The AUM fee for this property is 38.2% of the gross income/dividend. As you can see it's not performance related, it's insulated from costs, it's not locked to the shareholder's dividend and it wasn't phased in, more like dropped in from a great height. As for the actual amount, how high can we make it Brad without p1ssing everybody off. It's actually 1.2% of the property value, works out at an eye-watering sum for the whole portfolio.
No idea where PP think this is going. Last properties weren't even 5% funded. For investors, more trapped P2P money earning little to nothing unless you're willing to take a 15-35% haircut. I have sympathy for people who have invested large sums and are being treated with contempt.
All this data has public access now.
Last Edit: Nov 21, 2020 14:38:22 GMT by Ton ⓉⓞⓃ: To add "PP" to the title
Seems to me fairly obvious that all the properties will be sold off at the 5 year point, and PP are taking what they can (the AUM fee) in the interim. I don't like it, but losing a few percent to allow an orderly sell off of assets over the next 2-3 years is probably better than them going bust/pulling the plug and getting (even more expensive) administrators in.
Post by scepticalinvestor on Nov 20, 2020 12:05:40 GMT
It's only after the Oct 30 disclosures were published that I realised how important the AUM was to PP's management+shareholders and how divorced it was from pretty much anything else. It's like an IFA from the bad old days.
Also, as the graphic shows, the kind of impact it has on return to investors is horrendous to say the least.
As one of the early investors who thought PP was an absolutely brilliant way to invest in property, I can't wait to see the back of PP and all my investments sold.
One example that should have been addressed years ago would be the 8 new build flats bought in January 2016. One line in the investment case tells you all you need to know -
This property has a long history of poor performance, resulting in dividend reductions in Jan-19 and Oct-19. High tenant turnover, long vacancies, soft rental conditions in the area and a high service charge have all contributed to the deficit.
So, in order - High tenant turnover: People don't move house for the fun of it. It's an expensive and disruptive process. An alternative but similar property that is much cheaper to rent will make people vote with their feet.
Long vacancies: There are similar properties locally that are much cheaper to live in.
Soft rental conditions: Soft for whom? The market rate is clearly lower than PP want to charge.
High service charge: On a new build? Someone's being ripped off. No wonder they are moving out.
If the rent was cut to a competetive level and the service charge was sorted maybe more people would want to live there and actually stay put. If PP had shown some interest in fixing the problems earlier we would now be receiving dividends from these properties instead of looking at an £81,000+ capital shortfall and an rent deficit of £15,329 a year.
PP are looking very complacent. Still, as long as they are raking in the £21,967 AUM fee on these flats (so far) everything's fine.
Post by scepticalinvestor on Nov 23, 2020 16:08:59 GMT
Ugh, that makes for ugly reading. All this arises from having the folk running the show having very little skin in the game. And that situation is made far worse by the AUM fee which they can rake in come sun or rain.
As long the property brings in enough cash to cover their AUM fee....
Service charge payable by the tenant? In all my years of renting and letting private property in London and the North West, I've never seen tenants charged a "service charge".
Hopefully PP will be less incompetent when it comes to selling off 5-yr anniversary properties on the open market. Let's see.
It now seems clear that insufficient PP investors opt to roll-over / reinvest and so most / all properties will be marketed for sale on reaching their 5 years anniversary.
It therefore seems clear that PP is a busted flush as a future business model, and should be planning its wind-down on that basis.
PP’s Directors should competitively tender for a competent property agent (eg. JLL, Hamptons, etc) to take over all management of the property portfolio, both for rental purposes and then to market for sale. A performance-related fee structure should be agreed to maximise returns for investors. PP itself should then axe headcount and costs across the board, stop any further origination, close the SM, ditch the AUM fee and accept its failure as a business.
... Service charge payable by the tenant? In all my years of renting and letting private property in London and the North West, I've never seen tenants charged a "service charge". ...
The whole block has 44 flats and a garden. The service charge covers the cost of cleaning the public areas and maintaining the garden. I rang the estate agent when I spotted a flat (not one of PP's) on rightmove a couple of years ago (can't beat personal research).
I did think PP would be invest and forget for the small amount of money I had but I'm now researching every property not just the ones I'm in.