis it was precisely this control and security that investors appreciated.
Our Investors are comforted by the “back to basics” approach to lending, and the connection to the assets and transaction of their choice.
If you have any queries relating to commercial finance or fixed interest investment we would be pleased to discuss these with you.
To sum up what we do in one sentence, we link quality borrowers with quality properties directly to investors for mutual gain.